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ANNAMALAI UNIVERSITY
DIRECTORATE OF DISTANCE EDUCATION
Master of Business Administration(MBA)

MBA Marketing Management
Second Year
SALES AND DISTRIBUTION MANAGEMENT

LESSONS : 1 – 25
Copyright Reserved
(For Private Circulation Only)
2
MASTER OF BUSINESS ADMINISTRATION (MBA)

MBA MARKETING MANAGEMENT
SECOND YEAR
Editorial Board
Members
Dr. E. Selvarajan
Dean
Faculty of Arts
Annamalai University
Annamalainagar
Dr. C. Samudhra Rajakumar Dr. C. Madhavi

Professor and Head Professor and Head
Dept. of Business Administration Management Wing, DDE
Annamalai University Annamalai University
Annamalainagar Annamalainagar
Internals
Dr. S. Arulkumar Dr. C. Babusundararaman
Assistant Professor Assistant Professor
Management Wing, DDE Management Wing, DDE
Annamalai University Annamalai University
Annamalainagar Annamalainagar
Externals
Dr. R. Thenmozhi Dr. K. Maran

Professor and Head Professor and Director
Dept. of Management Studies Sri Sairam Institute of Management Studies
University of Madras Chennai
Chennai
Lesson Writers
Dr. M.S. Premapriya Dr. J. Jayakrishnan

Assistant Professor Associate Professor
Dept of Management Studies Department of Business Administration
Anna University (Regional Campus) Annamalai University
Coimbatore - 46 Annamalainagar
1

SECOND YEAR
SYLLABUS
Unit-I
Importance of sales management – types of selling – selling and marketing – sales
objectives – functions of sales management – duties and responsibilities of sales
manager – selling process.
Salesmanship – Art, science and profession, types of salesmanship – advantages
and limitations of Salesmanship – Qualities of good salesman.
Unit-II
Sales planning, sales policy –sales organization, sales forecasting methods –
designing sales territories – fixing sales quota. Types of quotas.
Structuring and managing sales force –controlling and motivating sales force –
Recruitment and selection of sales for force – the need for sales force –selection
Training of salesman – importance – objectives – methods of training – supervising
salesman – executive sales training programme.
Unit-III
Appraising salesman’s performance – methods of appraisal – indices of salesman’s
performance – compensation of sales force – principles of compensating salesman –
methods of compensation – Additional compensation schemes.
Unit–IV
Physical Distribution: Meaning, Distribution Mix, Role of Distribution in Marketing.
The Channel of Distribution – Importance – Selection of Right Channel – Types of
Channels – Channels for Perishable and non perishable Durable Goods – Channel for
Agricultural and Industrial Goods – Managing Dealer Network.
Unit–V
Distribution Environment: Competitors, Intensive and Extensive Distribution:
Franchise Selling, Public Distribution – Special Features. Description of Intermediaries
– Role and Importance – Merchant Middlemen Vs Agent Middlemen.
Unit–VI
Introduction to Retail: Retail in India – Retail Marketing Strategy – Retail Store
formats – Basics of Retail Merchandising Procurement – Retail Pricing and evaluating
merchandise performance – Retail Store Operations – Managing Retail Business – Retail
Organisation and Operations Management – Managing Retail Services.
Reference Books
1) Richard R. Still and Edward W. Cundiff – Sales Management, Prentice Hall, 1958.
2) Eugene M. Johnson – Sales Management, Tata McGraw Hill,1993.
3) Gilbert A. Churchill – Sales Force Management, Tata McGraw Hill, 2000.
4) V.S. Ramasamy, Marketing Management, Macmillan, 2009.
5) R.S.N Pillai and Bhagavathy Modern Marketing S.Chand & Sons, 2001
6) Krishna k.Havaldhar sales and Distribution management Tata McGraw Hill, 2006.
Journals and Magazine
1) International journal of sales retailing and marketing
2) Journal of Retailing
Web Resources
1.www.salesandmarketing.com 2. www.indianjournalofmarketing.com;
3. www.freemba.in 4. www.authorstream.com
ii

SECOND YEAR
CONTENTS
LESSON PAGE
LESSON NAME
NO. NO.
1. Sales Management 1
2. Functions of Sales Management 12
3. Salesmanship 21
4. Merits and demerits of Salesmanship 34
5. Sales Planning 43
6 Sales Forecasting and Sales Quota 60
7 Controlling and Motivating Sales force 76
8 Training of Salesman 95
9 Appraising Salesman Performance 109
10 Indices of Salesman’s Performance 122
11 Compensation of Sales Force 132
12 Compensation Methods and Schemes 141
13 Physical Distribution 152
14 Role of Physical Distribution in Marketing 157
15 Transportation 161
16 Selection of Good Transport 165
17 Types of Channels of Distribution and their importance 169
18 Selection of the Channel Members 173
19 Inventory Management in the channel of Distribution 178
20 Distribution Cost Analysis and Control 181
21 Management Marketing Risk 186
22 Structure of Marketing Channels 191
23 Wholesaling 196
24 Retailing 202
25 Distribution Environment 206
1
LESSON-1
SALES MANAGEMENT
1.1 INTRODUCTION
A sale is one of the most crucial functions of an organization. It is the
principal, and often, the only revenue generating function in the organization. A
sale has formed an important part of business throughout history and will continue
to do so. A constant evolution has been witnessed in the sales function from the
early Stone Age, through the Iron ages and the Middle ages to sales in the twenty-
first century. The evolution of the sales concept can also be studied in terms of
seven generations.
In addition to helping an organization achieve its business goals, the selling
function performs various other roles such as enhancing knowledge pertaining to
the internal and external environments, developing positive relationships with
customers, suppliers and distributors, and negotiating with customers to sell the
company’s products profitably. Despite the crucial role the selling function plays in
the growth of an organization, sales has a rather negative image associated with it.
Sales management is a business discipline which is focused on the practical
application of sales techniques and the management of a firm's sales operations. It
is an important business function as net sales through the sale
of products and services and resulting profit drive most commercial business. The
art of meeting and exceeding the sales goals of an organization through effective
planning, controlling, budgeting and leadership refers to sales management. Sales
management helps the organization to achieve the sales targets efficiently.
It starts with helping develop the right products, setting the right prices and
distributing in the right places, and continues with marketing messaging, customer
service and other selling efforts. All of these efforts must be coordinated so one
doesn’t interfere any of the others. Setting plans, monitoring them and tracking
results lets you continue to adapt, eliminate weaknesses and take advantage of
opportunities.
1.2 OBJECTIVES
After reading this chapter you should be able to know
 The Meaning of Sales management
 Importance of Sales management
 Types of selling
 Selling and marketing
 Sales objectives
1.3 CONTENTS
1.3.1 Meaning and Definition of Sales Management
1.3.2 Distribution
1.3.3 Importance of Sales Management
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1.3.4 Types of Selling

1.3.5 Selling and Marketing Concept
1.3.6 Difference between Marketing and Selling
1.3.1 MEANING AND DEFINITION OF SALES MANAGEMENT
Sales management in an organization is a business discipline, which focuses
on the practical application of sales techniques and the management of a firm’s
sales operation. It is done in an efficient and effective manner through planning,
staffing, training, leading and controlling organizational resources. Sales
management is done by Sales Managers and they are responsible for generating
sales, profits and customer satisfaction.
Sales management is the process of developing a sales force, coordinating sales
operations, and implementing sales techniques that allow a business to
consistently hit, and even surpass, its sales targets. Sales management originally
referred exclusively to the direction of sales force personnel and lately the term
transformed into broader aspect in addition to the management of personnel selling
in general view sales management refers the management of overall marketing
activities such as advertising, sales promotion, marketing research, physical
distribution, pricing and product merchandising.
It is attainment of sales in an efficient and effective manner and all the
activities involved in sales are managed. Sales Management’s ultimate goal is to
attain sales objectives of company.
Sales Management involves various activities like-
 Formulation of sales strategies like account management policies, sales force
compensation policies, sales revenue forecasts, and sales plan
 Implementation of those strategies
 Sales Research, Price fixation, Establishing sales territories and co-
ordination of sales
 Sales techniques required
 Hiring staff, setting goals, regular monitoring
Sales Management is the most crucial and determining factor in any business
enterprise. It is important to meet competition and to make efficient and economic
distribution system to reduce costs. It is also important when new product to be
launched and when distribution costs to be reduced.
According to American Marketing Association sales management refers “the
planning, direction and control of personnel selling, including recruiting, selecting,
equipping, assigning, routing, supervising, paying and motivating as these tasks
apply to the personal sales force”.
“Sales management: The attainment of sales forces goals in an effective and
efficient manner through planning, staffing, training, directing, and evaluating
organizational resources.” – Charles M. Futrell
3
1.3.2 DISTRIBUTION
Distribution is the process of making a product or service available for use or
consumption to the end consumer or business.
Distribution could be of the following two types
(i) Direct Distribution
It can be defined as expanding or moving from one place to another without
changing direction or stopping. For example, Bata has no distribution channel; it
sells its products directly to the end consumers.
(ii) Indirect Distribution
It can be defined as means that are not directly caused by or resulting from
something. For example, LG sells its product from the factory to the dealers, and it
reaches the consumers through dealers.
1.3.3 IMPORTANCE OF SALES MANAGEMENT
Sales management is very crucial for any organization to achieve its targets. In
order to increase customer demand for a particular product, we need management
of sales.
The following points need to be considered for sales management in an
organization −
 The first and foremost importance of sales management is that it
facilitates the sale of a product at a price, which realizes profits and
helps in generating revenue to the company.
 It helps to achieve organizational goals and objectives by focusing on the
aim and planning a strategy regarding achievement of the goal within a
timeframe.
 Sales team monitors the customer preference, government policy,
competitor situation, etc., to make the required changes accordingly and
manage sales.
 By monitoring the customer preference, the salesperson develops a
positive relationship with the customer, which helps to retain the
customer for a long period of time.
 Both the buyers and sellers have the same type of relationship, which is
based on exchange of goods, services and money. This helps in attaining
customer satisfaction.
Sales management has gained importance to meet increasing competition and
the need for improved methods of distribution to reduce cost and to increase
profits. Sales management today is the most important function in a commercial
and business enterprise.
Importance of the Sales Management:
 Introduction of new products in the market.
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 Increasing the production of existing products.

 Reducing cost of sales and distribution.
 Export market.
 development in the means and communication of transportation within
and outside the country
 Rise in per capita income and demand for more goods by the
consumers.
According to Robert n. McCurry in his famous article ‘the mystique of super
salesmanship’ (Harvard business review, march-April 1961, p.114) classified a
salesperson’s position in the organization on following ways:-
 position where a salesperson’s job is predominantly to deliver a product;
 positions where a salespersons is predominantly an internal order taker;
 positions where a salesperson is also predominantly an order taker but
works in the field;
 positions where a salesperson is not expected or permitted to take an
order but is called only to build goodwill or to educate an actual or
potential user;
 positions where the emphasis is placed on technical knowledge;
 positions which demand the creative sales of tangible products;
 positions requiring the creative sale of intangible products;
While the role of sales management professionals is multidisciplinary, their
primary responsibilities are:-
a. Setting goals and standards for a sales-force;
b. Planning, budgeting, and organizing sales program to achieve pre-
defined goals;
c. Implementing the program with proper segmentation and
d. Controlling the overall program and evaluating the results.
1.3.4 TYPES OF SELLING
Selling is first and foremost a transaction between the seller and the
prospective buyer or buyers where money (or something considered to have
monetary value) is exchanged for goods or services.
(i) Aggressive Selling
This is one of those styles where the sales rep stays highly focused and the only
intention is to sell. The sales rep with such a method indulges in a hard driving
selling style, where they look to indulge in a sale that happens with one call. They
are not the ones who believe in the so-called “sales process”, and try to get the job
done in one shot. The sales rep with such a style is of the belief that, if the prospect
walks then the sale is lost. The most peculiar aspect of such sales reps is that they
work the best as an individual, rather than being a part of the team.
5
(ii) Relationship building/Consultative Selling

Relationship building selling style is widely regarded as the most successful of
all selling styles. The sales rep here indulges in a type of method, where they adjust
well to any kind of selling situation. It does not matter to them whether the
prospect is in line to become a buyer or not. With this style, the sales rep adjusts to
whatever situation they have to deal with and get the best possible result. As the
name itself suggests, this process includes majorly relationship building and the
fact is, the sales process is not a one-time thing.
(iii) Need-oriented Selling
This is a kind of selling style, where you need to think quickly and adapt. The
sales rep needs to be highly tactful and at the same time, be able to ask such
questions to find out what the customer needs. Based upon the kind of need that
pops up, you will have to show yourself as the problem solver. In simple terms, this
selling style is about learning more about the client’s existing needs rather than
create new ones.
(iv) Product-oriented Selling
With product oriented selling style, the sales rep is more inclined towards
explaining the features and benefits of the product to the prospect. This style
includes a lot of product demo till the time the prospect is fully convinced about the
benefits. A point to be noted is that the sales rep must fully be aware of the product
or service as there could be a lot of questions from the prospect and in order to give
them a convincing answer, you must know all the salient features of the product
and the benefits associated with the same.
(v) Competition-oriented Selling:
The competition-oriented salesperson is very persistent in trying to persuade a
potential customer. Overcoming objections by never taking for an answer, they will
do everything to close a deal resulting in direct and interpersonal influence. With a
competition oriented mindset, the sales rep will go that extra mile to get the job
done. With the motive of the sales rep is to be a step ahead of the competition, they
will work their way out if the situation is tough and convince the prospect anyhow
to get the sale done.
1.3.5 SELLING AND MARKETING CONCEPT
Selling means the last step in the chain of commerce where a buyer exchanges
cash for a seller’s goods or service. Or selling means to transfer (goods) to or render
(services) for another in exchange for money.
“Marketing is the social process by which individuals and groups obtain what
they need and want through creating and exchanging products and value with
others.”
—
Philip Kotler
6
1. Selling Concept
The philosophy here is that the customers if left alone would not buy enough of
the company s products and hence companies must undertake a large-scale
aggressive selling and promotion effort. This concept is used when companies find
themselves with an overabundance of products that they have to sell in order to
deplete their inventories. This concept is practiced more profoundly in case of
unsought goods (that people seldom want to buy) like insurance products,
encyclopedias etc. The seller’s aim is to sell what they make rather than make what
will sell in the market. The company has to push their products through aggressive
personal selling, persuasive advertisement, extensive sales promotions (like heavy
use of price discounts), strong publicity and public relations.
But hard selling carries high risks. It assumes that customers who are coaxed
into buying a product will like it and if they don’t, that they won’t bad mouth it or
complain to consumer organizations and will simply forget about their
disappointment or dissatisfaction and will buy again. But with so many buying
options and high degree of cognitive level, the buyers cannot be taken for granted in
that way. The danger is that the focus on “making the sale” overshadows the focus
on building long-term relationships with customers and the dissatisfied customers
may bad-mouth the product to a great extent.
2. Marketing concept:
The role of a mutually satisfying exchange is central to the marketing concept.
The marketing concept holds that the key to achieving its organisational goals
consist of the company being more effective than competitors in creating, delivering
and communicating customer value to its chosen target markets in order to satisfy
the customers at a profit. Three features of the marketing concept are customer
orientation, coordinated effort by all departments within the organisation to provide
customer satisfaction and emphasis on long-term profit.
The marketing concept describes an ideal state of affairs. It exists when an
organisation focuses all of its efforts on providing products that satisfy its
customers. The customer is the focal point for how each area of the organisation is
run. Products are created with the goal of satisfying customers’ needs and wants.
All departments within the organisation should be organised around the
marketing function anticipating, stimulating and meeting customers’ requirements
and work together toward the goal of customer satisfaction. They closely coordinate
their efforts both to satisfy customer wants and achieve the organisation’s long-run
goals. When an organisation is attempting to implement the marketing concept, it
has a market orientation. An organisation is market oriented when it generates
market intelligence on its customer needs, disseminates the intelligence across
departments, and then responds organisation-wide to the information.
Organisations adopting the marketing concept are committed to market-focused
and customer-driven philosophies.
7
If you want to understand the real different between selling and marketing
concept, following is a visual representation of difference between two concepts.
1.3.6 DIFFERENCES BETWEEN MARKETING AND SELLING

S.No. Marketing Selling
1 Marketing consists of all the Selling is an integral part of

important mix like Product, marketing which aims at targeting
Pricing, Promotion, Selling, prospective customers and
Distribution etc. facilitating the product sales
2 Marketing is consumer driven Selling is mostly producer

and has long term goals of driven and has short term goal of
building customer loyalty and achieving the sales target or
higher customer satisfaction market share
3 Consumer needs are the Producer or manufacturer

guiding force behind all the needs are the guiding force behind
marketing strategies and activities all the selling activities
4 Considers of building a long Does not consider building up

term brand for long term benefits a brand for long term benefits
8
5 More focus on product Less focus on product

modification or product modification or product
improvement and very much improvement
dynamic in nature due to higher
focus on customer demand
6 Mind share or place in Market share or sales volume

consumers’ mind is more is more important here
important here
More emphasis on More emphasis on staying

technological advancement and with existing technology and
7 new products to satisfy increasing reducing costs to improve profits
customer demand
1.3.7 SALES OBJECTIVES

Every organization has an objective before initializing functions. We need to
understand the goal of managing sales. Here we are discussing Sales Management
in terms of its objectives. Sales management necessitates several objectives which
are executed by sales managers. There are three such main objectives exist in the
operational part of the organization:-
 Sales Volume
 Contribution to profits
 Continuous Growth
(i) Sales Volume
It is the capacity or the number of items sold or services sold in the normal
operations of a company in a specified period. The foremost objective of sales
management is to increase sales volume to generate revenue.
(ii) Contribution to Profit
The sales of the organization should contribute to profit, as it is the only
revenue generating department. It can be calculated as the percentage or ratio of
gain in total turnover.
(iii) Continuing Growth
One of the main objectives of Sales Management is to retain consumers to
continue growth of the organization. There should be regular expansion of sales
and demand for an item in the market with new advanced formulation.
Some other sales objectives
The sales executives in this case are the ones who help implement
these objectives.
 However it is the top management who are responsible to make skeleton
of the organizational operation and has guided the lower management
with full proof strategy to achieve these objectives of sales management.
9
 The top management should come out with the idea of new products
which are socially responsible and are marketed in a manner which
meets customer’s needs and expectations.
 Thus sales management involves a strong interaction between Sales,
marketing and top management and worked as an integrated unit under
the organization as a whole.
1.4 REVISION POINTS
Sales management
The attainment of sales forces goals in an effective and efficient manner
through planning, staffing, training, directing, and evaluating organizational
resources
Types of selling
 Aggressive Selling
 Consultative Selling
 Need-oriented Selling
 Product-oriented Selling
 Competition-oriented Selling
Sales objectives
 Sales Volume
 Contribution to profits
 Continuous Growth
1.5 INTEXT QUESTIONS
1 What do you mean sales Management?
2 What are the importance of sales management?
3 Describe different types of selling?
4 What is selling?
5 Define marketing?
6 What are the differences between selling and marketing?
7 Elaborate various objectives of sales?
1.6 SUMMARY
Sales management starts with helping develop the right products, setting the
right prices and distributing in the right places, and continues with marketing
messaging, customer service and other selling efforts. All of these efforts must be
coordinated so one doesn’t interfere any of the others. Setting plans, monitoring
them and tracking results lets you continue to adapt, eliminate weaknesses and
take advantage of opportunities.
1.7 TERMINAL EXERCISE
1. Sales Management refers the management activities such as
a) Advertising and sales promotion
b) Marketing research, physical distribution
c) Pricing and product merchandising
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d) Above all
2. The following all the points need for sales management except
a) New products
b) Increase the production
c) Reduce the cost
d) Import market
3. The sales rep is more inclined towards explaining the features and benefits
of the product to the prospect is called
a) Competition-oriented Selling
b) Product-oriented Selling
c) Aggressive Selling
d) Need-oriented Selling
4. Considers of building a long term brand for long term benefits because
a. It is a Marketing
b. It is a selling
c. Marketing and selling
d. None of above
1.8 SUPPLEMENTARY MATERIALS
1. Krishna K Havaldar Vasant M Cavale Sales and Distribution Management:
Text and Cases Tata McGraw-Hill Education, 01-Jun-2006
2. Tapan K. Panda, Sunil Sahadev Sales and Distribution Management Oxford
University Press, 2005
3. Bholanath Dutta Sales and Distribution Management I. K. International
Pvt. Ltd New Delhi 2011
1.9 ASSIGNMENTS
1. In your own words explain the why sales management is important
considering the development of right products.
2. State the various objectives of sales to be considered by an organization to
attain its goal.
1.10 SUGGESTED READINGS /REFERENCE BOOKS/SET BOOKS
1. S.L.Gupta “Sales and Distribution Management” Excel Books India,
2009
2. Peter Green, “Sales Management and Organization” 2007 first edition
3. Brain Tracy, “ The Psychology of selling” 2012, first edition.
4. Thomas N Ingram, Raymond W Laforge, Ramon A Avila, Charles H
Schwepker, “Sales Management Analysis and Decision Making” 2007,
sixth edition.
5. Richard R Still, “Sales Management Decision Strategies and Cases”,
2003, fifth edition.
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Sources from Websites

1. https://en.wikipedia.org/wiki/Sales_management
2. http://www.salesmanagementservices.com/what-is-sales-management/
3. https://blog.pipedrive.com/2016/05/sales-management/
4. http://www.businessdictionary.com/definition/sales-management.html
5. http://apttus.com/resources/sales-management-process-strategies/
6. https://www.tutorialspoint.com/sales_and_distribution_management/s
ales_and_distribution_management_process.htm
1.11 LEARNING ACTIVITIES
1. “Marketing is the social process by which individuals and groups obtain
what they need and want through creating and exchanging products and value with
others.” – Discuss.
1.12 KEYWORDS
Sales management, Importance of sales management, Selling and marketing,
Sales objectives
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LESSON-2
FUNCTIONS OF SALES MANAGEMENT
2.1 INTRODUCTION
Sales Management facilitates the directions of activities and functions which
are involved in the distribution of goods and services. According to Philip Kotler,
“Marketing management is the analysis, planning implementation and control of
programs designed to bring about desired exchanges with target markets for the
purpose of achieving organizational objectives. It relies heavily on designing the
organizations offering in terms of the target markets needs and desires and using
effective pricing, communication and distribution to inform, motivate and service
the market.”
Sales or Marketing Management is concerned with the chalking out of a definite
program, after careful analysis and forecasting of the market situations and the
ultimate execution of these plans to achieve the objectives of the organization.
Further their sales plans to a greater extent rest upon the requirements and
motives of the consumers in the market aimed at.
To achieve this objective the organization has to give heed to the right pricing,
effective advertising and sales promotion, discerning distribution and stimulating
the consumer’s through the best services. To sum up, marketing management may
be defined as the process of management of marketing programs for accomplishing
organizational goals and objectives. It involves planning, implementation and
control of marketing programs or campaigns.
2.2 OBJECTIVES
After completing this lesson you will be familiar with:
 Functions of Sales management
 Duties of Sales manager
 Responsibilities of sales manager
 Selling Process
2.3 CONTENTS
2.3.1 Functions of Sales management
2.3.2 Duties of Sales manager
2.3.3 Responsibilities of sales manager
2.2.4 Selling Process
2.3.1 FUNCTIONS OF SALES MANAGEMENT
(i) Sales research and planning.
(ii) Demand creation.
(iii) Sales costs and budget.
(iv) Price fixations.
(v) Development of products.
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(vi) Establishing sales territories.

(vii) Co-ordination of sales.
Some other functions of the Sales management
The basic Administration process are Planning, organizing, assembling
resources, directing and controlling. The sales executive performs all these
functions and therefore is subject to all the principles of the management
pertaining to their performance. These general management concepts may be
rephrased into sales management terms.
1. Planning
Planning includes product market promotion and sales force planning. It also
includes such activities as sales forecasting and budgeting which forms the basis
for the fiscal operating plans of the organization.
2. Organizing
The sales executive is responsible for organizing his field and office. Personnel
into the best groupings and structure for accomplishing the organization’s goals.
3. Directing
Such activities as sales training supervision and stimulation would be
considered as part of the directing process expected of the sales administrator.
4. Controlling
Devising compensation plans establishing sales territories setting sales quatos
evaluating performances against standards and market analysis are all part of the
sales manager’s controlling duties.
2.3.2 DUTIES AND RESPONSIBILITIES OF SALES MANAGER
The functions/ duties of a sales manager are many and varied. They may be
classified under the following three heads:
1. Managerial /executive duties or functions
2. Administrative duties or functions
3. Miscellaneous duties or functions
1) Managerial / Executive Duties or Functions
The main function of the sales manager is the management of sales operations
including sales programmes and sales personnel. The management of sales
programmes includes establishment and developing short-term and long-term sales
policies and sales objectives, in consultation with other heads of related
departments. He develops detailed sales programmes for his department designed
to improve competitive positions, to minimize re-distribution costs and to achieve
pre-determined sales goals in terms of amount and quantity. For this purpose he
should review and approve and if necessary, improve sales strategies, sales policies,
sales objectives and pricing policies of the respective products.
14
The management of sales personnel function includes recruitment, selection,

training, direction, supervision motivation and control of sales personnel in the best
interest of the organization. In smaller organizations, the top executive of the sales
department sales manager himself, performs this function. However, in large
organizations, services of staff specialists are made useful. He fixes sales territory
and sales quota for every salesman, watches his performance and takes necessary
timely action to correct hi performance.
2) Administrative Function
The administrative head of sales department is Sales Manager who is having
full control over the staff of the department and administering the sales office. He
establishes an effective plan of sales organization and also controls the activities of
the entire sales staff working under his control. He is the leader of the sales
personnel at all levels and guides, directs and provides them proper incentive so as
to perform their duties effectively.
Administration of sales office is one of the important functions of the sales
manager. It involves considerable amount of paper work and record-keeping,
depending on the nature of activities assigned to sales department.
3) Miscellaneous Functions
1) Maintenance of cordial and effective relationship with the heads of other
departments within the company.
2) To ensure that long-term customer relationship is maintained so as to
achieve the goals of the enterprise.
3) To conduct selling personally so as to increase the sales volume. For this
purpose he plans, develops and implements the field sales strategy, supervisor the
sales personnel and coordinates and controls the sales efforts of sales personnel.
4) To study the market conditions, problems of competition and the substitutes
coming into the market. He is required to inform the top management of these facts
along with his suggestions.
5) To maintain discipline in the sales organization.
6) To organize activities relating to sales promotion, such as, contests,
seminars, conferences and provide incentives to the sales staff and the customers.
7) To plan and organize distribution channel in consultation with top
management
8) To analyze the market thoroughly from time to time.
9) To undertake advertising campaign keeping in view the cost and sales
requirements.
10) To plan sales targets in consultation with other departments, such as
production department.
11) To prepare sales budget of a given period.
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Thus the sales manager performs a number of functions depending on the

nature of products and the size of the enterprise.
2.3.3 RESPONSIBILITIES OF SALES MANAGER
The responsibilities of a manager can be grouped under five heads :
1) Responsibility to himself.
2) Responsibility towards organization
3) Responsibility towards customers
4) Responsibility towards his staff and
5) Miscellaneous
They may be elaborated as under:
1) Responsibility to self
The foremost responsibility of the sales manager is to make him competent for
the work assigned to him by the enterprise. In this connection he must evaluate
himself from time to time and take make necessary improvements accordingly. The
following are the responsibilities towards himself:
a. To increase managerial abilities
b. To increase and develop selling abilities
c. To keep himself in contact with regional changes and developments
d. To have knowledge of latest marketing techniques
e. To have detailed knowledge of the products
f. To make continuous and sincere efforts for removing his weaknesses.
g. To develop the spirit of cooperation posses progressive outlook and have
good temperament.
2) Responsibility towards Organization
Since Sales Manager is a vita; part of the entire organization, he has a number
of responsibilities towards the organization. They may be summarized as under:
a. To maintain and also increase the goodwill of the enterprise among his
customers
b. To prepare the records and reports etc of his department regularly and
present the same before the top management accordingly.
c. To take steps of reducing sales cost.
d. To keep a constant watch on the activities of the competitors and keep
the top management aware of them along with his suggestions.
e. To make sincere efforts at achieving sales targets.
f. To coordinate and cooperate with the other departments
g. To feel proud of the organization
16
h. To keep the organization in touch with the changes that are taking place
in his region, department etc
i. To seek and also provide assistance and cooperation to the enterprise as
and when required. To maintain true and complete accounts of his
department.
3) Responsibility towards Customers
a. To remain in constant touch with the customers through sales
promotion and advertisement
b. To explain to the customers the advantages that they can have by
keeping themselves in touch with the company.
c. To provide information to the customers about the miscellaneous uses
of the products.
d. To keep himself in touch particularly with those salesmen who
command influence on customers.
e. To take interest and listen to the complaints of the customers and make
sincere efforts for solving the same satisfactorily.
4) Responsibility Towards Salesmen
a. To explain the techniques of presenting the products in such a way
before the customers which is less time consuming, cheaper and more
effective.
b. To recruit, select, train, supervise, control, remunerate, motivate and
promote the sales force so that it may perform the duties more efficiently
and effectively.
c. To explain the methods of dealing with the customer’s complaints
effectively.
d. To provide the detailed knowledge about the products.
e. To arrange and plan salesmen’s tours, allocate sales territories, fix sales
quotas of each salesman and check the compliance from time to time.
f. To listen and remove the grievances complaints and problems of the
sales force and take necessary timely steps for solving the same. He
must see that no clash of interest takes place.
5) Miscellaneous
a. Responsibility as to maintenance of public relations
b. Responsibility as to office management
c. Responsibility as to sales planning, sales targets sales policies sales
forecasting sales research etc
d. Responsibility as to reducing sales costs in view of sales volume.
e. Responsibility s to collect and analyze statistics in connection with
marketing research, product research and consumer research etc.
17
2.3.4 SELLING PROCESS

The selling process is essentially the series of steps followed by a salesperson
while selling a product. It includes the following steps:
1. Prospecting
The step in which potential customers are identified by the salesperson is
called prospecting.
2. Pre-approach
The stage where the salesperson collects information about the potential
customers and understands them before making the sales call is called pre-
approach.
3. Approach
Approach is the step where the salesperson actually meets the customer for
the first time.
4. Presentation
The step wherein the salesperson talks about how the product will satisfy the
customer’s needs and add value to his/her life is called presentation.
5. Handling Objections
In this step, the salesperson clarifies all the doubts and questions that the
customer has and eliminates all his objections to buying the product.
6. Closing
The step in which the customer is asked to place and order for the product is
called closing.
7. Follow-Up
This is the final step in the selling process where the salesperson follows up
with the customers to ensure satisfaction and builds the relationship in order to
repeat business with them.
2.4 REVISION POINTS
 Functions of Sales management
o Sales research and planning.
18
o Demand creation.
o Sales costs and budget.
o Price fixations.
o Development of products.
o Establishing sales territories.
o Co-ordination of sales.
 Duties and Responsibilities of sales manager
Duties:
o Managerial /executive duties or functions

o Administrative duties or functions
o Miscellaneous duties or functions
Responsibilities:
o Responsibility to himself.
o Responsibility towards organization
o Responsibility towards customers
o Responsibility towards his staff and
 Selling process
o Prospecting
o Pre-approach
o Approach
o Presentation
o Handling Objections
o Closing
o Follow-Up
1. What are the functions of sales management?
2. Explain various duties of sales manager?
3. What are the responsibilities of sales manager?
4. Elaborate the selling process.
2.6 SUMMARY
To achieve this objective the organization has to give heed to the right pricing,
effective advertising and sales promotion, discerning distribution and stimulating
the consumer’s through the best services. To sum up, marketing management may
be defined as the process of management of marketing programs for accomplishing
organizational goals and objectives. It involves planning, implementation and
control of marketing programs or campaigns. The selling process is essentially the
series of steps followed by a salesperson while selling a product. It includes the
following steps: The selling process is essentially the series of steps followed by a
salesperson while selling a product
19

1. To ensure that long-term customer relationship is maintained so as to achieve
the goals of the enterprise is a
a) Managerial duties
b) Administrative duties
c) Miscellaneous
d) Above all
2. To develop the spirit of cooperation posses progressive outlook and have good
temperament is a
a) Responsibility to himself
b) Responsibility towards organization
c) Responsibility towards customers
d) Responsibility towards his staff
3. To provide the detailed knowledge about the products is a
a) Responsibility towards his staff
b) Responsibility towards organization
c) Responsibility towards customers
d) Responsibility towards Salesmen
1. Calvin, Robert J. Sales Management Demystified. New York: McGraw-Hill,
2007.
2. Cron, William L., and Thomas E. DeCarlo. Dalrymple's Sales Management:
Concepts and Cases. 9th ed. New York: John Wiley and Sons, 2005.
3. Johnson, Mark W., and Greg W. Marshall. Sales Force Management. 9th
ed. Boston: McGraw-Hill, 2008.
2.9 ASSIGNMENTS
1. Critically examine the various functions of sales management considering
planning, organizing, assembling, directing and controlling.
2. Briefly discuss about the various duties and responsibilities of sales
manager.
1. S.L.Gupta “Sales and Distribution Management” Excel Books India, 2009
Schwepker, “Sales Management Analysis and Decision Making” 2007, sixth
edition.
5. Richard R Still, “ Sales Management Decision Strategies and Cases”, 2003,
fifth edition.
20

1. http://www.mbaskool.com/business-concepts/marketing-and-strategy-
terms/2069-selling-process.html
2. https://www.boddunan.com/articles/education/23-business-
management/13596-functions-a-responsibilities-of-sales-manager.html
3. http://www.reisa.com.au/publicinfo/steps-in-the-selling-process
4. http://2012books.lardbucket.org/books/powerful-selling/s10-01-it-s-a-
process-seven-steps-to-.html
5. https://salesandmarketing.com/content/7-responsibilities-sales-managers-
must-own
1. The selling process is essentially the series of steps followed by a salesperson
while selling a product. Explain the steps to be followed in selling process.
2.12 KEYWORDS
Functions of Sales management, duties and Responsibilities of sales manager,
selling process
21
LESSON-3
SALESMANSHIP
3.1 INTRODUCTION
Salesmanship is seller-initiated effort that provides prospective buyers with
information and motivates or persuades them to make favourable buying decisions
concerning the seller’s products or service. The salesman of today has to react and
interact in any different ways to many different people.
Apart from the knowledge of the product, a salesperson has to be a
psychologist with one prospect, a human computer with another, an adviser with
another, and at the same time a friend with some buyers. Salespersons must adjust
their personalities on every call. Salesmanship may be implemented not only
through personal selling but through advertising. Thus, advertising has been
described as “salesmanship in print.”
3.2 OBJECTIVES
The objective of this lesson is to make you:
 Meaning and Definition of salesmanship
 Concept of salesmanship
 Salesmanship is a art, science and profession
 Duties and qualities of a salesman
 Types of salesmanship
3.3 CONTENTS
3.3.1 Meaning of salesmanship
3.3.2 Definition of salesmanship
3.3.3 Old and Modern Concept of Salesmanship
3.3.4 Importance of Salesmanship
3.3.5 Duties and qualities of a Salesman
3.3.6 Salesmanship is a Art, science and Profession
3.3.7 Types of salesmanship
3.3.1 MEANING OF SALESMANSHIP
“The personal selling” and “salesmanship” are often used interchangeably, but
there is an important difference. Personal selling is the broader concept.
Salesmanship may or may not be an important part of personal selling and it is
never ‘all of it. Along with other key marketing elements, such as pricing,
advertising, product development and research, marketing channels and physical
distribution, the personal selling is a means through which marketing programmes
are implemented. The broad purpose of marketing is to bring a firm’s products into
contact with markets and to effect profitable exchanges of products for money. The
purpose of personal selling is to bring the right products into contact with the right
customers, and make ownership transfer.
Salesmanship is seller-initiated effort that provides prospective buyers with
information and motivates or persuades them to make favourable buying decisions
22
concerning the seller’s products or service. The salesman of today has to react and
interact in any different ways to many different people.
Apart from the knowledge of the product, a salesperson has to be a
psychologist with one prospect, a human computer with another, an adviser with
another, and at the same time a friend with some buyers. Salespersons must adjust
their personalities on every call. Salesmanship may be implemented not only
through personal selling but through advertising. Thus, advertising has been
described as “salesmanship in print.”
Some definitions emphasize that salesmanship is the art of influencing or
persuading people to do what sales representative wants them to do. For instance,
contractors, teachers, ministers, authors, politicians, industrial engineers etc.,
practice the art of influencing others to do what they want them to do. Every man is
a salesman in his own walks of life.
 He who works with his hands is a labourer.
 He who works with his hands and his head is a craftsman.
 He who works with his hands, HEAD and heart is an artist.
 He who works with hands, his head, his heart and his feet is a
salesman.”
Salesmanship is the ability to persuade people to want the things which they
already need. Salesmanship is the ability to convert human needs into wants. The
work of salesman is a service i.e., helping the consumer. The salesman gives a
solution to the customer’s problems. Salesmanship is the ability to handle the
people and to handle the products.
3.3.2 DEFINITION OF SALESMANSHIP
According to W.G Carter, “Salesmanship is in attempt to induce people to buy
goods.” According to the National Association of Marketing Teachers of America, “It
is the ability to persuade people to buy goods or services at a profit to the seller and
benefit to the buyer.”
According to Knox, “Salesmanship is the power or ability to influence people to
buy at a mutual profit, that which we have to sell, but which they may not have
thought of buying until call their attention to it. Salesmanship is the ability to
persuade people to want they already need.”
According to Prof Stephenson, “Salesmanship refers to conscious efforts on the
part of the seller to induce a prospective buyer to purchase something that he had
not really decided to buy, even if he had thought of it favorably. It consists of
persuading people to buy what you have for sale in making them want it, in helping
to make up their minds.”
According to J.C. Jagasia, “It is an ability to remove ignorance, doubt,
suspicion and emotional objection concerning the usefulness of a product.”
According to Holtzclaw, “Salesmanship is the power to persuade plenty of
people to pleasurably and permanently purchase your product at a profit.”
23
According to Carfield Blake, “Salesmanship consists of winning the buyers’

confidence for the sellers’ house and goods, thereby winning regular and permanent
customers.”
According to Sefred Gross, “Salesmanship is the art of increasing satisfaction
by persuading those people who should do so to buy specific goods or service.”
Salesmanship is one of the skills used in personal selling, as defined by Stroh,
“it is a direct, face-to-face, seller-to-buyer influence which can communicate the
facts necessary for marketing a buying decision; or it can utilize the psychology of
persuasion to encourage the formation of a buying decision”.
Thus, salesmanship is the process of persuading a person to buy goods or
services. It does not mean that salesmanship is applied only to personal selling; it
can also be applied to advertising- printed salesmanship. Salesmanship in its
broader meaning, includes all types of persuasion means, by a seller, viz.,
advertising, personal selling and other methods.
3.3.3 OLD AND MODERN CONCEPT OF SALESMANSHIP
In olden days, a salesman takes an order. He shows the goods. He waits for an
order. Then he receives the payment. He never attempts to guide, or help or
persuade the consumers. But the modern concept of salesmanship is entirely
different from the old concept of salesmanship. Modem concept is creative in
approach. He creates needs and converts them into wants. Customer satisfaction is
the main problem of salesman. Mutual profit is essential both for the buyer and the
seller. Salesman guides the customer to buy things which satisfy his want.
Salesman motivates the feelings of the customers to act.
3.3.3.1 Olden salesmanship:
1. Manifestation of cheat
In the past, salesman was most unbelievable as they were known for fraud,
dishonesty, chicanery. The Greeks called a retailer as ‘falsifier’ and Roman as
‘cheat’. It was true as most of the commercial adventures were pirates indulging in
vessel attacks, killing the crews and seizing the cargo; they would goods to the
extent of scuttling the vessels to hide their crime and traces.
2. Absence of a set-price
The good, which were dealt in did not enjoy any fixed price. It was but natural
that goods were scares and the demand outstripped the supply that gave the golden
opportunity to these salesmen to make hay. They did not hesitate to take full
advantage of the rarity and the scarcity of the supply. The prices were unaffordable.
This resulted in price high-haggling or bargaining. One tried to stretch too much
thus, one forced encouraging another.
3. Low grade activity
Selling, like many other ways of life, was looked down upon, as a degrading and
dishonest means of livelihood. The society of these days looked at salesman with
contempt and disrespect. It was because, trading itself was thought as an activity of
deceit and the sellers being the party to it. The position of a salesman on a social
24
scale was one of the lowest in terms earnings and mobility. It was considered as low
grade time as the persons were to move from one place to another and person to
person make their livelihood. It was true that salesman were lowest paid employees.
4. Absence of publicity
Most of the commodities were sold in small general stores. Resultantly, these
were limited travelling salesman; the trading community did not rely on advertising
and publicity. The methods of sale were ‘sale by display’ and ‘sale by inspection’ on
the spot. Even the shops did not use attractive fixtures and furniture, artistic-
decoration and painting. The concept of ‘window’ and ‘counter’ display were very
crude in form.
5. More an art
Selling was taken as an art; more so a gift than acquired skill. Accordingly,
good salesman were burn but not made. There was no deliberate attempt to learn
the tricks of the trade; there was not such scientific training. It was not called a
science and a profession as is done today. Thus, a son of a salesman would become
a salesman by birth and family occupation. There was no deliberate attempt to
identify it as a science and a profession. As a result, salesmanship did not flourish
at the pace expected in the past.
3.3.3.2 Modern Salesmanship:
Modern salesmanship, unlike olden salesmanship is characterized by the
features of development, refinement and modernity. Today’ this salesmanship is
honorable, challenging, rewarding and a professional career. Today, he is not more
a mule-back rider, but a ringer of door bells. Today’s sales people are dynamic
power in the world of business; they generate more revenue in any developed and
developing economy than other workers in any other such single profession. The
outstanding attributes are:
1. Manifestation of commercial honesty
Honesty is the best policy that rules the business world. Here, honesty does not
mean judicial honesty. That is, each salesman is honest and truthful to the ext. He
is expected to be honest. That is, he tells, demonstrates, displays, convinces by
plus points of the products and services. He never blames the products of others.
He says that his products are best without maligning the status of others. This
approach, attitude has made the customers to behave him as a friend and a guide
in making wise purchases. Customers have needs that can be met and problems
that can be solved by purchasing goods and services. Salesman seeks to uncover
potential or existing needs or problems and shows how the use of their products or
services can satisfy these needs or solve those problems honesty.
2. A respected profession
Today, salesmanship is not looked only as an art and science but as a
respected profession of high order. A professional professes his art and science. A
profession warrants acquisition of specialized knowledge, application of knowledge
as acquired, presence and respecting of a code of conduct and service to the
25
community than self-interest, for a reasonable remuneration. Thought on the

frame-work of these essentials and requisite salesmanship is profession
challenging, rewarding, respecting and absorbing. Today, successful are
professional men who have mastered the art and science of selling and sales
management. Today, we come across colleges and university departments which
ready to groom the younger into able salesman and saleswoman to shoulder the
responsibilities of turning the wheels of the economy-particularly the giant wheel
namely, sales. Community does not look down upon the career of a salesman. It is
an entry point and an able salesman may be tomorrow’s sales manager, general
manager or even managing director. It is a matter of interest, intelligence and
industry that take him to any heights.
3. Heavy reliance on advertising
Today’ this salesman and salesmanship rely heavily on advertising- the
counterpart of product promotion mix. It does not mean that he does not bank on
sales promotional media. The sales performance of today’s salesman is largely
hinged on powerful force of advertising. If he is the versatile actor, advertising
creates the stage and stage effects for illuminating success of his. He depends on
indoor, outdoor, direct and promotional advertising media and media vehicles so
much so that goods are presold. That is why advertising has been rightly described
as “salesmanship in print”. If one enters a shop today, it is easy to realize the deep
impact of promotion publicity such as window and counter display, showrooms and
show cases, fairs and exhibitions. To reach these outlets, print media, telecasting,
broadcasting, film and outdoor media are a must. That is, today the work of
salesman is much more easy and easy than before.
4. One price policy
With the instilled confidence and faith, the old system of bargaining is being
replaced by ‘one price’ system. As the manufacturers and dealers announces the
price of their products in advance in the advertisements and on the packages, the
old system of high-haggling is fast dying. Moreover, the changed concept of ‘self
service’ has revolutionized the marketing practices. Today, one who bargains is
looked down up on; bargaining is more an act of without and represents a silly
narrow mindedness in this age of affluence and plenty. The practice of ‘one price’
has also resulted in other guarantees and warrantees as many back speaking of
honesty of purpose and action in the consumer dealings. This has resulted in
saving of valuable time of both the seller and the buyer.
5. Widest assortments
The salesmanship of these days is built on the maximum consumer
satisfaction. The, key to the improved consumer satisfaction is choice- variety and
opportunity to select. Any dealer and his salesman is providing this facility of
widest choice by making available on the counter a variety of products in a given
product line. The choice is as to price, quality, size, dimensions, color
combinations, aroma, weights and so on. The range of selection is so wide today
26
that finally it is the salesman who is to help the customer in selecting a particular
product. In effect, a salesman is the purchase officer of a customer- a counselor, a
guide. The emphasis is on large sales volume through rapid stock turnover via
increased consumer satisfaction.
6. Sale of services
Sale of services is another outstanding feature of modern salesmanship. A
service is an intangible or impersonal activity or anticipated satisfaction who is
offered for sale either as such or in connection with sale of goods. These can be
broadly classed as consumer and industrial. The instances of consumer services
are hotel, food, personnel care, entertainment, transport, communication,
insurance and finance. Similarly, the examples of Industrial services are transport,
warehousing, insurance, finance, engineering, advertising, sales-promotion,
consultancy and office sources. Personal selling has upper hand in promoting the
sale of services both consumer and industrial services. A service salesman needs
higher degree of knowledge and skill and acumen of salesmanship –for services are
products and have to be considered physical entities. You may be a consultant, a
designer, or an artist or an advertising accounts executive or any other serviceman
in an industrial field; you must be able to position your service so that the potential
buyer understands it in relation to his needs and to the competitive offerings.
3.3.4 IMPORTANCE OF SALESMANSHIP
In the present day, salesmanship plays an important part. Salesman is the
connecting link between sellers and buyers at every step., i.e from the collection of
raw materials to the finished products. Of all, customers are the most benefited by
salesmen. Present era is of large-scale production, which is in anticipation of
demand. The market expands along with competition. This makes distribution a
difficult and a complex factor in the face of still competition. The expansion of the
market, growing competition etc., invite a better salesmanship.
1. Important to Producers:
Salesmanship is important to producers and manufacturers. For pushing
products into the competitive market, salesmanship is necessary. To capture new
markets also salesmanship is very important. Salesmen increase the sales volume.
It brings larger profits to the manufacturers. Salesmen work as the “eye and ear”
for the manufacturers.
They improve their products according to the taste of the consumers. They
improve their sales policies by keeping in mind the suggestions, impressions and
complaints of the consumers. He is the creator of demand. Hence it leads to
increased production and increased business activity. As such it increases
employment opportunity as well as personal incomes.
2. Important to Consumers:
Salesman educates and guides the consumers. He gives them more
satisfaction. ‘Consumers are right’ in the marketing. As such, he gives more
importance to them. Salesman helps the consumers in making the right decision
27
and proper selection of the products which they want to buy. Salesmanship
increases the rate of turnover, and hence reduces unsold stock. As such it
minimizes the economic stagnation. Consumers can select the best products
according to their requirements, taste and money.
3.3.5 DUTIES AND QUALITIES OF A SALESMAN
 Duties of salesman
1. The principal duty is to make sales of products or services.
2. He has to do the assigned duty (travelling).
3. He has to make collection of bills relating to sale.
4. He has to make report-Sales made, Calls made, Services rendered,
customers lost, competition and any other matters, relating to firm.
5. All complainants must be satisfied peacefully.
6. He has to attend sales meetings.
7. A salesman with his experience must supply information in order to
solve problems relating to product or the firm.
8. He must maintain a good relation with the customers.
9. He must assist the customers to make good selection.
10. He must develop a goodwill for the firm and the products.
11. He must have cooperative habits.
12. He takes periodic inventories of the stocks.
 Characteristics or the Qualities of a Successful Salesman

