UNIT-1

SALES AND DISTRIBUTION MANAGEMENT

Everything you need to know about sales management. Sales management is solely concerned
with the direction and control of the sales force. It refers to the management of sales personnel,
though sometimes, in a broader sense, it covers advertising, distribution, pricing and product
designing, all elements of marketing management.

It is related mainly to the management of the sales department which is an important

organizational unit of management.

The sales force may communicate effectively with the other departments of the company if it is a
well-planned organization and has an appropriate distribution network. It refers to the direction
and control of salesmen.

Evolution of Sales Management, Scope and Importance

The history of salesmanship is as old as human civilization. Paul Hermann described Bronze
Age‘s travelling salesperson‘s sample case. The salespeople used a wooden box, 26 inches long,
containing, in specifically hollowed compartments, axe, sword blades, buttons, etc.

The salespeople in the past were not held in high esteem by the society. The Roman meaning of
the word salesperson is ‗cheater‘, and Mercury, the god of cunning and barter, was regarded as
the patron deity of merchants and traders. The business and trade of buying and selling goods
flourished over centuries and centred only on some specific cities of the world. India was a great
destination for traders and resellers in the medieval age for spices, carpets, jewellery, etc.

Many diverse races and religions entered our country with the travelling salespeople. Even the
erstwhile colonial rulers of India, the British, came to India for the purpose of expanding their
business and trade, though subsequently they satisfied their political interest. They ruled this
country to protect their own business interests.
The first salespeople in the US were the yankee peddlers who carried clothing, spices, and
household articles from one part of the country to another part. In India they are called
pheriwallahs. These pheriwallahs move from village to village and sell sarees, dress materials,
and spices mostly in the rural markets of India, because rural housewives have lesser mobility
than urban housewives. These people move from the manufacturing bases of the country to
different consumption centres in India.

The pack peddlers in India traded with the tribal Indians and exchanged knives, beads, and
ornaments for furs, spices, salt, and handicrafts. These people were viewed as shrewd,
unprincipled tricksters who would not think twice before practicing product and price
manipulations for higher benefits. They sold coloured sugar water as medicine and cheated
people for smaller gains. In the beginning of the nineteenth century, these peddlers started using
horse-driven carts and wagons, and started stocking heavier goods.

They started storing goods such as furniture, weapons, ammunitions, food items, and grains.
Some of these wagon peddlers settled down in villages, and opened stores and trading posts. The
community of Baniyas or the trading caste in India has its origin in these settlers and store
owners. The big retailers travelled to the nearest cities to replenish their stocks and bought goods
to resell in their localities.

Wholesalers and manufacturers hired greeters and drummers who would seek out and invite
retailers to visit the display of the owner. The drummers would meet the passengers from
incoming trains and ship with great fanfare to beat their competitors. In the next phase, the
drummers started visiting the customer‘s place of business.

There were fewer than 1,000 travelling salespeople before 1860 in the US who were basically
credit investigators and took orders for goods. Their numbers increased as the pace and reach of
industrial .revolution spread across continents.

The techniques of modern sales management and selling techniques were refined by John Henry
Patterson, widely known as the father of modern sales management. He ran the National Cash
Registry. He asked his best salespeople to demonstrate their sales techniques to other
salespeople. The best sales approach was printed in a sales primer and distributed to all the other
salespeople to follow.

This is how the canned sales approach began. In addition to this, Mr Patterson assigned to his
salespeople exclusive territories and sales quotas in order to stretch their efforts. He arranged
frequent sales meetings that served the double purpose of training and socialization.

He also sent regular sales information on techniques of selling. Thomas J. Watson was trained by
Mr Patterson who later founded International Business Machines (IBM). Patterson was the
pathfinder who showed the strategy and skill required to transform a sales force into an effective
workforce for generating sales and profits.

Today, the process of sales management has undergone numerous changes in terms of strategy,
practice, and technological adoption to achieve the desired sales goal. A salesperson is no longer
an order taker or information provider; rather he is viewed as a consultant to the customers.

Due to non-personal form of business and increasing distances between the manufacturers and
customers, sales organizations are now emphasizing more on quality consulting skills to solve
the customers‘ problems. The real sales activity now is in retaining customers rather than just
closing the sales. This relational approach has changed the scope of sales management, and
research has found that it costs five times more to register a new customer than to sell a product
or service to an existing customer.