4. Establishing good relationship with a variety of people.
5. Learning quickly and adapting smoothly.
6. Planning ahead and efficiently managing his time and efforts.
7. Working hard to achieve his goals, dedicating himself to provide long-term
service, rather than having a get-rich-quick attitude.
8. Communicating clearly both in speech and in writing.
9. Thinking analytically and learning to break problems down to their basic
components.
10. Producing constantly both in quality and quantity rather than performing
erratically.
11. Persisting steadily his goal and not giving up easily.
12. Possessing and living up to high moral characteristics that enable people
to admire,, respect and trust him.
“Personality is the personal distinction or dynamic force which is felt by
everybody who comes within the radius.” Personality is the sum total of the
impressions made on people with whom one comes into contact. The impression is
28
the result of many qualities that one possesses. There are a number of qualities
which make a salesman successful.
3.3.6 SALESMANSHIP IS A ART, SCIENCE AND PROFESSION
Selling is one of the most important marketing activities in most organizations.
The scope for selling has increased substantially during the past few decades due to
growth in the industry. Persuasive selling skills are being used not only by
organizations whose objective is to earn profit but also by non-profit organizations
because of this varied nature selling has developed into a specialized area of
management. Before we get into the discussion that Salesmanship is an art or
science, first important thing that who is a salesperson? The most suitable answer
to this question is everyone is salesperson. We are always presenting our ideas, our
opinions or ourselves in every conversation that we have. If we are presenting our
feelings, it is usually done in such a way as to solicit a desired response (e.g.,
happiness, empathy, sadness, compassion, etc.). We have been doing this all of our
lives, and it is a natural part of our daily routine.
3.3.6.1 Salesmanship is an Art
An art is making of the knowledge more efficient by applying skill. Art is skill.
Art is a practical science. Art is a knack for doing something which is acquired by
study, practice and special experience. If science is knowledge, then art is action.
Bioscience we know a thing; by art we do that thing. An art is skill in performance
acquired by study, observation and experience.
Art is the practical side of skill. It is a knack for doing something which is
acquired by study and practice. Science makes a man perfect and arts makes a
man exact. Art is difficult to learn. It can be studied easily by the person who has
the skill. A salesman must possess the skill and it can be acquired and developed.
Every customer is an individual, but individuals are different. And a salesman
has to diagnose the customer by efficient dealings, of course by using his skills. A
salesman must have necessary knowledge and skill to face the various types of
customers. Exact human behaviour is unpredictable, uncontrollable and un-
understandable. Therefore, we can say that salesmanship is an art.
3.3.6.2 Salesmanship is a Science
Science is a body of systematized knowledge. When calling anything as a
science, it must be able to build up a body of laws or principles. The characteristics
and behaviour of facts are analysed systematically and laws are formulated.
Science is a system of facts and principles concerning a subject. Science is defined
as an accepted knowledge that has been systematized and formulated with
reference to the discovery or operation of general law. The principles or the set of
generalization, universally accepted, are called laws of that science. It is the
knowledge of research, discovery and experience and the principles are universally
accepted.
Salesmanship is a systematically arranged and specialized knowledge. It has its
own rules and principles. Salesmanship is a science based on human psychology. A
29
salesman has to study the psychology of the consumers. He must have knowledge
about their behaviour. He must have knowledge about the different characteristics
of goods which he has to sell.
As such, he requires a systematic knowledge of those goods. As a science,
salesmanship tries to follow certain basic principles, approach, demonstration and
concluding a sale etc. All these have to be followed systematically. Thus we may say
that salesmanship is a science.
3.3.6.3 Salesmanship is a Profession
A certain degree of skill or specialization is required for a profession.
Professional people such as lawyers, doctors, writers and actors get along with their
clients. Some people say, “Salesman are born, but not made.” Others feel,
“Salesmen are mostly made than born.” Still others assert, “Salesmen are born and
made.” There are certain qualities-emotional, physical developments etc. that are
born qualities. With pleasing personality and through convincing approach,
prospects can be made attractive. But for a good salesman, personality alone is not
enough. There are specialized institutions imparting training in salesmanship. A
professional usually considers ‘service’ as its aim. He offers his service to his
employer, whose profit is increased. Again the profession requires skill. The skill is
present in the salesmanship.
A professional man secures the best regards for the mastery of his subject. In
the era of stiff competition, personality alone will not make a sale. Training makes
one a good salesman. Thus, salesman is nothing but a skilful dealer with the public
and he converts them into customers. The knowledge of four fundamentals-
prospect, product, personality and organisation together with mastery over sales
process makes salesmanship a profession.
Therefore, the term Salesmanship includes both a knowledge of fundamental
selling principles and the ability to apply them in the actual making of sales and
these skills has been changed ordinary salesman into professional. It comprehends
both the science and the art as well as profession.
3.3.7 TYPES OF SALESMANSHIP
1. Manufacturer’s Salesmen:
(a) Missionary Salesmen:
They are also known as Creative Salesmen or Pioneer Salesmen. They are
employed by manufacturers and do the work, of missionary nature. They create
demand for the products. They usually develop goodwill. They call on distributors-
wholesalers, retailers, customers, in order to educate, train and induce them to
promote the products. Manufacturers of medical supplies use this type of salesmen
to promote their products.
(b) Merchandising Salesmen:
They assist dealers by giving suggestions on display, store- layout, service
facility etc. They arrange wide publicity and conduct demonstration for dealer
30
salesmen, by even working along with them. They are largely involved in drugs,
medicines, grocery etc. There is a wide scope for this category.
(c) Dealer-Servicing Salesman:
These salesmen call on retailers in their territory and visit them often. They
bring samples of new products, take orders and make up window display.
(d) Sale Promotion Salesmen:
They are also known as Retail Salesman. They are specialized in promotional
work. They are representatives of medical firms or publishers. They may not take
spot orders but they try to convince people like doctors about the new drug,
research work, testing, result etc. They create demand by calling on customers,
(e) Technical Salesmen:
They are trained technically. They provide technical assistance to company’s
customers on matter connected with the product, its quality, its design, its
installation etc. Generally these types of salesmen deal with computers,
equipment’s, machinery items, chemical products etc.
2. Wholesaler’s Salesmen:
Products reach the hands of customers through a number of channels, the
main channel being wholesalers. They are the nerve-centres of distribution between
manufacturers and retailers. These salesmen are mainly concerned with retailers
through whom the products are to be marketed.
Their main concerns are:
1. To guide the wholesalers in giving credit transaction to retailers,
2. To collect bills from retailers and customers,
3. To collect information of the market trend,
4. To help retailers to improve sales and
5. To take orders from retailers.
3. Retail Salesmen:
They are of two types:
1. Indoor salesmen and
2. Outdoor Salesmen.
Indoor salesmen work within the store counter sales over the counter. They do
not need training as they have to face only customers and not the prospects. They
deal with regular buyers. They are order filling salesmen. They receive orders and
execute them. They must have good manners and a helpful attitude. They must be
able to guide the customers and help them to make quick decisions. They must
also be knowledgeable and honest. Above all, they must maintain products in the
shelves in an attractive manner.
Outdoor salesmen may also be called travelling salesmen. Their main job is to
make regular travels, visit customers, canvass orders etc. They must possess all the
qualities of ideal salesmen.
31
4. Speciality Salesmen:
They are to sell speciality products-expensive durable goods, furniture, books,
house furnishings, washing machines, automobiles, refrigerators etc. People
purchase these products only after a personal and careful selection, because they
do not buy them frequently. Salesmen of this kind must be masters of the art of
salesmanship. They are representatives of manufacturers, who produce special
items.
3.4 REVISION POINTS
 Importance of salesmanship
 Important to Producers
 Important to consumers
 Duties of salesman
 The principal duty is to make sales of products or services.
 He has to do the assigned duty (travelling).
 He has to make collection of bills relating to sale.
 He has to make report-Sales made, Calls made, Services rendered,
customers lost, competition and any other matters, relating to firm.
 Qualities of a Successful Salesman
 Establishing good relationship with a variety of people.
 Learning quickly and adapting smoothly.
 Planning ahead and efficiently managing his time and efforts.
 Working hard to achieve his goals, dedicating himself to provide long-
term service, rather than having a get-rich-quick attitude.
 Types of Salesmanship
 Manufacturer’s Salesmen
(a) Missionary Salesmen
(b) Merchandising Salesmen
(c) Dealer-Servicing Salesman
(d) Sale Promotion Salesmen
 Wholesaler’s Salesmen
 Retail Salesmen
 Speciality Salesmen
1. What is salesmanship?
2. Define salesmanship?
3. Explain old and modern concept of salesmanship?
4. Why need salesmanship?
5. What are the duties of salesman?
6. What are qualities of salesman?
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7. Elaborate is a salesmanship art or science or profession?

8. Explain different kinds of salesman?
3.6 SUMMARY
Salesmanship is the process of persuading a person to buy goods or services. It
does not mean that salesmanship is applied only to personal selling; it can also be
applied to advertising- printed salesmanship. Salesmanship in its broader meaning,
includes all types of persuasion means, by a seller, viz., advertising, personal
selling and other methods. Personality is the sum total of the impressions made on
people with whom one comes into contact. The impression is the result of many
qualities that one possesses. There are a number of qualities which make a
salesman successful. Salesmanship includes both a knowledge of fundamental
selling principles and the ability to apply them in the actual making of sales and
these skills has been changed ordinary salesman into professional. It comprehends
both the science and the art as well as profession.
1. An ability to remove ignorance, doubt, suspicion and emotional objection
concerning the usefulness of a product
a) Salesman quality b) Salesmanship
c) Both d) Sales strategy
2. Working hard to achieve his goals, dedicating himself to provide long-term
service, rather than having a get-rich-quick attitude is one of the
a) Quality of salesman b) Duty of sales manager
c) Responsibility of management d) Responsibility towards organization
3. Salesmanship is a systematically arranged and specialized knowledge so it is a
a) An Art b) Science
c) Profession d) None of above
4. Outdoor salesmen may also be called
a) Retail salesman b) Travelling salesman
c) Manufacturer salesman d) Sale Promotion Salesmen
Pvt Ltd New Delhi 2011
3.9 ASSIGNMENTS
1. Give a detailed note on the Old and Modern concept of salesmanship.
2. ‘Customers are more benefited by salesman.’ Is this statement correct?
Argue your answer.
33
3.10 SUGGESTED READINGS/REFERENCE BOOKS/SET BOOKS

2009
sixth edition.
5. Richard R Still, “ Sales Management Decision Strategies and Cases”,
1. http://www.yourarticlelibrary.com/salesmanship/salesmanship-
definition-importance-duties-and-types/50988/
2. http://www.preservearticles.com/201103144514/comparative-study-
on-olden-and-modern-salesmanship.html
3. http://www.streetdirectory.com/travel_guide/73200/sales/salesmansh
ip_is_it_a_art_or_science.html
4. http://www.yourarticlelibrary.com/salesmanship/is-salesmanship-a-
science-or-an-art-discussed/50983/
“Salesmanship is the art of influencing or persuading people to do what sales
representative wants them to do.” – Discuss.
3.12 KEYWORDS
Definition of salesmanship, Concept of salesmanship, Salesmanship is a art,
science and profession, Duties and qualities and types of salesmanship
34
LESSON-4
MERITS AND DEMERITS OF SALESMANSHIP
4.1 INTRODUCTION
Usually manufacturer produces things in anticipation of demand. Many of
them also produce on mass scale. Consumers derive maximum utility out of
salesmanship. A good salesman makes a study of the needs of customers and
satisfies them promptly. Good salesmanship ultimately leads to the economic
development and progress of a country and to the general rise in the standard of
living. When sales are good, industry, trade and commerce prosper and the country
as a whole gets benefit. Good salesmanship goes far in making a nation great.
4.2 OBJECTIVES
After completing this lesson you will be familiar with:
 Advantages of salesmanship
 Disadvantages of Salesmanship
 Qualities of salesman
4.3 CONTENTS
4.3.1 Advantages of salesmanship
4.3.2 Disadvantages of salesmanship
4.3.3 Qualities of good salesman
4.3.1 ADVANTAGES OF SALESMANSHIP
The advantages of salesmanship can be well understood from the following
discussions:-
1. Advantages of producers
Usually manufacturer produces things in anticipation of demand. Many of
them also produce on mass scale. Salesmanship helps producers in following
ways:-
a. It enables the producers to push their products in a competitive market.
Efficient salesmen are able to sell whatever the producers produce.
b. It helps the producers to increase production.
c. As production and sales increase, manufactures get more profit.
d. Capacity of the industry increases.
e. It also promotes goodwill of the firm.
2. Advantages to consumers
Consumers derive maximum utility out of salesmanship. A good salesman
makes a study of the needs of customers and satisfies them promptly.
(a) Salesmanship helps customers to select right type articles.
(b) It never cheats them by supplying duplicate goods at higher prices.
(c) It suggests; informs and guides customers in purchasing articles.
Thus, consumers get genuine goods at a moderate price due to salesmanship.
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3. Advantages to the nation

Good salesmanship ultimately leads to the economic development and progress
of a country and to the general rise in the standard of living. When sales are good,
industry, trade and commerce prosper and the country as a whole gets benefit.
Good salesmanship goes far in making a nation great.
4. Advantages to the Government
The Government also receives maximum utility out of salesmanship.
Salesmanship helps the producers to produce and sell more of goods and services.
As production and sale in country increases, the Government is able to get more
revenue by way of various taxes, duties and levies like sales tax, income tax, excise
duty, freight and transportation charges.
5. Advantages to the society
Salesmanship contributes to economic development of a society. It increases
the production and eases distribution. The standard of living of the people improves
as their personality capita income increases. Salesmanship removes ignorance and
educates people regarding different types of products and their utilities.
6. Advantages to unemployed
Successful salesmanship, by increasing business activity creates many
employment opportunities for unemployed. This, in turn, increases income and
welfare of the whole country.
7. An advantage to salesman
The salesman himself is benefited directly or indirectly by salesmanship. The
advantages are :
(a) Fabulous incomes
Generally, a salesman is paid a monthly salary and commission which is linked
with sales. If sales increases the commission also increases. As sales form the basis
of business and profit many concerns do not hesitate to offer attractive bonuses,
prerequisites of various kinds to the right type of salesman in addition to salary.
Salesmen of top grade of the famous concerns of the world have earned fabulous
income.
(b) Opportunity of learning
Salesmanship offers interesting and thrilling opportunities to men, who like the
job by nature and training. Every customer may mean a new challenge to them. In
course of his routine work, a salesman avails the opportunity of learning the
business methods and practices. This he present him to set up his own business in
future.
(c) Opportunities to relax and enjoy
Salesmanship offers great opportunities to travelling salesman to see new
places and some of these may be good from the point of view of health. Salesman
will love to visit beautiful places or those having fine climate. Though pushing sales
will be the main task, there will be much scope to relax and enjoy. Thus, good
36
salesmanship is useful to all- producers, consumers, the state and the salesman
himself.
4.3.2 DISADVANTAGES OF SALESMANSHIP
Modern salesmanship is not free from defects. The followings are the main
disadvantages:
1. Lack of knowledgeable and skilled salesman
Salesman having the necessary training and aptitude are rare. Salesman who
have adequate knowledge and necessary skill are found wanting in many concerns
at the counter and elsewhere, they are unable to do full justice to their work.
2. Bad employers
Many employers engaging the services of salesmen are unscrupulous. They
violate or circumvent laws and try to exploit their salesmen. As good work is not
appreciated and payment is very less, many intelligent and enterprising salesmen
feel discouraged and disgusted. They lose interest to work honestly and efficiently.
3. Little respect
Salesmanship as a profession commands little respect in many countries
including India. Moreover, salesmen are not recruited either on the basis of
examination results or according to any strict rule. As an entry into the profession
is easy, many incompetent people become salesman only to bring discredit to it.
4. Practices of fraud
The practices of fraud and deception is another drawback of salesmanship.
Malpractices of various types and misrepresentation do great harm to the cause of
salesmanship.
5. Difficult job
Salesmanship is not an easy job for those, who are introverts not desirous or
mixing freely with others. Salesmanship requires frequent travelling and this may
prove to be harmful to the health of the salesman besides being inconvenient to
him and his family. Rude and rough behavior of customers or retailers, and step
motherly treatment given by the employers are likely to make salesmanship a
thankless, disgusting and miserable task.
4.3.3 QUALITIES OF GOOD SALESMAN
‘Personality’ refers to the dynamic force of a person which attracts and
impresses others. Similarly, “Sales Personality” or ‘Personality of Salesman’
includes his appearance, his characters, his mannerisms, his talk and the general
impression which impresses and convinces the prospects. By using these qualities
and abilities skillfully, the salesman is able to impress the customers favorably. As
a result, the customers are attracted towards the product or service and ultimately
purchase it. In other words of H. W. Morten “Personality is that personal distinction
or dynamic force which is felt by everyone who comes within the radius.”
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Essential Qualities/Traits of a salesman:

1. Sound health
A salesman should posses a sound and physique in order to become efficient. A
salesman who is not healthy cannot maintain a pleasing appearance. He will also
not be able carry on his duties efficiently.
2. Good posture
Good posture enhances the appearance and personality of the salesman. A
salesman should maintain an alluring posture, i.e. he should stand erect or sit
erect while meeting a customer. It makes a good impression on the customer.
Therefore the salesman should try to acquire certain good posture in order to
attract customers.
3. Pleasant voice
Voice is the index of one’s own feelings than the facial expression. The quality
and the tone of the voice also have its influence on the hearer. The salesman should
have pleasant, clear and forceful voice. The voice should not be coarse, high
pitched, shrill, commanding or nasal. These types of voices generally irritate
customers.
4. Good appearance
A good physical appearance is a big asset for salesman. The first impression on
the customer is created by the appearance of the salesman. A good appearance
generally gives more confidence to a salesman and he is able to convince the
customers more easily. The appearance of the salesman may be divided into 3
important segments:
1. Cleanliness, 2. Grooming and 3. Clothes.
5. Cheerfulness
Cheerfulness is the greatest virtue of a good salesman. Everyone wants to be
with persons, who are cheerful. If the salesman is cheerful, possesses a good
health, vigour and a rich sense of humor, then he can attract large number of
customers.
6. Imagination
It is an important consideration which detects the exact need of the customers.
This quality helps the salesman to understand the problems of customers in his
position. But it is depressing to see in India that many salesmen have absolutely no
imagination.
7. Alertness
Alertness refers to active sensitivity to the situation before oneself. It is nothing
but presence of mind as to what to say, how to say and on what occasion. It
consists of keen power of observation and common sense to take correct decisions
quickly.
38
8. Resourcefulness
It is a mental ability to think and find out alternatives. It includes devising new
approaches to make people do what you want them to do. Resourcefulness has
great role to play in salesmanship.
9. Initiative
Initiative is the ability to work on his own without any guidance from anybody.
It is very useful quality for success in dealing with customers. Of course, in early
stages a salesman has to work under the supervision and guidance of senior
salesman. But in course of time, he has to depend upon himself and take
independent decisions.
10. Observation
Power of observation is another important quality of a salesman. A good
salesman must be a keen observer. He should observe the changes in style, fashion
of people, activities of rivals, Government policies, general attitude of customers
and other things.
11. Self-confidence
Self-confidence is another important quality, which every salesman should
possess. The salesman should keep Self-confidence both on himself and the goods
he sells to the customers. A salesman lacking Self-confidence can not convince his
customer properly or overcome his objections.
12. Memory
Sharp memory is another important attribute of a salesman. Sharp memory
refers to capacity to recognize this customer, recall his past interviews with them,
recalling their requirements and suggestions. As a matter of fact, lack of memory is
responsible for committing many errors. For this purpose, it is better for a
salesman to keep a notebook and write important points for future reference.
13. Sociability
It refers to ability of salesman to meet the public and make friends with them.
A true salesman must be an extrovert, i.e., a man who likes mixing with people in
every type of situation. Moreover, he should not hesitate to meet unknown persons.
He must be a friend, philosophers and guide to customers.
14. Enthusiasm
A salesman should be enthusiastic; otherwise he will fail to create interest in
the minds of the prospects. Enthusiasm creates assurance in the minds of the
buyers for a salesman’s products and services.
15. Tact
A salesman should be a man of tact. Tact means doing the right thing at the
right time, in the right way. It further includes mental awareness of the salesman to
tackle all kinds of situations. However, tact should not mean cheating or
cunningness. Tact or diplomacy helps in avoiding objections, obstacles in sales
programme.
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16. Court-operation
The modern salesman has to face several challenges in the market for better
business. To meet these challenges a salesman should have a good co-operation
with customers, fellow salesmen and employer. The customers depend upon the
salesman to a great extent for selecting products. He (salesman) should extend full
co-operation and help to them (customers) by recommending the best product to
suit their needs.
17. Courtesy
There is a saying that “Courtesy costs nothing but returns high dividend”. This
particularly holds good in the field of salesmanship. Courtesy is a mixture of
politeness and consideration. It is an indication of refinement and culture. The
salesman must be polite, modest, and courteous to turn the hearts of customers.
18. Patience and tolerance
Patience and tolerance take a very important place in the development of a
salesman. A salesman to become successful must be extremely patient in dealing
with a buyer. In no case he should lose his temper, but to show a spirit impatient
and angry, but a salesman should remain calm and cool.
19. Effective speech
A salesman should be a good conversationalist. Ability to speak correctly and
clearly impresses the customers favourably. The sales talk should be clear,
pleasant and persuasive, but not like the situations; each situation may have to be
treated in a special manner. The salesman should have a good command over
English and other languages, sweet voice, clear pronunciation, fluent expressions,
etc.
20. Honesty
The salesman should be extremely and thoroughly honest. An honest salesman
is liked by every customer. While dealing with a customer, the salesman must be
true and frank about the products he wants to sell. He should not misrepresent or
exaggerate facts. If a salesman cheats a customer, that customer is lost forever.
21. Integrity
Integrity of a salesman is an important trait in his character. Integrity means
uprightness of character, moral soundness, good behavior, honesty, fulfillment of
promises, and strength of character. A salesman who does not have integrity of
character will not be in a position to create good impression upon his employer,
fellow salesman and customers.
22. Loyalty
Loyalty means willingness of obey. Loyalty of a salesman can be classified into
four groups :(i) loyalty to the organization, (ii) loyalty to the customers, (iii) loyalty to
the fellow-workers.
23. Reliability
A salesman should be trustworthy and reliable. He should take his work
seriously and with responsibility. He should not give exaggerated promises. He
must be truthful in his statements and honest in his dealings. If a salesman is
40
reliable, customers will have no fear of being cheated while purchasing goods from
him.
24. Industriousness
It refers to the ability to work hard to achieve a goal. Unless a salesman works
hard, it is very difficult for him to acquire the detailed knowledge of the customers
and product. Absent a result he cannot achieve his targeted sales. The salesman,
therefore, must remain active both mentally and physically. Dullness should be
avoided.
25. Courage
It refers to moral strength of a person. Sometimes a salesman may commit
mistakes and make false promises, which may lead to an unpleasant atmosphere.
But a good salesman must have enough courage to face such situations boldly. He
should be daring enough to take risk and should be firm in his decisions.
26. Sincerity
Sincerity is another good quality of a successful salesman. A sincere salesman
attends his customers sincerely and explains them all the merits and demerits of
the product. He also attends to the customers promptly. A sincere salesman does
not face any difficulty to achieve his target.
27. Maturity
Maturity refers to balance of mind. A salesman should be matured. He should
accept gracefully both criticisms and praises. Equal weight age should be given to
both for and against. Maturity compels a salesman to think before he takes any
action.
28. Determination
Determination is nothing but will to succeed and go ahead. Patience and
perseverance are the ingredients of strong determination towards his duties and
responsibilities. At times he may face resistance from the customers but it should
not distract him from his original aims. He should work patiently and calmly to
achieve the predetermined target.
4.4 REVISION POINTS
 Advantages of Salesmanship
 Advantages of producers
 Advantages to consumers
 Advantages to the nation
 Advantages to the Government
 Advantages to the society
 Advantages to unemployed
 An advantage to salesman
 Disadvantages of Salesmanship
 Lack of knowledgeable and skilled salesman
 Bad employers
 Little respect
41
 Practices of fraud
 Difficult job
 Qualities of Good Salesman
 Sound Health
 Good Posture
 Pleasant Voice
 Good Appearance
 Cheerfulness
 Imagination
 Alertness
 Resourcefulness
 Initiative
 Observation Memory
 Self-Confidence
1. What are the advantages of salesmanship?
2. What are the Disadvantages of salesmanship?
3. What are the qualities should have as a salesman?
4.6 SUMMARY
Good salesmanship ultimately leads to the economic development and progress
of a country and to the general rise in the standard of living. When sales are good,
industry, trade and commerce prosper and the country as a whole gets benefit.
Good salesmanship goes far in making a nation great. The Government also
receives maximum utility out of salesmanship. Salesmanship helps the producers
to produce and sell more of goods and services. As production and sale in country
increases, the Government is able to get more revenue by way of various taxes,
duties and levies like sales tax, income tax, excise duty, freight and transportation
charges.“Sales Personality” or ‘Personality of Salesman’ includes his appearance,
his characters, his mannerisms, his talk and the general impression which
impresses and convinces the prospects. By using these qualities and abilities
skillfully, the salesman is able to impress the customers favorably. As a result, the
customers are attracted towards the product or service and ultimately purchase it
1. As production and sale in country increases, the Government is able to get
more revenue by way of various taxes, duties is a
a) Merits to society b) Merits to government
c) Merits to sales people d) Merits to the nation
2. In the following, which one is a disadvantage of salesmanship?
a) Fabulous incomes b) Good employer
c) More respect d) Difficult job
3. Which one is none of salesman quality ?
a) Alertness b) Cheerfulness
42
c) Pleasant voice d) More speech

2. Kotler, Philip, and Gary Armstrong. Principles of Marketing. 12th ed. Upper
Saddle River, NJ: Prentice Hall, 2007.
3. Thomas, Wayne M. The Sales Manager's Success Manual. New York:
AMACOM, 2008.
4.9 ASSIGNMENTS
1. ‘A good salesman makes a study of the needs of customers and satisfies
them promptly.’ – Discuss.
2. Explain how salesmanship helps producers in manufacturing their products
and write a note on the advantages of salesmanship.
(a) S.L.Gupta “Sales and Distribution Management” Excel Books India, 2009
(b) Peter Green, “Sales Management and Organization” 2007 first edition
(c) Brain Tracy, “ The Psychology of selling” 2012, first edition.
(d) Thomas N Ingram, Raymond W Laforge, Ramon A Avila, Charles H
edition.
(e) Richard R Still, “ Sales Management Decision Strategies and Cases”, 2003,
fifth edition.
a. http://www.indiastudychannel.com/resources/139588-Salesmanship-
and-the-qualities-of-a-good-salesman.aspx
b. http://prasad-m.blogspot.in/2015/01/advantages-and-disadvantages-
of.html
c. http://www.answers.com/Q/What_are_the_advantages_and_disadvanta
ges_of_salesmanship
d. http://www.preservearticles.com/201103144508/7-major-advantages-
of-salesmanship.html
e. http://www.preservearticles.com/201103144511/5-major-
disadvantages-of-salesmanship.html
f. http://www.preservearticles.com/201103064422/qualities-of-a-
successful-salesman.html
1. “Personality is that personal distinction or dynamic force which is felt by
everyone who comes within the radius.” – Explain.
4.12 KEYWORDS
Advantages of salesmanship, Disadvantages of Salesmanship, Qualities of
salesman
43
LESSON-5
SALES PLANNING
5.1 INTRODUCTION
A sales plan contains the objectives of the sales process, the responsibilities
and incentives of those involved in the sales process, and the resources that will be
available or used for the sales process. The sales plan usually includes objectives
(sales targets), assigned sales representatives, what products they are authorized to
sell, list of sales roles, responsibilities, and territories. The sales planning process
is very important for an organization as success cannot be achieved by haphazard
actions. Sales planning process is usually done in the second stage of planning and
can be carried out only when the company has a strategic marketing plan in place.
5.2 OBJECTIVES
After reading this chapter you should be able to know :
 Sales planning
 Sales planning process
 Sales Policy
 Sales Organization
5.3 CONTENTS
5.3.1 Sales Planning
5.3.2 Sales planning process
5.3.3 Sales policy
5.3.4 Sales Organization
5.3.5 Specialization in a field sales organization
5.3.1 SALES PLANNING
A sales plan contains the objectives of the sales process, the responsibilities
and incentives of those involved in the sales process, and the resources that will be
available or used for the sales process. The sales plan usually includes objectives
(sales targets), assigned sales representatives, what products they are authorized to
sell, list of sales roles, responsibilities, and territories.
A plan containing an assessment of current sales for a product in a given
region or market, a statement of sales objectives, strategies for achieving the stated
sales objectives, and resources available for achieving this goal.
A sales plan may also assign particular sales representatives or other staff to
particular roles or territories, and may include a breakdown of who will focus
improving sales for which product.
5.3.2 SALES PLANNING PROCESS
The sales planning process is very important for an organization as success
cannot be achieved by haphazard actions. Sales planning process is usually done in
the second stage of planning and can be carried out only when the company has a
strategic marketing plan in place.
44
The first thing that an organization does is make a strategic marketing plan.
Once the strategic marketing plan is made, the organization knows the segment
that has to be targeted, and also, the consumer buying behaviour for that segment.
Accordingly sales planning is done.
1) Setting objectives
Your sales planning is going to start only when you have defined the objectives
for the sales team. For example – The objective of an air conditioning company
might be to increase the market share of the company. For this, it will have to
penetrate a new geographic market. Thus the objective of sales planning is to
penetrate a new market to increase market share.
2) Determine the actions necessary
Once you know the objectives of your sales plan, you have to forecast what
actions you need to take and the operations which are needed in effect before you
implement the sales plan. This is a crucial step in the sales planning process
because if you do not forecast the correct operations strategy, then in future you
will face operational difficulties which will hamper you in meeting your sales
objectives.
For example – The air conditioning company needs to penetrate a new
geographic territory to increase market share. Thus it needs Sales as well as service
operation backup in this territory. The marketing department should also know the
new territory so that they can come up with aggressive marketing tactics to target
that territory.
3) Organize your actions
Coming back to the first point – haphazard actions will never bring results.
Once you know the operations that are necessary, you need to organize your sales
planning.
For example The first priority of the air conditioning company in new territory
will be to have a service setup. Than to have a sales setup and the
necessary channel in place. Once that happens, they will have to bombard the new
territory with aggressive marketing tactics. Thus an organized action plan needs to
be made during the sales planning process.
4) Implement
Once you have your actions planned and organized, implementing them is the
next step. Although it may sound easy, there are many real time and real world
problems you may face while implementing a sales plan.
For example – The customers of the new territory might not respond to the new
air conditioners entering the market. On the other hand, the product might be
picked up readily by the customers and you might not be able to adapt with the
unexpected demand which can make your brand lose face from the start.
5) Measure results
As in any planning process, the fifth and very important step in the sales
planning process is to measure the results. Unlike advertising, sales results are
45
very easy to measure because everything is documented and recorded. For example
– the air conditioning company will measure the total sales of the geographic
territory in study. At the same time it will find out the competitors sales as well for
record keeping.
6) Re evaluate
When you have the sales records in hand, ensure that you analyse the sales
records to know whether or not the sales planning process has succeeded. The
analysis will tell you what you did right and what went wrong. Thus, based on the
analysis you can know the good work that has to be repeated as well as the bad
work which has to be avoided.
For example – Your sales report shows that you have succeeded in penetrating
the new geographic territory. This stage will help you set your objectives for the
next year and you will plan increasing your brand equity through quality of sales
and service. If on the other hand, you have failed to penetrate the market, then you
need to study the reasons which caused the failure and in the next year, sales
planning should be done taking these negative results into account and the sales
objectives should be re planned.
Remember that a sale is a dynamic process and your competitors are
themselves watching you all the time. In the above example, the air conditioning
segment is one of the vigorously growing segments across the world and it comes
with its own share of challenges. Thus your sales planning will go a long way in
implementing your organizations visions as well as in implementing the strategic
marketing plan.
5.3.3 SALES POLICY
Sales policy consists of internal rules, principles and procedures which help to
define the efficient way of support for the established sales process, as well as the
wanted behavior of all the participants in that process, in order to ease the
communication and cooperation with the future or potential clients. The integral
parts of the sales policy are:
 Customer categorization
 Delivery policy
 Price policy
 Charging policy
 Supply policy
 Complaints policy
 Customer loans
 Code of behavior towards customers
 Reports on customer visits
 Indicators of sales success
46
5.3.4 SALES ORGANISATION

Sales organisation consists of human beings or persons working together for
the effective marketing of products manufactured by the firm or the products
purchased for resale. Sales organisation co-ordinates the efforts of members of a
group to bring about a desirable result. It provides an efficient, economic and
flexible administrative set up to ensure timely movement of products from the
warehouse to the ultimate consumer. Thus it provides satisfactory job to buyers
and sellers.
A sales organisation has a number of departments. It has a planned and well
co-ordinated structure. It performs the functions of planning, organizing and
controlling marketing and distribution of products. Sales organisation is a
foundation for effective sales planning and sales policies. Systematic execution of
plans and policies and programmes of a sales organisation control all the sales
activities. As such it ensures maximum efficiency and profitability without losing
consumer service and satisfaction.
According to Boiling, “A good sales organisation is one wherein the functions or
departments have each been carefully planned and co-ordinated towards the
objective of putting the product in the hands of the consumers—the whole effort
being efficiently supervised and managed, so that each function is carried out in
the desired manner.”
5.3.4.1 Need for a Sales Organization:
“A sales organisation is like a power station sending out energy, which is
devoted to the advertising and selling of particular lines; and there is a tremendous
waste of energy between the power station and the points where it reaches the
consumers. Therefore, there arises the necessity of organizing the sales
department.” So long as the firm is a small one, there is no need for sales
organisation, as the proprietor himself can sell all the output or in certain cases, he
is assisted by one or two salesmen, under his direct control. But when the firm or
the business itself expands, because of extension of markets, production in large-
scale, competitive market etc., the need for a sales organisation is felt.
The need arises because of the following factors:
1. Production in anticipation of demand, which must be sold.
2. To create demand for the products through efficient salesmen.
3. Execution of orders without delay.
4. Satisfactory action against complaints from customers.
5. Collection of credit sales.
6. Keeping enough stock by looking at the future demand.
7. Maximum contribution to profit.
8. To enforce proper supervision of sales-force.
9. To divide and fix authority among the subordinates.
10. To locate responsibility.
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5.3.4.2 Importance of Sales Organisation:

A sales organisation is the mechanism through which a sales manager’s
philosophy is translated into action. The sales organisation provides the vehicle for
making decisions on planning, organisation, selection and training of salesmen,
their motivation, directing and controlling them. It also provides vehicle through
which these decisions are implemented.
A sale organisation is like a power-station sending out energy which is
devoted to the advertising and selling of particular lines and there is a tremendous
waste of energy between the power station and the points where it reaches the
consumers. Therefore, there arises the necessity of organizing the sales
department. “Sales are the life blood of business,” Sales organisation is part and
parcel of a business firm. All the departments are carefully plaited in a good sales
organisation.
The importance of the sales organisation
1. Blood circulation of a human body keeps a man alive and in sound health.
Similarly the sales strengthen the organisation. The more is the sales, the more is
the profit.
2. Increasing sales means progress of the firm. If the sales fall down, it is fatal,
because sales are the life blood of the business, as the blood is to a human body.
3. Consumers are the kings. Manufacturers produce goods for consumers.
They must be satisfied in the market which is full of competitors with products for
similar use. So suitable products are necessary, and for this an organisation is
necessary.
4. To move the products from the factory to the consumers, the sales
organisation is necessary— demand creation.
5. To handle the orders promptly i.e., from the stages of enquiry to order at full
satisfaction to consumers.
6. Collection of dues is also important. Several drops make an ocean; at the
same time milking cows should not be neglected.
7. To keep good public relations by redressing the complaints if any, and to
create a good image of the firm.
5.3.4.3 Functions of a Sales Organisation:
Modem sales organisation is not only profit-oriented but also customer-
oriented.
The following are the important functions of a sales organisation:
1. Analysis of markets thoroughly, including product and market research.
2. Adoption of a selfishly sound but defensible sales policy.
3. Accurate market or sales forecasting and planning the sales campaign,
based on relevant data.
4. Deciding about prices and terms of sales and pricing policies.
48
5. Packaging for the consumer wants a container which will satisfy his
desire for attractive appearance, keeping qualities, utility, and correct
price and many other factors.
6. Branding the product.
7. Deciding the channels of distribution.
8. Selection, training and control of salesmen and fixing their remuneration.
9. Allocation of Territory and quota-setting.
10. Sales programmers and sales promotion activities.
11. Arranging for advertising and publicity.
12. Order preparation and office recording.
13. Preparation of customer’s record cards.
14. Scrutiny and recording of reports.
15. Study of statistical records and returns.
16. Maintenance of salesmen’s records.
5.3.4.4 Structure of the Sales Organisation:
The following factors are to be taken into consideration while designing the
structure of a sales organisation:
1. Nature of the market
2. Sales policies of the enterprise
3. Nature of the product
4. Number of products
5. Availability of financial resources
6. Level of distribution system
7. Size of the company
8. Price of the product
9. Ability of the professionals
10. Position of competitors’ Products.
5.3.4.5 BASIC TYPES OF ORGANISATIONAL STRUCTURE
You are familiar with the concept of line, staff and functional authority through
your past exposure. Among the designs of sales organisations that prevail in Indian
industry, line and staff are more common forms, while functional organisation is
relatively rare.
a) Line Sales Organisation
The line sales organisation is the most basic forms of sales organisation,
characterized by a chain of command running from the top sales executive down to
the level of the salesman. All executives have line authority over their subordinates
who in turn are accountable only to their immediate superior. Since lines of
49
authority run vertically in this structure, executives at each level are generally
independent of all others al the same level. Through assignment of quotas or sales
targets, responsibilities are usually, clearly delineated. Figure 1 gives the sales
organisation of liquor division of Jagatjit Industries Ltd., designed as a line sales
organisation.
FIG 1: LINE SALES ORGANISATION
The liquor division is headed by the vice president marketing, who has two
marketing managers looking after the southwest region and northeast region,
reporting to him. The Marketing Manager has a line authority over a number of
regional and Area managers who in turn control a field staff of sales executive, field
sales officer and sales representatives, each level connected to the subordinate level
by scalar lines of command.
Line organization is extensively used in similar firms are those dealing in a
narrow product line, or selling in a limited geographic area.
The line organization places great demands on the time and abilities of the top
sales executives. You can realize that with all field reporting finally coming to him
through his subordinate Area sales manager, most of his time would be taken up
by the task of sales supervision and direction leaving him with little time for
planning and policy making. As the line organization has no subordinate
specialists, that top sales executive needs to be a person with outstanding ability
and all-round knowledge of every fact of the sales function. Since operational
details of managing the sales department take up a large part of the line executive’s
time, sometimes he is forced to take decisions without benefit of adequate planning.
50
Line organization also becomes in appropriate in case of rapidly growing

organizations are those with large sales staffs, as growing departments necessitate
additional layers of executives to be added. Increase in vertical levels is often
accompanied by distortion directions and reduced efficiency of communication,
resulting in poorer results.
b) Line and staff sales Organization
Line and staff organizations usually result as the size of the operations
grows. It is characteristically found in medium and large firms which sizeable sales
staff selling diversified product lines. The line and staff department is differentiated
by the presence to staff specialists of staff assistants to advise and assist the top
sales executive. These specialists are experts in their own fields which could be
sales training, service, sales analysis and planning, dealer relations, sales
promotion, sales personnel development and so on. While staff executives and
assistants do not have the line authority to command, they advise the line
executives through recommendations and provide the benefit of specialization in
the organization. The inclusion of the staff component frees the line executive from
the burden of detail. By delegating problem involving in depth study or detailed
analysis to staff specialists, the line executive gets more time for policy making and
planning. A pool of experts becomes available for providing advice and assistance
in specialized fields. The activity of planning can also be subdivided and assigned
to staff specialists. More information is also made available for better decision-
making. Figure 2 gives the sales organization of Prentice Hall of India Ltd. Which
has both line and staff components.
The organization is headed by the Managing Director who has, reporting to him
line managers called Regional Managers and staff managers who look after the staff
functions of customer service and sales promotion. The Customers Service
Manager is basically in-charge of feeding in information and facilitating
procurement of international editions for the organization. He advises the line
managers on the suitability of the various international editions and keeps them
informed about the developments in this field. The sales promotion manager
performs the advisory function with respect to the sales promotion activities of the
organization and co-ordinates with the Regional Sales managers as to the
promotional needs. The Regional managers are the line executives who are
accountable for the operating results in their territories and control their own field
staff of sales executives and salesmen.
51
The problem that arises with line and staff organization is basically one of the
coordination. The work of the staff specialists needs to be actively coordinated with
the operations of the line department and generally a lag develops, as reports and
recommendations take time to compile.
Line and Staff organization also sometimes generates problems of interpersonal
relations. The staff executives tend to overstep their advisory authority and try to
assume and sometimes succeed in assuming the authority to issue orders and
directions. This presents difficulties of dual subordination and may create
confusion. The fact that staff specialists do not share direct responsibility for
results is also resented by some line executives. Experience has shown that to a
large extent these problems can be minimized if all areas in which line and staff
executives have to share authority and responsibility are specifically written down
as components of the job description
C) Functional Sales Organisation
The functional sales organization is aimed at utilizing the benefits of
specialization to its fullest extent. In the functional sales organization, all sales
personnel receive direction from , and are accountable to different executives, on
different aspects of their work. Somewhat in contravention to the principle of unity
of command, the functional organizational structure gives all executives, each a
specialist in his own field, a direct authority to command and issue orders to his
functional authority therefore, simply means that at any given time, a sales person
could be under instruction from a number of executives, depending upon the
functional specializations setup. The top sales executives has coordinating
responsibilities in respect of the actions of functional heads in functional
52
organizations have not been found to be a very appropriate structure for sales
organization. Here each sales person is under direction of several executives. In
larger firms where the size of the sales force is substantial, the degree of
centralization necessitated by the functional organizational structure, renders the
operation inefficient. Smaller the medium sized firms on the other hand find the
system expensive because of the high degree of specialization. Another weakness of
the structure is that burden of coordinating the activities of highly diverse
specialists is placed on a single individual. In case that individual is not capable
enough in this regard, the whole structure is likely to become cumbersome and
ineffective.
5.3.5 SPECIALIZATION IN A FIELD SALES ORGANIZATION

The field sales forces are typically organised on the basis of geographic,
customer or product wise specialisation, with many sales organisations combining
customer and product specialisations with geographic territories.
(i) Geographic Specialisation:
The most common pattern organising a sales force is by geographic territories
where sales personnel are assigned to a specified geographic area, and will sell only
to customers in that area. For example Figure 4 shows the field sales organisation
of Food Specialties Limited, where the whole of the country has been divided into
four areas and put in charge of Area Sales Managers. These areas representing
North, South. West, and East regions are Delhi, Madras, Bombay and Calcutta.
These major divisions are further divided into smaller geographical territories,
which are covered by Area Sales Officers. The area sales officers have in turn
reporting to them area sales representatives who look after customers in the
specific area assigned to them.
53
A major advantage which characterises the geographic organisation is that the

sales personnel usually have a smaller area of operation than in the other
organizational schemes and over a period of time get to know their customers and
markets intimately which can lead to intensive market cultivation. The organisation
becomes more responsive to local needs. The geographic organisation is generally a
flat rather than tall organisation and the shorter lines of communication make for
greater effectiveness of supervision and control. Another advantage that follows is
that travel time and expenses can be reduced if call patterns are properly devised.
On the other hand, because multiple offices are set up, administrative expenses
and the burden of coordinating the sales activities of a widespread organization
become heavy. Geographic organisation is generally more effective when the
product line is not too wide or consists of relatively simple, non-technical products.
The disadvantage with geographic specialization is that the sales persons need
to be responsible for the entire product line in their territory and they may not be
equally knowledge about all products. Further within the territory, they may choose
to concentrate on products and customers that are easy prospects.
(ii) Product Specialisation
Product specilisation is usually called for when the product line is large and
diverse or when the products are technical enough to warrant specialized
applications knowledge, or when adequate technical knowledge is an
important determinant of successful selling. Product specialisation is generally
combined with geographic territorisation at the higher levels, while at the level of
the field operators, different salesmen may be assigned to specific product lines.
Instead of selling the entire product line in a specific territory, a salesperson
assigned to a particular product/product group, will sell only that product to the
54
customers in that area. Given below is the example of a company selling office
equipment ranging from typewriters to computers. The initial geographic division is
followed by product specialisation at the field personnel level.
In the above example since the product line is both technical and diverse. It is
not possible for one sales person to acquire enough technical knowledge to sell the
entire product line successfully. Product specialisation, as shown above would
allow the sales personnel to specialise in their respective product lines which in
turn would result in more effective sales performance. Customer queries and sales
resistance can be handled more effectively on account of intensive product
knowledge. On the other hand, each salesman in the above example would have to
tour the entire state, which would result in higher travel time and expenses.
Even when the product line is not too technical but the product range is wide
enough, organisations find splitting the sales responsibility product wise a more
effective arrangement. At Dabur, which produces a very wide range of health and
personal care products the sales organisation has initially been divided
geographically but the field operators have been given charge of different product
groups. The company has divided its product line into two major product groups
i.e. health care products and family use products. Even though two salesmen may
be assigned to the Same territory, each will be responsible for only the product
group assigned to him. The sales organisation structure is given below in Figure 6.
55
Organising the sales force by product specialisation generates additional

expenses, which should be carefully weighed against the benefits of such a
structure. There is an obvious increase in travel and administrative expenses.
There is some duplication of effort also as two salesmen from the company selling
different products in the same territory may call on the same customer to which
many customers may object.
(iii) Customer specialisation
Customer specialisation is practiced in situations when almost identical
products are marketed to consumers each of which may present a different set of
selling problems. In this kind of organisational scheme each sales person sells the
entire product line to the selected buyers. The sales organisation of Modi Xerox, a
manufacturer of photocopiers is organised by Customer specialization. As the
figure below shows, each Branch Sales Manager controls 3 Sales Managers -Major
Accounts who in turn have reporting to them Major Account Managers. Each Major
Account Manager is given the charge of a certain number of Customers (accounts)
and is supposed to service their entire requirement with respect to the company's
products.
56
Customer specialisation enables the sales persons to become more

knowledgeable about the unique problems and needs of each group of Customers.
A Customer oriented sales force is consistent with the marketing concept with its
increased emphasis on consumer satisfaction. The greater market specialisation
developed as a result of constantly working with the same set of consumers imparts
a degree of professionalism to the sales task and has been found to result in lower
turnover of sales personnel.
The main disadvantage of this form of specialisation is that geographical
territories may typically overlap. There may be a number of the company's
representatives covering the same geographical area, but serving different
Customers, often resulting in higher costs.
5.4 REVISION POINTS
 Sales planning
 A sales planning containing an assessment of current sales for a
product in a given region or market, a statement of sales objectives,
strategies for achieving the stated sales objectives, and resources
available for achieving this goal.
 Sales planning process
 Setting objectives
 Determine the actions necessary
 Organize your actions
57
 Implement
 Measure results
 Re evaluate
 Sales policy
 Sales policy consists of internal rules, principles and procedures
which help to define the efficient way of support for the established
sales process, as well as the wanted behavior of all the participants in
that process, in order to ease the communication and cooperation
with the future or potential clients
 Sales organisation
 A good sales organisation is one wherein the functions or
departments have each been carefully planned and co-ordinated
towards the objective of putting the product in the hands of the
consumers the whole effort being efficiently supervised and managed,
so that each function is carried out in the desired manner
 Importance of the sales organisation,
 Blood circulation of a human body keeps a man alive and in sound
health. Similarly the sales strengthen the organisation. The more is
the sales, the more is the profit.
 Increasing sales means progress of the firm. If the sales fall down, it
is fatal, because sales are the life blood of the business, as the blood
is to a human body.
 Consumers are the kings. Manufacturers produce goods for
consumers. They must be satisfied in the market which is full of
competitors with products for similar use. So suitable products are
necessary, and for this an organization is necessary.
 To move the products from the factory to the consumers, the sales
organization is necessary demand creation.
 Functions of a sales organization
 Analysis of markets thoroughly, including product and market
research.
 Adoption of a selfishly sound but defensible sales policy.
 Accurate market or sales forecasting and planning the sales
campaign, based on relevant data.
 Deciding about prices and terms of sales and pricing policies.
 Types of organizational Structure
 Line Sales Organization
 Line And Staff Organizations
 Functional Sales Organization
 Specialization in a Field Sales Organization
 Geographic Specialization
 Customer Specialization
 Product Wise Specialization,
58

1. What is sales planning?
2. What are the steps in sales planning?
3. What do you mean sales policy?
4. What is sales organization?
5. What are the importance of sales organization?
6. What are the functions of sales organization?
7. Explain various types of organizational Structure
8. What are the specialization in a Field Sales Organization
5.6 SUMMARY
A sales plan may also assign particular sales representatives or other staff to
particular roles or territories, and may include a breakdown of who will focus
improving sales for which product. Sales policy consists of internal rules, principles
and procedures which help to define the efficient way of support for the established
sales process, as well as the wanted behavior of all the participants in that process,
in order to ease the communication and cooperation with the future or potential
clients. Sales organization consists of human beings or persons working together
for the effective marketing of products manufactured by the firm or the products
purchased for resale. Sales organization co-ordinates the efforts of members of a
group to bring about a desirable result
1. An assessment of current sales for a product in a given region or market, a
statement of sales objectives, resources available for achieving this goal
a) Sales planning b) Planning process
c) Sales policy d) None of above
2. In the following which one not a sales policy?
a) Delivery policy b) Price policy
c) Supply policy d) Cost policy
3. All sales personnel receive direction from, and are accountable to different
executives that is
a) Line sale organization b) Line and staff sale organization
c) Functional sale organizational d) None of above
2. Tapan K. Panda, Sunil Sahadev Sales and Distribution Management
Oxford University Press, 2005
59
5.9 ASSIGNMENTS
(a) Explain why sales planning process is important for an organization to
achieve successful growth.
(b) What is sales policy? State the integral parts of sales policy.
a. S.L.Gupta “Sales and Distribution Management” Excel Books India, 2009
b. Peter Green, “Sales Management and Organization” 2007 first edition
c. Brain Tracy, “The Psychology of selling” 2012, first edition.
d. Thomas N Ingram, Raymond W Laforge, Ramon A Avila, Charles H
sixth edition.
e. Richard R Still, “Sales Management Decision Strategies and Cases”, 2003,
fifth edition.
a. http://www.emarketingdictionary.com/Internet_Marketing_dictionary_S
ales_Plan_definition.html
b. http://www.collinsdictionary.com/dictionary/english/sales-planning
c. http://www.marketing91.com/sales-planning-process/
d. http://www.emarketingdictionary.com/Internet_Marketing_dictionary_S
ales_Plan_definition.html
e. http://en.omegact.biz/sales-management/definition-of-the-sales-
policy/
1. “A sales organisation is like a power station sending out energy, which is
devoted to the advertising and selling of particular line.’ Discuss the need and
importance of a sales organization.
5.12 KEYWORDS
Sales planning, Sales planning process, Sales Policy, Sales Organization
60
LESSON-6
SALES FORECASTING AND SALES QUOTA
6.1 INTRODUCTION
The word ‘relationship’ is of importance and indicates that there is some
connection between the variables under observation. In the same way, regression
analysis is a statistical device, which helps us to estimate or predict the unknown
values of one variable from the known values of another variable. For instance, you
publish a text book on “Banking”, affiliated to different universities. The permitted
intake capacity of each and the medium through which the students are taught are
known. Is it a compulsory or an optional subject? By getting all these details and
also by considering the sales activities of promotional work, you may be able to
declare the probable copies to be printed.
6.2 OBJECTIVES
 Methods of Sales forecasting
 Sales territory
 Fixing sales quota
 Types of sales quotas
 Structuring and Managing Sales Force
6.3 CONTENTS
6.3.1 Methods of Sales forecasting
6.3.2 Sales territory
6.3.3 Sales quota
6.3.4 Structuring and Managing Sales Force
6.3.1 METHODS OF SALES FORECASTING
The following are the various methods of sales forecasting:
1. Jury of Executive Opinion.
2. Sales Force Opinion.
3. Test Marketing Result.
4. Consumer’s Buying Plan.
5. Market Factor Analysis.
6. Expert Opinion.
7. Econometric Model Building.
8. Past Sales (Historical Method).
9. Statistical Methods.
1. Jury of Executive Opinion:
This method of sales forecasting is the oldest. One or more of the executives,
who are experienced and have good knowledge of the market factors make out the
expected sales. The executives are responsible while forecasting sales figures
61
through estimates and experiences. All the factors-internal and external—are taken
into account. This is a type of committee approach. This method is simple as
experiences and judgment are pooled together in taking a sales forecast figure. If
there are many executives, their estimates are averaged in drawing the sales
forecast.
Merits:
(a) This method is simple and quick.
(b) Detailed data are not needed.
(c) There is economy.
Demerits:
a. It is not based on factual data.
b. It is difficult to draw a final decision.
c. More or less, the method rests on guess-work, and may lead to wrong
forecasts.
d. It is difficult to break down the forecasts into products, markets, etc.
2. Sales Force Opinion:
Under this method, salesmen, or intermediaries are required to make out an
estimate sales in their respective territories for a given period. Salesmen are in close
touch with the consumers and possess good knowledge about the future demand
trend. Thus all the sales force estimates are processed, integrated, modified, and a
sales volume estimate formed for the whole market, for the given period.
Merits:
(a) Specialized knowledge is utilized.
(b) Salesmen are confident and responsible to meet the quota fixed.
(c) This method facilitates to break down in terms of products, territories,
customers, salesmen etc.
Demerits:
(a) Success depends upon the competency of salesmen.
(b) A broad outlook is absent.
(c) The estimation may be unattainable or may to too low for the forecasts
as the salesmen may be optimistic or pessimistic.
3. Test Marketing Result
Under the market test method, products are introduced in a limited
geographical area and the result is studied. Taking this result as a base, sales
forecast is made. This test is conducted as a sample on pre-test basis in order to
understand the market response.
Merits:
(a) The system is reliable as forecast is based on actual result.
(b) Management can understand the defects and take steps to rectify.
(c) It is good for introducing new products, in a new territory etc.
62
Demerits:
(a) All the markets are not homogeneous. But study is made on the basis of a
part of a market.
(b) It is a time-consuming process.
(c) It is costly.
4. Consumers’ Buying Plan
Consumers, as a source of information, are approached to know their likely
purchases during the period under a given set of conditions. This method is
suitable when there are few customers. This type of forecasting is generally adopted
for industrial goods. It is suitable for industries, which produce costly goods to a
limited number of buyers- wholesalers, retailers, potential consumers etc. A survey
is conducted on face to face basis or survey method. It is because changes are
constant while buyer behaviour and buying decisions change frequently.
Merits:
(a) First hand information is possible.
(b) User’s intention is known.
Demerits:
(a) Customer’s expectation cannot be measured exactly.
(b) It is difficult to identify actual buyers.
(c) It is good when users are few, but not practicable when consumers are
many.
(d) Long run forecasting is not possible.
(e) The system is costly.
(f) Buyers may change their buying decisions.
5. Market Factor Analysis
A company’s sales may depend on the behaviour of certain market factors. The
principal factors which affect the sales may be determined. By studying the
behaviours of the factors, forecasting should be made. Correlation is the statistical
analysis which analyses the degree of extent to which two variables fluctuate with
reference to each other.
The word ‘relationship’ is of importance and indicates that there is some
connection between the variables under observation. In the same way, regression
analysis is a statistical device, which helps us to estimate or predict the unknown
values of one variable from the known values of another variable.
For instance, you publish a text book on “Banking”, affiliated to different
universities. The permitted intake capacity of each and the medium through which
the students are taught are known. Is it a compulsory or an optional subject? By
getting all these details and also by considering the sales activities of promotional
work, you may be able to declare the probable copies to be printed.
The key to the successful use of this method lies in the selection of the
appropriate market factors. Minimizing the number of market factors is also
important. Thus the demand decision makers have to consider price, competitions,
63
advertising, disposal income, buying habits, consumption habits, consumer price

index, change in population etc.
Merits:
(a) It is a sound method.
(b) Market factor is analysed in detail.
Demerits:
(a) It is costly.
(b) It is time-consuming.
(c) It is a short run process.
6. Expert Opinion:
Many types of consultancy agencies have entered into the field of sales. The
consultancy agency has specialized experts in the respective field. This includes
dealers, trade associations etc. They may conduct market researches and possess
ready-made statistical data. Firms may make use of the opinions of such experts.
These opinions may be carefully analysed by the company and a sound forecasting
is made.
Merits:
(a) Forecasting is quick and inexpensive.
(b) It will be more accurate.
(c) Specialized knowledge is utilized.
Demerits:
(a) It may not be reliable.
(b) The success of forecasting depends upon the competency of experts.
(c) A broad outlook may be lacking.
7. Econometric Model Building
This is a mathematical approach of study and is an ideal way to forecast sales.
This method is more useful for marketing durable goods. It is in the form of
equations, which represent a set of relationships among different demand
determining market factors. By analyzing the market factors (independent variable)
and sales (dependent variable), sales are forecast. This system does not entirely
depend upon correlation analysis. It has great scope, but adoption of this method
depends upon availability of complete information. The market factors which are
more accurate, quick and less costly may be selected for a sound forecasting.
8. Past Sales (Historical method):
Personal judgement of sales forecasting can be beneficially supplemented by
the use of statistical and quantitative methods. Past sales are a good basis and on
this basis future sales can be formulated and forecast. According to Kirkpatrick,
today’s sales activity flows into tomorrow’s sales activities; that is last year’s sales
extend into this year’s sales. This approach is adding or deducting a set of
percentage to the sales of previous year(s). For new industries and for new
products, this method is not suitable.
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(a) Simple Sales Percentage:

Under this method, sales forecast is made by adding simply a flat percentage of
sales so as to forecast sales as given below:
Next year sales = Present year sales + This year sales/Last year sales
or = Present year sales + 10 or 5% of present sale
(b) Time Series Analysis:
A time series analysis is a statistical method of studying historical data. It
involves the isolation of long time trend, cyclical changes, seasonal variations and
irregular fluctuations. Past sales figures are taken as a base, analysed and adjusted
to future trends. The past records and reports enable us to interpret the
information and forecast future trends and trade cycle too.
Merits:
(a) No guess-work creeps in.
(b) The method is simple and inexpensive.
(c) This is an objective method.
Demerits:
(a) ‘Market is dynamic’ is not considered.
(b) No provision is made for upswings and downswings in sales activities.
9. Statistical Methods:
Statistical methods are considered to be superior techniques of sales
forecasting, because their reliability is higher than that of other techniques.
They are:
(i) Trend Method
(ii) Graphical Method
(iii) Time-series Method:
(a) Freehand method
(b) Semi-average method
(c) Moving average method
(d) Method of least square
(iv) Correlation method
(v) Regression method.
6.3.2 SALES TERRITORY
A sales territory is the customer group or geographical area for which an
individual salesperson or a sales team holds responsibility. Territories can be
defined on the basis of geography, sales potential, history, or a combination of
factors. Companies strive to balance their territories because this can reduce costs
and increase sales.
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The main reasons for establishing the Sales Territories is as under:

1. To Organize the workload across territories in order to allow for equal
coverage and representation of existing customers and prospects
2. To balance territory revenue potential across territories to allow for even
rewards and incentives to all sales reps
3. Economize and selling operations expenses.
4. To Increase Efficiency of your sales force overall, whether by reducing travel
time or increasing vertical industry expertise
6.3.2.1 INPUTS TO THE DESIGN OF SALES TERRITORIES
The principal data in the design of sales territories are
1.Customer Analysis
The first step in determining the territorial coverage plans is to identify the
number size and location of potential customers may be defined as individual
buying units – individual consumers families retail stores companies buying
departments large corporations and so on, depending upon the nature of the
market. The size of the customers is the major determinant of the frequency with
which it is necessary to call up that account. Further the geographic concentration
of the customers by size should be determined at the first stage.
2. Establishing the control unit
Closely related to the analysis of the customers is the determination of the
basic control unit to be used in the analysis. A control unit is some geographic
delineation of the total market usually a trading area city or district or state. The
control unit chosen should be small enough so that each sales territory includes
atleast one control unit. The control unit chosen should be logically related to the
kind of the product being sold the marketing channel and the composition of the
market. Information about the number size and location of customers organized
according to basic geographic control unit provides the major basis for the
development of the territorial coverage plan.
3. Optimum call frequency
The third input required is determine the optimum call frequency. The basis for
the determination of call frequency is the grouping of accounts according to some
measure of potential business available and the resulting requirements of the
customer for sales and service calls. The determination of the frequency of calls
upon each class of account is typically based upon a combination executive
judgment and the analysis of previous call patterns.
4. Time per call
Average time required per calls is to be determined. This may vary with the
size of the customer. As the desirable call frequency for a class of customer
increases the time required for call tend to increase. In arriving it executive
judgment must be combined with an analysis of previous call patterns to determine
required time per call for each account category.
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Travel time between calls

Travel time between calls is influenced by the territory’s topography and the
availability of transportation facilities. On an analysis of previous call patterns
amount of time required can be estimated. An alternative “ time and duty “ analysis
may be used. It is desirable to vary to length of time per cal frequency in a
controlled way and to develop measures of changes in the effectiveness of sales
calls on an experimental basis.
6.3.2.2 PROCEDURES FOR DESIGNING TERRITORIES
The basic object of designing sales territories is to have proper market coverage
of accounts in each territory and cruel performance opportunities for each sales
person. The following is the procedure for designing territory.
1. Select planning and control unit
The first step in territory design is to select the planning and control unit that
will be used in the analysis i.e. some entity that is smaller than a territory. The
total market area served by a firm is divided into these planning and control units
then they are analyzed and grouped together to form territories. However data are
often times not available for small planning and control units and the computation
task more complex as more units are included in the analysis.
2. Analyze the opportunities in the planning and control unit.
Determine the amount of opportunity available from each planning and control
unit. The most often used measure of opportunity is market potential. Everything
else being equal the higher the market potential is the more opportunity available.
3. Form Initial Territories
Once planning and control units have been selected and opportunity evaluated
initial territories can be designed. The objective is to group the planning and control
units into territories that are as equal as possible in opportunity.
4. Assess the territory work load
The preceding steps produce territories of equal opportunity. It may take more
work to realize this opportunity in some territories than in others. Therefore the
work load of each territory should be equalized by the number of sales calls
required to cover the accounts in the territory the amount of travel time in the
territory the total number of accounts and any other factor that measure the
amount of work required by a sales person assigned to the territory.
5. Finalize the territory design
The final step is to adjust the initial territories to achieve equal work loads for
each sales person. The objective is to achieve the best possible balance between
equal opportunity and equal work load for each territory. Typically both of these
objectives cannot be completely achieved. So management must decide upon the
best trade offers for its situation.
6.3.3 SALES QUOTA
Any kind of sales figures given to any particular person or region or distributor
is called Sales Quota. It can be measured either in terms money or the stock of
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goods sold. It is particularly an amount of target sales that is assessed on daily or

monthly basis. To assess the performance of an individual sales person, his/her
ability is looked to meet the given target.
Sales Quota is the sales goal set for a product line, company division or sales
representative. It helps the managers to define and stimulate sales effort. Sales
quota is the minimum sales goal for a set time span.
Generally sales quotas are set slightly higher than the estimated sales so as to
stretch the sales force effort. Sales quotas are developed through the study of
annual territory marketing plan. In this the plan for developing new accounts and
expanding existing accounts is given by the representatives.
Sales quotas is a Individual sales target figure assigned to each sales unit such
a sales person, dealer, distributor, region, or territory, as a required minimum for a
specified period (month, quarter, year). Sales quotas may be expressed either in
dollar figures (monetary terms) or in number of goods or services sold (volume
terms).
6.3.3.1 PURPOSES OF SALES QUOTAS
i. To provide standards for evaluating performance:
Quotas provide a way to determine which sales people, territory, other units of
the sales organization, or distribution points are on average lower than average or
above average work. They are measures to measure sales performance. The
comparisons with quota sales performance identify weak and strong points, but
management must dig deeper to discover the reasons for variations.
ii. To provide objective and incentives for the sales force:
Quotas provide vendors, distribution points and others involved in the sale of
the activities, objectives and incentives to achieve certain level of performance.
Many companies use quotas to provide their sales force incentives of increased
remuneration as commissions or bonuses if the quota is exceeded and / or
recognized for superior performance. Needless to say that to be true motivators,
sales quotas must be seen to be realistic and achievable and in a surpass able
measure.
iii. To monitor the activities of sellers:
Quotas offer the ability to direct and control the sales activities of the sellers.
Sellers are responsible for certain activities such customer calls daily, calling for
new accounts, which gives a minimum number of events and realization of the
enterprise. If the sellers fail to meet these quotas, the company can take corrective
action to remedy the error.
iv. To assess the productivity of sales people:
Quotas provide a stick yard to measure the overall effectiveness of sales
representatives. By comparing actual results with SELLERS quotas areas of activity
are determined where the sales force need help to improve productivity.
v. To control the selling:
Quotas are also designed to keep selling expenses within limits. Some
companies reimburse costs to sell only to a certain sales quota percentage. Other
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expenses bind to the seller of remuneration to limit unnecessary expenses.

spending quota helps companies define profit quotas.
vi. To make effective compensation plan:
Quotas play an important role in the company’s sales compensation plan.
Some Indian companies follow the practice that their sellers receive a commission
only when they exceed their allocated quotas. Companies can also use quota
attainment in whole or in part as the basis for calculating the premium. If the seller
fails to minimum desired quota, it will not be allowed for any bonus.
vii. To evaluate the results of sales contest:
Sales quotas are frequently used in conjunction with sales contests. Companies
use most of the time “performance against quota” as the main base giving rewards
in sales contests. sales contests are more powerful incentives if all participants feel
they have a chance to win prizes based on the quota realization percentage which is
more or less equally common denominator. Therefore, it causes average seller to
turn into an average return above.
6.3.3.2 IMPORTANT FACTORS FOR FIXING SALES QUOTA IN AN ORGANISATION
A number of factors are used for establishing sales quota for salesmen. The
quota may be based on past sales records, buying power of customers, company
policies, total production for the year, competition, etc.
1. Past sales records:
Past sales of established organisations form a good index for future
performance. Thus, while setting sales quota, past sales may be taken into account.
Otherwise stated, the future sales quota is fixed keeping in view the past sales. New
companies can fix their sales quota by observing and going through the past sales
of the competing firms.
2. Buying power of customers:
A manufacturer can have a rough estimate of the buying powers of customers
of a particular area. The buying power of a particular area can be known by the
economic status, income of the customers living in the area, living habits, etc.
Accordingly, the manufacturer can estimate sales quota for that particular area.
3. Company’s policies:
Company’s policies regarding credit, quality of goods, discount, selling terms
have a direct impact while estimating sales quota for the salesman. In case the
company has a liberal credit policy, high quality goods, offers higher rate of
discount and facilitates installment selling, larger sales quota can be set for the
individual salesman. These policies help to increase the demand for goods and
services and as such increase the sales quota of each salesman.
4. Total production for the year:
A company’s total production in a particular year also plays an important role
in determining the size of the sales quota. If, in a particular year, the production is
high then higher sales quota can be set for the salesmen because goods which are
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produced need to be sold. On the other hand, if the production is normal in a

particular year, moderate sales quota for each salesman is fixed.
5. Extent of competition:
If the company in question is facing higher competition, the sales quota fixed is
usually lower. In other words, the intensity of competition is inversely proportional
to the size of the sales quota. It means that companies enjoying lesser competition
or near monopoly can have larger sales quota fixed for each salesman as there is
every possibility of larger volume of sales.
6. Opinions of experts:
Experts in the sales field are of immense help in determining the sales quota.
Dealers, agents, consultancy firms and other agencies which are closer to the
market are in a position to know the kind and quantity of goods that can be sold in
a particular area. Companies can take the help of such agencies or persons in
fixing sales quota for each salesman.
6.3.3.3 TYPES OF SALES QUOTA
Differences in forecasts and budgetary procedures, management philosophy,
sales problems, and the executive judgment, and changes in quotas procedures
setting, so that each business to have somewhat unique quota. Ignoring the small
differences, but quotas are divided into four categories:
i. Sales volume quota:
The most commonly used are those quotas based on sales volume. Such quotas
are set for individual sales person, geographies, product lines or distribution outlet
or only to one or more of them in combination. sales quotas are also set to balance
sales of slow-moving products and fast moving products or between different
categories of customers per sales unit. The sales volume of quota can be defined in
terms of product sales units, sales or rupees or both on the set and the base
product wise.
Some companies combine these two and set quotas on the basis of points.
Points are awarded on achieving a specific level of sales in units and terms of
rupees for each product / customer. For example: A company could consider Rs
1000 equal to 1 point, Rs 2000 equal to 2 points and so on… At the same time
company can assign 3 points for the unit sales of A and five points for the unit
selling products B. Companies use this type of approach usually because of
problems encountered in the implementation is the sales volume in rupees or sales
unit volume quota. Unit sales quotas volumes are useful in market situations
where product prices fluctuate significantly or when the product of the unit price is
quite high. Rupee quota sales volumes are appropriate in the case of the sales force
to sell multiple products to one or different types of customers.
ii. Financial or budgetary quotas:
Financial or budget quotas are determined to achieve the desired net income
and to control incurred selling expenses. In other words, it is set to different units
of the sales organization to control expenses, gross margin or net income. The
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intention in the financial quota implementation is to understand the sales staff that
this job consist of something more than obtaining sales volume. It makes the staff
more aware that the company is in business to make a profit. Expense allowances
focus on keeping expenses in line with sales volumes, controlling indirectly gross
margin and net profit contribution. The gross margin or net profit quotas
emphasize the contribution margin and profit, thus controlling indirect selling
expenses.
Spending quotas:
To make the sales force aware of the need to maintain the sales costs within
reasonable limits, some established businesses quota for expenses related to the
different sales levels achieved by their sales force. And to ensure compliance they
bind even the compensation of incentives to keep spending within limits. Since
sales are the result of completed sales tasks that vary across sales territories, it is
difficult to set a percentage expenditure quotas of sales in a uniform manner. Also
very strict standards compliance spending quotas lead to demonization of sales
force. As such expenditure quota is generally used as a complement to other types
of quotas.
Directors’ net:
Net profit quotas are especially useful in multi-product firms where different
products help level variable profits. Its focus is on the sales force to make good use
of their time. It is important for management to ensure that do not its sales force to
spend more time on less profitable products, because sellers are costing the
company the opportunity to earn higher profits from their higher margin products.
In other words, it must ensure that its salespeople spend their maximum time on
the most profitable customers. The objective can be achieved by setting a quota on
net income for its sales force, and therefore, encouraging them to sell more high-
margin products and less low margin products.
iii. The activity of quotas:
Good performance in competitive markets requires the sales force to make
sales, as well as activities related to the development of the market. These activities
have long-term implications on the goodwill of the company. To ensure that these
important activities are carried out, some companies set quotas for the sales force
in terms of various marketing activities to be performed by them within a given
period. Finally, the company has set a target level performance for those sales.
Some of the common types of quotas activity prevailing in the Indian companies are
as follows:
 Number of known prospects

 Number of new accounts opened
 Number of calls to make on behalf of the company
 Number of known dealers
 Number of rendering service calls
 Number of events made
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The main activity quota merit lies in his ability to lead the sales force to
perform the urgent sales activities and significant non-sales, but market
development activities in a balanced and fair manner.
iv. Quotas combination:
Depending on the nature of the product and the market, the sale of the tasks
required to perform as well as the sale of the challenges facing the company, some
companies find it useful to set quotas in combination of two or three types
described above. Rupee sales volume and net profit of quotas or unit sales volume
and activity quota in a combined manner are commonly used in many consumer
and industrial businesses in India.
6.3.4 STRUCTURING AND MANAGING SALES FORCE
The face of any organization is the sales force. Companies spend a considerable
amount of time and money on sales force rather than on any other promotional
activity. However, sales force is expensive and companies are looking forward to
managing them in an efficient and effective manner.
Designing of the Sales Force
Sales force is linking between companies and customer. Therefore, companies
have to be careful in designing and structuring sales force.
1. The first step is setting out an objective for sales force. Earlier companies had a
single objective increasing sale making it objective also for sales people. Sales
people are asked to perform a search for prospective clients or lead. Sales
people are asked to balance time between a prospective customer and current
customer. Effective communication of product and services is essential to close
the deal. Sales people also play an important role in after sales service and can
make a difference for the company. Sales people are eyes and ears of the
company in the market gathering information about competition and customer
changing demands.
2. The second step is use sales people strategically. Sales people have to combine
efforts with other team members to achieve the objective. Sales people should
be aware how to analyze market data been provided and convert them into
marketing strategies.
3. The third step is deciding the structure of the sales force. The structure of the
sales is dependent on the strategy followed by the company.
Common sales force structures are as follows:-
 Territorial structure is used where every sales representative is assigned
specific geographical area. This structure is preferred for building
relationships with locals.
 Product structure is used for complex and un- related product portfolio.
Here the sales people are directly associated with research and development
of the products.
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 Market structure is used if the companies are operating different industry

or market segments. Every sales force specializes in a definite market and
helps push a product efficiently across the given market. However, the
disadvantage would arise if customers are located over a wide geographical
area.
 Complex structure is used when companies are in business of selling
complex product to different customer across a large geographical area.
Here sales force structure is a combination of other structures discussed.
Once the structure is designed companies need to make a decision with respect
to the size of the sales force. The size of the sales force is dependent on the market
size and number of customers.
1. The next step is to design compensation for the sales force. Compensation
plays a big motivational factor for sales people. Companies follow a
structure of a fixed amount plus a variable amount depending of success
achieved in the market. Allowances play an important factor in the salary
owing to continuous travel and market visits.
Managing Sales Force
Integral part for success of marketing strategy is management of the sales
force. The management of sales consists of following:-
1. Recruitment is at the centre of an effective sales force. One approach in the
selection is asking a customer what characteristics they look for in a sales
representative. Companies develop selection procedure where behavioral
and management skills are tested.
2. Training is essential to remain ahead of the competition. Sales force needs
training before entering the market as well as training at different stage of
the product life cycle.
3. Supervision on sales force is decided on the profile of product portfolio. A
general supervision is maintained with respect to sales people dealing with
potential clients. Another supervision is related to efficient time
management from preparation of client call to closing of the deal.
4. Motivation is a key aspect for management of the sales force. Here
compensation plays an important in driving up the motivational level.
Compensation can be assigned based on sales quota. Other motivational
tools are social gathering and family outing.
5. Evaluation is essential to management of a sales force. Sales reports sent
by the sales force serve a good starting point of evaluation.
6. Art of negotiation and relationship marketing these two are the important
aspects of successful sales representative and long term benefit for the
company.
6.4 REVISION POINTS
 Sales territory
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and increase sales.
 Inputs to the Design of Sales Territories
 Customer Analysis
 Establishing the Control Unit
 Optimum Call Frequency
 Time per Call
 Travel Time between Calls
 Procedures for Designing Territories
 Select planning and control unit
 Analyze the opportunities in the planning and control unit.
 Form Initial Territories
 Assess the territory work load
 Finalize the territory design
 Sales Quota
Sales quota is the sales goal set for a product line, company division or sales
representative. It helps the managers to define and stimulate sales effort. Sales
quota is the minimum sales goal for a set time span.
 Purposes of Sales Quotas
 To provide standards for evaluating performance
 To provide objective and incentives for the sales force
 To monitor the activities of sellers
 To assess the productivity of sales people
 To control the selling
 To make effective compensation plan
 Important factors for fixing sales quota in an organisation
 Past sales records
 Buying power of customers
 Company’s policies
 Total production for the year
 Extent of competition
 Opinions of experts
 Types of sales quota
 Sales volume quota
 Financial or budgetary quotas
 The activity of quotas
 Quotas combination
(a) What do you mean sales Management?
(b) What are the importance of sales management?
(c) Describe different types of selling?
(d) What is selling?
74
(e) Define marketing?

(f) What are the differences between selling and marketing?
(g) Elaborate various objectives of sales?
6.6 SUMMARY
and increase sales. A number of factors are used for establishing sales quota for
salesmen. The quota may be based on past sales records, buying power of
customers, company policies, total production for the year, competition, etc.
Differences in forecasts and budgetary procedures, management philosophy, sales
problems, and the executive judgment, and changes in quotas procedures setting,
so that each business to have somewhat unique quota. Ignoring the small
differences, but quotas are divided into four categories.
1. Products are introduced in a limited geographical area and the result is studied
this is a
a) Sales planning
b) Test Marketing Result
c) Sales Force Opinion
d) Market Factor Analysis
2. sales goal set for a product line, company division or sales representative is a
a) Sales strategy
b) Sales planning
c) Sales quota
d) Sales process
3. To achieve the desired net income and to control incurred selling expenses is
called
a) Budget quotas
b) The activity of quotas
c) Quotas combination
d) Sales volume quota
4. Sales representative is assigned specific geographical area and it is preferred for
building relationships with locals it is called
a) Complex structure
b) Market structure
c) Territorial structure
d) Product structure
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6.9 ASSIGNMENTS
1. Critically examine the various methods of sales forecasting, highlighting
their merits and demerits.
2. Define sales territory. Bring out the major reasons for establishing a sales
territory by the companies.
3. Brain Tracy, “The Psychology of selling” 2012, first edition.
edition.
fifth edition.
1. https://www.bayt.com/en/specialties/q/83635/the-main-reason-for-
establishing-sales-territories-is-to/
2. https://www.boundless.com/marketing/textbooks/boundless-marketing-
textbook/personal-selling-and-sales-promotion-14/managing-the-sales-
force-94/creating-sales-force-structure-territories-and-goals-464-5732/
3. https://salesbenchmarkindex.com/insights/5-steps-for-designing-
territories-for-your-top-talent/
4. http://studiousguy.com/sales-quota/
5. http://www.shareyouressays.com/89364/6-important-factors-for-fixing-
sales-quota-in-an-organisation
6. http://salesforcemanagement.blogspot.in/2008/02/objective-of-fixing-
sales-quota.html
7. https://www.bayt.com/en/specialties/q/126893/what-is-sales-quota-
explain-the-types-of-sales-quota-and-its-purpose/
8. http://www.winstudent.com/what-are-the-types-of-sales-quotas/
1. Discuss the basic objective of designing a sales territory and bring out the
steps to be followed in designing a territory for your own company.
6.12 KEYWORDS
 Methods of Sales forecasting, Sales territory, Fixing sales quota, Types of
sales quotas,
 Structuring and Managing Sales Force.
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LESSON-7
CONTROLLING AND MOTIVATING SALESFORCE
7.1 INTRODUCTION
Control means a check, a means of controlling or testing. Control involves such
functions as checking, verifying, standard selling, and directing or guiding. One
may say, “Control means watching results and translating them into positive
action.” Control is a process to establish the standard of performance measuring
the work done. Through control salesman’s performance can be appraised.
All the organisations must have the operation of control, as a tool, for their
progress and successful working. It is an act of checking or verifying the
performance as per the plans. “Control consists in verifying whether everything
occurs in conformity with the plans adopted, the instructions issued and the
principles established. Its objective is to point out weaknesses and errors in order
to rectify them and prevent their recurrence. It operates on everything, people and
actions.”
7.2 OBJECTIVES
 Controlling and motivating sales force
 Need for control of sales force
 Motivation
 Recruitment and selection of sales force
 Selection
7.3 CONTENTS
7.3.1 Controlling and motivating sales force
7.3.2 Need for control of sales force
7.3.3 Methods of control
7.3.4 Motivation
7.3.5 Process of motivation
7.3.6 Recruitment and selection of sales force
7.3.7 Recruitment
7.3.8 Selection
7.3.1 CONTROLLING AND MOTIVATING SALES FORCE
1.Controlling the Sales Force
The last but not the least significant phase is control of sales force operations.
In any sphere of activity, supervision and control of salesmen is essential with a
view to achieve the maximum success. The sales operations are to be materialized
as per plans laid down, followed by scientific control of efforts and resources. A plan
is necessary when you construct a building. In the same way, in business also a
chalked out plan is a sine-qua-non and the plan to be under a successful control is
essential.
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action.” Control is a process to establish the standard of performance measuring

the work done. Through control salesman’s performance can be appraised.
All the organisations must have the operation of control, as a tool, for their
progress and successful working. It is an act of checking or verifying the
performance as per the plans. “Control consists in verifying whether everything
occurs in conformity with the plans adopted, the instructions issued and the
principles established. Its objective is to point out weaknesses and errors in order
to rectify them and prevent their recurrence. It operates on everything, people and
actions.”
7.3.2 NEED FOR CONTROL OF SALES FORCE
The manager exercises the control over the activities of salesmen through
supervision. The planned sales operations are to be carried out systematically in
order to get success over the aimed result.
The need for supervision arises because of:
1. Salesmen may be working independently and may be at a longer distance
from the sales manager. There may arise a problem of co-ordination, of salesmen’s
effort with the other sales efforts i.e., publicity, sales promotions etc. To ensure co-
ordination, control is a must.
2. The sales affected by each salesman should be known to the sales manager,
who compares the actual with the targets, to find negative variation, which should
be rectified by corrective actions. There may be mistakes in the approach of a
salesman, laziness in activities etc.,. These must be traced out and the salesman
guided in order to channelize his efforts into desired path.
3. Efforts of the salesman have to be directed to maximize profits to firm in the
light of progressive ideas and techniques to ensure the proper utilization of men
and materials.
4. “Of all the assets customers are the most valuable.” To build a sound public
relation, complaints of different types of customers are to be redressed. Thereby, it
is possible to build a good image in the minds of the public. The salesman is guided
by the sales manager, who tries to satisfy the customers through salesmen.
Prerequisites of Control:
1. The sales manager should know what exactly he expects a salesman to do.
(through fixing the sales quota).
2. Salesman should be given an idea of what he is expected to do. (through
training).
3. Sales manager should know that the salesman is doing exactly what he is
expected to do. (through reports).
4. Salesman should be made to know that the sales manager knows what he
does, (through personal talk and reports).
5. Salesman should know that the sales manager appreciates what he does,
(through reports).
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Elements Involved in Control:

The following steps are involved in the process of control:
1. Analysis of Performance:
All controls involve the setting of a standard and the measurement of
performance against their standard. The performances are analyzed and compared
with reference to the objectives, budgets and standards. This will reveal the
variances between the performance and the standard.
2. Analysis of Variance:
After finding out the variance, the first question is whether this variance is
significant. If the variance is significant, the next question is usually, “What went
wrong with the performance?” and possibly a better question will be “What is wrong
with the standard?” Effective sales control should reveal poor execution of sales
policies or indicate when sales policies need changing.
Sales Control may not, however, disclose the reasons for poor execution. For
instance, poor execution may be due to ignorance of sales policies, inability to
perform the tasks, resentment, discontent etc. The significant variances are
considered carefully to enable the authority to take corrective steps.
3. Measures to Deal with Unfavorable Variance:
The function of control is to identify the weakness and errors in the sales
efforts. Reasons and causes are found out and their remedial measures are
formulated in order to correct the weakness and errors in a speedy manner. These
enable the sales manager to guide the individual salesman when necessary. All
these are done in order to improve the sales programme performance.
7.3.3 METHODS OF CONTROL
Control is essential in order to secure optimum performance from salesmen.
Sales managers effect controls, by common methods, through personal contacts,
correspondence and report.
1. Personal Contact:
Personal contacts are more effective than other methods. Sales manager
himself or through branch managers or field supervisors, exercises controls over
the salesmen. Salesmen can be assisted and inspired, and corrective steps can be
taken.
2. Correspondence:
This method is commonly accepted and is economical. Through
correspondence, instructions are passed on to the salesmen and replies received
from the salesmen. The salesmen are supervised or controlled through letters.
3. Reports:
They are not in the form of letters. Printed report forms are used by the
salesmen to make reports to the sales manager. In certain cases, the report may be
oral.
BASES OF CONTROL
The control of salesman is based on:
(1) Reports and Records
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(2) Sales Territories and Sales Quotas