As a pan of sales function, the managerial challenge is to improve the productivity and efficiency
level of the traditional sales force. But modern sales management is confronted with challenges
that affect both productivity and efficiency of its selling approach. In response, newer and better
selling techniques and approaches are being used, such as telemarketing, key account
management, use of independent sales force, team selling, electronic data interchange (EDI), and
application of technology to provide information and services to the customers.

The domain of sales management has become multidisciplinary in which sales managers have to
manage a diverse workforce and complex technologies. Sales managers have to perform duties
 such as recruiting, training, selecting, motivating, forecasting, controlling, and administering
salespeople, while performing the primary responsibility of revenue generation for the firms.

They have to manage and satisfy multiple stakeholders, such as customers, suppliers, sales
representatives, and top management with the objective of increasing sales and profitability.
There are guiding principles and concepts in the field of sales and marketing that shape the
destiny of sales managers and the domain of knowledge in sales management.

Sales Management -Meaning

Sales management is solely concerned with the direction and control of the sales force. Sales
management refers to the management of sales personnel, though sometimes, in a broader sense,
it covers advertising, distribution, pricing and product designing, all elements of marketing
management.

The scope of sales management is very important and drives the whole sales system. In nutshell
the 3 key factors of sales management are:

1. Sales Operation: This will include identification and allocation of territory to the sales team.
Measuring and monitoring their performance. Motivating and leading by example to help them
close deals and hit their targets and put incentives in their pocket.
2. Sales Strategies: This has got all to do with product positioning, price decisions and running
promotions. Knowing when to discontinue a product and also know the activities of the
competitors.
3. Sales Analysis: Evaluating and understand product movement, which product is bringing in the
most revenue and which is unmoving. Also measuring forecast versus actual will help a sales
personnel to understand and take corrective measures. To know who is the top 3 sales
performing personnels can give us an judgement of the manouvers we need to make in the team
to reach our fixed targets.

Importance
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 programmes designed to bring about desired
exchanges with target markets for the purpose of achieving organizational objectives.

It relies heavily on designing the organization‘s 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 programme,
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 programmes for accomplishing organizational goals and objectives. It
involves planning, implementation and control of marketing programmes or campaigns.

Functions:

(i) Sales research and planning.

(ii) Demand creation.

(iii) Sales costs and budget.

(iv) Price fixations.

(v) Development of products.

(vi) Establishing sales territories.

(vii) Co-ordination of sales.

These functions differ from company to company according to their size and the nature of their
products.

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:

1.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.

2. 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.

3. Sales team monitors the customer preference, government policy, competitor situation, etc., to
make the required changes accordingly and manage sales.

4. 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.

5. 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.

6. Sales Management may differ from one organization to the other, but overall, we can conclude
that sales management is very important for an organization for achieving its short- and long-
term goals.

Objective of Sales Management

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 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.

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. 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. These are the major objectives a sales executive has to focus on in sales
management.

Skills of Sales Personnel

Skills of a Sales Executive Sales management is an art where the sales executive or the
salesperson helps the organization or individual to achieve its objective or buy a product with
their skills. The following are some skills that a sales executive needs to possess:
1. Conceptual Skills
Conceptual skill includes the formulation of ideas. Managers understand abstract relationships,
improve ideas, and solve issues creatively. The sales executive should be well versed with the
concept of the product he/she is selling.

2. People Skills
People skills involve the ability to interact effectively with people in a friendly way, especially
in business. The term ‗people skills‘ involves both psychological skills and social skills, but they
are less inclusive than life skills. Every person has a different mindset, so a sales executive
should know how to present the product depending on the customer‘s mindset.
3.Technical Skills
Technical skills are the abilities captured through learning and practice. They are often job or
task specific. In simple words, a specific skill set or proficiency is required to perform a specific
job or task. As a part of conceptual skills, a sales executive should also have a good grasp on the
technical skills of the product.
4.Decision Skills
Decision skills are the most important because to tackle the questions from consumers, sales
executive should always have the knowledge of competitors‘ products and take a wise decision.
Monitoring Performance Sales executives should monitor the performance of the employees and
report to higher management to improve the performance and fill the loop holes. Thus,
conceptual skills deal with ideas, technical skills deal with things, people skills concern
individuals, technical skills are concerned with product-specific skills, and decision skills relate
to decision-making.