(3) Determination of salesman’s authority
(4) Field Supervision and
(5) Remuneration Plans.
(1) Reports and Records:
REPORT:
Every sales manager needs accurate and up-to-date information, on the basis
of which he formulates policies for future business. Formulation of policies may not
be practical in the absence of information. For the growing needs of the
organisation, expanding the professions, widening activities of the business etc., it
has become essential to look for the information.
A report is a presentation of facts on the basis of activities. Salesmen’s reports-
daily, weekly, monthly, provide valuable information relating to the salesmen’s
activities for a sales organisation. Salesmen, who are the primary source of
information, being the eyes and ears of the selling firms, are asked to send reports
periodically.
The report will reveal the following information:
1. Number of calls made on customers
2. Number of sales related to number of calls
3. Amount of sales made—volume and value
4. Details of sales made to regular customers
5. Details of sales made to new customers
6. Details of sales lost to old customers
7. Reasons for customers lost
8. Sales by product line
9. Outstanding accounts
(a) Collections made
(b) Bad debts due to bankruptcy
10. Credit worthiness of customers
11. Degree of competition existing
12. Number of complaints received
13. Number of complaints attended
14. Selling expenses total and per order
15. Impact of advertising and activities relating to sales promotion.
Report must be brief and in condensed form. It gives the needed information.
Unnecessary or unwanted information is avoided, as many companies use standard
forms for salesmen’s report. Therefore, it is easy for the sales manager to
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understand the weak activities and suggest corrective measures to the concerned
salesman.
REPORTS
Reports are the basis, on which the records of each salesman are prepared.
They will reveal the following condensed idea relating to salesmen, based on
actual performance:
1. Sales by product lines
2. Sales to regular customers
3. Sales to new accounts
4. Minimum, maximum and average size of orders
5. Account lost
6. Selling expenses for each order
7. Movements of products-slow or fast.
(ii) Sales Territories and Sales Quotas:
Sales manager must try to know the sales field well in advance, before the
production starts. He must know the area of demand for the products and for this
he should know the habits and economic position of the customers; and the type of
demand and quality of products usually in demand. In short, a detailed study of
consumers is important. The sources of information are year books, census reports,
publications, professional organisations etc.
Sales Territory:
Almost all the firms divide their markets, after the sales field is located into
different territories. Sales territory is a particular grouping of customers and
prospects assigned to a salesman. A sales territory is a geographical area which
contains present and potential customers, who can be served effectively and
economically by a single salesman. Its aim is to facilitate management’s task in
matching sales efforts with the sales opportunities. An efficient salesman can
successfully discharge his duties and responsibilities if the territory allotted to him
is of workable and suitable size. A good sales planning is based on sales territory,
rather than taking the whole market area. That is, the market of a firm’s product is
divided into small segments or territories or areas, so that each territory can be
allotted to each salesman. When allotting perfect sales territories, which have been
planned carefully, the following objectives are aimed for the reasons thereof:
1. Sales effort can be fruited more effectively in the assigned territory.
2. It is possible to have increased market coverage, not losing the orders to
competitors. He meets the competition wisely as it is pre-planned, because
he knows the local condition.
3. It prevents the duplication or overlapping sales efforts.
4. Headquarters of each sales territory can be located in a place, where
greater number of customers is located.
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5. Work load for each salesman can equitably be distributed, in terms of

sales volume.
Sales Quota:
Apart from the allocation of sales territories, salesmen are further controlled by
fixing sales quota. Almost all the companies use quota system of defining and
evaluating the task expected of the salesmen. Sales quota may be defined as the
estimated volume of sales that a company expects to secure within a definite period
of time.
Quota is the amount of business, in terms of value or in terms of units of sales,
which is fixed for every salesman. It may be fixed for a geographical area to be
achieved within a definite period of time, a month or a year. Shorter the period, the
better it is. It is a target or a standard of performance that the salesman has to
attain. The quota is fixed on the basis of sales forecast. For an effective control,
smaller area and shorter period are preferred.
A sales quota, to be effective, practical and successful, should satisfy the following:
1. Sales quota must be attainable and fair.
2. It must be scientifically calculated. It should not be too small or too big.
3. It must provide definite incentive to salesman.
4. It must be flexible.
5. It must be simple and must be fixed in consultation with the salesman.
Sales quota brings the following benefits:
1. The sales quota can be used as yardstick to assess the performance of the
salesmen.
2. It is a measuring rod with which the sales operations are directed and
controlled to more profitable channels.
3. It is possible and easier to locate strong markets and weak markets.
4. It is a device to adopt more effective compensation plans.
5. It fixes the responsibility on each salesman and so they work hard to
attain the goal. The salesmen never allow the sales to fall below the quota.
6. It facilitates sales contests and is a base.
(iii) Salesmen’s Authority:
If the sales manager goes for doing all the works of a firm, it is very difficult to
conduct the business Moreover, he lacks time. Therefore, the job is divided and
entrusted to the salesmen. When the authority is passed on to the salesmen, there
is transfer of power to the salesmen i.e., delegation of power. Delegation is the
required authority to the salesmen to discharge their assigned job.
When one is delegated the authority, it means permission is given to do the
duties. When authority is conferred on salesmen, they know their responsibilities.
Customers may not be willing to deal with a salesman having no authority. There
are no hard and fast rules as to how much authority be given to a salesman. In
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modern time, the degree of authority is reduced. The authority and freedom of
salesmen varies from firm to firm. To what extent the authority is given to a
salesman depends upon the size and nature of the firm. Since the salesmen are
representing the firm and deal with customers, who have no direct contact with the
firm, the salesmen’s authority be well-defined. Generally, catalogue, price lists
advertisements etc., reveal the prices, guarantees, quality and other details of the
products. And the salesmen are being relieved of these botherations.
However, salesmen may be conferred with certain measure of authority in
dealing with the matters, such as special concessions, discount rates, granting
credit, settlement of claims, settlement of damages, defective, unsalable items etc.
But it is important that salesmen are watched in their acts which must be in
accordance with the instructions by the sales manager and their activities are
subject to the approval of the sales manager.
(iv) Field Supervision:
Performance of a function or service by an individual is called duty; activities
that an individual is required to perform are a duty on him. Authority is a right or
power required to perform a job on the basis of duty assigned to one. An authorized
person is empowered to do the assigned job Responsibility must always be followed
by corresponding authority or power. Authority and responsibility move in opposite
directions.
Authority always moves from the top downward, whereas responsibility moves
upwards. Authority is derived from sales manager to whom the salesmen are
responsible for proper performance of their activities. The individual responsibility
and freedom of the sales personnel vary from firm to firm. A good degree of control
is essential over the activities of the salesmen.
Generally the sales manager or any senior sales personnel or field supervisor;
are appointed to check the activities of the salesmen so as to:
1. Know whether the salesman is doing his job in best way
2. Find out deficiencies if any
3. Make suggestions for further improvement
4. Check the procedure of orders taking
5. Evaluate the performance of salesman
6. Provide spot motivation to salesman
7. Secure maximum coverage of the market
Control aims at appraisal of salesman’s performance. It must be done
periodically and on continuing basis as to determine the compliance of policies and
attainment of targeted quota in respect of job. Supervision and control are different.
Supervision aims at direction for working and control includes supervision and
evaluation of past performance.
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(v) Routing and Scheduling:

Time must be used wisely while a salesman travels in his respective territorial
area. Salesman will be encouraged to get maximum sales by reducing the wastage
of time. Routing and scheduling is one of the techniques of controlling a salesman’s
day to day activities. A planned routing of the salesman will facilitate easy
communication, maximum territorial coverage and thereby reduce the waste time.
Management has a closer control. A clear tour plan is there and reveals route,
location of customers, transport facilities, maps etc. The planned routes and
schedules are to be followed by the salesman. The reports sent by the salesman can
be compared with the planned routes and schedules and this reveals the
deviations.
7.3.4 MOTIVATION
Motivation is that force within us that directs our behavior. The sources of our
motivation is our needs wants and the outcome is our actions. Motivation is an
internal drive that directs our selection of behaviors. Motivating sales persons
means getting that sales person to put a lot of effort into his selling job rather than
directing that effort elsewhere. A sales person works hard at this job as long as it
provides opportunities to meet his needs. But if these opportunities decrease or
one’s needs change while the job stays the same job related effort will also decrease
non job activities will gain higher priority to provide satisfaction. There are many
theories of motivation discussion of which is outside of the purview of this paper.
The essence of motivational theories is that the motivational process begins when
an individual perceives an unfulfilled need and begins to search for ways to met the
need. When the people feel that needs can be partially or fully met through job
behavior they will set goals and direct their efforts accordingly. Subsequent
performance is evaluated and reinforced through rewards and punishment. This
may lead to re-assessment of the need and means for satisfying the need. So sales
manager is to establish and maintain a job environment that is fulfilling and
stimulating the sales force.
FACTORS AFFECTING MOTIVATION
Motivation is complex affected by many individual and inter related factors.
Some of such factors are given here.
1.Factors relating to the job
Sales people are motivated by the job satisfaction they receive. Job satisfaction
is the result of job characteristics such as skill variety task identify and autonomy
etc.
2.Factors relating to organization
Organizational climate influence on motivation. This involves the sales person’s
perceptions of the work environment and of relationships with other people
encountered on the job.
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3.Factors relating to the job environment

The sales person’s environment it is an assigned territory, with its particular
potential and work load. It seems logical that the sales person’s motivation would
be affected if his territory was below average in potential or above average in work
load or some combination of these two conditions.
4.Factors relating to personal characteristics
Age related to a variety of motivational factors. Younger sales people are more
motivated by promotion opportunities while other sales people will work harder to
assure job security. Sales people who were old, married and had large familities
found financial rewards more desirable and promotional opportunities less
desirable.
GUIDELINES FOR MOTIVATING SALES PEOPLE
Sales manager should realize that practically everything they do will influence
sales force motivation one way or other. The people they recruit the plans and
policies they institute the training they provide and the way they communicate
with and supervise sales people are among the more important factors. The
following are the guidelines for motivating the sales people.
1.Recruit and selection
Recruit and select the people whose personal motives match the requirements
and rewards the job. These should not be over stated. Investing more time in
recruitment and selection to assure a good match is likely to pay off later in terms
of fewer motivational and managerial problems.
2.Incorporation of individual needs
Attempt to incorporate the individual needs of sales people into motivational
programme. Sales force segmentation offers some of the benefits of individualized
approaches and may be a logical alternatives in large sales force.
3.Information and Skills
The importance of providing adequate job information is well documented in
expectancy theory. It sales manager euip their sales people to make accurate
expectancy a major motivational task is accomplished.
4.Job design
Job skill variety task significance job autonomy and job feed are significantly
related to the intrinsic motivational levels of sales force. Given the nature of sales
job one would expect good opportunities to stimulate intrinsic motivation without
major changes in the job.
5.Building self esteem
Researchers have emphasized the importance of building self esteem to
enhance motivation and performance of sales people. Sales manager can use the
insights of reinforcement theories to build self esteem in the sales force.
7.3.5 PROCESS OF MOTIVATION
The process of motivation starts with the need which may be the perception of
deficiency in an individual. For example, an employee in the organization considers
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the need for higher pay, more challenging work, for time off etc. These needs
influence the thought processes of employee that directs him to satisfy the needs by
adopting a particular pattern of action. In case the selected course of action of an
employee leads him towards expected results in the form of reward than he will
definitely be motivated by the similar reward to give the same performance in the
future. On the other hand, if the anticipated rewards are not resulted by adopting a
certain line of action, then the employee would not be likely to repeat his behavior.
So the rewards of certain action, act as a feedback mechanism that supports the
employee to evaluate the consequences when he is considering his future action.
Fundamental Phases – Process of Motivation
Following are the basic phases of the process of motivation.
1.Need Identification
In the first phase of the process of motivation is the employee feels certain need
that is unsatisfied & hence he identifies that need. Then the unfulfilled need
stimulates the employee to search certain goal by creating tension in him. This
tension acts as driving force for the accomplishment of the set goals which can
satisfy the tension creating need.
2. Exploring Ways to Fulfill the Need
In this phase of the process of motivation, different alternative ways are
explored that can satisfy the unsatisfied need that is identified in the first phase. In
fact the unsatisfied need stimulates the thought processes of the employee that
direct him to adopt a certain course of action.
3.Selecting Goals
In the third phase of the process of motivation, the goals are selected on the
basis of identifying needs and alternative course of actions.
4.Performance of Employee
In the fourth phase of Motivation Process, the identified need stimulates the
employees perform in a certain way that has already been considered by him. So
the employee performs certain course of action to the satisfaction of unsatisfied
need.
5.Rewards/Punishments as Consequences of Performance:
If the consequences of the particular course of action followed by an employee
are in the form of rewards, then the employee would be motivated to perform the
same level of efforts for acquisition of similar rewards in future. Whereas when the
anticipated results of the actions of an employee lack the rewards, then he would
not be willing to repeat his behavior in the future.
6.Reassessment of Deficiencies of Need
When an employee feels satisfaction for his certain unsatisfied need through
the rewards of a certain line of action, then he again reassesses any further
unsatisfied need and resultantly the whole process is repeated again.
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7.3.6 RECRUITMENT AND SELECTION OF SALES FORCE

In most of the companies sales manager have the ultimate responsibility for
recruitment and selection. They may have the support of top management or they
coordinate with the human resource personnel or other managers within the firm.
But the sales manager who generally retires primary recruitment and selection
responsibilities. To empriasize the importance of recruitment and selection,
consider only a few of the potential problems associated with its inadequate
implementation.
1. Inadequate sales coverage and lack of customer follow up
2. Increased training costs to overcome deficiencies
3. More supervisory problems
4. High turnover rates
5. Difficulty in establishing enduring relationships with customers
PLANNING FOR RECRUITMENT AND SELECTION
If you habitually replace employees who have left your company, you may not
be thinking about what positions your company actually needs. Instead of hiring to
maintain the status quo, your human resources department can plan ahead to
anticipate what new positions and skills you will need to remain competitive. If you
wish to maintain most of your positions, HR can plan to improve the talent and
functions of those positions effectively.
1.The Vacancy and Job Description
The first recruitment task of your human resources staff is an examination of
the position in relation to your business strategy. HR should ask how the position
fits into your future needs and what additional responsibilities might need to be
added to the job. HR can follow that evaluation with a detailed job description,
based not on the description you keep on file, but on an understanding of your
growing business needs.
2.Establishing Selection Criteria
You can fall into a trap of seeking employees who fit into your culture instead
of finding candidates who have skill sets you need. Part of your recruitment plan
should include explicit criteria for choosing successful candidates. List the job
competencies they must have as well as the attitudes and interests that will help
them succeed in a position. This part of your plan keeps you on track when you
have competing candidates. Use your selection criteria as a checklist to help you
focus on your needs for the job.
3.Internal Versus External Search
You may benefit from planning an internal search for candidates before you
announce openings to the public. Plan to notify current employees of openings and
publish the job description on your intranet or through company email. Decide in
advance whether you will open the position to external applicants no matter what
talent you find internally or whether you will cancel the external search if you find a
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current employee for the job. Planning the interaction of your internal and external
searches can help you find the best talent for your positions.
4.Evaluation and Testing
Expect HR to conduct skills tests and aptitude tests for candidates you are
serious about. You need employees who can get up to speed quickly, and it is up to
HR to plan for testing as part of the selection process. Review testing from time to
time to make sure it aligns with the skills you need on the job.
5.The Interview Process
Establish who will do the interviewing, such as an initial interview with HR, a
manager and even the business owner before a candidate is approved. Determine if
all interviewers must agree on a candidate or if one person's view carries more
weight than the others.
6.Background Checks
Background checks cost you money, so ask HR to determine which stage of the
hiring process is appropriate for this tool. One cost-saving solution is running a
check on a candidate only when you are ready to make her an offer. Whatever your
decision, HR must include this process in its plan.
7.3.7 RECRUITMENT OF SALESMEN
According to Edwin B Flippo - Recruitment is the process of searching for
prospective employees and stimulating them to apply for jobs in the organization. It
is therefore clear that, recruitment is the process by which suitable sources of
manpower are identified to meet the manpower requirement of a sales organization”
Recruiting is a process by which a firm secure a pool of applications to be
considered for hiring. In this line the first step is to have a clear understanding of
the type of the people and the number of people needed with specific qualifications
and experience. Towards the following analysis is to be made.
1.Job analysis
To effectively recruit and select sales people sales manager must have a most
complete understanding of the job for which candidates are sought. To assure an
understanding of the sales job the sales managers may need to conduct confirm or
update a job analysis which entails an investigation of the tasks duties and
responsibilities of the job.
2.Job qualification
The job analysis indicates what the sales people are supposed to do on the job
while job qualifications refer to the aptitude skill knowledge personal traits and
willingness to accept occupational conditions necessary to perform the job.
Common sales job qualification address sales experience educational level
willingness to travel and ability to work independently.
3.Job description
Job description includes basic job-related data that is useful to advertise a
specific job and attract a pool of talent. It includes information such as job title, job
location, reporting to and of sales people, job summary, nature and objectives of a
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job, tasks and duties to be performed, working conditions, machines, tools and
equipments to be used by a prospective sales man and hazards involved in it.
Purpose of Job Description
a. The main purpose of job description is to collect job-related data in
order to advertise for a particular job. It helps in attracting, targeting,
recruiting and selecting the right candidate for the right job.
b. It is done to determine what needs to be delivered in a particular job. It
clarifies what employees are supposed to do if selected for that
particular job opening.
c. It gives recruiting staff a clear view what kind of candidate is required by
a particular department or division to perform a specific task or job.
d. It also clarifies who will report to whom.
4.Job specification
A job specification is a written statement of educational qualifications, specific
qualities, level of experience, physical, emotional, technical and communication
skills required to perform a job, responsibilities involved in a job and other unusual
sensory demands. It also includes general health, mental health, intelligence,
aptitude, memory, judgment, leadership skills, emotional ability, adaptability,
flexibility, values and ethics, manners and creativity, etc.
Purpose of Job Specification
a) Described on the basis of job description, job specification helps candidates

analyze whether are eligible to apply for a particular job vacancy or not.
b) It helps recruiting team of an organization understand what level of
qualifications, qualities and set of characteristics should be present in a
candidate to make him or her eligible for the job opening.
c) Job Specification gives detailed information about any job including job
responsibilities, desired technical and physical skills, conversational ability
and much more.
d) It helps in selecting the most appropriate candidate for a particular job.
SOURCES FOR RECRUITING SALES STAFF

Recruitment refers to employing the right kind and the right number of sales
personnel for a sales job. Since recruiting is the first step in the placement of a
candidate, it holds a lot of importance and must be done properly.
Recruiting Sources Within the Company
 Current Sales Personnel - A Company's Sales Personnel have a large
circle of acquaintances both on and off the job. Hence, they act as an
excellent source for recommending other suitable sales people to join the
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organization. Such prospective candidates already know much about the

Company policies.
 Company Executives - Recommendations from sales managers and
other executives are other important sources of recruitment. People who
work for a Company understand the requirement and are in a position
to recommend suitable people to join the organisation.
 Internal Transfers - This is another common source for recruiting sales
personnel from with in the organization. These posts can be filled by
personnel from other departments or the non selling team of the sales
department who already have excellent product knowledge.
Sources of Recruitment Outside the Company
 Direct Applications - Many Companies receive applications as well walk in
candidates who wish to join the organization's sales team.
Such volunteered applications should be processed and interviewed if they
meet the basic requirements.
 Employment Agencies / Consultants - Placement Agencies and
Recruitment Consultants have become a good choice for Companies looking
for suitable candidates for their organization. To receive good response, the
HR manager must provide them with a clear statement of the job objectives
and requirement.
 Educational Institutions / Universities - This is a favourable choice for
most organizations who are looking for fresh talent. Company heads
approach colleges, universities and Institutes of repute and conduct
campus interviews. Such 'on the campus' recruitment is done once a year.
Training is provided to the prospective candidates during vacations to give
them background knowledge.
 Employees of Customers - For some companies, their customer becomes a
good recruiting source. Such customers recommend personnel in their
organization who have reached the maximum capacity in their present
employment.
 Online Job Portals & Websites - Job websites are a good source of
recruitment. Prospective job seekers register themselves with these websites
and offer their resumes online. Employers looking for suitable candidates
make use of these websites to reach suitable job seekers. Some popular
websites include 123oye.com, monster.com etc.
 Sales Force of Competing Companies - The sales people in competing
companies act as a logical recruiting choice since they already have relevant
sales experience and require minimal training. However, such sales staffs
have to be offered higher salaries to convince them to leave their present
employment.
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7.3.8 SALES FORCE SELECTION

Selection is the process that an organization uses to determine which job
applicant will be the most successful in meeting the demands of the job or will fit
well with the existing work groups and the culture of the organization. Poor
selection procedures and processes lead to various unnecessary costs in the
organization. In the recruitment process, an organization hires the most suitable
and qualified candidate whether he is internal or external to the organization to fill
a job vacancy.
Definition: The Selection is a process of picking the right candidate with
prerequisite qualifications and capabilities to fill the jobs in the organization.
The selection process is quite lengthy and complex as it involves a series of
steps before making the final selection. The procedure of selection may vary from
industry to industry, company to company and even from department to
department. Every organization designs its selection process, keeping in mind the
urgency of hiring people and the prerequisites for the job vacancy.
SELECTION PROCESS
The selection procedure comprises of following systematic steps:
1. Preliminary Interview: The preliminary interview is also called as a

screening interview wherein those candidates are eliminated from the
further selection process who do not meet the minimum eligibility criteria as
required by the organization. Here, the individuals are checked for their
academic qualifications, skill sets, family backgrounds and their interest in
working with the firm. The preliminary interview is less formal and is
basically done to weed out the unsuitable candidates very much before
proceeding with a full-fledged selection process.
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2. Receiving Applications: Once the individual qualifies the preliminary

interview he is required to fill in the application form in the prescribed
format. This application contains the candidate data such as age,
qualification, experience, etc. This information helps the interviewer to get
the fair idea about the candidate and formulate questions to get more
information about him.
3. Screening Applications: Once the applications are received, these are
screened by the screening committee, who then prepare a list of those
applicants whom they find suitable for the interviews. The short listing
criteria could be the age, sex, qualification, experience of an individual. Once
the list is prepared, the qualified candidates are called for the interview
either through a registered mail or e-mails.
4. Employment Tests: In order to check the mental ability and skill set of an
individual, several tests are conducted. Such as intelligence tests, aptitude
tests, interest tests, psychological tests, personality tests, etc. These tests
are conducted to judge the suitability of the candidate for the job.
5. Employment Interview: The one on one session with the candidate is
conducted to gain more insights about him. Here, the interviewer asks
questions from the applicant to discover more about him and to give him the
accurate picture of the kind of a job he is required to perform. Also, the
briefing of certain organizational policies is done, which is crucial in the
performance of the job. Through an interview, it is easier for the employer to
understand the candidate’s expectations from the job and also his
communication skills along with the confidence level can be checked at this
stage.
6. Checking References: The firms usually ask for the references from the
candidate to cross check the authenticity of the information provided by
him. These references could be from the education institute from where the
candidate has completed his studies or from his previous employment where
he was formerly engaged. These references are checked to know the conduct
and behavior of an individual and also his potential of learning new jobs.
7. Medical Examination: Here the physical and mental fitness of the
candidate are checked to ensure that he is capable of performing the job. In
some organizations, the medical examination is done at the very beginning
of the selection process while in some cases it is done after the final
selection. Thus, this stage is not rigid and can take place anywhere in the
process. The medical examination is an important step in the selection
process as it helps in ascertaining the applicant’s physical ability to fulfill
the job requirements.
8. Final Selection: Finally, the candidate who qualifies all the rounds of a
selection process is given the appointment letter to join the firm. Thus, the
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selection is complex and a lengthy process as it involves several stages than

an individual has to qualify before getting finally selected for the job.
7.4 REVISION POINTS
 Control
Control is a process to establish the standard of performance measuring the
work done. Through control salesman’s performance can be appraised.
 Bases of Control
 Reports and Records
 Sales Territories and Sales Quotas
 Determination of salesman’s authority
 Field Supervision and
 Remuneration Plans
 Motivation
Motivation is that force within us that directs our behavior. The source of our
motivation is our needs wants and the outcome is our actions. Motivation is an
internal drive that directs our selection of behaviors
 Selection
The Selection is a process of picking the right candidate with prerequisite
qualifications and capabilities to fill the jobs in the organization
 Sources of Recruitment
Within the Company
 Internal Transfers
 Company Executives
 Current Sales Personnel
Outside the Company
 Direct Applications
 Employment Agencies
 Educational Institutions
 Employees of Customers
 Online Job Portals & Websites
 Sales Force of Competing Companies
1. What is control?
2. What are the bases of control?
3. Explain controlling of the sales force?
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4. What is motivation?
5. Elaborate motivating the sales force?
6. Explain recruitment of sales force?
7. Elaborate selection of sales force?
7.6 SUMMARY
action. Control is essential in order to secure optimum performance from salesmen.
Sales managers effect controls, by common methods, through personal contacts,
correspondence and report. Motivation is that force within us that directs our
behavior. The sources of our motivation is our needs wants and the outcome is our
actions. Motivation is an internal drive that directs our selection of behaviors. Sales
manager should realize that practically everything they do will influence sales force
motivation one way or other . The people they recruit the plans and policies they
institute the training they provide and the way they communicate with and
supervise sales people are among the more important factors. The following are the
guidelines for motivating the sales people.
1. Instructions are passed on to the salesmen and replies received from the
salesmen is a
a) Personal Contact method b) Correspondence method
c) Reports d) None of above
2. A written statement of educational qualifications, specific qualities, experience,
physical, emotional, technical and communication skills required to perform a job
is called
a) Job description b) Job specification
c) Job qualification d) Job analysis
3. Which is not a external source of salespeople recruitment
a) Employees of Customers b) Sales Force of Competing Companies
c) Consultants d) Current Sales Personnel
4. To check the mental ability and skill set of an individual, and conduct
several tests is called
a) Employment Tests b) Interview
c) Medical test d) None of above
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Pvt Ltd New delhi 2011
7.9 ASSIGNMENTS
1. Explain how the planned operations are to be carried out systematically in
order to get success over the aimed result.
2. In your own words discuss the methods of control with regard to personal
contacts, correspondence and report.
1. Boone, Louis E., and David L. Kurtz. Contemporary Marketing 2005.
Thomson South-Western, 2005.
2. Calvin, Robert J. Sales Management. McGraw-Hill, 2004.
3. Cichelli, David J. Compensating the Sales Force: A Practical Guide to
Designing Winning Sales Compensation Plans." McGraw-Hill, 2004.
4. Cohon, Charles M. The Sales Force. Manufacturers and Agents National
Education Foundation, 2004.
5. Gitomer, Jeffrey. The Sales Bible: The Ultimate Sales Resource. John Wiley &
Sons, 2003.
1. http://www.businessdictionary.com/definition/employee-selection.html
2. http://businessjargons.com/selection-process.html
3. http://smallbusiness.chron.com/importance-selection-recruitment-
orientation-process-17372.html
4. http://www.marketing91.com/recruitment-selection-sales-personnel/
5. http://www.contentwriter.in/articles/hr/recruiting-sales-staff.htm
6. https://www.boundless.com/marketing/textbooks/boundless-marketing-
textbook/personal-selling-and-sales-promotion-14/managing-the-sales-
force-94/recruiting-and-selecting-salespeople-465-10601/
7. https://hr.ucr.edu/recruitment/guidelines/process.html
8. http://www.yourarticlelibrary.com/recruitment/recruitment-process-5-
steps-involved-in-recruitment-process-with-diagram/35261/
1. Write a detail note about the guidelines for motivating sales people.
2. How sales force can be motivated? Explain.
7.12 KEYWORDS
Controlling, Motivating sales force , Motivation, Recruitment ,Selection
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LESSON-8
TRAINING OF SALESMAN
8.1 INTRODUCTION
Training constitutes a basic concept in human resource development. It is
concerned with developing a particular skill to a desired standard by instruction
and practice. Training is a highly useful tool that can bring an employee into a
position where they can do their job correctly, effectively, and conscientiously.
Training is the act of increasing the knowledge and skill of an employee for doing a
particular job.
8.2 OBJECTIVES
 Training
 Sales training needs
 Methods of Training of Salesmen
 Advantages and Limitations of training
 Sales training programs
8.3 CONTENTS
8.3.1 Training
8.3.2 Identification of Sales Training Needs
8.3.3 Methods of Training of Salesmen
8.3.4 Advantages and Limitations of Salesman’s Training
8.3.5 Major Sales Training Topics
8.3.6 Sales Training Programs
8.3.1 TRAINING
Training constitutes a basic concept in human resource development. It is
concerned with developing a particular skill to a desired standard by instruction
and practice. Training is a highly useful tool that can bring an employee into a
position where they can do their job correctly, effectively, and conscientiously.
Training is the act of increasing the knowledge and skill of an employee for doing a
particular job.
Definition of Training
Dale S. Beach defines training as ‘the organized procedure by which people
learn knowledge and/or skill for a definite purpose’. Training refers to the teaching
and learning activities carried on for the primary purpose of helping members of an
organization acquire and apply the knowledge, skills, abilities, and attitudes needed
by a particular job and organization.
According to Edwin Flippo, ‘training is the act of increasing the skills of an
employee for doing a particular job’.
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IMPORTANCE OF TRAINING TO SALESMAN

While some people may possess an extroverted "sales personality" that makes
them a natural fit for the career, effective selling is still a skill that must be
developed. Sales training can help aspiring salespeople develop and practice the
skills they need to succeed and increase their confidence level. Proper sales training
is important for a number of reasons.
(i) Improving Communication Skills
While many sales people enjoy talking to people, they may not possess well-
rounded communication skills. Sales training should help to foster key skills such
as listening to gain an understanding of what the prospect truly wants and needs,
as well as the art of asking the right questions during the presentation. Training
should also involve learning how to effectively communicate with all types of
personalities and diverse populations.
(ii) Learning Sales Methodology
Sales training can teach the salesperson a proven methodology that has proven
to be successful. This gives the salesperson a road map to keep her on track
throughout the presentation instead of simply "winging it." A key component of
most sales methodologies is the development of various closing techniques to gain a
buying commitment from the prospect. Trainees should learn how to look for the
various signals that indicate the prospect is ready to buy.
(iii) Overcoming Objections
Objections are a normal part of the sales process, as prospects tend to seek
reasons not to buy. An improperly trained salesperson may simply agree with the
objection and stop selling. On the other hand, the most successful salespeople
expect to receive objections during their presentation. Sales training can teach
salespeople how to anticipate objections as well as techniques for overcoming them.
A commonly used training technique is role playing, where the "prospect" offers
numerous objections to the trainee during a mock presentation.
(iv) Developing Administrative Skills
Some salespeople have a tendency to focus solely on the "people" aspects of the
position, such as prospecting and making sales calls, while overlooking the
administrative tasks. Effective sales training points out the importance of functions
such as tracking daily activities, keeping accurate records and analyzing closing
ratios. This information can help the salesperson better manage their time, increase
organization and determine areas that need improving. Training can include how to
use software programs that can simply the administrative process and save
precious time.
OBJECTIVES OF SALES TRAINING PROGRAM
Effective sales training programs typically prepare participants to sell products
and services. To drive business results, successful salesmen focus on the buyer’s
needs and provide solutions, not just make a sales transaction. Sales training
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objectives include learning how to analyze, present and negotiate effectively.

Workshops typically start with lectures, demonstrations or a case studies. Then,
facilitators lead participants through role-playing exercises to apply tips,
techniques and strategies learned from the instruction. At the completion of a
typical session, participants have developed the skills and knowledge to identify
their customers’ business drivers, qualify opportunities, demonstrate value to
customers and respond to objections.
(i) Identifying Customer Needs
Sales training programs provide opportunities for a participant to learn how to
identify customer needs. This typically enables him to make more sales.
Successfully following up on customer leads starts by assessing what customers
might need from the company’s product or service. For example, a sales training
workshop might help participants categorize customers into types, such as needing
to be understood, feel welcomed, act important or require help. An effective
salesman understands his customer’s concerns, products and services, customers
and market share. Typically, the object of sales training programs is to persuade
participants that once you know your customer, you can focus your sales pitch
more effectively.
(ii) Qualifying Opportunities
Effective salesmen qualify opportunities efficiently using all the data and
information available. Sales training objectives include ensuring participants have
the ability to use the company’s customer relationship management software. Using
data, they can then determine if a potential customer is likely to buy, if the
company’s products and services are likely to win the deal and if it is worth the
effort to spend time on this sale.
(iii) Demonstrating Value
Sales training programs enable a participant to describe the company’s
products and services so they show value to potential customers. With a thorough
understanding of the benefits and features, a salesman can promote his company’s
benefit. He should be able to explain his company’s history, mission and strategic
objectives in addition to the logistics of completing an order. An additional goal of
sales training is to distribute sales guides that include product specifications and
basic pricing.
(iv) Overcoming Objections
A participant in a typical sales training program learns how to respond to a
customer’s questions. This enables him to become an effective salesman. It involves
handling a potential customer’s objections by asking probing inquiries to
understand concerns, listen carefully to a customer’s problems without
interruption, respond by thanking the customer for her insight and replying with
confidence, offer details including facts and figures, and keep a message concise.
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He also learns how to form solid business relationships based on integrity and
trust.
Some other objectives
Objectives of Salesmen’s Training
The objectives of salesmen’s training may be varied in nature. They may differ
from industry, nature of the products, company policies etc. In general, the
objectives of salesmen’s training are as follows :
1. Detailed knowledge of the product.
2. Knowledge of sales policy of the enterprise.
3. Knowledge of the basic principles of selling.
4. Knowledge about the sales organization and the enterprise, including
history and the goodwill of the enterprise.
5. Knowledge about the customers.
6. Knowledge about the competitors and methods to increase sales in view
of the competition.
7. Method of facing customer’s objections, convince the customer and
create demand of the product.
8. Method of meeting, convincing and presenting product information to
the customers.
9. Increase the morale of the salesmen.
10. Increasing sales of the enterprise.
11. Method of creating new customers
12. Knowledge about the method of reporting sales, communication of
orders of customers, maintenance of accounts, reimbursement of
expenses, display and demonstration of products, preparing daily
reports , servicing the customers etc.
13. Acquaint him with the laws and regulations relating to sale of goods.
14. Equip the salesman with necessary abilities and techniques to carry on
his duties with vigor.
15. Keep him informed of the prevailing market conditions.
16. Achieving the sales targets.
17. Increasing the general efficiency of the salesmen.
18. Preparing the salesmen’s force for replacing retiring, incompetent
salesmen etc.
Who should be trained?
Sales training should be available for several district groups within the sales
organizations. Any one of the following types of personnel may warrant a tailor
made sales training program.
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1. Sales trainees without prior business experience

2. Sales trainees with significant prior sales experience
3. Present company salesman.
4. Sales force supervisory personnel
8.3.2 IDENTIFICATION OF SALES TRAINING NEEDS
On the basis of the following analysis the need for the sales training program
is estimated.
1. Poor job of prospecting for new accounts
2. Lack of preplanning of sales calls
3. Lack of sales strategies for different accounts
4. Failure to match call frequency with potential
5. Spending too much time with customers
6. Failure to achieve sales targets
7. Failure to general targeted profits
8. Inability to do target business within the prescribed expenses
9. Number of the complaints from the customer
10. Need for imparting knowledge about new product, product improvement
and competitors strategies.
SALES TRAINING PROGRAMME CONTENT
The substance of most sales training can be classified under three broad
headings.
1. Knowledge of the company’s product market and policies
2. Skill in the use of the selling techniques often built upon a knowledge of
past techniques that have been effective.
3. An understanding of effective work pattern
4. Customer and industry orientation
5. Inspirations
The need for sales training is directly proportional to the extent that a company
introduces new products, enters new market of alter the selling policies.
8.3.3 METHODS OF TRAINING OF SALESMEN
Since the work of salesmen is of varied nature and differs widely from industry
to industry, it is not possible to suggest or prescribe any single method of training
to salesmen which may suit all types of salesmen. That is why different types of
salesmen are appointed for different types of jobs in a sales department. Hence,
there are different methods of training salesmen. They may be classified under the
following two broad heads :
1. Individual Training Method
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2. Group Training Method

1) INDIVIDUAL TRAINING METHOD
The individual training methods include on the job training, training through
correspondence, internship training, training through study courses, training
through individual coaching, training through special assignments, observation
posts etc. as given below:
1. Training on the job:
It is a practical method of training in which the trainee gets actual experience
by working along with some senior supervisor on the job. It is the most popular
method of training. It is also called ‘training within industry’ or ‘coach and pupil
training ‘. Trainees work along with senior supervisor until the senior supervisor is
fully satisfied that the trainee is competent to work individually. Under this method
of training process charts, manuals, demonstration, tape records etc are also used.
2. Training through Correspondence:
Under this method training is provided to the trainees through correspondence.
The special study courses are supplied to the trainees through post by a recognized
institution regularly at the residence of the trainees. On the basis of the study
courses the trainee is required to answer questions. These answers are duly
examined by the panel of the institution regularly. The trainees are intimated about
the mistakes committed by them. After a certain period the trainees are required to
appear for an informal examination. As soon as they pass the prescribed
examination degrees or certificates to the trainees are awarded.
3. Internship Training:
This method of training refers to a joint programme of training in which the
technical institution and business houses co-operate. The object of such co-
operation is to provide theoretical and practical training both side by side to the
trainees. As soon as the trainees complete their training they are taken in the
regular service of the concerned business house.
4. Training through Study Courses:
Under this method of training, study courses are prepared under the direct
supervision and guidance of the experts. Necessary illustration is done through
photos and pictures. These study courses are supplied to the trainees who are
required to have a detailed study of the same. The idea behind this method of
training is to refresh the trainee with latest and up-to-date techniques and
methods of salesmanship.
5. Training through Individual Coaching:
Under this method of training, coaching is provided by the supervisor to the
trainees on a continuous and regularly scheduled basis. It is essential that the
supervisor should consider the training of the trainee placed under him, as part of
this job.
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6. Training through Special assignments:

Under this method o training, the trainees are provided special assignments
with complete freedom to handle the affairs as they please. This method of training
aims to create confidence in the trainee to do the task to the best of his ability.
7. Observation Posts:
This method stresses learning by observation. ‘Assistant to’ positions make
good observation posts in development of the trainee. Trainee holding assistant
posts are likely to grasp and assimilate problems pertaining to a particular post
most effectively.
2) GROUP TRAINING METHOD
Under this method, training is provided in groups. The advantage of this
method is that training is provided to several trainees at a time. The most common
methods under group training are as follows:
1. The Lecture Method:
This easiest, quickest, simplest and cheapest method of providing training to
the trainee. Under this method, lectures are delivered by senior supervisors and
leading experts to a group of trainee consisting of 15 to 20 trainees who are sitting
in a room. This is a sort of classroom lecture method which is a traditional one.
Visual aids are also used so as to make the lecture most effective. After the lecture,
questions are asked so as to have a clear conception, as soon as the desired series
of lectures are completed, written and oral examinations may be arranged
2. The Conference and Seminar Method:
Under this method conferences and seminars are arranged under the
leadership of experts and the trainees are required to participate in the same. All
those present acquire latest and up to date information on the basis of actual
contribution in one way or the other. This method can create greater degree of
interest, gives a chance to each one o participate, develops group morale and
stimulates analytical thinking.
3. Committee Method:
Under this method, committees are formed under the leadership of a senior
supervisor. The trainees are the members of the committees. The idea behind this
method is to teach the trainees about organizational relationship and help he
member (trainee) to visualize the operations of each major organizational unit of the
enterprise. Thus trainee thus gets wider perspective having to adjust and
accommodate others viewpoints and thereby gain practice in reaching decisions.
4. Case Method:
Under this method, an actual or hypothetical case of sales is discussed by the
trainees in the presence and guidance of a senior supervisor. There are open and
frank discussions amongst the members (trainees).
5. Round Table Method:
Under this method, the trainees are required to sit around a table under the
leadership of a senior supervisor or expert. They discuss and express their ideas on
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a particular subject. It is the best method of having mutual exchange of ideas

amongst the trainees on a particular subject.
6. The Panel Method:
Under this method, a discussion is presented by a certain number of experts
on the panel who take the trouble to prepare and present the facts and discussions.
The same further follows with the general discussion in which active participation
of the trainees takes place.
7. Role Playing Method:
Under this method, training is provided to the trainee by presenting a sales
drama before the trainees. In this method, a salesman is required to face the
problems, criticism and objections of a number of customers. He solves their
problems and replies to the criticism and objections in a very skillful, pleasing and
convincing manner. It is an interesting and effective method of training.
8. Job Rotation Method:
Under this method, the trainees are required to work on different types of jobs
in the sales organization. It provides boarding, balancing and enriching experience
to the trainees. However, in order to make this system more effective the number
and sequences of the jobs used for training should be carefully selected.
9. The ‘Brainstorming’ Method:
Under this method, any particular problem is thrown at the persons (trainees)
sitting round the table and the participants throw out whatever comes into their
minds. No one is permitted to contradict. Some good ideas are selected and the rest
(useless ideas) find their way into the waste paper basket.
10. The ‘each-one-train-one’ Method:
Under this method, salesmen are divided into teams of two i.e. one of them is
an old (experienced) salesman while the other is a new trainee. The old salesman
teaches the new one all the techniques which he has acquired through his
experience.
Miscellaneous Methods :
1. Visual training
2. Sensitivity
3. Multiple table method
4. You tell it method and
5. Task force method etc.
8.3.4 ADVANTAGES AND LIMITAIONS OF SALESMAN’S TRAINING
Advantages of Salesman’s Training
A newly appointed salesman is neither aware of the products not knows the
techniques of attracting and presenting the product before the prospective
customer. Training makes the salesman aware of all these. The following are the
advantages in favour of training salesmen:
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1. Trained salesmen can see opportunities in a market which have been

previously overlooked.
2. Training is necessary not only to those who are dealing in specialty
goods but also to others. A salesman, even though he is a born
salesman, requires to be trained in connection to policy and views of the
enterprise.
3. With increase in sales the cost of selling per unit is reduced
considerably.
4. Training enables salesmen to gain a deeper understanding of the
customer’s problems and as such can help in solving such problems
more efficiently and quickly.
5. Trained salesman knows his job quite well and therefore, needs less
supervision and control resulting in a smaller supervision cost.
6. Trained salesman acquire deeper insight into customer’s needs and
wants.
7. Properly trained salesman is in a better position to face the keen
competition that may exist in the business.
8. Credit losses are considerably reduced in case of trained salesmen.
9. Training helps to lessen the time that a newly selected person takes in
picking up the job.
10. Training relieves the enterprises of inefficient salesman who may be a
burden on the enterprise.
11. Training helps the salesmen in building a congenial relations with
customers. A trained salesman is in a position to secure high degree of
understanding and co-operation with the customers.
12. Increased volume of business resulting from training is not only
advantageous to the enterprise but is also in the interest of the
salesmen who may expect better remuneration and promotion etc.
Limitations of Salesmen Training
1. Some of the experts are of the opinion that “Salesmen are born and not
made”. He is gifted with natural qualities of salesmen and hence
training is uncalled for.
2. Taking into consideration the indefinite results secure, the cost of
training is too high ranging from Rs.25,000 to Rs.65,000 depending on
the complexity of the sales job. Particularly small enterprises cannot
dare to establish their own training center.
3. Tempting offers are made by competitors to trained and good salesman.
As such it becomes difficult t retain such salesman. As such the
expenditure incurred on the training of a salesman proves to be a waste.
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4. Training is a means and not an end. It is not essential that a trained

salesman may come to the level as required.
5. Even admitting that training is necessary the process of training is too
slow. The salesman might become impatient and hence it is likely that
he may leave the job even before completing the training.
6. Every salesman has his own way of doing work, and that to impose a
system of training upon him simply spoil his successful methods
without eradicating his faults.
7. If a person desires to learn swimming, the best way is to get into the
water and swim and he will learn, swimming himself. Similar is the case
with the training of a salesman. All the theoretical knowledge imparted
to a salesman is of no use if not accompanied with practical training.
8. Different types of salesmen are recruited for different types of jobs.
However, it is not possible to provide all types of training under one roof.
9. Some sales managers do not consider training to a salesman desirable
as they do not have either sufficient time or required skill and talent to
provide training to salesman. They feel that it will adversely affect their
duties.
Most of the employees hesitate to train their sales army because it is time
consuming process. In case of a salesman dealing in staple consumer goods a
training period of 18 days to 18 months is needed. On the contrary, in the case of
specialty technical products, the period ranges from 3 months to 3 years.
8.3.5 MAJOR SALES TRAINING TOPICS
Every firm has a need to cover the following topics.
Product knowledge
Probably the major emphasis in most sales training programme is on getting
across specific features and applications of a company’s product. For new sales
trainees developing a familiarity with the product line is usually the first step in his
sales training programs.
Sales Policy knowledge
Both new sales trainees and experience sales man need to have a precise
understanding of companies sales policies. They are terms of sale availability of
cooperative advertising shipping specifications policies on returns allowances and
cancellations.
Skill in selling techniques
How for a company should go in teaching selling techniques as part of its
training programme is debatable. Some sales training directors feel that the only
way a man can learn to sell is by experience in the field.
Effective work patterns
Sales training programme deals with the development of effective work
patterns. Because salesman must work alone most of the time, they are need of
105
guidelines on how to allocate their time and how to manage the non selling aspects
of their job.
8.3.6 SALES TRAINING PROGRAMS
1. Sales training programs
(a) Dimensions of Professional Selling
(b) Trainer Certification Workshop
(c) Selling Skills Coaching
(d) Advanced Positional Selling
(e) Building Customer Equity
(f) Excellence in Inside Sales
(g) Pathway to Negotiations
(h) Profit Dimensions
(i) Target Account Planning Strategies
2. Leadership Development Programs
(a) Mentoring Sales Leadership
(b) Results-Producing Leadership
(c) Transitioning to a Supervisory Role
3. Training for Customer Service
(a) Creating Distinctive Customer Experiences
(b) Excellence in Customer Service
(c) Inspiring Trust and Building Commitment
8.4 REVISION POINTS
 Training
Training is the act of increasing the skills of an employee for doing a particular
job.
 Importance of Training
 Improving Communication Skills
 Learning Sales Methodology
 Overcoming Objections
 Developing Administrative Skills
 Objectives of Sales Training Program
 Identifying Customer Needs
 Qualifying Opportunities
 Demonstrating Value
 Overcoming Objections
 Identification of Sales Training Needs
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 Poor job of prospecting for new accounts

 Lack of preplanning of sales calls
 Lack of sales strategies for different accounts
 Failure to match call frequency with potential
 Individual Training Method
 Training on the Job
 Training Through Correspondence:
 Internship Training
 Training Through Study Courses:
 Training Through Individual Coaching:
 Group Training Method
 The Lecture Method
 The Conference and Seminar Method:
 Committee Method
 Case Method:
 Round Table Method
1. What is Training?
2. How Identify the Sales Training Needs?
3. Explain various objectives of sales training program?
4. Explain various Methods of Training of Salesmen?
5. What are the Advantages and Limitations of Salesman’s Training
6. What are the topic should be cover in Sales Training?
7. What are Sales Training Programs?
8.6 SUMMARY
Training as ‘the organized procedure by which people learn knowledge and skill
for a definite purpose Training refers to the teaching and learning activities carried
on for the primary purpose of helping members of an organization acquire and
apply the knowledge, skills, abilities, and attitudes needed by a particular job and
organization. Effective sales training programs typically prepare participants to sell
products and services. To drive business results, successful salesmen focus on the
buyer’s needs and provide solutions, not just make a sales transaction.
1. Who should be trained?
a) New Employee
b) Existing Employee
107
c) Sales Executive
d) Above all
2. Training refers to a joint programme of training in which the technical
institution and business houses co-operate
a) Internship Training
b) Individual Coaching
c) Special assignments
d) Observation method
3. Any particular problem is thrown at the persons sitting round the table and
the participants throw out whatever comes into their minds is a
a) The Panel Method
b) Role Playing Method
c) Job Rotation Method
d) The Brainstorming Method
1. Krishna K Havaldar Vasant M Cavale Sales and Distribution
Management: Text and Cases Tata McGraw-Hill Education, 01-Jun-
2006
3. Bholanath Dutta Sales and Distribution Management I. K.
International Pvt. Ltd New Delhi 2011
8.9 ASSIGNMENTS
1. Explain how people can be made fit for the career and how their skill can be
developed?
2. In detail explain the objectives of sales training program focusing on buyer’s
needs and providing solutions.
edition.
fifth edition.
108

1. http://www.yourarticlelibrary.com/salesmanship/6-main-advantages-
of-properly-training-your-salesmen/1925/
2. http://blog.commlabindia.com/elearning-design/training-needs-sales-
people
3. http://yourbusiness.azcentral.com/objectives-sales-training-
10926.html
4. http://smallbusiness.chron.com/importance-sales-training-49411.html
5. http://www.yourarticlelibrary.com/salesmanship/8-important-training-
methods-for-salesmen/1931/
6. http://www.managementstudyguide.com/training-and-
development.htm
1. ‘Training is the act of increasing the skills of an employee for doing a
particular job’. – Explain in detail.
8.12 KEYWORDS
Training, Sales training needs, Methods of Training of Salesmen, Advantages
and Limitations of training, Sales training programs
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LESSON-9
APPRAISING SALESMAN PERFORMANCE
9.1 INTRODUCTION
Performance Appraisal is the systematic evaluation of the performance of
employees and to understand the abilities of a person for further growth and
development. Performance appraisal serves as a motivation tool. Through
evaluating performance of employees, a person’s efficiency can be determined if the
targets are achieved. : Performance Appraisal helps the supervisors to chalk out
the promotion programmes for efficient employees. In this regards, inefficient
workers can be dismissed or demoted in case.
9.2 OBJECTIVES
After reading this chapter you should be able to know:
 Performance Appraisal
 Objectives of performance Appraisal
 Purpose of salesperson evaluation
 Approaches to performance Appraisal
9.3 CONTENTS
9.2.1 Performance Appraisal
9.2.2 Purpose / Importance of Salesperson Performance Evaluation
9.2.3 Approaches to Performance Appraisal
9.2.4 Measure a Salesperson’s Performance
9.2.5 Methods of Performance Appraisal Of Sales-Force
9.3.1 PERFORMANCE APPRAISAL
development. Performance appraisal is generally done in systematic ways which are
as follows:
1. The supervisors measure the pay of employees and compare it with
targets and plans.
2. The supervisor analyses the factors behind work performances of
employees.
3. The employers are in position to guide the employees for a better
performance.
Objectives of Performance Appraisal
Performance Appraisal can be done with following objectives in mind:
1. To maintain records in order to determine compensation packages, wage
structure, salaries raises, etc.
2. To identify the strengths and weaknesses of employees to place right
men on right job.
110
3. To maintain and assess the potential present in a person for further

growth and development.
4. To provide a feedback to employees regarding their performance and
related status.
5. To provide a feedback to employees regarding their performance and
related status.
6. It serves as a basis for influencing working habits of the employees.
7. To review and retain the promotional and other training programmes.
Advantages of Performance Appraisal
It is said that performance appraisal is an investment for the company which
can be justified by following advantages:
1. Promotion: Performance Appraisal helps the supervisors to chalk out the
promotion programmes for efficient employees. In this regards, inefficient
workers can be dismissed or demoted in case.
2. Compensation: Performance Appraisal helps in chalking out compensation
packages for employees. Merit rating is possible through performance
appraisal. Performance Appraisal tries to give worth to a performance.
Compensation packages which includes bonus, high salary rates, extra
benefits, allowances and pre-requisites are dependent on performance
appraisal. The criteria should be merit rather than seniority.
3. Employees Development: The systematic procedure of performance
appraisal helps the supervisors to frame training policies and programmes.
It helps to analyse strengths and weaknesses of employees so that new jobs
can be designed for efficient employees. It also helps in framing future
development programmes.
4. Selection Validation: Performance Appraisal helps the supervisors to
understand the validity and importance of the selection procedure. The
supervisors come to know the validity and thereby the strengths and
weaknesses of selection procedure. Future changes in selection methods can
be made in this regard.
5. Communication: For an organization, effective communication between
employees and employers is very important. Through performance appraisal,
communication can be sought for in the following ways:
(a) Through performance appraisal, the employers can understand and
accept skills of subordinates.
(b) The subordinates can also understand and create a trust and
confidence in superiors.
(c) It also helps in maintaining cordial and congenial labour management
relationship.
(d) It develops the spirit of work and boosts the morale of employees.
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(e) All the above factors ensure effective communication.

Motivation: Performance appraisal serves as a motivation tool. Through
evaluating performance of employees, a person’s efficiency can be determined if the
targets are achieved. This very well motivates a person for better job and helps him
to improve his performance in the future.
9.3.2 PURPOSE / IMPORTANCE OF SALESPERSON PERFORMANCE EVALUATION
The purpose of salesperson evaluation is to measure job performance. Many
evaluations provide quantitative measurements essential for a production-oriented
work environment. Other salespersons evaluations provide employers with metrics
regarding the quality of salesperson work. The importance of an salesperson
evaluation is that it's instrumental in determining whether an employee's skill set is
appropriately matched to the salesperson’s job
1.Strengths and Weaknesses
Organizations must continually assess salesperson strengths and weaknesses.
By doing so, employers are better able to match salesperson qualification to job
assignments. Salesperson evaluations provide an assessment of the strengths and
weaknesses for individual salesperson s as well as the collective talents of
salesperson s by department or team. For example, an salesperson evaluation can
reveal whether your salesperson s have strong proficiency in computer software
applications for finance use, yet weaknesses in applications used for presenting
finance-related information in multimedia format. The importance of salesperson
valuations to assess workers' skills is particularly significant in work force planning
processes.
2.Training and Development
Salesperson training and development needs are other reasons salesperson
evaluations are important. Assessing salesperson strengths and weaknesses is the
first step in determining the type of training salesperson s need. Training usually
supports salesperson s acquiring new skills; development helps build upon
salesperson aptitude and current performance. Upon learning salesperson
strengths and weaknesses, a salesperson evaluation decides what type of training
salesperson s need to perform their job tasks. An evaluation also sheds light on
development programs, which benefit salesperson and employer. An example would
be professional development workshops for marketing managers to enhance their
business communication skills.
3.Performance Goals
Evaluations contain performance standards -- the level at which salesperson s
must perform their job duties to meet their employer's expectations. A performance
standard might be delivering quarterly presentations to the executive leadership
team. Salesperson who fails to provide company executives with timely financial
reports four times each year falls below the company's expectations. Without an
evaluation to communicate performance standards, the employer is neglectful in
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providing its salesperson s with the tools necessary to achieve their job
responsibilities.
4.Recognition and Reward
Performance measurement through salesperson evaluations is a component of
many organizations' compensation structures. The ratings salesperson s receives as
a result of supervisors observing and evaluating their performance can directly
impact the amount of the salesperson’s salary or wage increase. Salesperson
evaluations give supervisors and managers an opportunity to recognize
salespersons' hard work, dedication and commitment. In lieu of monetary rewards,
evaluations also are used to identify highly proficient workers to whom the
employer can assign additional duties and responsibilities, or even promote to a
leadership role.
Some other Purposes
1. To identify employees for salary increases, promotion, transfer and lay-off
or termination of services.
2. To determine training and development needs of the employees.
3. To motivate employees by providing feedback on their performance levels.
4. To establish a basis for research and reference for personnel decisions in
future.
9.3.3 APPROACHES TO PERFORMANCE APPRAISAL
Three approaches are to be adapted to performance appraisal. These
approaches are discussed below:
1. Trait Approach: As the term implies, this approach involves rating the
individual salesman’s personal traits or characteristics such as initiative,
decisiveness and dependability. Though used commonly by management, this
approach is considered to be the weakest. This basically arises from the fact that
these traits are ambiguous relative the actual job performance and the needed
improvement. Appraising someone having low initiative does not say anything
precise about how to improve. Also this can trigger a defensive reaction on the part
of the salesman being appraised.
2. Behavioural Approach: Approach points directly to the persons’ actual work
behavior rather than a trait like his or her personality. For example, it can be
focused to seek information as to the salesman works alone on all projects, on most
projects or about half of projects. Similarly, whether he or she teams up with others
on major project or works alone on all major projects.
When these behavioral patterns are coupled with performance rating, appraisal is
enhanced.
3. Results Approach: This approach focuses on the product or the outcome of
one’s effort. It seeks to identify and evaluate what has been accomplished by an
salesman subject to appraisal. Management by objectives MBO) is usually regarded
as the most appropriate format for using the results approach.
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CRITERIA FOR PERFORMANCE EVALUATION

The typical salesman job is multidimensional. Sales people normally sell
multiple products to diverse customers and performance a variety of selling and
non selling activities. Therefore any comprehensive assessment of sales person
performance must include multiple criteria.
1.Behavioural analysis
The behavioral dimension consists of criteria related to activities performed by
individual sales people. The emphasis on evaluating exactly what each sales person
does. These behavior criteria should not only address activities related to short
term sales generation but should also include non selling activities needed to
ensure long term customer satisfaction.
2.Professional development
Professional development criteria assess improvements in certain
characteristics of sales people that are related to successful performance in the job.
Many sales organizations appear to incorporate multiple professional development
criteria into their sales person performance evaluations. This is appropriate since
have control over the development of personal
3.Results achieved
The result achieved by the sales people are extremely important and should be
typically evaluated. A potential problem with the use of results criteria is that the
overall results measures do not reflect the territory situations faced by the
individual sales people.
4.Profitability
A potential problem with focusing on sales results is that the profitability of
sales is not assessed. Sales people can affect profitability. They have an impact on
gross profits through the specific product they sell or the price they negotiate for
final sale.
9.3.4 MEASURE A SALESPERSON’S PERFORMANCE
Good performance criteria should have quantitative and qualitative
measurements. The following are some of the major categories for both areas.
QUANTITATIVE MEASUREMENTS
1-Sales quota for the year, for the region/territory, percentage as compared to
others and other regions/territories.
Looking at just one person’s sales quota does really tell you anything about
that person’s performance. You need to see how each person in doing relative
his/her surround, the regional performance and others.
2-Accounts managed, number of account calls
You need to measure sales personnel on how they handle and manage
accounts. You may have one person having a good quota but with just one account
versus another person with equally good quota but with numerous accounts.
3-Handling of expenses
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It is great to have good people exceeding quotas but you want them to be
profitable at the same time. Individuals should be goaled on managing and
controlling expenses as related to their job (examples: marketing programs, travel,
demos, and sales venues)
4-Geographic coverage
Account coverage should be factored in to get a quota per account ratio. This
will recognize individuals who not only strive for revenue, but also strive to develop
accounts for future rewards.
5-Products and services sold per goals
A well balance of portfolio to revenues not only benefits a sales person but
provides a nice competitive advantage in the overall market place
6-New accounts/ new opportunities
It always great to get re-occurring revenues, but a good salesperson always
needs to develop the “next” group of customers. This is important for many reasons;
two of them are increasing your base and opening up new markets.
QUALITATIVE MEASUREMENTS
1-Innovation- creative ways to “sell” to various accounts
Companies always need to differentiate themselves and what better resource
then your sales person who is the front line with the customers. You can write great
brochures, wonderful case studies, but the best promotion is a high energy sales
person who exudes enthusiasm.
2-Recuiting and training of others
People in sales are the most critical resource and usually ones of higher salary;
therefore bringing on and training these individuals is a key component for sales
success.
3-Motivation and motivation of others
Sales people’s attitude is a reflection of the company they work for, thus if you
want your image to be positive, can do, and confident looking then make sure part
of sales appraisal has this factor.
4-Role modeling/leadership for others
Related to recruiting and motivation, sales are a focal point from a customer’s
point of view. Thus performance should include how a sales person is viewed by
the customer, follow sales people and sales management
5- Managing accounts, tasks and personnel
Sales people have to be good business people also. How one manages and cares
for accounts is equally important as acquiring accounts.
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6-Efficiency in tasks, meeting goals

Good sales people (actually all employees) need to be efficient because we all
contribute to the success of the enterprise and therefore how we get things done
has an impact on both customer satisfaction and economic factors.
9.3.5 METHODS OF PERFORMANCE APPRAISAL OF SALES-FORCE
Every sales manager and sales supervisor appraises the performance of the
salesmen under his charge. It is unfortunate that the importance of organized
appraisal is not recognized by many sales executives; some believe in accurate
appraisal as it is not possible because of the nature of sales job and good many
variables influence his performance; still, there are others who dismiss the idea on
the count that such an appraisal is purely subjective and superficial and
unsupported by facts and coloured by personal whims and fancies of the appraiser.
However, in spite of these problems of judging the salesman’s performance, reliable
methods of evaluation can be developed to provide sound appraisal of salesman’s
work. The principal methods of evaluating such performance can be of two types
namely, qualitative and quantitative.
The qualitative methods are:
1. Personal observation by sales executives.

2. Merit rating.
3. Customer opinion of salesmen.
On the other hand, the quantitative methods are:
1. Analysis of sales records and reports.
2. Comparison of salesman’s performance with quota.
3. Ratio analysis.
4. Profit and loss statement.
A. Qualitative methods:
1. Personal observation by the sales executives:
Personal observation of sales performance of sales-force by sales supervisors,
branch and district sales managers, sales manager and other, sales executive staff
is used in appraising the salesmen’s effectiveness. This method involves casual,
informal impressions by the sales executives in their day-to-day contacts with the
salesmen in the office and the field. As it appears superficial, many sales managers
feel that there should be extensive and continuous appraisal. Appraisal begins with
sales supervisors who work closely in the field with small group of salesmen. Here,
the sales supervisor appraises sales performance of each one with a view to detect
the possible selling weaknesses to bring about refinement in the due course.
Branch sales managers do undertake appraisal work with a view to recognize the
good performance on the basis of which they can decide on employee up-gradation
and transfer. Regional or divisional sales managers appraise the salesmen to make
long-range plans, strengthen marketing organization and boost operations. Sales
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staff at headquarters appraises sales-force to determine the effectiveness of

recruitment, selection, training and control of salesmen.
2. Merit rating:
Another reliable method of measuring the sales aptitudes and performance is
merit rating. Rating are made of each salesman by his superior who completes a
rating form containing series of traits and accomplishments on the basis of which a
salesman is rated. A numerical scale ranging from ‘high’ to ‘low’ is used by the rates
in rating each characteristic of a salesman. These characteristics are determined by
the nature of selling task. However, the most common traits are industry,
dependability, loyalty, cooperativeness, initiative, judgment, knowledge of product
company sales task. Therefore, separate forms are used for salesmen engaged in
different types of sales jobs. Merit-ratings are fruitfully employed by sales managers
to record the progress of salesmen as a guide in determining promotions,
demotions, transfers, counsels, compensation, and recruitment, selection, training
and to boost the morale of sales-force by considering their performance.
3. Customer opinion of salesmen:
Sales managers and supervisors get regular comments on salesmen under their
charge through their personal contacts with consumers and dealers. The
relationship of a salesman with consumers, dealers, architects, contractors,
purchasing agents and the like has deeper bearing on his sales performance.
Usually, those salesmen who work well with others, command respect and
friendship of customers and is credited with superior performance. Customer
opinion of salesman is usually a reflection of the personality and personal service of
the individual. The salesman, who instructs the buyers in the operation of the
product, makes prompt adjustments, helps customers in getting good delivery and
service is well treated by the customers. Similarly, a salesman who gives dealer
sales assistance, merchandising and management advice has the favourable
opinion. A good customer and dealer opinion is a mark of his success and a bad
opinion is a sure sign of poor performance.
B. Quantitative methods:
1. Analysis of sales records and reports:
Controlling the individual salesman’s performance by sales managers and sales
supervisors begins with the sales call report. Information from the call report is
summarized on a salesman’s weekly and monthly sales record files in the sales
office. These summary records give condensed account of his sales, commission,
travel expenses, number of calls, loss of working day, new accounts opened,
performance in relation to quota, of products sold and other facts about his
activities. With these salient facts of a salesman’s performance in the summary
records a sales manager or the supervisor can make a weekly and monthly analysis
of a salesman’s progress and take prompt corrective action. Any deviation from a
normal performance can be quickly noted and called to attention of the salesman
concerned.
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The deviation can be analyzed and plans be made for personal supervision to
bring the salesman’s performance back to normalcy. It also shows outstanding
performance of some salesmen so that recognition can be given to those who
deserve it. Such analysis is not only needed for control but for future planning of
operations and designing the programmes. A caution is to be exercised here in that
salesman’s effectiveness should not be based entirely on the analysis of the sales
reports and records because, there are many other factors which influence sales-
performance which are not revealed by sales reports and records alone.
2. Comparison of salesmen’s performance with quotas:
One of the most common methods of appraising the salesmen is comparing
present and past salesmen’s performance with quotas or standards of
accomplishment established for sales volume, profit, expenses and the activities.
Sales quotas are set by management after due consultation with the salesman, for
each salesman’s territory for a specific period. Each salesman is judged on the
basis of his performance in relation to his quota. Though separate quotas may be
established for sales volume, sales expenses, gross-profit and activities, the most
popular is sales volume quota expressed in terms of so many units or rupees for a
specific period.
Such a figure spelled out is arrived on the basis of a detailed analysis of market
potential, past sales performance estimates by salesmen and dealers, new products
or product of product improvements, advertising, competition, the ability of
salesman, judgment of sales executive and the prevailing economic conditions.
Such a sales quota can be for all the products in a line or for individual product or
group of products, for an area say, branch or district or a region, for a specific
period ranging from a month to a year or for individual customer or a group of
customers and for a call or sale. On the basis of comparison, the sales executives
appraise the effectiveness of each salesman and take necessary action.
3. Ratio analysis:
Certain ratios are much helpful in measuring sales performance in analyzing
sales reports and records that the sales office has. Take the example of sales
expenses ratio. This ratio establishes the relationship between the sales expenses
and the sales volume. If annual sales are say Rs. 2,00,000 and sales expenses are
Rs. 5,000, then the expenses ratio will be 40 per cent (Rs. 5, 00 /Rs. 2.00,000) x
100 . Taking the specific conditions prevailing in each sales territory such norms
can be fixed and the actual can be compared with these norms and deviations can
be analyzed for taking necessary corrective action. This being an expenses ratio, it
is dangerous for a salesman to exceed this ratio or percentage. Similarly, sales
performance can be appraised on the basis of sales profit ratio.
This ratio speaks of the rate of profitability in terms of profits. Say, a firm has
an estimated sales of Rs. 1,00,000 and a profit of Rs. 15,000, then the sales profit
ratio will be 15 percent (Rs. 15, 00 /Rs. 1.00,000) x 100 .If this 1, 00,000 figure is
accepted as norm for sales-man’s performance, every salesman should reach this
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and cross it as income ratio. Such ratios can be: stores displays to total retail
accounts served, a ratio of direct mail programmes to the total accounts or a ratio
of time spent in stores to total selling time, in case of missionary salesmen. In case
of new business, this ratio can be of new accounts to total accounts. Through ratio
analysis is not fully used in appraising sales effectiveness, it can be a valuable
guide if one uses it in cross-verification way.
4. Profit and loss statement analysis:
It is a recognized fact that ability to sell at a profit is a clear indication of
excellence of sales performance. A salesman’s profit performance is measured by
profit and loss statements for his sales territory. Progressive and cost conscious
companies prepare income statement for each salesman’s territory giving the details
of net sales, cost of goods sold, gross profit, operating expenses and the net profit.
Depending on the individual company procedures, either gross profit or net profit
and other related expenses are analyzed and salesman’s effectiveness is determined
in the back-ground of standards so set. This profit and loss statement method of
evaluating salesman’s performance has its own limitations. Neither gross profit nor
net profit gives a totally accurate picture of salesman’s performance. It is quite
possible that the two salesmen selling the same articles may give different profits;
this may be due to the differences in territory size, demand pattern, nature of
products sold, nature of accounts dealt with, market potential, caliber of outlets,
economic conditions and so on. Therefore, one is to be careful while using this as a
yardstick to measure the efficiency of the sales-force at the command of the
company.
9.4 REVISION POINTS
 Performance Appraisal
 Performance Appraisal is the systematic evaluation of the
performance of employees and to understand the abilities of a person for
further growth and development
 Importance of salesperson performance evaluation
 Strengths and Weaknesses
 Training and Development
 Performance Goals
 Recognition and Reward
 Methods of Performance Appraisal
The qualitative methods :
 Personal observation by sales executives.

 Merit rating.
 Customer opinion of salesmen.
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The quantitative methods:

 Analysis of sales records and reports.
 Comparison of salesman’s performance with quota.
 Ratio analysis.
 Profit and loss statement.
1. What is performance appraisal?
2. Explain various importance of salesman’s performance evaluation?
3. Explain approaches and criteria of performance appraisal?
4. How to measures salesperson performance?
5. Explain various method of performance appraisal?
9.6 SUMMARY
development. The purpose of salesperson evaluation is to measure job performance.
Many evaluations provide quantitative measurements essential for a production-
oriented work environment. Other salespersons evaluations provide employers with
metrics regarding the quality of salesperson work. Every sales manager and sales
supervisor appraises the performance of the salesmen under his charge. It is
unfortunate that the importance of organized appraisal is not recognized by many
sales executives; some believe in accurate appraisal as it is not possible because of
the nature of sales job and good many variables influence his performance; still,
there are others who dismiss the idea on the count that such an appraisal is purely
subjective and superficial and unsupported by facts and colored by personal whims
and fancies of the appraiser. However, in spite of these problems of judging the
salesman’s performance, reliable methods of evaluation can be developed to provide
sound appraisal of salesman’s work.
1. Which one is main objective of performance appraisal?
a) Maintain records
b) Identify the strengths and weaknesses
c) Provide a feedback
d) Above all
2. Rating the individual salesman’s personal characteristics is called
a) Behavioral approach
b) Trait approach
c) Result approach
d) Observation method
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3. Any particular problem is thrown at the persons sitting round the table and the
participants throw out whatever comes into their minds is a
a) The Panel Method
b) Role Playing Method
c) Job Rotation Method
d) The Brainstorming Method
4. Sales managers and supervisors get regular comments on salesmen under their
charge through their personal contacts with consumers and dealers is called
a) Personal observation by sales executives
b) Merit rating.
c) Customer opinion of salesmen
d) Above all
2006
International Pvt Ltd New Delhi 2011
9.9 ASSIGNMENTS
1. Justify that performance appraisal is an investment for the company.
2. Mention the various purpose and importance of sales person performance
evaluation.
2009
sixth edition.
a) http://www.managementstudyguide.com/performance-appraisal-
tools.htm
b) http://www.yourarticlelibrary.com/sales/performance-appraisal-of-
sales-force/49137/
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c) https://social.hays.com/2015/08/31/7-reasons-why-you-should-be-
conducting-performance-appraisals-more-often/
d) https://www.successfactors.com/en_us/lp/articles/employee-
performance-evaluations.html
e) http://smallbusiness.chron.com/importance-employee-evaluation-
12020.html
f) http://hrmpractice.com/approaches-to-performance-appraisal/
g) http://www.fao.org/docrep/w7505e/w7505e06.htm
h) http://smallbusiness.chron.com/criteria-employee-evaluation-
1975.html
i) http://www.hrgconsulting.com/quantitative-vs-qualitative/
1. ‘Performance Appraisal is the systematic evaluation of the performance of
employees.’ – Discuss.
9.12 KEYWORDS
Performance Appraisal, Objectives of performance Appraisal, Purpose of
salesperson evaluation, Approaches to performance Appraisal
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LESSON-10
INDICES OF SALESMAN’S PERFORMANCE
10.1 INTRODUCTION
A performance indicator or key performance indicator (KPI) is a type
of performance measurement. KPIs evaluate the success of an organization or of a
particular activity in which it engages. Choosing the right KPIs relies upon a good
understanding of what is important to the organization. Categorization of
indicators. Key performance indicators define a set of values against which to
measure. These raw sets of values, which are fed to systems in charge of
summarizing the information, are called indicators. Performance indicators differ
from business drivers and aims (or goals). A school might consider the failure rate
of its students as a key performance indicator which might help the school
understand its position in the educational community, whereas a business might
consider the percentage of income from returning customers as a potential KPI.
10.2 OBJECTIVES
 about indices of Salesman’s Performance
 its important to Managing Field Sales Teams
 the key performance indicators
 Methods of Evaluating performance of Salesperson
10.3 CONTENTS
10.3.1 Indices of Salesman’s Performance
10.3.2 Important to managing field Sales Teams
10.3.3 Key performance Indicators for sales People
10.3.4 Methods of evaluating performance of Salesperson
10.3.1 INDICES OF SALESMAN’S PERFORMANCE
particular activity in which it engages. Often success is simply the repeated,
periodic achievement of some levels of operational goal (e.g. zero defects, 10/10
customer satisfaction, etc.), and sometimes success is defined in terms of making
progress toward strategic goals. Accordingly, choosing the right KPIs relies upon a
good understanding of what is important to the organization. Categorization of
indicators. Key performance indicators define a set of values against which to
measure. These raw sets of values, which are fed to systems in charge of
summarizing the information, are called indicators. Indicators identifiable and
marked as possible candidates for KPIs can be summarized into the following sub-
categories:
1. Quantitative indicators that can be presented with a number.
2. Qualitative indicators that can't be presented as a number.
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3. Leading indicators that can predict the outcome of a process

4. Lagging indicators that present the success or failure post hoc
5. Input indicators that measure the amount of resources consumed
during the generation of the outcome
6. Process indicators that represent the efficiency or the productivity of the
process
7. Output indicators that reflect the outcome or results of the process
activities
8. Practical indicators that interface with existing company processes.
9. Directional indicators specifying whether or not an organization is
getting better.
10. Actionable indicators are sufficiently in an organization's control to
effect change.
11. Financial indicators used in performance measurement and when
looking at an operating index.
IDENTIFICATION INDICATORS OF ORGANIZATION
Performance indicators differ from business drivers and aims (or goals). A
school might consider the failure rate of its students as a key performance indicator
which might help the school understand its position in the educational community,
whereas a business might consider the percentage of income from returning
customers as a potential KPI.
The key stages in identifying KPIs are:
 Having a pre-defined business process.
 Having requirements for the business process.
 Having a quantitative/qualitative measurement of the results and
comparison with set goals.
 Investigating variances and tweaking processes or resources to achieve
short-term goals.
Key performance indicators (KPIs) are ways to periodically assess the
performances of organizations, business units, and their division, departments and
employees. Accordingly, KPIs are most commonly defined in a way that is
understandable, meaningful, and measurable. They are rarely defined in such a
way such that their fulfillment would be hampered by factors seen as non-
controllable by the organizations or individuals responsible. Such KPIs are usually
ignored by organizations
Key performance indicators example.
1. New customer acquisition.
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2. Demographic analysis of individuals (potential customers) applying to

become customers, and the levels of approval, rejections, and pending
numbers
3. Status of existing customers
4. Customer attrition
5. Turnover (i.e., revenue) generated by segments of the customer
population
6. Outstanding balances held by segments of customers and terms of
payment
7. Collection of bad debts within customer relationships
8. Profitability of customers by demographic segments and segmentation of
customers by profitability
10.3.2 IMPORTANT TO MANAGING FIELD SALES TEAMS
KPIs, or Key Performance Indicators, are metrics used to track the performance
of a business, a department, or individuals against goals. The key is to choose the
ones that are most relevant to your industry and business goals focusing on
the wrong ones is costly to your company. To save you some time, we’ve narrowed
down a list of commonly used KPIs to the six we believe are most important to
managing field sales teams.
1) New Contacts Rate
This is the metric that managers most consistently monitor. How are your
salespeople contributing to the expansion of your business in their given territory?
Who’s reaching their quota? What percentage of your team is hitting their number?
Is quota too high? Too low? Share this data with your team so they can see how
they stack up against other reps. there’s nothing like a little competition to get your
team motivated.
2) Client Acquisition Rates
Another commonly used measurement is rate of client acquisition. Of the new
prospects your reps reach out to, how many convert to customers? It’s natural for
some salespeople to perform better than others -- but if there are large
discrepancies between conversion rates, dig deeper. Are lower-performing reps
approaching bad-fit prospects? Is there something that over performers does in
sales meetings that others don’t? Compare conversion rates to the number of
prospects a rep reaches out to. If you find that conversions decrease after a certain
number of touches, use that number as a benchmark to prevent your reps from
getting burned out or stretched too thin. Finally, use conversion rates to compare
different outreach methods, such as emailing or cold calling versus pursuing face-
to-face interactions.
3) Sales Volume per Location
By comparing sales volumes across locations including physical stores and
online transactions, you can see where demand for your product is highest and
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lowest, then tackle the why. If sales volume is large in region A, perhaps there is a
higher demand there, in which case you can focus on customizing certain products
and services for that region. Or, if you are comparing numbers across physical
stores, you can take advantage of A/B testing. For example, if two locations see
relatively similar sales volume in January, try implementing a promotional sale in
one location and not the other in February to see if it drives sales.
4) Pricing against Competitors
While managers and business owners shouldn’t track competitors’ every move,
being aware of their pricing can help create a competitive strategy. If your prices
don’t differ much, you can consider a price-matching strategy to guarantee your
customers the lowest prices, and you the most sales.
5) Existing Client Engagement
Maintaining good rapport with customers after the sale is important to ensure
long-term business. By regularly touching base with their customers to understand
how things are going and how they can help, salespeople can build trust and keep
customers happy. When reps are consistently available to help, customers know
they’ll always have somebody there to support their business needs. Beyond
benefiting your company’s business outlook, keeping in touch with clients supports
your business’ strategic goals as well. Ask your salespeople to keep a tally of
interactions they have with each of their customers, then compare the number of
touches to the average length of a client relationship.
6) Employee Satisfaction
Working in sales requires persistence, and sometimes representatives can run
out of steam. So one of your biggest challenges is making sure your sales reps are
motivated and enjoy their work. With a remote workforce, how do you keep your
sales force in sync? Do they feel like they’re part of a team? Do they agree with the
sales methods that you’ve implemented?
Employee feedback is crucial. KPIs are used not only to measure your team
members, but also your performance as a manager. Employee satisfaction can be
difficult to quantify.
10.3.3 KEY PERFORMANCE INDICATORS FOR SALES PEOPLE
1.Quota Fulfillment
According to the National Sales Center website, quota fulfillment is the leading
indicator of sales performance. Sales quotas serve the purpose of giving salespeople
a tangible goal. The ability to consistently meet and exceed a quota is often a sign of
a motivated salesperson. Factors to consider when establishing quotas include your
company's overall revenue goals, the historical revenue generation of each sales
territory, the past performance of each member of your sales team and whether you
plan to increase or decrease sales staff.
2.Closing Ratio
A closing ratio measures the salesperson's success at converting appointments
into actual sales. For instance, a salesperson that had 50 closing appointments in a
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given month and converted 20 into sales had a closing ratio of 40 percent. If a
salesperson has a lower closing ratio than is acceptable for your type of business or
industry, it is likely a sign that he could use additional assistance or training to
hone his closing skills.
3.Prospecting Activity
The salesperson's ability to prospect effectively can ensure that she develops
and maintains a steady stream of qualified candidates to contact for appointments.
Salespeople whose numbers are low due to not having enough prospects to see can
benefit from help in developing their prospecting skills. In many cases, simply
devoting more time to prospecting activities like cold-calling or generating referrals
from existing customers can resolve the issue. Developing more effective methods of
qualifying prospects can also help.
4.Customer Retention
Some salespeople may be highly successful at getting the initial sale but are
poor at following up after the sale. Keeping track of customer retention, which can
be measured by determining the number of customers who purchase more than
once, as well as those who choose to take their business elsewhere, is an indicator
of how well the salesperson serves the needs of his customers and makes an effort
to stay in touch on a regular basis.
10.3.4 METHODS OF EVALUATING PERFORMANCE OF SALESPERSON
Several methods were used to evaluate the capacity, talent and overall
performance of salespersons in a company. The most common methods used to
evaluate the performance are through
a) Sales Target
b) Sales territory and
c) Sales report
Evaluating performance of Salesperson by Sales Target
The organization sets sales. target for each salesman that he has to attain.
Such targets may be set either on the basis of units to be sold or based on the value
of sales. However, while setting the target it is important to consider the following
points:
1. The target for sales must not be impossible to attain.
2. It must be reasonable.
3. It must be set taking into account the past records, market potentials, etc.
4. Sales target must not be rigid.
5. The incentives to be given to the salesmen shall be linked to the targets.
Advantages of fixing sales targets
Setting targets for the salesperson will offer the following advantages:
1. Fixing sales target enables the salesman to work according to a plan.
2. It provides a basis for the evaluation of the salesman’s performance.
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3. It is possible to coordinate production and sales.

4. It does not allow any salesman to be insincere or careless.
5. It enables efficient salesperson to earn more by way of incentives by
attaining the target each time.
Problems in setting sales targets
1. It is difficult to evolve a basis upon which the target may be set.
2. Certain unpredictable changes in the market conditions may render the
targets unrealistic.
3. The same target cannot be set for all salesmen as the potentials of each
person and each market differ.
4. Some salesmen are capable of doing much more than the target set for
them. Thus, sales targets limit the initiative.
5. The target cannot be rigid. What was possible last year may not be possible
this year. Therefore, the target needs to be revised periodically.
Evaluating performance of Salesperson by Sales Territory
A sales territory is a small segment of the entire market for a product or
service. Each salesman is usually made in charge of a particular area or territory.
For the trend in sales in each such area, the salesman concerned becomes
accountable.
Thus, sales territory enables the business to not only evaluate the performance
of the salesman but also to know the sales trend.
Advantages of establishing sales territory
The advantages of establishing sales territory may be mentioned as follows:
1. It enables the business to cover the entire market more effectively.
2. It makes it possible for the salesman concerned to maintain good rapport
with the clients in his area.
3. It is possible to compare the progress in sales in each territory.
4. It also gives scope to compare the performance of salesmen working for
different territories.
5. It avoids duplication of work by salesmen in the same area.
6. It ensures proper allocation of funds for different territories.
7. It also helps to have knowledge of the extent of competition in each area. A
particular area, having intense competition, may require more funds for
sales promotion.
Factors to be considered in establishing sales territories
1. The sales territory should be so determined that it should be possible for
an average salesman to cover it within the stipulated time.
2. Having a particular sales territory should be profitable for the business.
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3. It should also give scope for the salesman to undertake any promotional
campaign.
4. Each salesman shall, as far as possible, be allotted not more than one
territory.
5. Each territory should be subject to periodical review. Additional
manpower or finance may be provided depending upon the
requirements.
Evaluating performance of Salesperson by Sales report
Salesmen are duty bound to prepare reports on the progress of their work and
forward the same to their organization for necessary action. As the salesmen are
the persons who know the dealers, buyers and competitors in each area, they are
expected to send periodical reports to their office at regular intervals.
Contents of Sales report
Such reports usually contain information on the names and addresses of the
customers, the orders received or to be received from them, the terms of the deal,
the preferences of the buyers, the action required on the order from the
organization, etc.
Advantages of sales reports
1. Sales reports enables the concern to take suitable action at the
appropriate time.
2. The report is an evidence of the actual work done by the salesperson.
3. It helps to evaluate the performance of the salesman.
4. The sales report is also an indicator of the effectiveness of the sales
promotional activities of the business.
5. It also indicates the trend in sales in each area and the steps to be taken
to increase sales in certain places.
10.4 REVISION POINTS
 Indices of Salesman’s Performance
 A performance indicator or key performance indicator (KPI) is a type
of performance measurement. KPIs evaluate the success of an
organization or of a particular activity in which it engages. Often
success is simply the repeated, periodic achievement of some levels of
operational goal
 The key stages in identifying KPI
 Having a pre-defined business process.
 Having requirements for the business process.
 Having a quantitative/qualitative measurement of the results and
comparison with set goals.
129
 Investigating variances and tweaking processes or resources to

achieve short-term goals
 Key performance indicators
 New customer acquisition.
 Demographic analysis of individual applying to become customers,
 Status of existing customers
 Customer attrition
 Important to Managing Field Sales Teams
 New Contacts Rate
 Client Acquisition Rates
 Sales Volume per Location
 Pricing Against Competitors
 Existing Client Engagement
 Employee Satisfaction
 Key Performance Indicators for Sales People
 Quota Fulfillment
 Closing Ratio
 Prospecting Activity
 Customer Retention
1. Elaborate indices of salesman performance?
2. What are the key stages to identify KPI?
3. How to manage field sales team?
4. Explain key performance indicators for sales people
5. What are the common methods used to evaluate the sales performance?
10.6 SUMMARY
particular activity in which it engages. Often success is simply the repeated,
periodic achievement of some levels of operational goal. Performance indicators
differ from business drivers and aims . A school might consider the failure rate of
its students as a key performance indicator which might help the school
understand its position in the educational community, whereas a business might
consider the percentage of income from returning customers as a potential KPI. Key
Performance Indicators, are metrics used to track the performance of a business, a
department, or individuals against goals. The key is to choose the ones that are
130
most relevant to your industry and business goals focusing on the wrong ones is
costly to your company.
1. Which one is not a key stage to identifying Key performance indicator?
a) Post defined business process
b) Requirements for the business
c) Quantitative measurement
d) Investigating variances
2. Which one most important to managing field sales?
a) New contacts Rate
b) Client acquisition rate
c) Employee satisfaction
d) Above all
3. Low turnover is a benefit of
a) Compensation sales force
b) Motivating the sales force
c) Controlling the sales force
d) Managing the sales force
2006
International Pvt. Ltd New Delhi 2011
10.9 ASSIGNMENTS
1. As a manager, explain how you will choose a Key Performance Indicator
that is more relevant to your industry.
2. In detail, discuss about the various Key Performance Indicators for sales
people.
2009
2. Peter Green, “Sales Management and Organization” 2007 first
edition
131