Types of Sales Manager

1. Administrative Sales Manager

Administrative sales managers are found normally in highly integrated sales organizations
selling multiple lines of products in national and international markets. He is known by
alternative titles such as ‗vice president‘, ‗in-charge of sales‘, ‗director of marketing‘, ‗general
sales manager‘ and ‗marketing manager‘.

He is primarily concerned with coordination and integration of all the company activities
relevant to marketing. He is not an authority on design, engineering, manufacturing and finance;
contrary to these, he is an authority on sales and profits. It does not mean, however, that he can
be aloof from other departments and their functions.

In addition to the crucial task of coordinating marketing with other company activities, he is to
coordinate the activities of his own sales organization within and with outside advertising and
sales counsel. He is responsible for sales planning that involves integration of sales personnel,
merchandising, advertising and promotion, financing, distribution network.

Planning also includes the determination of the functions of sales organization, delegation of
responsibilities, personnel selection, and performance evaluation. He frames the policies and
strategies on the prices, distribution, relations with dealers, service, advertising and sales-
promotion.
2. Field Sales Manager

The field sales manager or operating sales manager is a line sales executive reporting directly to
the administrative sales manager. Operative sales manager works under the direction, guidance
and supervision of the general sales manager.

He is mainly responsible for the effective implementation of sales plans and policies developed
by the administrative sales manager.

He is known for personal direction and control of sales personnel and hence, spends major
portion of his time in the field supervision of the work of sales-force. Manpower maintenance of
the sales organization is the basic task of this executive. He is to recruit, select, train, supervise,
stimulate, evaluate, equip, control and route the sales-force.

Field sales manager moves with salesmen on visits of importance. He assigns sales territories
and controls activities of salesmen through setting the standards of sales achievements, analysing
the sales reports, holding the sales meeting, supervising the advertising and sales-promotion
cooperation with dealers, directing sales contests, supervising warehousing inventories, dealer
relations and coordinating territorial and home office activities.

Thus, a field sales manager provides the administrative sales manager with the latest information
relating to the view points of dealers and consumers on company, company products, policies,
and practices with facts on market trends, competitors, distributors and individual salesman.

3. Administrative-cum-field Sales Manager

In case of smaller organizations, we come across such sales manager who combines the
functions of administrative and executive sales officer. Generally speaking, administration and
field operations cannot go together. However, size and economy points force many units to
combine the distinct roles of administration and field operation.

As an administrator, he plans, organizes, directs and coordinates. As a field operator, he guides

and supervises and controls the activities within the sales organisation. Thus, thinking and doing
are done by the same person that goes against the very idea of specialisation for an administrator
is a ‗thinker‘ and a line officer as ‗doer‘.

4. Assistant Sales Manager

Generally, the administrative sales manager is assisted by Assistant sales manager in the
administrative functions of planning, analysis, direction and coordination. He coordinates the
work of sales staff that is specialized in advertising, sales-promotion, research, merchandising
and dealer relations.

He may also handle sales office personnel, records and routine. He acts as the link between the
head-quarters and the field-sales-manager at distance. It is not a surprise if he discharges the
functions of field sales manager. Thus, he acts as both line and staff officer in the sales
organization.

5. Product-line Sales Manager

A company that markets variety of products has such product-line sales manager responsible for
one or group of products in the product- line. He is also known as product or brand manager.

He is responsible not only for sales but also for production, research, product- development,
planning, advertising and profit for the product or the group of products in question. He is to
report to the Marketing manager who coordinates the work of several product sales managers.

6. Marketing Staff Manager

As the title suggests, the Marketing staff manager is not a line-officer. He is one of the staff
specialists who are delegated some of the responsibilities of administrative sales manager. These
are the specialists in the areas of marketing research, sales-promotion, merchandising,
advertising, sales planning, sales personnel, distributor/dealer relations, sales costs, budget sales
finances, traffic, sales office administration and service and the like. These staff managers being
non-line officers have no field tasks.
These managers are accountable for analysing the needs of the marketing organization in respect
of their specific areas of specialization, developing plans and recommending solutions to the
problems encountered or thrown open.

7. Divisional/regional Sales Managers

In all the national organizations, one comes across these Divisional or Regional sales managers.
These are also known as District sales managers who are responsible for the delegated sales
operational duties on a territorial basis.

They report to Assistant sales managers or the field sales managers who act as the liaison officers
with headquarters. The functions of Divisional or Regional sales manager are similar to those of
field sales manager who is in charge of several divisions or regions and hence divisional or
regional managers.