Schwepker, “Sales Management Analysis and Decision Making”
2007, sixth edition.
5. Richard R Still, “Sales Management Decision Strategies and Cases”,
1. https://en.wikipedia.org/wiki/Performance_indicator
2. http://www.insightsquared.com/2013/05/the-right-key-sales-
performance-metrics-for-your-sales-reps/
3. http://blog.hubspot.com/sales/kpis-every-field-sales-leader-
should-be-measuring
4. http://managementofhumanresourcesms02.blogspot.in/2011/05/e
xplain-basic-principles-of.html
5. http://www.hr-guide.com/data/G400.htm
6. http://accountlearning.com/methods-of-evaluating-performance-of-
salesperson/
“Analyzing Sales Target, Sales territory and Sales report are the most
common and important methods to evaluate the performance of salesman” –
Discuss
10.12 KEYWORDS
Salesman’s Performance, Sales Teams, Sales Turnover, Client Acquisition,
Client Engagement, Customer Retention, customer acquisition
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LESSON-11
COMPENSATION OF SALES FORCE
11.1 INTRODUCTION
In each and every organization people work for to get something in return or
they expect something after completion of their work form employers. We must have
heard a common phrase: give and take. We must always give things to people in
exchange for what you take from them. Compensation refers to this Exchange, but
in monetary terms. Compensation from the employer an employee feedback for
work. It's just the monetary value that employers exchange for their employees with
the services that employees provided. Human Resource Management defines
compensation in these words "employee compensation refers to all forms of
remuneration to workers and arising from their employment. "The expression all
forms of remuneration" in the definition does not include any non-financial
benefits, but includes all the direct and indirect financial compensation.
11.2 OBJECTIVES
After reading this lesson you should be able to know:
 About Compensation of Sales Force
 The various Compensation System for sales force
 Designing the Sales Compensation Plans
11.3 CONTENTS
11.3.1 Compensation of Sales Force
11.3.2 Benefits
11.3.3 Components of a Compensation System
11.3.4 Characteristics of a good compensation plan
11.3.5 Designing the Sales Compensation Plans
10.3.4 COMPENSATION OF SALES FORCE
Workers today are not prepared to work just for the money apart from money
they expect some other benefits. This is known as extra employee benefits. Also
known as fringe benefits, employee benefits are non-financial form of compensation
offered in addition to cash salary to employees to enrich life. Employee benefits are
not performance-based, they are membership-based. Workers receive benefits
regardless of their performances. Employee benefits as a whole have no direct
influence on the performance of employee, however, insufficient benefits contribute
to the satisfaction of the low level and absenteeism and turnover in workers
increase. So would you must carefully design your benefit package. Your package
contains a cell phone to each employee, with them to a training workshop or
seminar, giving them a day or two off every month and so on. While the decision on
the package of benefits, the associated costs.
11.3.2 BENEFITS
A well-designed compensation and benefits plan helps attract motivate and
retain talent in the company. A well-designed compensation & benefits plan will
benefit in the following ways.
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1. Job satisfaction: your staff would be happy with their work and would like
to work for you if they honestly rewards in exchange for their services.
2. Motivation: We all have different types of needs. Some of us want money, so
they work for the company making them higher wages. Some value reach more
than money, she would join companies that have greater chances of promotion,
learning and development. A compensation plan that affects workers needs is more
likely to give them the way you want to act to motivate.
3. Low absenteeism: why would anyone want to skip the day and watch
favorite TV program at the home, if someone really enjoy the work at the office or
company's environment and satisfied with their salaries and get what they want
and need?
4. Low turnover: would someone or any staff want to work for other
organization if your company offers them fair rewards. The rewards which they
thought they deserved.
Development and administration of a salesmen’s compensation plan posses one
of the most difficult and complex set of problems faced by the sales manager. In
developing the sales compensation plan the manager must determine both the level
of compensation and the method by which salesman are to be paid. In
administrating the plan he must handle many difficult problems including
cancelled orders sales to poor credit risk and sales that result from the efforts of
two or more sales people. A carefully developed and well administrated
compensation plan can make a major contribution to profitable sales growth and to
sales force motivation and morale. A poor compensation plan can lead to high
turnover decline sales volume conflicts between salesman and management and a
continues flow of administrative problems and salesman’s complaints.
Compensation is a tool used by management for a variety of purposes to further the
existence of the company. Compensation may be adjusted according the business
needs, goals, and available resources.
Compensation may be used to:
a) Recruit and retain qualified employees.
b) Increase or maintain morale/satisfaction.
c) Reward and encourage peak performance.
d) Achieve internal and external equity.
e) Reduce turnover and encourage company loyalty.
f) Modify (through negotiations) practices of unions.
Recruitment and retention of qualified employees is a common goal shared by
many employers. To some extent, the availability and cost of qualified applicants for
open positions is determined by market factors beyond the control of the employer.
While an employer may set compensation levels for new hires and advertize those
salary ranges, it does so in the context of other employers seeking to hire from the
134
same applicant pool. Morale and job satisfaction are affected by compensation.
Often there is a balance (equity) that must be reached between the monetary value
the employer is willing to pay and the sentiments of worth felt be the employee. In
an attempt to save money, employers may opt to freeze salaries or salary levels at
the expense of satisfaction and morale. Conversely, an employer wishing to reduce
employee turnover may seek to increase salaries and salary levels.
11.3.3 COMPONENTS OF A COMPENSATION SYSTEM
Compensation will be perceived by employees as fair if based on systematic
components. Various compensation systems have developed to determine the value
of positions. These systems utilize many similar components including job
descriptions, salary ranges/structures, and written procedures.
The components of a compensation system include
 Job Descriptions A critical component of both compensation and selection
systems, job descriptions define in writing the responsibilities, requirements,
functions, duties, location, environment, conditions, and other aspects of
jobs. Descriptions may be developed for jobs individually or for entire job
families.
 Job Analysis The process of analyzing jobs from which job descriptions are
developed. Job analysis techniques include the use of interviews,
questionnaires, and observation.
 Job Evaluation A system for comparing jobs for the purpose of determining
appropriate compensation levels for individual jobs or job elements. There
are four main techniques: Ranking, Classification, Factor Comparison,
and Point Method.
 Pay Structures Useful for standardizing compensation practices. Most pay
structures include several grades with each grade containing a minimum
salary/wage and either step increments or grade range. Step increments are
common with union positions where the pay for each job is pre-determined
through collective bargaining.
 Salary Surveys Collections of salary and market data. May include average
salaries, inflation indicators, cost of living indicators, salary budget
averages. Companies may purchase results of surveys conducted by survey
vendors or may conduct their own salary surveys. When purchasing the
results of salary surveys conducted by other vendors, note that surveys may
be conducted within a specific industry or across industries as well as
within one geographical region or across different geographical regions.
Know which industry or geographic location the salary results pertain to
before comparing the results to your company.
11.3.4 CHARACTERISTICS (PRINCIPLES) OF A GOOD COMPENSATION PLAN
A good compensation plan has certain characteristics or requirements that
should be met. Unfortunately some of these requirements are not wholly compatible
135
with each other necessitating compromises between what is most desirable and
what is practical.
1.Fairness
The compensation plan should be perceived by employee as fair. If the
compensation can reasonably related to the sales persons contribution. If such
conditions are expressed quantitatively which can be measurable and tangible,
sales people accept the plans as fair one.
2.Flexibility
The compensation plan should be flexible enough to take into account
differences in territories that make one person’s selling job much more difficult
than others. It should be flexible enough to reward outstanding performance that is
not tied directly into the compensation plan.
3.Provide incentive
Since most people work in the field away from direct supervision they have
some discretion concerning the use of their time and efforts. An effective
compensation plan will entice sales people to go the extreme mile on their job
minimizing their efforts on behalf of their company.
4.Security of steady income
In contrast to the opportunity of maximizing rewards some assurance of steady
income is preferred by most people. In some types of selling in which sales are not
uniform throughout the year causing high fluctuations in the monthly income of
the sales persons.
5. Establish control
The incentives provided by a compensation plan must be directed towards
activities and objectives that management wishes to accomplish. Thus a proper pay
plan will guide the sales person via monetary rewards the proper use of time and
efforts. For instance the incentive aspect of the compensation may offer additional
selling effort by the sales person while the control aspect directs more of that effort
to products management wants emphasize and less to other products.
6.Meet objectives
Sales force effort must be directed to contribute to company and marketing
objectives. These objectives may be long term and short term and must be specified
clearly since they serve as the foundation for building the details of the plan.
From the employees’ perspective, pay is a necessity in life. The
compensation received from work is one of the chief reasons people seek
employment. Pay is the means by which they provide for their own and their
families’ needs. For some people, compensation may be the only (or certainly a
major) reason why they work. Others find compensation a contributing factor to
their efforts. But pay can do more than provide for employees’ psychological needs.
It can also indicate their value to the organization. Compensation Policy has
the objective to establish and maintain a compensation program that will:
136
a) Attract and retain qualified employees at all levels of responsibility who

perform in a manner that permits the college to achieve its objectives
and goals.
b) Reflect the relative value of jobs
c) Be extremely competitive and internally consistent and fair
d) Provide the flexibility (based upon availability of funds) toward
employees on the basis of individual performance and contribution to
the achievement of college goals
e) Foster good employee understanding and relationships; and
f) Comply with all Board of Regents, State, and Federal Laws and
Regulations.
Traditionally, the focus of compensation management has been primarily on
enabling an organization to recruit and retain employees while complying with legal
and statutory requirements. Pay was primarily related to status and hierarchical
position. It is now being viewed increasingly as the key to acquire a competitive
advantage. Innovations in compensation are considered necessary to do more with
less by reducing labour cost per unit of output, motivating employees to higher
performance, providing n impetus to skill development and higher quality and so
on.
Some basic principles
1. The general level of wages and salaries should be reasonably in line with
that prevailing in the market. The labour market criterion is most
commonly used.
2. There should be definite plan to ensure that differences in pay for jobs
are based upon variations in job requirements, such as skill effort,
responsibility or job or working conditions, and mental and physical
requirements.
3. The plan should carefully distinguish between jobs and employees. A
job carries a certain wage rate, and a person is assigned to fill it at that
rate. Exceptions sometimes occur in very high-level jobs in which job-
holder may make the job large or small, depending upon his ability and
contributions.
4. Equal pay for equal work, i.e., if two jobs have equal difficulty
requirements, the pay should be the same, regardless of who fills them.
5. An equitable practice should be adopted for the recognition of individual
differences inability and contribution.
6. There should be a clearly established procedure for hearing and
adjusting wage complains.
7. The wage should be sufficient to ensure for the worker and his family
reasonable standard of living.
137
8. Prompt and correct payments of the dues of the employees must be

ensured and arrears of payment should not accumulate.
11.3.5 DESIGNING THE SALES COMPENSATION PLANS
Designing sales compensation plans involves a number of decisions that will
define how plans will be managed and how a salesperson will be paid. This will
include exploring the five factors outlined below. Once designed, both your sales
and finance teams should test a plan extensively to identify problems or gaps,
based on circumstances that may arise for your business.
1. Eligibility
First step in developing a sales compensation plan is to determine who will
participate in the sales plan. Start with those who have direct impact on a sale,
such as salespeople, sales executives, or, for more complex products and services,
possibly a technical pre-sales consultant or engineer. If an executive participates in
the sales compensation plan, ensure that no conflict of interest exists for making
compensation plan decisions, and that the plan is aligned with any other executive
bonus plan in which they may participate. For a startup, it’s best to keep the plan
as simple and clear as possible, and not include too many peripheral support roles.
2. Total Target Compensation
Total target compensation is defined as the total amount that someone would
earn if they met their annual quota. It is important to establish a competitive value
for the job in relation to the market for similar skills in your region and industry.
This can be determined using informal networks or more formal channels such as
purchasing published compensation survey data. Ensure it is the total target
compensation value that you review, because the mix of salary and incentive will
vary based on a number of factors. Using total target compensation as the
benchmark (as opposed to actual incentive payments) is considered the best
practice, as there can be many uncontrollable or irrelevant factors that affect the
actual incentive pay in a given year.
3. Compensation Mix
Matching the right compensation mix or leverage for your plan (the ratio of
base salary to incentive compensation) to the role is critical. The mix will affect the
type of salesperson you will attract and the type of behaviour you’ll see. Example: If
a salesperson’s total target compensation was $150,000 with a 50/50 mix, then
their base salary would be $75,000 (50%) and their target or planned incentive pay
would be $75,000 (50%) if they achieved their quota. Actual amounts earned,
however, would fluctuate (often dramatically) based on what is achieved.
Two key factors influence the compensation mix of a job:
The degree of time spent devoted to driving sales versus other responsibilities
such as management, administration or ongoing customer service and support. The
higher the focus on selling, the higher the percentage of incentive. The length and
complexity of the sales cycle. Generally, the longer the sales cycle, the higher the
138
percentage of base salary to provide continuity of income and to recognize the effort
required for each sale
4. Performance Measures
Typically, performance measures in sales compensation plans will include one
or more of the following:
Revenue—note, it can be difficult to set quotas without historical data
Profitability—like revenue, profitability can also be difficult to forecast, but
considers both the revenue and expense for each sale. For example, if the
salesperson can change the price of the product or service within set guidelines,
this will affect profitability due to lower or higher revenue. Similarly, if the
salesperson adds functionality or more service options to the product or sale, this
will affect the cost or the expense of the sale and lower the profitability
Strategic objectives—this involves specific milestones that are typically
qualitative and well defined
5. Incentive Formulas and Features in Sales Compensation Plans
There are many possibilities to consider when determining incentive formulas
and features. The incentive formula may be very simple (e.g., a quota-based plan).
Or there can be many variables that make up a salesperson’s incentive formula.
The key to the calculation is to tie the market value, or total target compensation, of
the salesperson to the performance measure. This will allow you to calculate the
incentive payout at any level of achievement. This can vary by job or job level but it
is wise to keep the formula as simple as possible. The incentive formula can also
feature accelerators or caps. An accelerator is an increased rate of incentive once
the salesperson reaches their target or quota. For example, a commission rate may
be 5% until a quota is achieved and then increase to 7% for sales beyond that
target. The incentive formula may also have a pre-determined cap that limits the
amount of incentive that is paid.
 A well-designed compensation and benefits plan helps attract motivate and
retain talent in the company.
 A well-designed compensation & benefits plan will benefit in the following
ways.
 Job satisfaction
 Motivation
 Low absenteeism
 Low turnover
 Compensation will be perceived by employees as fair if based on systematic
components. Various compensation systems have developed to determine
the value of positions. These systems utilize many similar components
including job descriptions, salary ranges/structures, and written
procedures.
 A good compensation plan has certain characteristics or requirements that
should be met. Unfortunately some of these requirements are not wholly
139
compatible with each other necessitating compromises between what is most

desirable and what is practical.
 Designing sales compensation plans involves a number of decisions that will
define how plans will be managed and how a salesperson will be paid.
 Principles of a good compensation plan
 Fairness
 Flexibility
 Provide incentive
 Security of steady income
 Establish control
1. Elaborate compensation of sales force?
2. Explain various principles of compensation plan?
3. Elaborate the sales compensation plan?
4. Discuss the benefits of good compensation plan to sales force.
11.6 SUMMARY
There is enough evidence to suggest that the effects of a sales force incentive
programme transcend both the lack of respect for salespeople and cost. According
to the book, The Complete Guide to Sales Force Incentive Compensation, the
authors (Zoltners, Sinha, Lorimer) made an emphatic statement based on their
best-practice study that, “ The sales force compensation plan is an important driver
of sales success.” Attracts and retains the beat salespeople. As you may be aware
talented and high performing sales professionals are difficult to come by in the
sales industry. These elite salespeople able to exceed target achievements are
motivated by aggressive and rewarding sales compensation packages.
Without a well-designed and implemented plan, it won’t be able to attract the super
salespeople nor even able to retain above average salespeople who will look
elsewhere for opportunities.
1) Which one most important to managing field sales?
a. New contacts Rate b.Client acquisition rate
c. Employee satisfaction d.Above all
2) Low turnover is a benefit of
a. Compensation sales force b.Motivating the sales force
c. Controlling the sales force d.Managing the sales force
3) Which one is principles of a good compensation plan?

a. Fairness b. Flexibility
Provide incentive d. Above all
140

3. Bholanath Dutta Sales and Distribution Management I. K. International Pvt.
Ltd New Delhi 2011
11.9 ASSIGNMENTS
1. As a manager, explain how you will frame the compensation plan for your
sales executive? Will you give weight age to merit or experience? Discuss.
2. In detail, discuss about the advantages of compensation plan to
organization as well as sales people.
a) S.L.Gupta “Sales and Distribution Management” Excel Books India, 2009
b) Peter Green, “Sales Management and Organization” 2007 first edition
c) Brain Tracy, “ The Psychology of selling” 2012, first edition.
d) Thomas N Ingram, Raymond W Laforge, Ramon A Avila, Charles H
edition.
e) Richard R Still, “ Sales Management Decision Strategies and Cases”, 2003,
fifth edition.
1. https://en.wikipedia.org/wiki/Performance_indicator
2. http://www.insightsquared.com/2013/05/the-right-key-sales-
performance-metrics-for-your-sales-reps/
3. http://blog.hubspot.com/sales/kpis-every-field-sales-leader-should-be-
measuring
4. http://managementofhumanresourcesms02.blogspot.in/2011/05/expla
in-basic-principles-of.html
5. http://www.hr-guide.com/data/G400.htm
1. "Employee compensation refers to all forms of remuneration to workers and
arising from their employment." – Discuss.
11.12 KEYWORDS
Compensation of Sales Force, Compensation System, Sales Compensation
Plans,
141
LESSON-12
COMPENSATION METHODS AND SCHEMES
12.1 INTRODUCTION
Motivating the sales force should be such that each sales person gives her/his
best performance. Money helps a person acquire status and improve life styles. But
money can provide motivation up to a point, beyond which non-monetary
incentives become important. For every sale executed, the sales person gets a
commission fixed at a certain percentage say 3-5% of the total sales made in a
month. In this method a high achiever gets the highest reward but the main draw-
back of this method is that a salesperson becomes uncertain about his/her
monthly income. In some month, the salesperson may not earn at all, because due
to situation beyond control, he/she has not executed any sale.
12.2 OBJECTIVES
 Compensation Methods of Sales Force
 Additional Compensation Plans
12.3 CONTENTS
12.3.1 Compensation Methods of Sales Force
12.3.2 Additional Compensation Plans
12.3.1 COMPENSATION METHODS OF SALES FORCE
best performance. This is the responsibility of the sales manager and the three
ways this objective can be achieved.
i. Offering challenging sales territories, in which the sales person finds job
satisfaction as well as spend major time in a week with his family.
ii. Leadership style of the Sales Manager is such that the sales force is fully
satisfied with the work environment. Managerial grid type leadership may be more
rewarding.
iii. Suitable compensation package for the sales-force provide motivation to do
their best. Sales-force compensation is an important tool for motivation.
The compensation has two parts:
(i) Monetary and
(ii) Non-monetary
Money helps a person acquire status and improve life styles. But money can
provide motivation up to a point, beyond which non-monetary incentives become
important.
(i) Straight Salary Method:
This comprises of fixed salary per month. This form of compensation is useful
for selling capital goods, industrial products and project sale where mostly one time
sales deal takes place. The limitation of this method is that it creates complacency
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among the sales force who become used to the fixed salary scheme and loose
initiative and aggressiveness for achieving higher performance.
In this compensation method, the market development suffers, since the
salesperson puts no extra effort for the purpose. However, this compensation
method may be satisfying for a non-performing salesperson. A high caliber and
performing sales person will start losing initiative and the organisation will
ultimately be a great looser.
(ii) Commission Only Method:
The only commission method of compensation is applied with the belief that
the reward should be commensurate to one’s efforts. For every sale executed, the
sales person gets a commission fixed at a certain percentage say 3-5% of the total
sales made in a month. In this method a high achiever gets the highest reward but
the main draw-back of this method is that a salesperson becomes uncertain about
his/her monthly income. In some month, the salesperson may not earn at all,
because due to situation beyond control, he/she has not executed any sale.
If the opportunity permits, the salesperson may push the fast moving items
with making little efforts for prospecting a sale. Since, the privatization of Life-
Insurance and General Insurance fields in India, many large domestic foreign
players have entered the field and most of these companies are adopting the only
commission method for their insurance agents who put flexible working hours for
the sale of policies.
(iii) Combination of Salary and Commission Methods:
The limitations of above two schemes of compensation are over come through a
combination plan. In the combination plan, a sales person is given a fixed monthly
salary which is independent of his/her sales performance. The other part of
compensation is the commission which is linked to his/her sales performance.
These two parts together may make a salesperson satisfying so far as monetary
compensation is concerned and he/she would do the best to earn extra money
every month in the way of larger amount of commission due to improved sales
performance.
A good organization may provide additional perks for the high performing sales
force according to the service rules which may include motor cycle, cars, lunch
coupons and club membership etc. This combination method has the advantage of
the sales persons responding to market conditions and putting in their best efforts.
It also ensures prospecting, market penetration and selling slow moving items
whenever the situations arise.
The main drawback of this method is that it equates a senior sales person with
a junior one and it prohibits generation of organisation loyalty for the sales force.
The high performing persons may find opportunity to leave the company for better
prospect.
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(iv) Non-Monetary Incentives for the Sales force:

It is the wisdom and leadership of the sales manager which help in devising
means for retaining the high achievers in the sales-team within the organisation. A
good organisation where the high performing sales force would like to be associated
for long may create satisfying work environment, good career prospect, and
attractive retirement benefits like superannuation scheme, medical benefits for self
and family members, annual leave travel allowance for the family, children’s
education allowance, foreign postings/tours on official work and recommending for
attending management development programmes etc.
It is the responsibility of the sales manager to ensure that a high performing
sales person is adequately rewarded on monetary and non-monetary terms and the
salesperson is able to deliver the best according to his/her potential.
Some other compensation methods.
1. Direct Compensation
Direct compensation persuade to financial benefits offered and provided to
workers in return of the services that they provide to the Company. The financial
benefits include Transportation, leave travel allowance, medical allowance, rent of
the house allowance, basic salary. They are provided at an expected period at a
definite time.
2. Basic Salary
Salary is that amount which is received by the employee after some task done
by him/her for a certain period of time that can be a day, a week, a month, etc. It is
the wealth employees receive from their company for which they are working by
depiction their services.
3. Rent Allowance
Some of the Organizations either provide accommodations to its employees who
are from different regions, state or country or they provide house rent allowances to
its employees. This is done in order to maintain social security and to provide
motivation in their work.
3.Transportation
Employer provides some transportation facilities to its employees. Some of the
organization also provides petrol allowance and other allowances also they provide
their own transport services in order to pick and drop to their employees before and
after completion of their day to day task. European Care Group England provides
transportation allowance to its employees.
4.Leave Travel Allowance
These types of allowances can be provided to preserve the best aptitude in the
company. Employees are provided allowances to visit the places that they want to
visit with their family members. These allowances determined according to the
position hold by the employees. For example Google has such compensation system
in order to motivate their employees and to make them innovative.
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5.Medical compensation
Most of the Organizations also provide medical reimbursement to their
employees. The employees are provided with medical claims for them and also their
family members. These types of claims include treatment bills compensation and
health-insurances.
6.Bonus
Bonus is paid to the employees during festive seasons to motivate them and
provide them the social security. The bonus amount usually amounts to one
month's salary of the employee.
7.Special Allowance
Special allowance stands for the allowance such as mobile allowances,
overtime, food/meals commissions, travel expenses, reduction in the interest loans;
insurance etc are provided to employees to provide them social security and
motivate them which improve the organizational productivity.
INDIRECT COMPENSATION
Indirect compensation refers to non-cash benefits offered to employees in the
exchange of the service provided by them to the organization. They include leave
policy, overtime policy, car policy, hospitalization, insurance, travel assistance
limits, retirement benefits, vacation rentals.
1. Leaving Policy
It is the right of any employees to satisfactory number of leave during working
with the company. The companies provide for paid leaves, casual browse, medical
leaves (sick leave), statutory wage and maternity leaves.
2. Overtime policy
Employees shall with the sufficient allowances and facilities during their
overtime, as he/she is happened to do so, such as transport, overtime pay, etc.
3. Hospitalization
Must be provided compensation to get their regular check-ups, let's say at an
interval even their dependents, should be eligible for medi-claims that makes the
employees stimulated and more secure.
4. Insurance
Organizations also offer for accidental insurance and life insurance for
employees. This gives them the emotional security and they feel valued in the
organization and it also make help them to make more innovative.
5. Let travel
The workers are equipped with leaves and travel expenses to go for holiday with
their families. Some organizations settle for a tour of the employees of the
organization. This is usually done to make the workers be stress free.
6. Retirement Benefits
Organizations can provide for their employees in favor of them after they retire
from the organization on the prescribed age for retirement and other benefits.
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7. Holiday Homes
Organizations offer for holiday homes and guest house for their employees in
different locations. These houses are usually found in hill station and other most
sought after vacation spots. The organizations ensure that employees are not facing
any kind of difficulties during their stay at Guesthouse.
8. Flexible timings
Organizations offer flexible timings to workers who can't come to work during
normal shifts thanks to their personal problems and valid reasons.
Non-Monitory compensation
Here are the six non-monetary benefits you can provide to your employees:
1. Flexibility
It is a mandate for employees to follow their bosses, but if supervisors get all
the say, they will immediately feel limited. Workers still require a room where they
can voice out their opinion and ideas, as well as the liberty to be versatile on their
approaches to conflicts and problems. You can also emphasize flexibility in terms of
work hours. Most of the career people these days are moms and dads who have
greater personal responsibilities. To be able to work at their own pace will permit
them to take care of all their obligations (both at home and at the office).
2. Recognition
Who does not want to be recognized? Yet many employees are not given even a
pat in the back or a handshake by their bosses. If they give employers the privilege
to criticize, it is only right for the managers to give away praises. Recognition can
come in different forms. A simple e-mail blast can already do wonders. You may
also hold an informal appreciation ceremony for all those who have excelled
expectations for a given month.
3. Training
When you train your employees, it means there is plenty of room for them to
grow. They don’t have to feel stuck to a routine job. They can look forward to much
bigger challenges. Trainings give good types of stress, something that motivates
employees to push themselves to the limit. Personally, it gives them a good idea of
their own strengths and weaknesses.
Trainings, however, should be in line with the career path the employee wants
to take. Otherwise, they cannot use the learning to the fullest. It is best to conduct
skill assessment before creating training programs.
4. Belongingness
Sickness is just one of the least causes of absenteeism. It is actually conflict
and politics in the workplace that makes workers hate coming to the office. Though
most employees understand the employee-manager relationship, it is also
important to them that they can sense a feeling of friendship and belongingness.
Take time to come up with team-building activities. It does not have to be very long
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or tedious. Your team simply has to strengthen trust, respect, and accountability
with each other.
5. Chance to Contribute
You can greatly motivate your employees if you can make them feel that the
success of your organization also depends on them. You can do this by allowing
them to head projects as well as getting their consensus on major decisions that
can affect your business and organization.
6. Fringe Benefits
Fringe benefits include additional allowances, leaves, health insurance plans,
and other perks that they can enjoy alone or with their loved ones.
12.3.2 ADDITIONAL COMPENSATION PLANS
Check out the meanings behind some of the benefits offered at many
organizations today.
1. Child and Elder care benefits
2. Compensation time
3. Family-friendly benefits
4. Flex time
5. Health insurance
6. Job resources
7. Life and disability insurance
8. Phased retirement
9. Professional development
10. Relocation
11. Retirement investment plans
12. Sick, personal, and parental leave
13. Tuition reimbursement
14. Vacation time
1. Child and Elder care benefits
Child care and elder care are becoming more prevalent in benefits packages. If
these issues affect your life, find out what the employer offers either in terms of
payment or referrals.
2. Compensation time
While few nonprofit employers offer overtime pay for exempt staff, many do
offer “comp time.” Comp time means that for every extra hour you work overtime
you can take up to an hour off. This may be a formal system that requires you to
keep careful records, or it may mean that you have the flexibility to come in late or
leave early; there may also be a cap to comp time.
3. Family-friendly benefits
Workplace policies and culture can have a huge impact on work/life balance
for all employees and their families. For example, an employer may offer staff
opportunities to telework, create their own work schedules, and/or receive paid
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leave to care for sick family members or a newborn or newly adopted child.
Workplace cultural practices that benefit families include recognizing the family
responsibilities of fathers (not just mothers), and considering staff for promotions,
raises, and bonuses even when they take advantage of family-friendly policies.
4. Flex time:
Perhaps the employer can’t be flexible about your salary, but they may be
flexible about your work time.
Could you reduce the number of hours on the job?
Could you work alternate hours that would allow you to pursue other
opportunities (whether paid or connected to other passions)? You could also ask
about job sharing, compressed workweeks (e.g., working ten hours a day for four
days), and telecommuting.
5. Health insurance:
This is one of the standard benefits that organizations usually offer full-time
employees; most internships and part-time jobs will not provide health care
benefits. This is also one of the benefits that will probably not be open to
negotiation because of laws requiring employers to provide consistent health
benefits to all employees. However, you should still find out the specifics of the
health care options that each position offers.
Options: Some organizations offer several options of health care plans from
which to choose (Preferred Provider Organization [PPO], Health Maintenance
Organization [HMO], Point of Service [POS], etc.). There should be an HR person (or
someone in Operations or Administration who acts as a Benefits Coordinator) in the
organization who can explain the pros and cons of each option. This is a
particularly complex part of your compensation package and you should inquire
about the plan’s details and costs.
Structure: Medical services have gradually changed from traditional fee-for-
service organizations into health maintenance organizations (HMOs). HMOs receive
a fixed premium each month, and in exchange offer a range of services. HMOs
provide many services under one plan, while fee-for-service providers operate less
centrally and allow members to choose which medical practitioners they use. With
these plans, there may be different pay scales for doctors outside a network.
Mental health services/Employee assistance programs (EAPs): Some
employers offer employee assistance programs, typically set up with an outside
contracting agency, to provide confidential counseling in dealing with stress,
substance abuse, relationship problems, and family issues and/or personal
concerns.
Other services: If you have specific, recurring medical needs (physical therapy,
allergies, prescriptions, etc.) check to see that your treatments are covered by an
employer’s plan.
Dental and vision insurance: With some health plans, dental and vision
coverage is included, while in others it may be only partially covered or not covered
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at all. Consider whether preventive care and surgical care are covered and to what
extent (deductibles, co-pay, and annual and lifetime maximums).
6. Job resources:
Does the organization have the resources (equipment, office space, personnel,
budgets, software, policies) that would make your work life easier? Is there a budget
for other things that you need to do a good job? Some employers are willing to make
adjustments or investments to accommodate your work needs. Consider if you need
any other information about your work environment and the resources that will be
at your disposal to evaluate the job offer properly.
7. Life and disability insurance:
Life insurance usually affords a certain amount of basic coverage for employees
with the option of buying additional coverage for employees and their families.
Disability insurance provides a percentage of lost wages in case the employee is
unable to work due to a non–work-related injury or illness. The period and cost of
this kind of coverage varies from plan to plan, and is above any disability coverage
required by the state.
Please note that Worker’s Compensation is another form of insurance that most
employers are legally required to carry for injuries that happen while on the job.
8. Phased retirement
For workers who plan to retire (eventually), some employers offer opportunities
to gradually reduce responsibilities and working hours as a way to help ramp-up
the knowledge and skills of the next generation of organizational leaders.
9. Professional development programs:
Professional development reimbursement is an incredibly valuable part of a
compensation package because, if you are someone new to the sector, you have
much to learn about the field. Be sure to ask about opportunities to attend
conferences or national meetings.
Even the smallest nonprofits often see the value of networking and
development. Expressing interest in these opportunities at the outset will make it
clear that you are interested in growing with the organization.
10. Relocation expenses:
If a position within an organization requires a move, sometimes an employer
will help pay for your moving expenses. Employers can help defray the cost of a
move in many different ways. Some employers will pay a percentage of your salary
as their contribution to moving expenses; others will offer a flat contribution; still
others reimburse an employee for the exact cost of the move. If relocation is
necessary for the position, it is worth asking if compensation for relocation
expenses is an option.
11. Retirement investment plans:
The most common retirement plans are Sections 403(b) and 401(k).
These plans allow employees to deduct a portion of their pre-tax salary and put it
into a fund for their retirement, which can help employees fall into a lower tax
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bracket. The money is invested while in the account and cannot be taken out of the
fund (without incurring penalties) until an employee reaches retirement age. An
employer may contribute or match a percentage of the employee’s contribution;
whether or not your employer does is an important question to ask. Most nonprofits
offer 403(b) retirement plans that mainly differ from a 401(k) plan in how they are
administered. For all practical purposes, the benefits of these two types of
retirement plans are comparable. Some nonprofits offer defined benefit plans (a
pension plan with guaranteed payouts).
12. Sick, personal, and parental leave:
The Family and Medical Leave Act requires that most organizations with 50 or
more employees provide up to three months of unpaid leave for personal or family
illness, and parental leave for the birth of a child. Some employers only offer what
is required under the FMLA, while others provide some form of paid time off for
similar reasons. Often an employer will require staff to use vacation and sick days
first.
13. Tuition reimbursement:
These programs help support an employee’s continuing education.
Reimbursement can range from a single workshop or a college course to a full
degree program. Larger organizations are more likely to offer a formal plan,
although smaller organizations are often willing to negotiate time away from work
for educational purposes, even if they can’t help with the cost.
Also keep in mind that many education-focused nonprofits (like private
universities) offer scholarships to partners, spouses, and children of employees.
14. Vacation time:
This is one of the more flexible and variable benefits. However, there are often
specific guidelines on vacation days. For example, vacation days may be limited
during an employee’s first year (or first few months); they may not begin
accumulating immediately; and there may be a cap on the number of days an
employee can take consecutively or during peak periods when time off is
discouraged. Similarly, be sure to find out if and how the organization delineates
between vacations, personal days, paid holidays, mental health days, and so on.
1. Compensation methods
 Monetary Method
 Straight Salary Method
 Commission Only Method:
 Combination of Salary and Commission Methods:
 Non-monetary method
2. Additional Compensation Plans
 Child and Elder care benefits

 Compensation time
 Family-friendly benefits
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 Flex time
 Health insurance
 Job resources
 Life and disability insurance
 Phased retirement
 Professional development
 Relocation
 Retirement investment plans
 Sick, personal, and parental leave
 Tuition reimbursement
 Vacation time
1. Elaborate the various Compensation Methods of Sales Force?
2. Explain the Additional Compensation Plans in detail?
12.6 SUMMARY
best performance. This is the responsibility of the sales manager and the three
ways this objective can be achieved. Offering challenging sales territories, in which
the sales person finds job satisfaction as well as spend major time in a week with
his family. Leadership style of the Sales Manager is such that the sales force is fully
satisfied with the work environment. Managerial grid type leadership may be more
rewarding. Suitable compensation package for the sales-force provide motivation to
do their best. Sales-force compensation is an important tool for motivation.
1. Money helps a person acquire __________
i. Status
ii. Richer
iii. Prosperity
iv. Happiness
2. Non-cash benefits are referred as
i. Bonus
ii. Insurance
iii. Indirect compensation
iv. Special Allowance
3. The form of compensation useful for selling capital goods, industrial products
and project sale where mostly one time sales deal takes place is ____________.
i. Straight Salary Method
ii. Commission only Method
iii. Combination of Salary and Commission
iv. Non-monetary Incentive
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2006
International Pvt Ltd New Delhi 2011
12.9 ASSIGNMENTS
1. Give a detailed account on the two parts of compensation method of
sales force. Explain how a sales person could give the best performance
through motivation.
2. Being a manager, discuss on the non-monetary benefits that you can
provide your employees.
2009
sixth edition.
1. http://www.vitaver.com/blog/2010/07/6-non-monetary-rewards-that-
motivate-employees/
2. http://www.money-zine.com/career-development/finding-a-job/top-
employee-benefits/
3. https://www.cpsa.com/articles/what-is-the-difference-between-direct-
indirect-and-non-financial-compensation
4. https://www.ukessays.com/essays/management/the-direct-
compensation-and-benefits-in-an-organization-management-essay.php
5. http://salesforcemanagement.blogspot.in/2008/12/compensation-
plans-types.html
6. http://idealistcareers.org/common-job-benefits/
1. Discuss the additional compensation plans that are offered by many
organisations today.
12.12 KEYWORDS
Compensation Methods of Sales Force, Additional Compensation Plans
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LESSON-13
PHYSICAL DISTRIBUTION
13.1 INTRODUCTION
The major purpose of marketing is to satisfy the human needs to delivering the
product of various types to buyers when and where they want them and at a
reasonable cost. Physical distribution activities and decisions are important for
many kinds of manufacturers, wholesalers and retailers affecting both customer
satisfaction and bottom-line profit performance. The management of physical
distribution provides an exciting opportunity for improving customer services and
reducing costs. Major activities that are normally grouped together in an integrated
approach to physical distribution management are transportation, inventory,
warehousing and order processing. Each activity with its many specific functions
represents an important management task, and decisions about it must be
coordinated with all other distribution decisions.
Physical distribution involves planning, implementing and controlling the
physical flows of materials and final goods from points of origin to points of use to
meet customer needs at a profit. Hence, physical distribution management is the
process of strategically managing the movement and storage of materials, parts and
finished inventory from suppliers between enterprise facilities and to customer.
13.2 OBJECTIVE
 After reading this lession, you can understand meaning of physical
distribution and Physical distribution mix.
13.3 CONTENTS
13.3.1 Meaning of Physical distribution
13.3.2 Physical distribution Mix
13.3.1 Meaning of Physical distribution
Physical distribution is the group of activities associated with the supply of
finished product from the production line to the consumers. The physical
distribution considers many sales distribution channels, such as wholesale and
retail, and includes critical decision areas like customer service, inventory,
materials, packaging, order processing, and transportation and logistics. You often
will hear these processes be referred to as distribution, which is used to describe
the marketing and movement of products.
Accounting for nearly half of the entire marketing budget of products, the
physical distribution process typically garnishes a lot of attention from business
managers and owners. As a result, these activities are often the focus of process
improvement and cost-saving initiatives in many companies.
13.3.2 Physical distribution Mix
Distribution planning and accounting
Distribution Planning is a systematic approach to ensure that the process
encompassing the delivery of goods to different distribution centres is done properly
keeping in mind which goods are to be supplied in what quantity at what location
in the desired time. It is done keeping in mind the demand trends over the years
153
accounting for seasonal variations and also the anticipated demand according to
this year’s prediction. If distribution planning is done correctly, it increases
efficiency. All goods shortages are minimized as demand is accounted for during the
time of distribution and costs of ordering, transporting and holding goods is also
reduced considerably. If correct distribution is done, the major advantage is that
inventory can also be kept under control in the desired level.
For example: Distribution planning of Frooti should be done properly
keeping in mind the demand for the product throughout the year, both peak season
and off season and also knowing which regions are the major consumers of the
product as distribution frequency in those regions need to be more.
Transportation
Transportation management is an important to successful physical distribution
decisions making. Such transportation decisions are:
a) Measuring the cost and service aspects of transportations
b) Selecting transportation modes (rail, truck, ship or air)
c) Assessing the impact of regulatory changes on them spot operations
d) Deciding whether to use owned or hired transportations
e) Establishing criteria and methods for evaluating performance of
transportation.
Order Processing
The order department prepares multicopy invoices and despatches them to
various departments. The company and customer benefits when these are prepared
out quickly and accurately. Companies are making use of computers for order
processing.
Ware Housing
Every company has to store its goods while they wait to be sold. A storage
function is necessary, because production and consumption cycle rarely unmatch.
The company must decide on a desirable number of warehouses and their
locations. More stocking locations means that goods can be delivered to customers
more quickly and warehousing costs go up. The number of stocking locations must
strike a balance between customer service levels and distribution costs.
Inventory
Inventory levels represent a major physical distribution decisions affecting
customer satisfaction. Marketers would like their companies to carry enough stock
to fill all customer orders immediately. However, it is not cost effective for a
company to carry this much inventory. Inventory cost increases at an increasing
rate as the customer service level appropriates 100 per cent. Management would
need to know by how much sales and profits would increase as a result of carrying
larger inventories and promising faster order fulfillment times.
The decisions on warehousing, inventory and transportations requires the
highest degree of coordination. Many growing number of companies have a
permanent committee consisting of managers responsible for different physical
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distribution activities. These committees meet periodically to develop policies for

improving over all distribution efficiency.
Receiving
Receiving operations involve the transfer of ownership of goods, which by its
nature involves financial responsibility. Ensuring that the documentation is
accurate, correct and smoothly and efficient allows the material to be made
available to the customer as soon as possible. An accurate reporting of what is
received has a direct effect on the accounting and payout for goods. Inaccuracies in
counting or failure to report damaged or missing items means the business will be
paying for goods they did not receive, which affects the bottom line on an ongoing
basis. Finding ways to improve warehouse systems to make them accurate,
foolproof and easy improves profitability for companies in a practical way.
Packaging/Repackaging
Packing is not just putting something in a box and calling it a day. In the world
of logistics, packing is an important part of the supply chain. It is the period when
documentation and records are compiled and goods are sorted and stored. In
addition to this handling and record-keeping, packing can play directly into your
shipping costs. Carriers are a big fan of "dimensional weight" pricing nowadays,
which means your packages need to be as space-efficient as possible in order to get
the best rates. In other words, Lean Supply Solutions' expert packing procedures
provide clients with properly packaged parcels at an affordable cost.
Repackaging is a type of value-added service that takes place whenever a
change or reconfiguration needs to be made to a product. Most 3PL warehousing
and distribution providers offer some level of repackaging, though not all do so for
the same reasons. One of the more common reasons for repacking a product is to
move it into your company's personal branded packaging rather than use what the
manufacturer sends it in. Other possible reasons can include making adjustments
based on unique customer requests or to make a change to any pre-assembled kits
your warehouse makes use of.
Dispatch of goods
Dispatch is a procedure for assigning employees (workers) or vehicles to
customers. Industries that dispatch include taxicabs, couriers, emergency services,
as well as home and commercial services such as maid services, plumbing, HVAC,
pest control and electricians.
With vehicle dispatching, clients are matched to vehicles according to the order
in which clients called and the proximity of vehicles to each client's pick-up
location. Telephone operators take calls from clients, then either enter the client's
information into a computer or write it down and give it to a dispatcher. In some
cases, calls may be assigned a priority by the call-taker. Priority calls may jump the
queue of pending calls. In the first scenario, a central computer then communicates
with the mobile data terminal located in each vehicle (see computer assisted
dispatch); in the second, the dispatcher communicates with the driver of each
vehicle via two-way radio.
With home or commercial service dispatching, customers usually schedule
services in advance and the dispatching occurs the morning of the scheduled
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service. Depending on the type of service, workers are dispatched individually or in

teams of two or more. Dispatchers have to coordinate worker availability, skill,
travel time and availability of parts.
Customer service
Customer service is the act of taking care of the customer's needs by providing
and delivering professional, helpful, high quality service and assistance before,
during, and after the customer's requirements are met.
Communication
A communication channel is a particular type of media through which a
message is sent and received. In other words, it's the method of communication
used. The communication channels can flow down from superiors to subordinates,
up from subordinates to superiors, or across from and to co-workers of the same
hierarchical level of authority.
Meaning–Physical Distribution Mix–Order processing – Transportation –
Warehousing – Inventory.
1. Define physical distribution.
2. What is the physical distribution mix?
13.6 SUMMARY
Physical distribution activities and decisions are important for many kinds of
manufacturers, wholesalers and retailers affecting both customer satisfaction and
bottom-line profit performance. Physical distribution management is the process of
strategically managing the movement and storage of materials, parts and finished
inventory from suppliers between enterprise facilities and to customer.
13.7 TERMINAL EXERCISES
Explain physical distribution in the purchase of home furniture?
13.8 SUPPLEMENTARY MATERIAL
K.Shidhara Bhat – Sales and distribution management, Himalaya publishing
house, Chennai.
13.9 ASSIGNMENT
What you perceive about importance of physical distributions mix?
13.10 SUGGESTED READINGS/REFERENCE BOOKS
1. Philip Kotler - Marketing Management, Prentice Hall of India, New Delhi.
2. Gavens, Hills & Woodruff, Marketing Management Richard D. Irwin.
3. JC Gandhi, Marketing – A Managerial Induction, Tata McGraw-Hill
Publishing Company, New Delhi.
4. V.S. Ramasamy, Marketing Management, McMillan.
Discuss your experience about the physical distribution in Amazon.com
product
13.12 KEY WORDS
Order Processing, Transportation, Inventory and Ware Housing
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LESION 14
ROLE OF PHYSICAL DISTRIBUTION IN MARKETING
14.1 INTRODUCTIONS
Many companies state their Physical distribution objectives as getting the right
goods to the right place at the right time for the least cost. unfortunately, this
provides little actual guidance. No Physical distribution system can simultaneously
maximise customer service and minimise distribution cost. Maximum customer
service implies large inventories, premium transportations and multiple
warehouses, all of which raise distribution cost. Minimum distribution cost implies
cheap transportation, low stocks and few warehouses.
14.2 OBJECTIVE
 After reading this lession, you can understand aim, level and role of
physical distribution
14.3 CONTENTS
14.3.1 Aim of Physical Distribution
14.3.2 Levels of Physical Distribution
14.3.3 Role of Physical Distribution
14.3.1 Aim of Physical Distribution
The starting point for designing the physical distribution system is to study
what the customers want and what competitors are offering. Customers are
interested in several things. On time delivery, supplier willingness to meet customer
emergency needs, careful handling of merchandise, supplier willingness to carry
inventory for the customer. The company has to reach the relative importance of
these services to customers. Most physical distribution decisions involve trade off
between costs, customer service level and sales. An important point is that trade off
must be made in the physical distribution. The lowest cost approached may not be
best if customers are not satisfied. A higher service level may make a better
strategy. If different channel members or target makers want different customer
service levels, different strategies may be needed.
14.3.2 Levels of Physical Distribution Systems
The difficulties of managing physical distribution as an integrated system are
compounded by the various levels that exist in many systems. When first adopting
a physical distribution management approach, a firm may find it beneficial to divide
the system into key subsystems for analysis. The supplier/manufacturer and the
manufacturer/middlemen/and user portions of the total systems represent two
major sub systems. The latter portion corresponding to the channel system, which
connects the firms with its end-user markets. The channel system frequently
involves more complex design and management tasks because experienced
manufacturers probably already have efficient distribution systems with their
suppliers and within manufacturing operations.
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14.3.3. Role of Physical Distributions in the Organisation

The physical distribution arrangement or system designed to move the goods
from producers and manufacturers to the users has a definite role. That is why; all
wise business firms have forged ahead with investment of good deal of time,
treasure and talent in physical distribution system improvements to get best to
others.
It provides a new orientation for marketing. It gives distribution factors the
importance they deserve in marketing and business policies, plans and decisions.
This ‘dark continent’ the other half of marketing has some constructive
contributions to make. These are1:
Creation of utilities
The physical distribution function of a firm provides the place and time
dimensions which contribute a basic element of marketing mix. The major
components of physical distribution are transportation and warehousing.
Creation of or addition of utility is addition of value to a thing. It is transport
system that creates place utility making goods more useful by bringing them from
the places where they are not needed to the places where they are badly needed.
Warehousing system is known for creating time utility. By holding the goods
from the time of their production till their consumption thus avoiding gluts and
shortages over a given period of time. The outcome is the maximisation of consumer
satisfaction and profits to the firm.
Improved consumer services
In general terms, ‘consumer service’ is the service provided to the customer
from the time of order placed till the product is delivered.
In fact, it is much more than this and covers price, sales representation, after-
sale services, product range offering, product availability and the like. Customer
service in physical distribution function consists of providing products at the time
and location corresponding to the customer needs. Improvement in customer
service is possible when we talk of a service level.
A customer service level is a measure of how well the customer service function
is being performed. Customers would be cent-percent satisfied if a wide range of
products were available at the right place and time in sufficient quantities to meet
the needs and wants of all who were willing and able to buy.
This is an ideal case indeed which is rate to a customer. However, high levels of
customer satisfaction can be possible through a viable distribution system that
takes into account the factors that affect customer service such as time,
dependability, communication, availability and convenience.
158
Cut in distribution costs

The prices paid by the user consist of not only production costs but also
delivery costs. Experts have estimated that the physical distribution costs are in the
range of 20 to 25 percent of the price.
If the total physical distribution costs are taken, transportation accounts for 45
percent; warehousing 25 percent; inventory carrying costs 10 per cent; receiving
and shipping costs 5 percent; packing 6 percent; administration 5 per cent and
order processing 4 percent. Therefore, physical distribution system can be
instrumental in slashing down these costs.
There are tangible and intangible costs for which the customer is to bear the
brunt. Economy can be brought about in tangible and intangible costs by
systematic planning of inventory levels, warehousing location and operations,
transportation schedules and modes, material handling, order processing and
communication. It is the ‘last frontier’ for cost economies and the economy’s dark
continent. It is the virgin land for cost control and cost reduction.
Increased market share
A new look and approach to physical distribution can contribute beyond the
attainment of the twin objectives of improving consumer satisfaction and dealer
profit margins. An increased market share one of the major aims of any growth
aspiring marketing unit can be possible. There are definite ways in which an
efficient physical distribution system can contribute towards this end.
A well designed physical distribution frame can decentralize its warehousing
operations; devise the combinations of efficient and economic means of transport to
pen errata into the areas untapped so far, planning inventory operations to avoid
stock-outs and gluts.
These minute points are constructive in arresting the loss of consumer interest
and loyalty. Thus, it can also add to rebuilding the class of customers the greatest
asset for any marketing organisation that is adaptive.
Price stabilisation
Physical distribution can contribute considerably to the attainment of the
situation of price stabilisation. Physical distributional components are capable of
bringing about much desired price stabilisation.
Among other things the customers expect price stability over a period and
place. It is the best use of available transport and warehousing facilities that can
bring about amicable and matching adjustment between the demand for and
supply of goods thus preventing price fluctuations and distortions.
This is of particular importance in all the underdeveloped and developing
economies where these components particularly transportation and warehousing
have not reached the heights of sophistication and refinement.
159

Role of physical distribution-Price stabilization-Increased market share-Cut in
distribution costs-Improved consumer services-Creation of utilities
What are the role of physical distribution?
14.6 SUMMARY
Physical distribution considerations are important in the design of new
channels of distributions and in the modification of existing systems because
channel arrangements become physical distributions operating parameters.
Physical distributions include slow moving inventory, abnormal stock-out,
customer complaints, excessive inter warehouse shipments and premium freight
charges. Management should have available performance standards for spotting
performance gaps in physical distributions.
1. Explain the importance of physical distribution
www.yourarticlelibrary.com/goods/importance-of-physical-distribution-
system/49198
14.9 ASSIGNMENT
You are purchased television in Chennai showroom. But, you are living in
Chidambaram. Assume yourself the purchased television should be distributed in
your living place with delivery promises by the dealer. Discuss role of distribution.
1. Philip Kotler - Marketing Management, Prentice Hall of India, New Delhi.
2. Gavens, Hills & Woodruff, Marketing Management Richard D. Irwin.
3. JC Gandhi, Marketing – A Managerial Induction, TATA McGraw-Hill
Publishing Company, New Delhi.
4. V.S. Ramasamy, Marketing Management, McMillan.
Visit the dealer of TATA Tiscon Iron Steel dealer at your nearest place and order
the steel product for your home. Write your experience relating to physical
distribution of your ordered the steel materials.
14.12. KEY WORDS
Role of Physical Distribution
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LESSION 15
TRANSPORTATION
15.1 INTRODUCTION
Transportation is the marketing function of moving goods. It provides time and
place utility. Transporting can help achieve economics of scale in production. If
production cost can be reduced by producing larger quantities in one location,
these savings may more than offset the added cost of transporting the finished
products to customers.
15.2 OBJECTIVE
 After reading this lesion, you can understand the meaning, kinds of
transport and function of transport as well as advantage and limitation.
15.3 CONTENTS
 Meaning
 kinds of Transport
 function of transport
15.3.1. Kinds of Transportation
Different modes of transportation is available to the management with their
respective advantages and disadvantages some of them are;
a. Railways
In the Indian transportation system Indian Railways occupy an important role
to keep the nation secured with a large net work throughout the country. Both for
goods and passenger transport many people and firms depend on railways. Many
important industrial and market centres are well connected with railways. In using
it as a mode of transportation, we must be aware of its advantages and
disadvantages.
Advantages: (1) The railways are important mainly for carrying heavy and
bulk goods such as raw materials, steel, chemicals and machines over a long
distance. (2) Railway charges are regulated by the government, consequently while
fixing the tariff by taking into socio-economic considerations, differentials or
preferential tariff rates may be followed. Sometimes certain good which are
identified may be transported even below the cost of operation (3) Railway system is
well managed assuring the flow of traffic of good in all climates and calamities
(4) Safe transportation is assured.
Disadvantages: (1) The charge levied by railways is not economical in the
short routes and loading, unloading and handling charges are very high. (2) Some
times, time consumed in transportation is higher than other modes causing long
time blocking of goods in transit. (3) Shortage of wagons create a situation of
holding stock on the railway yards for an unknown period. (4) Railway workers are
not so particular about the delicacy of the products and their rough handling cause
damage of the products in transit. (5) In reaching the destination, the receiver has
to arrange him self for local transportation.
161
In railways had low or nil profits over a period causing insufficient

replacements and renewals causing hardships to the transporter. Further there is
no much expansion of the existing routes and addition of new routes. In spite of
these limitations, railways are vital for the development of business.
b) Road Ways
The second alternative transport available in India is the road ways. There is a
lengthy net work of road ways with national high ways connecting different states
and business centres. These are maintained by Indian Government. In addition to
this, state owned road ways are there. Some of the roads are maintained by local
governments. Though there is a big net work of road system, the road condition is
not good at many places causing increased cost of transportation. Particularly,
roads connecting villages from where a huge volume of agro-based material is
coming to the business is fair weather roads. The peculiarity of the traffic on Indian
roads is a variety of vehicles are used for transportation ranging bullock carts to
heavy trucks. Traffic sense of people and vehicle conditions are very poor and
nobody bothers about rules and regulations. Inspite of these limitations, due to the
advantages of reaching to the end state of the customer, fast and comfort, people
are preferring road transportation for a number of products.
c) Air Freight
The most expensive cargo transporting is airplane but the transport is very
quick which in turn facilitate the reduction of holding stock. High value and low
weight goods like high fashion goods and industrial parts are often shipped by air
mail. Air freight is creating a transport business by carrying across continents and
oceans. Air freight is also becoming very important for small emergency deliveries
that absolutely need to be transported. An important advantage of using planes is
that the cost of packing, unpacking and preparing the goods for sale may be
reduced or eliminated. It reduces spoilage and damage of goods in transit. The
limitations are that Indian air transportation is not well connected with many cities
and town over the country. Even the existing some of the air ports are not having
night loading facilities. For bulk size products air lifting is very difficult.
d) Water Transportation
Transportation on sea water is familiar for international business because the
cost is very less and bulk commodities can be shipped easily. Its only limitations is
a long time is consumed during the transportation. The other mode of water
transportations is inland water transportation. India is having a big net work rivers
and cannals which useful for cheap water transportation but due to insufficient
infrastructure much attention is not paid on it so far.
e) Pipe Line Transportation
Liquid and gas particularly petroleum products are suitable for pipeline
transportation. The pipe line transportation, in spite of its heavy initial investment
on building pipes, it operational costs are low, transportation is uninterpreted, safe
and cheap.
162
f) Containerisation
The concept of containarisation is essential particularly in export activities.
Multi-Mode Transportation
So far we had gone through each type of transportation separately. But in
practice products are moved by several modes in spite of their advantages and
limitations.
15.3.3 Function of Transport
Physical Supply of Products
Transportation carries necessary raw materials to factory for production of
goods and supplies finished goods to consumers. It creates place and time utility of
goods by transporting from one place to another. It easily carries finished to the
hands of those who need and use them. This significantly increases aggregate sales
of goods. In fact, transport is such a key of marketing, which helps in carrying
goods to the scattered consumers in different places, narrows the gap between
producers and consumers and facilitates to distribute goods to the consumers at
minimum cost and time.
Specialization
Transportation facility encourages division of labor and specialization on
geographical or regional basis. Transportation cost highly affects localization of
industries. Production of goods may center at such place where the environment is
the best and production cost is minimum. This makes maximum utilization of local
resources possible, which is both economically and socially necessary.
Mobility of Labour and Capital
Transportation facility provides mobility to labour and capital. If more labour
force is available at any place, transport helps to carry it economically to necessary
place. The means of transport carry labours from one place to another. This
encourages labour and capital to use and invest in more productive sectors.
Stabilization in Price
Transportation helps to bring stability in price of different products. It
transports goods from more supplied places to scarcely supplied areas. This
establishes coordination between demand and supply, and brings stability in
prices. It helps to supply necessary goods regularly to the consumers. Besides this,
consumers get necessary goods at lower prices, because it encourages competition
among producers and makes mass production at lower cost possible.
Other Importance
Beside economic importance, transportation has also social, political and
cultural importance. It establishes social and utility by narrowing geographical
distance. It consolidates social and cultural utility and strengthens national
integration. It helps to establish relationship with foreign countries. Transportation
also helps widen knowledge and skill in different sectors. In this way, it helps
establish social utility, uniformity and integrity and strengthens national security.
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Advantages
1. Cost effective
2. Fast delivery
3. Ideal for short distances, national or mainland Europe
4. Ideal for transporting perishables (eg fruit and vegetables)
5. Easy to monitor location of goods
6. Easy to communicate with driver
7. Ideal for sending by courier shortages to customers
Mode of Transportation – Railways – Roadway – Air freight – Water Transport –
Pipe line transportation – Containerisation.
1. What are the various kinds of transport?
2. Write the function of transport.
15.6 SUMMARY
Marketers need to be concerned with transportation decisions. Transportation
choices will affect product pricing. On time delivery performance, and the condition
by the goods when they arrive, all of which affects customer satisfaction.
Explain transportation.
Michalle Bangarf – Performance Pays, Security Distributing and Marketing,
March 2006.
15.9 ASSIGNMENTS
1. Discuss about advantages and disadvantages of railways.
2. Discuss about modes of transportation.
15.10. SUGGESTED READINGS/REFERENCE BOOKS
1. McCarthy & William D. Perrault - Basic Marketing, Irwin.
2. J.E. Gandhi – Marketing, TATA McGraw Hill.
15.11. LEARNING ACTIVITIES
Explain the factors that should be considered in choosing the mode of
transport for physical distribution of goods.
15.12 KEYWORDS
Transport Kinds, Function
164
LESSON 16
SELECTION OF GOOD TRANSPORT
16.1 INTRODUCTION
Marketers need to be concerned with their company’s transportation decisions.
Transportations choice will affect the pricing of the products, on time delivery
performance and the conditions of the goods when they arrive, all of which will
affect customer satisfaction. In transporting goods, the company can choose any
one or a combination of any modes of transport explained in the previous lesson.
We are developing criteria which may be used as a measuring scale to decide which
mode or combination is appropriate on the basis of the following.
16.2 OBJECTIVE
 After reading this lesion, you can understand managing the transport
and criteria for selecting good transport.
16.3 CONTENTS
16.3.1 Managing the transport
16.3.2 Criteria for Selection of Good Transport
16.3.3 Limitation of transport
16.3.1 Managing transport
A transportation management system (TMS) is a subset of supply chain
management concerning transportation operations and may be part of an
enterprise resource planning system.
A TMS usually "sits" between an ERP or legacy order processing and
warehouse/distribution module. A typical scenario would include both inbound
(procurement) and outbound (shipping) orders to be evaluated by the TMS Planning
Module offering the user various suggested routing solutions. These solutions are
evaluated by the user for reasonableness and are passed along to the
transportation provider analysis module to select the best mode and least cost
provider. Once the best provider is selected, the solution typically generates
electronic load tendering and track/trace to execute the optimized shipment with
the selected carrier, and later to support freight audit and payment (settlement
process). Links back to ERP systems (after orders turned into optimal shipments),
and sometimes secondarily to WMS programs also linked to ERP are also common.
1. Planning and optimizing of terrestrial transport rounds
2. Inbound and outbound transportation mode and transportation provider
selection
3. Management of motor carrier, rail, air and maritime transport
4. Real time transportation tracking
5. Service quality control in the form of KPIs (see below)
6. Vehicle Load and Route optimization
7. Transport costs and scheme simulation
165
8. Shipment batching of orders

9. Cost control, KPI (Key performance indicators) reporting and statistics
10. Freight Audit
16.3.2 Criteria for Selection of Good Transport
1. Cost
Cost of transportations is the visible criteria in selection of the mode of
transport. The cost includes actual freight rates, internal transport, loading and
unloading, insurance, taxes, packing required to suit the mode of transport and
possible damages in transit. In this regard, the distance to be travelled and the
quantity to be transported are to be considered. In addition to his we have to
establish that the selected mode results in to a fixed cost of transport or variable
cost of transport. If the freight is same for wagon or truck irrespective of half load or
full load of material, total quantity to be transported is full load, transport cost
pursuit less other wise it will be more. In a variable cost irrespective of the total
quantity, the charge may be levied per unit. Distance to be transported also
influence the cost. In general for long distance railways are cheaper than road
ways.
2. Availability
On the basis of the cost one may come to the conclusion, a particular mode of
transport is cheaper but such transport at the locations of the requirement, at the
time of the requirement to the required extent must be available. Particularly,
under developing countries like India where infrastructural facilities are limited, it
may be difficult to get what we wish. As a result due to no other alternative, one
forced to choose the high cost transportation. So availability of the choice also
influence on the mode of transport.
3. Frequency
Sometime the least cost mode of transport is available but its frequency for
repeated transportation may be difficult. As business is repetitive, stock must be
transported repeatedly, sometimes even daily. If that much frequency of transport
is not available the choice of the transport may be affected. In this regard
particularly in road transport, to maintain frequency, annual contracts may be
entered with the truck suppliers so that availability and frequency is assured
through cost is higher.
4. Dependability
Dependability is the result of possible failure of the transporting agency to
under take the transportation as per the agreement. The causes for doubtful
dependency arises from two source – one external to the transporting agency such
as climatic conditions, road conditions, traffic conditions and agitations which
cause for delay in transport. Internal causes are bad vehicle condition causing
frequent vehicle failure or slow movement, inefficient workers and lack of
commitment to the agreement.
166
5. Safety
Safety means reaching the product to the destination without damage, or
thefts. Some time a particular transport mode may be cheap in cost, high in
frequency and available at the door but it is not safe for use. The reasons are
possibility of loss of the product, lack of maintenance of required conditions in
transit may create a problem of safety.
6. Capability of the Transport Media
Certain types of the products are bulk in size and production is against the
orders of the customers. As a result each time of transporting different shapes,
sizes and design of the product is to be transported while selecting the transport,
we must look into capability of the mode to provide such transport facilities.
7. Product Characteristics
Product characteristics such as liquids, gases, hazardous materials,
perishables and maintenance of the product in transport also influence on the
choice of the transport. Chemicals and gases safety and security in transit is more
important than speed of the transport. Perishable goods need quick transport or air
conditioning in transport.
8. Speed
Speed is the time consumed in between the two points of transport. Some may
move faster and reach the destination in short time, other may slow and take longer
time to reach the same distance. Depending upon the time within which the
product is required, mode of transport may be selected.
9. Urgency
Though not at all times, sometimes product may be needed at the destination
urgently. Under such circumstances fast moving mode of transportation may be
selected.
If the shipper seeks speed air and truck are the prime contenders. If the goal is
low cost, then water and pipe line are the sources. Trucks stand high on most of
the criteria and that accounts for their growing share. The flexibility of strucks
makes then better at moving small quantities of goods for short distances. The
transport function should fit into the whole marketing strategy. But picking the
best alternative can be difficult, what is best depends on the product, other
physical distribution decisions and service level available with each mode of
transport. The best alternative should not only be as low cost as possible – but also
provide the level of service required. It is important to see that low transporting cost
is not the only criteria for selecting the best mode. Since certain elements of the
distribution function are often more important than others in the firm, trade off
analysis should be directed to those elements that comprise the major portion of
distribution costs.
In choosing the transportation modes companies can decide between private
contract and common carriers. Transportation decisions must consider the complex
trade off between various transportation modes and their implications for other
167
distribution elements such as ware housing and inventory. As transportation costs

change over a period, companies need to reanalyse their option in search for
optimal physical distribution.
16.3.3 Limitation of transport
1. Transport subject to traffic delays
2. Transport subject to breakdown
3. Goods susceptible to damage through careless drivin
4. Bad weather
5. Driving regulations can cause delays
Criteria for selection of good transportation.
1. Establish the criteria for selection of mode of transportations.
2. Why do firms tradeoff between various modes of transportations?
3. Is the cost a dominating factor in choosing the mode of transportation?
Defend your answer.
16.6 SUMMARY
Transportation is a necessary function of marketing because most of the
markets are geographically separated from the areas of production. Transportation
plays a prominent role in the distribution of goods. It bestows on the goods both the
advantages of time and place utilities and also enhances their economic value.
List out the types of transportation.
16.8 SUPPLEMENTARY MATERIALS/JOURNALS
1. TMS versus Freight Audit Outsourcing – Control Pay
2. Managers Handbook: What salespeople are paid?
3. Sales by Marketing Management, February 1995.
16.9 ASSIGNMENTS
"For transporting perishable products to distant places air transport is most
suitable and cheaper". Explain
1. Philip Kolter - Marketing Management.
2. Gahens, Hills & Woodruff - Marketing Management.
3. McCarboy - Basic Marketing.
4. J.C. Gandhi - Marketing.
Discuss some of the recent trends in developing sales from compensation
programs.
16.12 KEY WORDS
Speed and Safety in Transportation
168
LESSON – 17
TYPES OF CHANNELS OF DISTRIBUTION AND THEIR IMPORTANCE
17.1 INTRODUCTION
The marketing system is made up of a vast configuration of organisations and
individuals, linked together by flows of information’s, products, negotiations, risks,
money and people. Specific firms are aligned to form a channel of distribution that
connects producers of products with the people and organisations and people that
consume the products. Each channel in the marketing system seeks to satisfy the
needs and wants of targeted end users and also to meet the objectives of the
channel’s participants. Each organisation in the distribution channel performs
particular activities in connecting end users with desired goods and services.
17.2 OBJECTIVES
 After reading this lesson you can understand the concept of channel of
distribution, significance of the channel of distribution and functions
and flows involved in the channel of distributions.
17.3 CONTENTS
 Channel of Distribution
 Importance
 Flows in Marketing Channel
Definition of the Channel
In discussing the marketing channel we must first arrive a meaningful
definition. The reality of marketing channel, like any other else can be perceived
more than one way, depending on the intent of the conversations. A popular
definition views it as a route or path way taken by goods as they flow from point to
point and the final user. This definition tend to emphasize the movement of goods
or services. Since its stress is on physical distribution, it seems to down play firms
that move ownership. An adequate definition must include all institutions involved
in the channel and it must be sufficiently broad to include goods and services.
Nystrom says, “The channel of distribution for a product refers to the course of
ownership taken in the transfer of title to it as it moves from manufacturer to final
consumer”. This definition does not include the significance of physical distribution
and only title flow is taken into account. American Marketing Associations says
that a channel is, “the structure of intra company organisation units and extra-
company agents and dealers, whole sale and retail through which the commodity,
product or service is marketed”.
Thus a channel is defined as, “A team of merchant and agent business
institutions that combine physical movement and title movement of products in
order to create useful assortments for specified markets”. On the basis of this the
channel management may be stated as the development of a consistant strategy
based on relevant decisions designed to move title and physical goods so as to
achieve the firm’s purpose with in the parameters of the environment.
169
Channel management and physical distribution management, though closely

related, are actually quite different. Channel management is concerned with the
entire process of setting up and operating the contractual organisation that is
responsible for meeting the firms distribution objectives. Physical distribution
management on the other hand is more narrowly focused on providing product
availability at the appropriate times and places in the marketing channel. Quite
often channel management must be well under-way before physical distribution
strategy can ever be considered. Effective physical distribution is often vital to the
success of the firm’s overall distribution strategy.
Importance of the Channel of Distribution
After knowing what is channel of distribution, now let us identify the
importance and significance of the channel of distributions.
1. Creation of Economic Value
Production, marketing and consumption working together create economic
value. Without marketing there is no interaction between production and
consumption because marketing performs the essential function of distribution.
Thus the channel of distribution is the vehicle through which products move and
within which marketing functions are performed.
2. Channel Importance in Creating Utility
Utility is defined as the ability of a product to satisfy a want. Thus utility is the
basis for economic value. There are four types of utility that can be identified: form,
place, time and possession utility. From utility is any change in the make up of the
product, which is the result of product and production strategy. The remaining
three utilities could not occur with channel of distribution. Time utility is having
the good when the customer wishes to purchase. A product has no purpose to a
consumer if it is made available either before or after it is needed. It is the storage
that creates time utility. The channel creates time utility by warehousing. Place
utility is having the product at the location desired by consumers. The channel
creates place utility by means of transportation. Possession utility refers to all the
activities necessary to change the ownership of goods. Distribution seeks to own
goods for resale. Possession utility concerns with the change of title which flows in
the channel down to the consumer.
In reality the above four types of utility are inseparable. The consumer can not
obtain a finished product unless it is transported to the consumer’s place of
residence, stored until he is ready to buy and title passed on to him.
3. Assortment
Through the established network of distribution the retailers consumer get the
facility of acquiring all types of products that are needed at one place. This
facilitates to consumer to save time effort and money in procuring the variety of
products. This is possible because of the existence of a good network.
170
4. Functional services
There is general agreement on six broad activities: buying, selling
transportation, storage, marketing, research and service surrounding the sale.
Channel of distribution is essential for performing these activities.
Flows in marketing channel
Once a channel of distribution is developed, a series of flows emerges. These
flows provide the links that tie the channel members and other agencies together in
the distribution of goods and services. From channel management standpoint, the
most important of these flows are:
1. Product flow refers to the actual physical movement of product from
manufacturer to the consumer through various intermediaries of
distribution.
2. Negotiation flow represents the interplay of buying and selling functions
associated with the transfer of title. Negotiation flows in both directions.
Negotiations involve a mental exchange between buyers and sellers at all
levels of the channel.
3. The ownership flows from manufacturer to consumer as the title flows
downward from producer to consumer. The middlemen actively facilitate the
flow of title.
4. Information flow is a two way communication. Information flows from
producer to consumer about the product, performance, price and conditions
of the sale. After sale expectations, reactions and satisfactions of the product
and after sale services flow from consumer to the producer.
5. Promotion flow refers to the flow of persuasive communication in the form of
advertising, personal selling, sales promotion and publicity.
The concept of channel flows provides a good basis for separating channel
members from non-channel members. Recall that in our definition of marketing
channel only those parties who were engaged in the negotiators functions of buying,
selling and transferring title were considered to be members of the contractual
organisation. From the stand point of channel flows there, only those parties who
participate in the negotiations or ownership flows would be members of marketing
channel. This provides very useful framework for understanding the scope and
complexity of channel management. Also from the perspective of channel
management, the concept of flows in marketing channels helps to convey the
dynamic nature of marketing channels. The word flow suggests movement or a fluid
state and indeed is the nature of channels of distributions changes, both obvious
and subtle, always seem to be occurring. New forms of distribution emerge,
different types of middlemen appear in the channel while others drop out, unusual
competitive structures close off some avenues of distribution and open up others.
Changing pattern of buying behaviour and new forms of technology add yet another
dimension of change to channels of distribution. Channel flows must be adapted
and adjusted to meet these changes.
171

Importance of Channel of Distribution.
1. Define marketing channel?
2. What is significance of channel of distribution?
3. Explain various flows involved in the channel of distribution.
17.6 SUMMARY
Efficient system of physical distribution provide the goods/services at a low
cost. It increases the probability for repeat sales, a higher customer retention rate,
and the addition of new customers. Physical distribution lower the level of stock
and avoid out of stock situations. This is possible by devising a constant delivery
schedule
What do you mean by marketing channel?
17.8. SUPPLEMENTARY MATERIAL
Rolpf Anderson – Journal of Personal Selling of Sales Management, 4 fall, 1996.
17.9 ASSIGNMENTS
Discuss about importance of channel of distribution.
17.10. SUGGESTED READINGS/REFERENCE BOOKS
1. Bert Rosenbloom - Marketing Channels, The Dryden Press.
2. C.Glenm Walter - Marketing Channels, Good year Publishing Company.
3. Louis W.Sterm - Marketing Channels, Prentice Hall Inc.
“For transporting perishable products to distant places air transport is most
suitable”. Explain.
17.12 KEY WORDS
Assortment, Functional Services.
172
LESSON 18
SELECTION OF THE CHANNEL MEMBERS
18.1 INTRODUCTION
Channel selection involves the determination of the most effective route to
market, given the environment in which business finds itself. In one sense, the
channel selection is the natural outgrowth of understanding channel design. In
other sense, channel design is the result of selecting a particular type of channel.
Channel selection is the fundamental decision of channel management and
particular channel selected affects every other decisions of management. The
determination of an effective channel is never completed. The channel leader must
face the problems periodically. The term channel selection is used to refer to (a)
Channel adoption which occurs when the firm initially decides on a preferred route
to make from among available channel alternatives, (b) Channel modification is the
process of continuous re-evaluation, adjustment and change that occurs with a
channel over the life of the product and (c) Channel creation is development from
the ground up of channel where no alternative already exists. Channel creation
typically involves designing new institutions or using existing institutions in a new
manner.
18.2 OBJECTIVES
 After reading this lesson you can understand importance of selection of
channel members, and establish the criteria against which intermediaries
may be selected as channel members.
18.3 CONTENTS
 Importance
 Process of Selecting the Channel Members
IMPORTANCE OF THE SELECTION OF THE CHANNEL
Most of the organisations do not realise the importance of channel selection.
First the existence of an effective channel is important because it can greatly
improve operational efficiency. A well chosen channel may lead to lower shipping
cost through reduced delivery time and better matching of products to middlemen
needs. A sound channel may also improve efficiency by providing for shorter routes
to the market. Failure to establish an appropriate channel of distribution may lead
to increased promotional costs, poor market coverage, ineffective sales efforts, a
misbalance of production and sales and slow and misdirected physical distribution.
Process of selecting the channel members
The process of selecting the channel members consists of three basic steps.
1. Finding prospective intermediaries
2. Applying selection criteria to determine the suitability of prospective
intermediaries for becoming channel members.
3. Securing the prospective intermediaries as actual channel members.
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A. Finding Prospective Channel Members: A wide variety of sources is available

to help the channel manager find prospective channel members.
The most important of these are:
1. Field sales organisation: For those firms who have their own existing sales
force already calling on wholesales and retailers is an excellent source for
finding new channel members.
2. Trade sources: Trade sources such as trade associations, trade
publications, directories, other firms selling related or similar products,
trade shows and grape vine are all valuable sources of information about
prospective intermediaries.
3. Re-seller in enquiries: Many firms learn about potential channel members
through direct enquiries from intermediaries expressing an interest in
handling their product line.
4. Customers: Some firms look to the customers of prospective intermediaries
as a source of information.
5. Advertisement in trade publications offer an opportunity to find potential
channel members.
6. Trade shows or conventions can be very fruitful source for finding potential
channel member.
7. Finally, some of the firms also find the chambers of commerce, local
dealers, direct mails, contact from previous applications and independent
consultants as source of information for locating intermediaries.
B. Development of Selection Criteria: Brendel developed a list of some twenty
key questions to ask for prospective channel members. They are:
1. Does the distribution really want our line or is he after it just because of
present day shortages?
2. How well established is he?
3. What is his reputation among his customers?
4. What is his reputation among manufacturers?
5. Is he aggressive?
6. What other allied lines does the distributor handle?
7. What is his financial position?
8. Has he the ability to discount his bill?
9. What is the size of his facilities?
10. Will he maintain an adequate inventory for services?
11. What important customers does the distributors sell?
12. Which ones doesn’t he sell?
13. Does he maintain stable prices?
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14. Does he give yearly sale figures for the last five years?
15. What territory does he actually cover?
16. Are his salesmen trained?
17. How many fieldmen has he?
18. How many inside employees has he?
19. Does he believe in active cooperation, sales training and sales
promotion?
20. What are his facilities for these activities?
Pegram divided the criteria into a number of categories which are given below:
1. Credit and finance: With financial resources the intermediary is able to
bring into business and capacity to raise the same to meet short-term
expected and unexpected requirements is the basic criteria used by
many for judging the acceptability of a prospective channel members.
2. Sales strength: Most firms also mention the sales capacity of the
prospective member. Higher the capacity, greater the chance of
selection.
3. Product line: Manufacturers were generally found to consider four
aspects of the intermediary’s product line. (a) Competitive products (b)
Compatible products (c) Complementary products and (d) Quality of line
carried. As a general rule manufacturers try to avoid, where ever
possible intermediaries who carry directly competitive product line.
Manufacturers do typically prefer intermediaries who handle compatible
products. Intermediaries who carry complementary products are looked
upon favourably because by carrying such products they offer a better
overall product mix to their customers. Manufacturers generally seek
intermediaries who carry product line that are equal to or better than its
own lines.
4. Reputation: Most manufacturers will flatly eliminate prospective
intermediaries who do not enjoy good reputation in the concerned
markets.
5. Market coverage: The adequacy of covering the geographical territory
which the manufacturers like to reach is known as market coverage,
Generally, manufacturers will attempt to get the best territorial coverage
with minimum of overlapping.
6. Sales performance: The basic consideration here is whether the
prospective intermediary has a high probability of capturing the market
share which the manufacturer believes. Manufacturer will seek detailed
sales performance data from prospective intermediaries to get a first-
hand view of their effectiveness.
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7. Management succession: A major consideration here is that many

intermediaries are managed by the owner founder, and most of them are
independent small business. Consequently, if the firm's founder dies,
the continuity of management is left in doubt.
8. Management ability: Many manufacturers feel that a prospective
channel member is not even worth considering if the quality of its
management is poor.
9. Attitudes: This applies mainly to a prospective intermediary’s
enthusiasm, initiative and especially aggressiveness. These qualities are
believed to be closely related to long term success in handling the
manufactures product.
10. Size of intermediary: Sometimes the intermediary is judged on his size of
the business. The belief is that the larger the organisation and sales
volume, the larger will be the sale of the manufacturer’s product also.
11. Customer location: If the customer is nearer to the producer, shorter
channel may be sufficient. Otherwise, larger channel is required.
Shorter channel is suitable if the customers are geographically
concentrated. Otherwise, if customers are scattered, lengthy channel is
required.
Product characteristics also influence on the channel. Perishable goods require
short channel and quick movement of goods. Durable goods may not require such a
short channel. Industrial products may require direct channel of distribution.
Order size: Where the size of the order is large, there is some significant savings
possible between the producer and buyers. This also influences on the choice of the
middlemen to reduce the cost of operations.
At this point we must understand what kind of channel is being selected. The
tendency is to assume that the channel’s manager seeks the one ideal channel. In
fact this is never true. The concept of the ideal channel is attractive, but it does not
stand the test of sound practical application. Two firms can attempt the same
channel and one will fail while the other succeeds.
c) Securing the Channel Members
It is important to remember that the selection process is a two way street. It is
not only the producer who does the selection, intermediaries, particularly those
who are large and well established feel that they too can be selective of whom they
will represent. There are a number of specific inducements which the channel
manager in a producing firm can use in attempting to secure channel members.
Such inducements are product line offered, profit margins, sales volume,
advertisement and promotional support, managerial assistance fair dealing and
friendly relationships.
Importance of the selection of channel
176

1. Explain the concept of selection of the channel members.
2. Write the importance attached to the selection of channel members.
3. What are criteria against which prospective intermediaries are selected?
18.6 SUMMARY
Channel design is the result of selecting a particular type of channel. It is the
fundamental of decision of channel management. It also involves designing new
institutions using existing institutions in a new manner.
How will you select the panel members?
18.8. SUPPLEMENTARY MATERIALS
www. Bms:tm, Wally Wood, Reinventing the Sales force, Across the board April,
1994.
18.9 ASSIGNMENT
Explain functions of transport in the marketing of goods. Give out the
comparative advantages of different modes of transport in the marketing of goods
1. Bert Resenbloom - Marketing Channels, The Dryden Press.
2. C. Glenn Walter - Marketing Channels, Good Year Publishing Company.
3. Stern & Ansary - Marketing Channels Prentice Hall of India.
“Middlemen are parasites. They should be eliminated”. Do you agree?
18.12 KEY WORDS
Product line, Reputation
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LESSON 19
INVENTORY MANAGEMENT IN THE CHANNEL OF DISTRIBUTION
19.1 INTRODUCTION
Storing is the marketing function of holding goods. It provides time utility and
here the term inventory is the amount of goods being stored. Storing is necessary
when production of goods does not match consumption. This is common when
mass production is at one point and consumption is at various points of long
distances. Storing allows producers and middlemen to keep stocks at convenient
locations – ready to meet customer needs. In fact storing is one of the major
activities of some middlemen. Most channel members provide the storing function
for some length of time. Even the final consumers store some-things for their future
needs. Since, storing can be provided anywhere along the channel, the storing
function offers several ways to vary a firm’s marketing mix and its channel system
by adjusting the time goods are held sharing the storing costs and delegating the
job to a specialised storing facility. This latter variation would mean adding another
member to the distribution channel which channel members store the product, and
for how long, affects the behaviour of all channel members.
19.2 OBJECTIVE
 After reading this lesson you can understand the role and significance
of inventory in the channel of distribution.
19.3 CONTENTS
 Meaning
 EOQ
Meaning
From the marketing stand point, inventory management refers to management
of products on the move. It involves planning and control of finished goods after
these are brought out of the production centre but before they are delivered to
customers. In the management of inventory, usually, two decision areas attract
managerial attention, namely determination of the type and location of warehouses
and determining the inventory levels and ways of controlling them. Inventory
decisions are concerned with the balancing of the cost of carrying inventory,
ordering products from suppliers and controlling inventory to achieve the desired
level of customer satisfaction.
Inventory accumulation is expensive, yet availability is essential to having
satisfied customers. Thus managing the trade off of inventory levels against other
physical distribution activities is important. Decisions about inventory turnover
should be influenced by the speed and cost of transportation, the location of the
facilities, the effectiveness of communication and handling and storage
requirements. However, reducing the costs of a particular distribution activity such
as carrying inventory may increase the costs of other distribution activities or
create unhappy customers.
Inventory management affects corporate profitability in two ways. First
maintaining higher levels of inventory lead to greater in stock availability and more
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constant service level to the customer. Second, inventory costs can be decreased by
lowering carrying costs and by purchasing in economical lots. Thus higher the level
of inventory the more favourable will be the impact on demand and the higher
inventory carrying costs will be. As a consequence, inventory decisions involve
evaluation of various costs and benefit trade offs. In this regard several decision
models can be used such of economic Ordering quantity, Fixed Order Point and
Fixed Order Intervel.
Inventory decision making involves knowing when to order and how much to
order. As inventory drawns down, management must know at what stock level to
place a new order. This stock level is called Economic Order Quantity. This EOQ
should be the higher, the higher the order lead time, the usage rate and service
standard. If the order lead time and customer usage rate are variable, the order
point should be set higher to provide a safety stock. The final order point should
balance the risks of stock out against the cost overstock.
The EOQ decision is how much to order. The larger the quantity ordered the
less frequently an order has to be placed. The company needs to balance order
processing costs and inventory carrying costs. These carrying cots include storage
charges, cost of capital, taxes and insurance and depreciation and obsolescence.
Marketing managers who want their companies to carry larger inventories need to
show that the larger inventories would produce incremental gross profit that would
exceed incremental inventory carrying costs. The optimal order quantity can be
determined by observing how order processing costs and inventory carrying costs
sum up at different order levels. Order processing cost per unit decreases with the
number of units ordered, because the order costs are spread over more units.
Inventory carrying charges per unit increase with the number of units ordered,
because each unit remains longer in inventory.
Economic Ordering Quantity (EOQ)
Economic Ordering Quantity (EOQ) is the size of an order of an item to be
placed in inventory that results in a minimum total cost, taking into account the
ordering costs and the cost of carrying the items in the inventory. The calculation of
EOQ is obtained from the following formula.
2PD
EOQ = CV
Where
P = Ordering cost (Per order)
D = Annual Demand (Units)
C = Annual Inventory carrying cost as a percentage of product cost.
V = Average cost of one unit of inventory.
Incorporation of Uncertain Demand
Advanced inventory models incorporate more realistic assumptions than
continuous constant known rate of demand. The uncertainties of demand and lead
time can be included in the analysis using the fixed order point model or the fixed
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order interval model. The fixed order point model follows the decision rule of
ordering inventory when stock reaches a predetermined minimum required to
satisfy the demand during the order cycle. The basis of the order point is that the
remaining inventory will satisfy demand during the order cycle. A calculated fixed
order quantity is ordered every time the inventory level reaches a level, in such a
way that the remaining inventory will satisfy demand during the order cycle. The
fixed order interval model compares current inventory with forecasted demand;
replacement orders are made at regular, specified times.
Order Processing
The timely flow of correct information through the distribution net work can
reduce the costs of other physical distribution activities. Information connects the
various organisations and distribution functions and serve as the nerve centre of
the distribution system. It provides data on order processing, transportation
scheduling, delivery status, inventory turnover and systems performance. Planning
for information flow, control and feed back must be incorporated into the inventory
management.
Inventory management
1. Write on the role of inventory management in the channel of
distribution.
2. What is economic ordering quantity? How do you calculate it?
19.6 SUMMARY
Inventory is necessary when production of goods does not match consumption.
This is common when mass production is at one point and consumption is at
various point of long distance.
EOQ – Explain in details.
Thomas G Brashear and Charles M. Brooks – Journal of Business Research, 58,
March 2005.
19.9 ASSIGNMENT
What is the inter-relation between inventory levels, transportation and
warehousing?
19.10 SUGGESTED READINGS / REFERENCE BOOKS
1. Philip Kilter - Marketing Management, Prentice Hall of India.
2. Gavens, Hills & Woodruff - Marketing Management, Richard D.Irwin.
3. McCarthy & Perreault - Basic marketing, Irwin.
What consideration influence a firm in designing its channels of distribution?
Discuss.
19.12 KEY WORDS
Ordinary cost, Annual demand.
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LESSON – 20
DISTRIBUTION COST ANALYSIS AND CONTROL
20.1 INTRODUCTION
Every business exists to serve customers at a profit. This fact is equally true in
the industrial and financial household consumer markets. The act of service has an
associated cost which the firm willingly incurs because of anticipation of making
profit. A channel of distribution provides the services of assortment, development
and delivery but there is an associate costs. If costs were the only consideration for
the manufacturer, the selection of the channel would be a simple matter. The
manufacturer would simply choose to sell through the most efficient wholesalers
and that would be the end of the matter. However, cost is not the only
consideration. The profitability of the channel must also be considered. The
appropriate channel is not necessarily the least costly one; it is the one that comes
closest to achieve the firm’s objectives including the revenue and profit objectives. A
channel that keeps cost low but does so by relinquishing a disproportionate
revenue is not a good channel for manufacturer. A more profitable channel is one in
which the manufacturer has more control over sales and distribution or it may be
the channel where the manufacturer has the greater speed of delivery. Obviously
much depends on the efficiency with which the firms making up the channel
perform marketing functions. The analysis of distribution cost is to be worked into
with this fundamental background. Though cost alone is not the decider of the
channel, the best control on costs will enhance the profitability of distribution.
20.2 OBJECTIVES
 After reading this lesson you can understand the significance of cost of
distribution in channel selection, establish the procedure to analyse the
cost of distribution and develop a criteria for controlling cost of
distribution
20.3 CONTENTS
 Distribution cost analysis
 Process
 Controlling the cost of distribution
DISTRIBUTION COST ANALYSIS
Distribution cost analysis is a tool which when properly employed can aid
channel members in determining whether the channels in which they participate
are profitable or whether alterations and modification in existing channels are
needed based on a knowledge of revenue and costs associated with servicing them.
Generally, a distribution cost analysis would be undertaken by a manufacturer,
because these channel members tend to have the greatest vested interest with
respect to the performance of the products throughout the channel.
One use of the methods rests on the adequacy of accounting data which can be
manipulated to provide an assessment of various channels which gives a
181
considerable opportunity to reduce costs and increase profits through analysis of

relative costs by channels. In order to perform a distribution cost analysis, the
accounting data typically available to a firm on its profit and loss statements must
first be recognised and reclassified into marketing function or flow categories.
PROCESS OF DISTRIBUTION COST ANALYSIS
The first step in this process is picking up the daily, monthly, quarterly or
annual financial statements of the firms where a consolidated costs and revenues
for the said period is available. This costs may be split into functional cost groups
of those associated with the marketing flows of physical possession (storage and
delivery) promotion (personal selling, advertising and sales promotion and publicity)
and ordering and payment (billing and collection). Clearly, this is an over
simplification, because many of the expenses incurred by a firm do not related
directly to the performance of marketing functions.
The second step in distribution cost analysis as it applies directly to marketing
channel decisions involves determining how much of each activity has gone into
serving the various channels used by the firm. This step calls for allocation of
various costs associated with each functional (flow) category to each channel. Some
of the bases available for allocating selected costs associated with various
functional categories to different channel or customer grouping are given in the
following table.
Allocation of functional cost groups to channel or customer grouping

Base of allocation to channel or customer
S. No. Functional Cost Group
groupings
1. Storage of goods Floor space occupied
2. Order assembly (handling) Number of invoices
3. Packing and shipping Weight or number of shipping units
4. Transportation Weight or number of units transported
5. Selling Number of sales calls
6. Sales promotion Cost promotion per rupee sales or units
7. Order entry Number of orders
8. Bills Number of invoice lines
9. Credit extension Average amount outstanding or bad
debts or rate interest on capital
10. Account receivable Number of invoice posted
11. Advertising Cost of space for specific intermediary
12. Commission payable to Cost for rupee sale or unit sales
intermediaries
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The above may be calculated for each type of the channel used by the firm. If
possible, these may be divided into fixed costs and variable costs which facilitate
building up a break-even-analysis for best guidance to make the right channel
decisions.
The third step in distribution cost analysis is the preparation of a profit and
loss statement for each channel. Cost of goods sold is allocated to each channel in
proportion to the references that the channel delivers. This reveals the profitability
index of all the members of the channel may be prepared by ranking them top to
the bottom. It would also be imperative to generate an anlaysis by product line and
to study the interaction effects between channel and product profitability. In
isolation, a distribution cost analysis can only indicate symptoms, coupled with a
product line analysis, a channel audit, some knowledge of the channel member’s
perception of marketing programs and strategic profit model analysis, it may lead
directly to causes.
Besides the decision making dilemma, there is considerable controversy
surrounding the allocation methods to be used in distribution cost analysis. This
controversy, generally, revolves around whether to allocate all costs of only direct
and traceable costs. If the latter is the case the analyst must be satisfied in dealing
with a contribution to profit figure as his final output, rather than a net profit
figure. For marketing channel problems this approach is acceptable, because it is
extremely difficult, if not impossible, to find reasonable ways of allocating indirect,
non traceable common costs to alternate channels. Even with these accounting
questions distribution cost analysis, performed only a rudimentary fashion, can
from the beginning step in the development of a channel wide information system.
In the process of going through the exercise, the manager is forced to consider all
the criteria variables making for profitable channel relations. He will, in turn begin
to ask for appropriate information from other departments within his own firm and
from other channel members. This process, in and of itself, should lead to more
effective communication of common problems, and it is to be hoped, to more
successful inter-organisation management.
Controlling the cost of distribution
Once the data has been classified, several types of comparisons can be made
for pre and post cost control of distribution. Internal comparisons include only data
made available from the business’s own records. External comparison relate
internal figures to those made available from outside the firm. Valuable conclusions
about the operations of distribution system can be drawn by using both the types of
comparisons for further control of cost distribution in a firm.
A. Internal Comparison
Internal comparisons are basic and evaluation should begin with this type of
analysis. The following list shows types of internal comparisons that can be made
for controlling cost of distribution. In every item referred to are sales, stock,
promotion, purchase, expenses and profit.
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1. Compare the forecast to actual results of most recent period. This shows
whether the results coincide with the forecast.
2. Compare the forecast, by item, to actual figures for each pat period. This
shows how the forecast has changed over time.
3. Compare actual figures, by items, in the most recent period to each past
period. This indicates the trend in actual figures.
4. Compare forecast to actual figures in the most recent period, between each
territory, between each divisions or between each departments. This
illustrates how the organisational units measure up to each other.
5. Compare, forecast to actual figures in each previous period between each
territory, between each division and between each department. This given
the true comparison between organisational units.
6. Compare the items to each other in each period by actual figures, as a
percentage to net sales. This provides a study of the importance of each
item.
B. External Comparison
External comparisons are important to evaluation because an impartial
standard is used. Internal comparisons reflect company mistakes and omissions.
External comparison shows how the business with all its successes and failures,
relates to other. The following type of external comparison can be made.
1. Compare the company’s latest results to industry or market leader or
nearest competition. This gives an indication of relative position.
2. Compare the company’s latest results to industry or competitor for several
previous periods. This provides the picture of trends in company position.
3. Compare company results to other industries. This provides and indication
of company’s relative position in the economy.
Of course, no single business is likely to use all the described methods of
comparison. Each channel member must select the combination of comparisons
most suitable to its operations. The actual type of comparison utilised depends on
the size of the firm, financial strength, degree of integration, use of formal control
and intended use of the data. The effectiveness of comparison and control depends
upon accuracy of the original forecast. To make the forecast effective, the causes for
deviations between actual and forecasts must be analysed. If the reasons for
deviations are controllable, they must be incorporated in the future forecasting and
if they are uncontrollable, they must be taken as constraints in future plans.
Process of distribution of cost analysis
1. Write the significance of cost of distribution in the channel
2. What are the various factors that influence the overall cost of distribution?
184
3. Elucidate the various steps involved in the processing, analysing

distribution costs.
4. Discuss various ways of controlling cost of distribution.
20.6 SUMMARY
Distribution cost analysis is a tool which when properly employed can aid
channel members in determining whether the channels in which they participate
are profitable or whether alterations and modification in existing channels are
needed based on a knowledge of revenue and costs associated with servicing them.
What do you mean by distribution cost analysis?
Thomasa G. Broushear and Charles M. Brooks, Journal of Business Records,
March 2005.
20.9 ASSIGNMENTS
1. Discuss the process distribution cost analysis.
2. Discuss the controlling the cost of distribution.
1. C.Glemn Walter – Marketing Channels.
2. L.W.Stern & E.L.Ansary – Marketing Channels.
3. Best Rosenbloom – Marketing Channels.
4. Cavens, Hills and Woodruff – Marketing Management.
“Selection of distribution channels requires a compromise between cost and
control”. Discuss.
20.12 KEY WORDS
Internal Comparison, External Comparison
185
LESSON – 21
MANAGEMENT MARKETING RISK
21.1 INTRODUCTION
Risk is an universal phenomenon and is present in some form or other in all
business activities including marketing. Risk may be defined as uncertainty in
regard to cost, loss or damage. If they arise in marketing, it is known as marketing
risk. Marketing risk may be defined as the danger of loss from unforeseen
circumstances in future. From the time goods are produced in anticipation of
demand, to the time they are sold, they are subject to many risks such as those of
theft, fire, destruction, deterioration in quality, loss in storage and transportation,
losses arising out of fluctuations in prices or changes in fashions, competition, non
collection of bills, changes in demand, personal disabilities or changing laws. Since
all these risks are closely related to the process of marketing, they are all part and
parcel of marketing risks.
21.2 OBJECTIVES
 After reading this lesson you can understand the concept of marketing risk,
to classify the risk into various types, and to know the various ways of
dealing with the marketing risks.
21.3 CONTENTS
 Types of Risks
 Dealing with Risks
TYPES OF MARKETING RISKS
The views of various authors which are widely different from one another on the
types of risks are given below:
a) Convers, Hugey and Mitchell have classified marketing risks into four
categories as:
1. Risk from economic and social changes.
2. Moral risks such as theft.
3. Physical destruction of goods due to fire etc.
4. Liability for accidents to employees or customers.
b. James Stephenson classified the risk as:
1. Price risk.
2. Credit risk.
3. Exchange risk.
4. Delivery risk.
5. Quality risk.
c. Tousely, Clark & Clark: According to these authors marketing risks are of
three kinds:
1. Risks arising from changes in market conditions.
186
2. Risks arising mainly or wholly out of natural causes.