They are mainly responsible for maintaining the man-power in the concerned areas by recruiting,
selecting, and training, supervising, motivating and controlling the sales-force.

They are also responsible for directing branch or local office sales managers. The divisional sales
managers assist branch managers in solving their sales personnel problems, dealer relations,
warehousing and inventory, advertising and sales promotion, sales campaigns and sales
meetings.

8. Branch Sales Mangers

In case of sales organizations that operate branches or local sales offices in major cities of the
country, one is to come across such Branch sales managers. Branch sales manager is a line
executive responsible for the direction of a small group of salesmen calling on consumers or
dealers in the branch area.

He recruits, selects and trains, sales people with the guidance of Divisional or Regional sales
manager to whom he reports. He works along with salesmen in the field, supervises their sales
activities, holds periodic sales meetings, evaluates sales performance and helps in key accounts.
If warehouse is attached to branch, he supervises warehousing activities too.

9. Sales Supervisor

A sales supervisor is a line sales manager who supervises normally eight to fourteen salesmen.
He is seen in branch sales office of a national sales organisation having branches all over the
nation.

He is responsible to the local branch sales manager. In case there is no branch sales manager,
then he is responsible to the sales manager of the company directly. His work is to train and
motivate the salesmen under his charge.

His supervision, guidance and coaching helps in building up more confident sales personnel. He
is the key communicator in the transmission of information on sales policies of new products,
promotions and marketing programmes between the higher-ups and individual salesmen.

Emerging trends in Sales Management

To be successful in a changing market environment, it is important that sales managers

understand the importance of emerging trends in the following areas

Global Perspective

Global competition is intensifying. Domestic companies who never thought about foreign
competitors are suddenly finding them in their backyard. This is a challenge which sales
managers and salesperson must take on, they have to improve their personal selling efforts not
only in their countries but also in foreign countries. Selling goods and services in global markets
presents a challenge due to differences in culture, language, needs and requirements.

Technological Revolution

Digital revolution and management information system have greatly increased the capabilities of
consumers and marketing organizations. Consumer today can get information about products,
compare it with other brand, place an order and place an order instantly over the internet. This
has led to a different kind of sales force who collects information about internet users, markets
and prospects of internet buyers. It is mandatory for all companies to have their website now.

To compete effectively, sales person and managers will have to adopt the latest technology.

Customer Relationship Management [CRM]

Combining information technology with relationship marketing has resulted in customer

relationship management. Interestingly, the concept of relationship marketing came about earlier
by bringing quality, customer service and marketing together.

Relationship marketing aims in building long term satisfying relations with

key customers distributors and suppliers in order to earn and retain their long term preference
and business. CRM enable companies to provide excellent real-time service by focusing on
meeting the individual needs of each valued customer, through the use of CRM
software packages.
 Sales Force Diversity

The demographic characteristics of sales force is changing and becoming more varied. For
example, more and more women are taking up careers in sales management and selling. Also the
education level of sales people is going up most of them holding a college degree or a post
graduate degree. Sales managers now have to handle a sales force of these varied demographic,
expectations of each and every individual is different and sales manager needs to use different
motivational tools against each one of them.

Team Selling Approach

The practice of team selling is more widely followed by most companies in recent years. Team
selling approach is used when company wants to build a long term mutually beneficial
relationship with major customers, who have high sales and profitable potential. It is used for
selling a technically complex product or a service to a potential customer. The composition of
team may vary depending upon the customer from top management, technical specialist,
customer service, etc…

Managing Multi-Channels

Multi-channel marketing system occurs when organization uses two or more marketing channels
to target one or more customer segments. Major benefits of multi-channel marketing system are:

1. Lower channel cost

2. Increased market coverage
3. Customized selling

Multi-channel may also lead to conflicts and control problems, as two or more channels may
compete for same customer. A successful sales manager will have to effectively manage conflict
between the channels.

Ethical and Social Issues

 Sales managers have ethical and social responsibilities. Sales people face ethical issues such as
bribery, deception (or misleading) and high pressure sales tactics. Today‘s sales managers have
no choice but to ensure ethical standards from sales force otherwise they may be out of business
or even land up in legal problems.

Personal Selling

Personal selling is where businesses use people (the ―sales force‖) to sell the product after
meeting face-to-face with the customer.

The sellers promote the product through their attitude, appearance and specialist product
knowledge. They aim to inform and encourage the customer to buy, or at least trial the product.