3. Risks for which human element is responsible
All these put together, Jha * Singh classified these risks under four broad
categories.
1. Economic risks.
2. Natural risks.
3. Human risks.
4. Political risks.
1. Economic Risk
Economic risk is sometimes termed as market or price risk and is caused
primarily by price fluctuation. Price changes cause actual loss of potential profit to
those who own goods. Economists distinguish between three types of economic
risks:
(a) time risk, (b) place risk and (c) risk of competition
a. Time Risk: Most business operations today are carried on in anticipation of
demand. If the manufacturer fails to sell the product within the prescribed time,
time will create a risk. Changing fashions and styles create a time risk because as
time passes on, fashions may change and product may become obsolete which may
not be predicted so easily. Occurrence of time risk depends upon a number of
factors such as:
1. Saturation of the market.
2. Changes in consumer wants.
3. New invention and development
4. General business conditions, and
5. Seasonal fluctuations in demand.
b. Place Risk: Place risk emanates from the fact that demand for and price of
a commodity or service do not remain constant but they vary from place to place. It
is therefore most likely that goods purchased in one market will have to be sold at a
heavy loss in another market simply because prices are lower in the latter than in
the first market. These variations that generate place risks are generally caused by
two factors: (1) differences in geographical conditions and (2) differences in demand
at each business location.
c. Competition Risk: Competition is the normal condition of the market. To
maintain their position in the market the manufacturers are adopting various
methods. Price cutting is one of the methods that are generally adopted which
reduce sales of own product causing risk of reduced sales.
2. Natural Risks
Risks created by natural phenomenon are usually beyond human control. The
goods in the warehouses may get damaged by rain, snow, floods, storms,
187
earthquakes, lightning, hail, fire, pests etc. Which may lead to the risks of loss of
product and profit.
3. Human Risks
Human risks are those risks which spring out of the unpredictable nature of
human behaviour.
4. Political Risks
Risks arising out of changes in government policies or parties in the
government, change in taxation, change in the value of money, cut in imports, new
wage policies and price controls are the political risks.
DEALING WITH THE RISKS
The risks when they arise or when there are possibilities of their being arisen,
they may be dealt with in one of the following ways. They may be prevented, they
may be accepted or they may be shifted.
a. Prevention of Risk
Risks may very often be avoided by (1) Preventing harmful events (2) by
removing the uncertainty through adequate forecasting and research (3) by
combining risks through large scale operations and (4) an accumulation of reserve
to provide for meeting he risks.
Various measures generally adopted for preventing risk are:
1. Vertical Integration: A vertical integration through backward or forward
integration is one which controls all or most of the units necessary to production
and distribution. Formation of integration enables a firm to command full control
over all phases right from raw material, production, whole-sale and retail sales. It
will reduce the risk.
2. Formation of trade Association: Will shift the responsibility to solve the
common problems faced by the industry.
3. Better management: Improved management will forecast the risks in advance
and resort to adopt all sorts of measures in advance to prevent the risks.
4. Accurate and timely market information may also reduce the risks to a great
extent.
5. The device of marketing research on continual basis give in-depth knowledge
of the inherent changes that are occurring or to take place can be located for timely
actions and reactions.
b. Shifting the Risk
Practically it is not possible to eliminate or prevent all types of risks. Another
way to deal with the risks is to shift them to some other person or institution
prepared to shoulder them because the core business of such units is bearing the
risk of other to get profit. There are,
1. Insurance: One purpose of insurance is not to eliminate risks but to reduce
or averaging of risks. It is a device by which the losses likely to be caused by an
uncertain event is spread over a number of persons who are exposed to it and who
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propose insure themselves against such an event. Among the institutions sharing
risks, insurance companies are most important. Insurance cover is available to the
risks arising out of physical destruction or deterioration such as fire, theft and
pilferage etc. There are so many types of insurance policies covering hundreds of
varieties of risks.
2. Hedging: Hedging is a form of protection against an economic risk; usually
the risk of price changes which is effected by offsetting against one of hedging
depends upon the existence of two markets i.e. cash (spot) market and future
(forward trading) markets in which price movements are tied together and generally
are upward or downward to the same extent simultaneously. It may however be
noted that to the extent the movement of prices in the two markets do not follow
and an identification course, the hedger might at times gain and at times lose, but
such a gain or loss would be more than what it would have been in the absence of
hedging. Thus hedging protects the hedger against loss arising from adverse price
fluctuations, on the one hand, and presents him from making a windfall of profit on
account of faviourable price fluctuations, on the other.
c. Accepting Risks
Despite all preventive measures, there remains many risks which can neither
be estimated, averted or shifted to any agency. Hence they have to be borne by the
owner of the business. As these risks generally stem from a lack of inaccurate
market information, an elaborate system of market intelligence will reduce them to
a large extent.
Types of Marketing Risks – Dealing with the risks
1. Define marketing risks. What are its different types?
2. How could marketing risks be dealt with? Could they always be prevented?
21.6 SUMMARY
Modern marketing provides numerous methods with which the losses arising
from such rises could be anticipated and provides for corrective actions. Marketing
Risk can be eliminated thorough the strategies such as preparing proper marketing
plans. Segmenting the market and test marketing
Define marketing risk.
Sales materials: Sales compensation, Controller’s Report, 2006.
21.9 ASSIGNMENTS
1. Discuss the types of marketing risks.
2. Discuss the dealing with the risks.
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1. C.B. Memoria and Joshi – Principles and Practice of Management, Kitab
Mahal, Delhi.
2. S.M. Jha and L.P. Singh – Marketing Management - An Indian
Perspective, Himalaya Publishing House, Bombay.
Describe your understanding of the behavioural styles theory of leadership.
What direction does this theory offer to sales manager?
21.12 KEY WORDS
Marketing Risks
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UNIT - VI
LESSON – 22
STRUCTURE OF MARKETING CHANNELS
22.1 INTRODUCTION
Structure is the arrangement or interrelation of all the parts of a whole.
Channel structure is the group of channel members to which a set of distribution
tasks has been allocated. This definition suggests that in the development of
channel structure the channel manager is faced with an allocation decision. That
is, given a set of allocation tasks which must be performed to accomplish a firm’s
distribution objectives, the manager must decide how to allocate or structure the
tasks. Thus the structure of the channel will reflect the manner in which he has
allocated these tasks among the members of the channel. The diagrams or symbolic
notations of channel structure are really nothing more than “blue print” showing
the locus of the distribution tasks. The basis for making such allocation decisions
is specialisation and division of labour. Ideally the channel manager would like to
have total control over the allocation of distribution tasks so that he could assign
these tasks to the particular firms or parties who are best suited to perform them.
However, since the channel includes members which are independent firms and
because of the channel is subject to environmental constratits, in reality the
channel manager does not often have total control of the allocation of distribution
tasks.
22.2 OBJECTIVES
 After reading this lesson you can understand structure of the distribution
channel, functions of the middlemen in the channel and difference between
direct & indirect distribution
22.3 CONTENTS
 Marketing Channels
 Functions of Marketing Channel
 Levels
 Classifications of Intermediaries
 Number of Intermediaries
MARKETING CHANNELS
Since we have defined the marketing channel as including only those
participants who perform the negotiators functions of buying, selling and
transferring title, and those who do not perform these functions are not part of the
channel structure. We will consider these non-member participants (facilitating
agencies) as belonging to the ancillary structure of the marketing channel. More
specifically we well define ancillary structure as the group of institutions and
parties that assist channel members in performing distribution tasks. Channel
manager must attempt to allocate distribution tasks to these parties best suited to
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performs them. The role of facilitating agencies is rather one of providing services to
the channel members once the basis channel decisions were made.
MARKETING CHANNEL FUNCTIONS
Members in the marketing channel perform a number of key functions as
follows:
1. Information: The collection and dissemination of marketing research
information.
2. Promotion: The development and dissemination of persuasive
communication.
3. Negotiation: The attempt to reach final agreement
4. Ordering: Procuring the required product.
5. Financing: Providing finance to make the product move in the distribution.
6. Risk: Assuming the risk of carrying stock.
7. Physical possession: The successive storage and movement of goods.
8. Payments: Collecting and paying for the transactions.
9. Title: Transfer of the title in the flow.
Some of these flows are forward flows, others are backward flow and still others
move in both the directions. All of these functions have three things in common.
They use up scare resources, they can often by performed better through
specialisation and they are suitable among channel members. To the extent the
manufacturer performs the functions, the manufacturer’s costs go up and product
price must be higher. When some functions are shifted to middlemen, the
producer’s costs and price are lower, but the middlemen must add a charge to
cover their work. If the middlemen are more efficient than the manufacturer, the
price paid by consumers should be lower. The issue of who should perform various
channel tasks is one of relative efficiency and effectiveness. Changes in channel
institutions largely reflect the discovery of more efficient ways to combine or
separate economic functions that must be carried on to provide meaningful
assortment of goods to target customers.
Number of Channel Levels
Marketing channels can be characterised by the number of channel levels.
Each middleman who performs some work in bringing the product and its title
closer to the final buyer constitutes a channel level. Since producers and
consumers both perform some work, they are part of every channel. Marketing
intermediaries are organisations that perform the various channel of distribution
functions necessary to connect the producers with the end users.
LEVELS OF CHANNEL
There are different levels of channels in the distribution which are explained
below.
1. M --> C (Two level channel)
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2. M --> R --> C (Three level channel)

3. M --> W --> R --> (Four level channel)
4. M --> A --> W --> R --> C (Five level channel)
Where
A = Agent
C = Consumer
M = Manufacturer
R = Retailer
W = Wholesaler
Two Level Channel (zero level channels) or Direct Marketing Channel
It consists of a manufacturer selling directly to the ultimate consumer. The
term direct marketing has taken on new meanings over the years. Originally it was
simply a form of marketing in which producers directly supplied goods to the
ultimate consumers without intermediaries. Companies used sales people to sell
direct to end users or that operate factory outlets are using direct marketing. Later,
the term described marketing done through the mails, whether catalogue marketing
or direct mail marketing. As the telephone and other media came into heavy use to
promote offers directly to customers, direct marketing was redefined by the Direct
marketing Associations as, “Direct marketing is an interactive system of marketing
which uses one or more advertising media to effect a measurable response and/or
transactions at any location". ”Today many users of direct marketing visualize it as
playing a boarder role which can be called as direct relationship marketing. Sales
produced through direct marketing channel have been growing at a rapid rate.
Direct marketing has also grown rapidly in business to business marketing.
If the choice is direct marketing, the manufacturer performs all channel
functions. This method has advantages and limitations. Direct distribution
simplifies the channel network provided the manufacturer with control over
marketing activities, facilitates buyer-seller communication and eliminates the
profit margin of middlemen. But at the same time, direct distribution requires
substantial financial and managerial resources. Sometimes the cost of direct
distribution may be much expensive. If the firm is in direct contact with its
customers. It is more aware of changes in customer attitudes. Service firms often
use direct channels. If these services must be produced in the presence of the
customers, there may be little need for middlemen.
Indirect Channel of Distribution
In this channel there is no direct contact between producer and consumer.
Producer handles the deal through intermediaries. In this regard intermediaries
may be one or more depending upon the length of the channel. The more and more
middlemen used, the length of the channel increases.
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CLASSIFICATION OF INTERMEDIARIES
Marketing intermediaries are classified as follows:
1. Retailers: Businesses that buy and resell goods to consumers and
organisational end users. Retailers may take title to goods or handle on
consignment basis without taking title.
2. Agents/Brokers: Businesses that negotiate the purchase or sale or both but
don’t take title to the goods in which they deal. They commonly receive
commissions or fee and will not take possession also.
3. Wholesale’s/Distribution: Business units that buy and sell goods to retailers
and other merchants or institutions which are not ultimate consumers.
NUMBER OF INTERMEDIARIES
Companies have to decide on the number of middlemen to use at each channel
level. Three strategies are available.
1. Intensive distribution: Is the system in which producer stocks his products
in as many outlets as available to enhance the character of the place utility of the
product.
2. Exclusive distribution: Only one exclusive intermediary alone is selected for
distribution of the product. Through granting exclusive distribution, the
manufacturer hopes to obtain more aggressive and knowledgeable selling and more
control over intermediary’s policies.
3. Selective distribution: Between intensive and exclusive distribution is the
selective distribution. It is more than one but limited out of total available
intermediaries.
It can develop a good working relations with the selected middlemen and
consumer can search for the dealer of such goods and prepare to postpone the
purchase for a shorter period to go to the selected dealer.
Terms and Responsibilities of Channel Members
The producer must determine the conditions and responsibilities of the
participating channel members. The main elements in the trade relations mix are
price policies, conditions of sale, territorial rights and specific services tobe
performed by each party.
Marketing Channel Functions
1. What is the importance of marketing channel structure?
2. Write the advantages and disadvantages of different types of channel
structure.
3. What are the various functions performed by the channel members?
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22.6 SUMMARY
Channel structure is the group of channel members to which a set of
distribution tasks has been allocated. The channel manager would like to have total
control over the allocation of distribution tasks so that he could assign these tasks
to the particular firms or parties who are best suited to perform them.
Explain Intermediaries.
Sara Calabro – Measuring up: Sales and Marketing Management, March 2005.
22.9 ASSIGNMENTS
1. Discuss the classification of Intermediaries.
2. Define the direct marketing channel.
1. Philip Kotler – Marketing Management
2. Cravens, Hills & Woodruff – Marketing Management.
3. McCarthy & Perreault – Basic Marketing.
4. Stern & Ansary – Marketing Channels.
5. Glenn Walters – Marketing Channels.
6. Bernt Rosenbloom – Marketing Channels.
A multinational is planning to launch its brand of cosmetics in India. What
channels of distribution should it adopt to make an impact in the already crowded
market of cosmetics?
22.12 KEY WORDS
Retailers, Agents
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LESSON – 23
WHOLESALING
23.1 INTRODUCTION
Intermediaries or middlemen are independent business that assist producers in
the performance of negotiatory functions and other distribution tasks. They operate
basically at two levels, wholesale and retail.
23.2 OBJECTIVES
 After reading this lesson you can understand the concept of wholesaling,
look into the functions of whole seller and analyse the structure of the whole
seller.
23.3 CONTENTS
 Definition
 Functions
 Limitations of wholesaling
 Types
Definition of Wholesaling
Wholesaling is concerned with the activities of those persons or establishments
which sell to retailers and other merchants and or industrial, institutional and
commercial users, but who do not sell in significant amounts to ultimate
consumers.
Functions or Services Rendered by the Wholesalers
The rationale of the wholesaler’s existence boils down to the functions he
performs for the suppliers (producer) and consumers he serves. That is, his
economic justification is based on just what he can do for his clientele, whether
they be retailers, institutions, manufacturers or any other type of business
enterprise. The wholesaling functions are really variations of basic marketing
functions-buying, selling, grading, storing, transporting, financing, risk-taking and
gathering market information. These wholesaling functions are basic but keep in
mind that these functions are provided by some but not necessarily by all
wholesalers.
What wholesaler might do for producer?
Wholesalers perform the following functions to render service to the producer:
1. Planning local distribution.
2. Providing low cost sales contract over a wide geographical area.
3. Provide low cost warehousing and delivery.
4. Offering credit and capital to finance inventories and for extending
credit.
5. Accepting relatively large shipments thus achieving substantial
transportation and order processing savings.
6. Do the part of the selling functions of the producer.
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7. By providing market information, wholesaler reduces need for market

research.
8. Wholesaler generally brings together an assortment of merchandise, by
negotiating with a number of different sources. What wholesaler might
do for customers?
For their customers wholesalers are equally well suited for efficiently
performing such distribution tasks as.
1. Anticipate customer requirements and maintaining inventories tailored
to meet these requirements.
2. Assembling locally the varied products of many suppliers and holding
them available for delivery on short notice.
3. Buying in large quantities and breaking bulk to suit customers while
passing on some of the savings effected from buying in large lots.
4. Providing rapid delivery.
5. Extending credit.
6. Providing guarantees, making adjustments and handling returns and
allowances.
7. Providing information and advisory service.
What wholesaler might do for the society?
The services of the wholesaler is useful to the society as a whole. He is
facilitating continuous flow of goods and services. This service facilitates the society
to avoid the artificial shortages at consumption and unwanted stocks at
production. The economy of a nation will function uninterruptedly.
Disadvantages or limitations of wholesaling
The following disadvantages are identified with the wholesaling:
1. Slow in moving goods.
2. Slow in introducing new products.
3. Little manufacturer co-operation.
4. Lack of aggressive selling.
5. Poor market penetration.
6. Inefficient in administration.
7. Lack of commitment for one particular product or service.
8. High expenses incurred and passed on to the ultimate consumer.
9. High expectation of profit.
10. Intention of dominating the entire channel.
11. Resorting to black-marketing and malpractices during the periods of
scarcities.
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12. Non-fulfilment of government directions intended for the benefit of the

consumer.
Sometimes limitations of wholesaling may be more than the services rendered
by the wholesalers. Under this circumstance, government interference and strict
legal provisions may be necessary. In case where legal control also fail to give
intended results the only alternative left is elimination of wholesalers from the
channel of distribution. We can eliminate wholesalers but not their functions. To
perform these functions to achieve the intended objective of distribution, public
distribution (distribution by government agencies) may be introduced in place of or
in addition to the private wholesaling.
The structure of whole selling or types of wholesalers
Wholesaling may be characterised as an industry in which the degree of
specialisation has constantly increased as a response to the waves of changes. The
amount of institutional variety in wholesaling is tremendous, and to some extent
overwhelming. Such a variety offers buyers and sellers many channel choices, as
dictated by such considerations as size, market segmentation, financial strength,
services offered and chosen methods of operation. It also makes possible a higher
degree of marketing flows of functional shift ability, whereby all wholesaling
functions or small parts thereof may be shifted from one type of agency to another.
From the channel analysis perspective, it is important to understand what
specific roles the various types of wholesaling institutions and agencies assume so
that when a channel is designed or adjusted, the appropriate kind of organisation
can be included. An essential piece of information in this regard is whether a
wholesaler participates in all or only a few of the marketing flows such as physical
possession, ownership, promotion, negotiation, financing, risking, ordering or
payments. That is, assuming a manufacturer’s or retailer’s perspective for the
movement, what are the ones we could expect to receive from a wholesaler in the
way of services performed? Clearly, the more service performed, the higher will have
to be the wholesaler’s compensation from the channel as a whole.
Types of wholesalers
The most comprehensive and commonly used classification of wholesalers is
breaking them down into three major types as:
A. Merchant wholesalers
B. Agents brokers and commission merchants
C. Manufacturer’s sales branches and offices
A. Merchant Wholesalers
Merchant wholesalers are firms engaged primarily in buying, taking title to
usually storing and physically handling the products in relatively larger quantities
and reselling the products in small quantities to the retailers, industrial,
commercial and institutional concerns and to other wholesalers. They go under
many different names such as wholesaler, jobber, distributor, supply houses,
assembler, exporter, importer and many others.
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Merchant wholesalers also differ in how many of wholesale functions they

provide. There are two basic kinds of it.
(1) Service or full service wholesalers and (2) Limited function or limited service
wholesalers.
Service wholesalers: Service wholesalers provide all the wholesale functions.
Within this there are three types:
1. General merchandise wholesalers are service wholesalers who carry a wide
variety of non-perishable items.
2. Single line wholesalers are service wholesalers who carry a narrow line of
merchandise. They serve limited or single line stores. They cover more geographical
area and offer more specialised services
3. Specialty wholesalers are service wholesaler who carry very narrow range of
products and often more information and service. They often know a great deal
about the final target markets in their channel.
Limited Function Wholesalers
The provide only limited (some) wholesaling function:
1. Cash and carry wholesalers operate like service wholesalers except that the
customer must pay cash.
2. Drop-shippers own the products they sell but do not actually handle, stock
or deliver them. They get orders and pass these orders on to producers. Then the
orders are shipped directly to the customers. This is common in case of products so
bulky that additional handling would be expensive and possibly damaging. Also the
quantities they hold are so large.
3. Truck wholesalers specialise in delivering products that they stock in their
own trucks. Their speciality is that they deliver perishable products that regular
wholesalers prefer not to carry. They provide local delivery of the many small items
needed to the customers.
4. Mail order wholesalers sell out of catalogues that may be distributed widely
to small industrial customers and retailers who might not be called on by other
middlemen.
5. Rack jobbers are service specialists, who service their own racks in retail
stores.
B. Agent Middlemen: Agent middlemen are wholesalers who do not own the
product they sell. Their main purpose is to help in buying and selling. They usually
provide limited functions. They may operate at relatively low cost.
1. Manufacturers agent sells similar products for several non-competing
producers for a commission on what is actually sold. Their big “Plus” is that they
already call on some customers and can add another product line at relatively low
cost and at no cost to the producer until something is sold. If an area’s sales
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potential is low, a company may use a manufacturer’s agent instead of its own
representative because it is lower in cost.
2. The freelance broker has no permanent ties with any principal and he may
negotiate sales for a large number of principals over a time. There is no limitation
on the territory in which sales occur, but the agent is strictly bound by price, terms
and conditions of his principal.
3. Brokers bring together buyers and sellers. Brokers usually have a temporary
relationship with the buyer and seller while a particular deal is negotiated.
4. Commission merchants handle products shipped to them by sellers,
complete the sale and send money minus commission to each seller.
5. Selling agent takes over the whole marketing job of producers but not the
selling function alone. A selling agent may handle the entire output of one or more
producer-even competing producers with almost complete control of pricing, selling
and advertising. In effect, the agent becomes each producer’s marketing manager.
Financial trouble and managerial inability to manage the channel are the main
reasons a producer calls in a selling agent. Some times, the selling agent provides
working capital to the firm. When the firm uses a sales agent, there is no need for
organising a sales department.
C) Manufacturer’s Sales Branches and Offices
These are owned and operated by manufacturers but are physically separated
from production plants. They are used primarily for the purpose of distribution of
producer’s own products at wholesaling. Some have warehousing facilities where
inventories are maintained, while others are merely sales offices. Branches at best
market places facilitate to render wholesaling services at least cost or may generate
an income on the investment which is more than any other alternative investment.
In the situations where the functions of the wholesaler cannot be available to level
off investment, branches may be established. A firm may use all types of
wholesalers in different markets to maximize the services of the wholesaling.
Types of wholesalers
1. Explain the term wholesaling. Write the importance of wholesaling in the
channel.
2. What are the various functions or services the wholesaler can provide to
producer and retailer?
3. Classify the wholesalers and explain about each them.
23.6 SUMMARY
Wholesalers occupy a predominant position in the channels of distribution.
Most modern wholesale merchants provide information and advisory services to
retailers and they are often in a position to provide local market information to
manufacturer.
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Discuss the differences and similarities between the marketing decisions made
by the wholesalers.
Jerome and Mary – The Ultimately Accountable Job: Leading Today’s Sales
Organisation, Harward Bus
23.9 ASSIGNMENTS
1. Define the wholesales.
2. Discuss the service rendered by the wholesalers.
1. C.Glenn Walter – Marketing Channel.
2. Bet Rosenbloom – Marketing Channels.
3. L.W. Stren & A.L. Ansary – Marketing Channels.
4. E.J.McCathy & W.D. Ferreault – Basic Marketing.
A new readymade garments company is planning to launch its new garments in
the market and wishes to appoint wholesale agents in all districts. What should be
the criteria for selecting it.
23.12 KEY WORDS
Wholesalers, Agents
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LESSON – 24
RETAILING
24.1. INTRODUCTION
Retailing includes all the activities involved in selling goods or services direct to
final consumers for their personal and non-business uses. Any organisation that
does selling whether a manufacturer, wholesaler or retailer is doing retailing. It
does not matter how the goods or services are sold or where they are sold. A retailer
or store is any business unit whose sales volume comes primarily from retailing.
24.2 OBJECTIVES
 After reading this lesson you can understand the concept of retailing,
establishing the role and functions of retailers and classification of retailers.
24.3 CONTENTS
 Functions performed by Retailers and
 Classifications
FUNCTIONS PERFORMED BY RETAILERS
In concentrating and disposing goods the retailer performs most of the market
functions. By bringing goods to a point where they are readily available to the
public, placing them in an attractive display, advertising their satisfaction-giving
qualities and virtually creating a demand for them, the retailer performs the
significant functions of selling. The demands of public are anticipated by the
retailer in his purchasing. He often has been described as the purchasing agent for
the public. He reselects the goods that are made available to the public and in so
doing, he performs the buying function. The retailer also performs the storage
function. Finance is another important service that the retailer performs. The
retailer also is charged with the task of taking risks in price and style changes. He
must keep his market information current. In many instances the retail store
provides transportation both from wholesaler and to the door of the consumer. In
some instances the retailer even undertakes standardisation and grading of goods.
Value of the retail store
Consumers consider many factors in choosing a particular retailer. Some of the
most important ones are:
1. Convenience
2. Variety of selection
3. Quality of products
4. Help from sales people
5. Reputation for integrity and fairness in dealings
6. Service offered-delivery, credit and returned goods
7. Value offered.
CLASSIFICATION OF RETAILERS
Retailers operating today come in a wide variety of forms. The following is one
way of dividing them on the basis of:
1. The amount shopping effort required of consumers
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2. The ownership of the retail operation

3. The extent and type of product lines handled.
4. Various functions performed.
1. Shopping Effort
Retailers are classified according to how consumers perceive the store, the kind
of image the store conveys and the characteristics of store.
a. Convenience stores: These are located centrally, near the residences of work
places of their target customers. Such stores may carry wide assortments of
products shopping goods, convenience items, specialty products and even unsought
goods. Their owners emphasize location, parking, easy movement within the store,
long hours and quick checkout services. Convenience stores are the fast growing
segment of the retailing business.
b. Shopping stores: Are retail outlets that seem to be favoured by consumers
shopping for certain type of products. The Managers of such stores attempt to
create a perceived difference between their stores and those of competitors.
Advertising emphasises these differences and sales people are trained to give
knowledgeable service and advice. Shopping stores attract customers from greater
distances because of the width and depth of their assortments.
c. Specialty stores: Are those stores for which customers have developed a
strong attraction. For whatever reason-service, selection or reputation-some
customers consistently buy at these stores. They insist on this the store just as
some customers insist on a certain brand of a product.
2. Ownership Status
Another useful way of classifying retail stores is based on ownership. Thus a
retailer may operate independently or may be part of a chain, a co-operative, a
voluntary chain or a franchise operation.
a. An independent retailer: Owns a single store that has no affiliation with any
other retail units offering similar lines of merchandise. The vast majority of retail
operations fall into this category. They are able to develop close personal
relationships with customers and thus can make fast decisions in response to
markets desires.
b. Chain stores: are retail organisations consisting of two or more units under a
single owner. Such operations usually handle the same similar line of merchandise,
are designed and decorated similarly and rely on centralised buyers to select their
merchandise. Chain retailers enjoy the advantages of large scale operations such as
quantity discounts, a strong financial position, mass media advertising, brand
loyalty and lower unit cost.
c. Co-operative organisation: In this, independent retailers combine their
resources to maintain their own wholesaling operations. This allows them to enjoy
the benefits of large-scale purchasing.
d. Voluntary chains: are like co-operative organisations except that in this case
a wholesaler initiates and runs the organisation. The wholesaler may form a group
of independent retailers who gain benefit from the advantage of large-scale
operations.
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e. Franchise: A franchise is a legal contractual relationship between a supplier

and some or many small independent retailers. Under franchise agreement, the
franchiser exerts some control on how the franchise runs the business and in
return provides the franchisee with an established brand name as well as operating
assistance. The type of assistance varies widely. A franchisee pays a royalty based
on gross sales volume.
3. Product Lines
The variety (width) of products offered along with the assortment (depth) within
product line provides another means of classifying retailers.
a. General merchandise retailers: This retailer carries a wide range of products
for customers. He is prepared to sell anything that can bring reasonable volume of
sales.
b. Limited line retailer: This retailer offers an inventory that is held to only one
or several similar lines. They build patronage by offering a deep assortment and
expertise within that product line.
c. Specialty line retailers: They go a step further and offer only one or two
product lines but substantial depth within those lines and even an greater
expertise.
4. Functions Performed
Under this classification retailers are classified according to the major activities
or functions they carry out.
a. Departmental stores: are large stores that are organised into many separate
departments and offer many product lines. Each department is like a separate
limited lines sore or speciality shop. They handle a wide variety of products. They
are often considered the retailing leaders in a community and try to cater to
customers seeking shopping products.
b. Discount stores: are self service, general merchandise stores that combine
low price and high sales volume to achieve profits. They operate with rents, pay
cash and take care of any service.
c. Supermarkets: are large self-service stores that carry a full line of products,
relatively large, low cost, low margin and high volume designed to serve the
consumer’s total needs. Supermarkets as a method of doing business has recently
spread to various areas. Supermarkets attempt to provide for just about every need
and want that an average person might have.
d. Shopping centres: are groups of retail stores that are planned, developed and
controlled by one organisation. The centre is built to handle a wide variety of stores
to meet all the needs of the market it serves.
There are four important forms of non-store retailing. They are:
a. Mail Order Retailing: It is accomplished by description. Buyers do not see the
actual product until it arrives at their homes in the mail. Mail order retail may
involve catalogue sales, direct mail promotion or advertising through mass media.
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b. Door to Door Retailing: It includes all types of exchanges in which the

transaction occurs in the consumer’s home. The retailer or producer may call
directly on consumers or use ‘Party plan’ method in which one customer sponsors a
party for many friends and acquaintances. It offers convenience to the customer.
c. Telephone Retailing: It involves sale of goods over the telephone. It is
convenient in case of products where they can be purchased by actual selection of
the customer in the shop.
d. Vending Machine Retailing: It is a non-personal form of selling in which
customers buy products directly from conveniently located machines. So selling
and delivering the product is through a vending machine. Vending machines can
expand market’s distribution into places that could not otherwise be frequented.
Though they are open 24 hours for service, their operation is expensive.
Classification of Retailers
1. Explain the concept of retailing
2. What are the various services rendered by the retailers?
3. Classify the retail outlets and explain each one of them.
24.6 SUMMARY
Retailer is the last link in the chain of distribution between manufacturer and
ultimate consumer. The retail shop is one of the oldest and most widely used
business establishments in any country.
Define Retailing.
Mathew Boyle – Perilars Moads ahead, Fortune, 2001.
24.9 ASSIGNMENTS
1. What do you understand the term retailering? What are the various
forms of retail organisation?
2. "Large Scale manufacturer do not prefer direct selling". Discuss
1. Charles D. Schewe & Ruben M. Smith – Marketing, McGraw Hill Book
Company.
2. W.J. Taylor & R.Y. Shaw – Marketing, South-Western pub. company.
3. Philip Kotler - Marketing Management, Prentice Hall of India.
What are the types of distribution channels? What number of intermediaries
strategy is useful for selling computer by HCL?
24.12 KEY WORDS
Retailing
205
LESSON – 25
DISTRIBUTION ENVIRONMENT
25.1 INTRODUCTION
Marketing channels do not exist in a vacuum. Rather, they develop and are
operated in a complex environment that is continually changing. These
environmental changes and their underlying forces can have profound effects on
marketing channels in the short as well as long run. The channel managers must
be sensitive to the environment and environmental changes in order to plan
effective marketing channel strategies for meeting these changes successfully. To do
so, the channel manager must have a good understanding of the environment and
how it influences channel management. In the broad sense, the environment
consists of all external uncontrollable factors within which the marketing channel
exists. This means that there are myriads of variables affecting the channel. In
order to give some semblance of order to this huge array of external uncontrollable
variables, they an classified as:
25.2 OBJECTIVE
 After reading this lesson you can understand the impact of environmental
factors on the channel management.
25.3 CONTENTS
 Economic environment
 Competitive environment
 Socio-cultural environment
 Technological environment
 Legal environment
ECONOMIC ENVIRONMENT
The economy is probably the most obvious and pervasive category of
environmental variables affecting all members of the marketing channel. They must
pay careful attention to what is happening in the economy. In a channel
management context, economic factors are a critical determinant of channel
member behaviour and performance. The channel must therefore be aware of the
influence of economic variables on the participants in the channel of distribution.
We will look into several major economic phenomena in terms of their effects on
various parties in the marketing channel and their implications for channel
management.
a. Inflation: One reaction of channel members at the wholesale and retail
levels to higher rates of inflation are in large measure determined by the reactions
of consumers and other final users. Reactions of consumers during inflationary
periods are not easy to predict and it will lead to finding it hard to cope with the
mood.
b. Recession: As the recessionary period unflods, consumers can postpone
purchasing, slowdown, sometimes drastically. All members of the marketing
206
channel may feel the effect of recession in the form of substantial reduction in sales
volume and profitability. Firms caught with heavy inventories which they cannot
sell may be more drastically affected, even to the point of bankruptcy.
Manufacturers must develop special or contingency channel management strategies
for helping channel members during recessionary period. Such strategies should be
developed before a recession takes hold so that they can be quickly implemented if
and when a recession develops.
c. Shortages: Shortages can adversely affect all of the channel members.
Retailers face hostility from consumers who may hold the retailers directly
responsible for the shortages. Retailers are particularly susceptible to public ill-will
in times of shortages and attributed manipulation of prices and quantities. The
problem is compounded when wholesalers attempt to allocate the scarce products
in question among the retailers. Such allocation can never be perfectly fair and
some retailers are bound to feel. The major issue facing the channel managers with
regard to shortage is how to deal with shortages in ways that minimise adverse
channel member reactions, which in the long run can have serious negative
consequences. Manufacturers may be forced to increase the prices as at the
decreased production level break-even at the old price may not be feasible. It may
create an impression that the producer is taking undue advantage of shortages.
During the shortage period, producer may be tempted to reduce or eliminate
promotional comparing which may not be sound in the long run. Producer can
expedite the flow of goods in channel which may increase cost of distribution.
Competition
There are four types of competitions the channel Manager has to consider. They
are:
i. Horizontal Competition: Horizontal competition, is the competition between
intermediaries of the same type i.e. wholesaler vs wholesaler and retailer vs retailer
etc. This type of competition prevailing among different channel members at a
particular level channel, may offer different types of facilities or servicing to attract
the customers. Sometimes this type of competition prevails due to lack of well
defined rules and regulations of the operation of the channel or violation of
members which is not regulated by the channel manager.
ii. Intertype Competition: Is that competition between different types of
intermediaries at the same channel level competing with each other. i.e. super
bazaar Vs traditional retailer. Due to the size, volume of sales, assortment
capabilities and reputation may give advantage to one over the other.
iii. Vertical Competition: It refers to competition between channel members at
different levels of channel in the distribution such as retailers vs wholesaler.
Vertical competition may lead to complications.
iv. Channels System Competition: It refers to complete channel competition
with other complete channel system.
207
The channel manager must recognise the surface of the competition so that he
can take appropriate steps to regulate unwanted competition at the right time.
Failure to do so may lead to a situation which creates conflicts among the channel
members. If they are not properly handled at right time, the stronger will emerge as
the captain of the channel who may challenge the producer who is the channel
manager.
The socio-cultural environment
The structure of the marketing channel is significantly effected by the socio-
cultural environment within which it exists. The socio-cultural factors like growth
of education, changing role of women, changing family life-cycles and changing life
styles are having a bearing or impact demanding constant study of those factors on
the basis of which changes in the operation channel are to be incorporated.
Technological Environment
Technology is the most continually and rapidly changing aspect of the
environment, particularly in the industrial countries. In the face of this rapidly
changing and accelerating technology, the channel managers is faced with the task
of sorting out those developments that are relevant to his own firm and the
participants in the channel and determining how these changes are likely to affect
the channel participants. Technological changes through continual, do not occur
evenly or predictably over time. Some of the technological changes which have an
impact on the channel are teleshopping, computerised inventory and billing and
electronic scanners.
Legal Environment
The channel manager needs a general knowledge of some legislation pertaining
to channel management. This general background and awareness of the legal side
of channel management will help the manager to communicate better with legal
experts and avoid potentially serious and costly legal problems that can arise in the
management of channels. There are many central, state and local government laws
which affect marketing channels, but the following are particularly to be looked
into:
1. Laws relating to contract
2. Laws relating to sales tax and excise
3. Taxation laws
4. Essential commodities laws
5. Resale price maintenance laws
6. Consumer protection act
7. Laws regulating distribution
Because marketing channel includes other member firms, the channel member
must also be concerned with the impact of the environment on these channel
members. Since the effectiveness of channel is also influenced by the performance
of non member participants, such as facilitating agencies, he must also take into
account how the environment affects these non-member participants as well. The
208
channel manager must analyse the impact of environment not only on his own firm
and his analyse the impact of environment not only on his own firm and his
ultimate target markets but also on all of the participants in the channel.
Classification of distribution environment.
1. What are the various environmental factors which influence the marketing
channels?
2. Discuss the fundamental channel issues associated with inflationary and
recessionary periods in the economy.
25.6 SUMMARY
Distribution is the most powerful element among marketing mix elements. The
main function of this element is to find out most appropriate ways, through which
goods are made available in the markets. The system of distribution is the science
of Business-Logistics, whereby the right product is put at the right time and right
place before its consumer
Explain marketing channels.
25.8. SUPPLEMENTARY MATERIALS
Sara Calapro – Measuring up, sales marketing management, March, 2005.
25.9 ASSIGNMENTS
“Physical distribution has been described as the other half of marketing.
Explain.
1. Betrosenbloom –Marketing Channels.
2. L.W. Stren & A. EL. Ansary – Marketing Channels.
3. C.Glenn Walters – Marketing Channels.
Explain some time traps that you personally tend to fall into. What could you
do to avoid these time traps?
25.12 KEY WORDS
Recession, Shortages
346EN2703 / 348EN250
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346EN2703

Master of Business Administration(MBA)

SALES AND DISTRIBUTION MANAGEMENT

MASTER OF BUSINESS ADMINISTRATION (MBA)

SALES AND DISTRIBUTION MANAGEMENT

Dr. C. Samudhra Rajakumar Dr. C. Madhavi

Dr. R. Thenmozhi Dr. K. Maran

Dr. M.S. Premapriya Dr. J. Jayakrishnan

MASTER OF BUSINESS ADMINISTRATION (MBA)

MASTER OF BUSINESS ADMINISTRATION (MBA)

1.3.4 Types of Selling

 Increasing the production of existing products.

(ii) Relationship building/Consultative Selling

1.3.6 DIFFERENCES BETWEEN MARKETING AND SELLING

1 Marketing consists of all the Selling is an integral part of

2 Marketing is consumer driven Selling is mostly producer

3 Consumer needs are the Producer or manufacturer

4 Considers of building a long Does not consider building up

5 More focus on product Less focus on product

6 Mind share or place in Market share or sales volume

More emphasis on More emphasis on staying

1.3.7 SALES OBJECTIVES

Sources from Websites

(vi) Establishing sales territories.

The management of sales personnel function includes recruitment, selection,

Thus the sales manager performs a number of functions depending on the

2.3.4 SELLING PROCESS

o Managerial /executive duties or functions

2.7 TERMINAL EXERCISE

Sources from Websites

According to Carfield Blake, “Salesmanship consists of winning the buyers’

community than self-interest, for a reasonable remuneration. Thought on the

 Characteristics or the Qualities of a Successful Salesman

7. Elaborate is a salesmanship art or science or profession?

3.10 SUGGESTED READINGS/REFERENCE BOOKS/SET BOOKS

3. Advantages to the nation

Essential Qualities/Traits of a salesman:

c) Pleasant voice d) More speech

5.3.4 SALES ORGANISATION

5.3.4.2 Importance of Sales Organisation:

FIG 1: LINE SALES ORGANISATION

Line organization also becomes in appropriate in case of rapidly growing

5.3.5 SPECIALIZATION IN A FIELD SALES ORGANIZATION

A major advantage which characterises the geographic organisation is that the

Organising the sales force by product specialisation generates additional

Customer specialisation enables the sales persons to become more

5.5 INTEXT QUESTIONS

advertising, disposal income, buying habits, consumption habits, consumer price

(a) Simple Sales Percentage:

The main reasons for establishing the Sales Territories is as under:

Travel time between calls

goods sold. It is particularly an amount of target sales that is assessed on daily or

expenses bind to the seller of remuneration to limit unnecessary expenses.

produced need to be sold. On the other hand, if the production is normal in a

 Number of known prospects

 Market structure is used if the companies are operating different industry

A sales territory is the customer group or geographical area for which an

(e) Define marketing?

2. Tapan K. Panda, Sunil Sahadev Sales and Distribution Management

action.” Control is a process to establish the standard of performance measuring

Elements Involved in Control:

(2) Sales Territories and Sales Quotas

5. Work load for each salesman can equitably be distributed, in terms of