A good example of personal selling is found in department stores on the perfume and cosmetic
counters. A customer can get advice on how to apply the product and can try different products.
Products with relatively high prices, or with complex features, are often sold using personal
selling. Great examples include cars, office equipment (e.g. photocopiers) and many products
that are sold by businesses to other industrial customers.

Objectives of Personal Selling

Personal selling contributes in achieving the long-term objectives for the organization.

The following are some of the objectives of personal selling:

 To do the complete selling job when there are no other components in promotional mix
 To provide service to the existing customers and try to maintain contacts with the present
customers
 Identify and find new prospective customers.
 Promote the products to increase sales.
 Provide the information to the customers regarding the change in product line.
 Provide assistance to the customers to help in decision-making.
 Provide technical advice to customers for complex products.
 Gather the data in relation to market and provide it to company‘s management.

The reason behind setting personal selling objectives is to make decision on sales policies and
personal selling strategies, which helps in promoting the product. The objectives are set for long-
term, as it becomes the important element for qualitative personal selling objectives.

The objectives can also be quantitative if they are short-term and it could be adjusted from one
promotional period to another. The quantitative personal selling objective is related to sales
volume objective. Hence, the sales volume objective should also be explained.

The main advantages and disadvantages of personal selling can be summarized as follows:
Point-of-sale merchandising can be said to be a specialist form of personal selling. POS
merchandising involves face-to-face contact between sales representatives of producers and the
retail trade. A merchandiser will visit a range of suitable retail premises in his/her area and
encourage the retailer to stock products from a range. The visit also provides the opportunity for
the merchandiser to check on stock levels and to check whether the product is being displayed
optimally.

Psychology in Selling

People are highly complex and often mysterious, so we all struggle to understand our fellow
humans. However, now that you‘ve gotten over being afraid to sell, here are a few basic
psychological tidbits that can help you write compelling copy.

1. People make decisions emotionally

They decide based on a feeling, need, or emotion, not through a logical thought process. That‘s
why intangible benefits are the keys to persuasion.

When you‘re writing, you should ask yourself, ―What is the emotional hot button here?‖

2. People justify decisions with facts

Example: a man sees an advertisement with a photo of a sports car and instantly falls in love.
However, he can‘t bring himself to buy the car based on a feeling, so he reads the copy for
technical details about the powerful engine, safety features, and low maintenance.

He wants the car because it makes him feel good. But he buys it only when he can justify the
purchase rationally.

3. People are egocentric

The word ―egocentric‖ means centered around the ego or self. We all see the world in terms of
how it relates to us personally. So when your copy asks someone to do something, it must also
answer the unspoken question, ―What‘s in it for me?‖

On a deeper level, the question might be ―How does this give me feelings of personal worth?‖

4. People look for value

Value is not a fixed number. Value is relative to what you‘re selling, what others charge, what
the prospect is used to paying, how badly the prospect wants it, and how the prospect perceives
the difference between your offer and others.

You must demonstrate a value that seems to be equal to or greater than the asking price. The
greater the value relative to the price, the more likely people are to buy.

5. People think in terms of people

The human brain is not a computer, calculator, or information processor. Scientists have shown
that its primary function is to deal with social interactions.

Remember how some mathematical questions in high school were stated as real-life situations?
They were always easier to understand and solve than abstract problems. Your copy, therefore,
should feature people through names, personal pronouns, quotes, testimonials, stories, photos of
satisfied customers, etc.

6. You can‟t force people to do anything

When people buy, it‘s not because you wield some magical power over them.

You can urge. You can push. You can entice. But ultimately, people do what they want to do.
This means your job is to show how what you‘re offering meets your prospect‘s needs.
7. People love to buy

Some say people don‘t like to be ―sold.‖ Not true.

People love to be sold. They love to discover wonderful new products and experiences.

What people don‘t love is to be cheated or tricked. Therefore, it can be helpful to change your
analogy of the marketing process.

Instead of ―selling‖ to people, try to ―help‖ them. Sell good products, make appealing offers, and
treat people fairly. That‘s a surefire formula for success.

8. People are naturally suspicious

It‘s true that there‘s a sucker born every minute, but most people are moderately skeptical of any
offer. They seek to avoid risk.

You can never predict the level of suspicion any particular person has, so it‘s usually best to back
up all claims with evidence, such as testimonials, survey results, authoritative endorsements, test
results, and scientific data.

9. People are always looking for something

Love. Wealth. Glory. Comfort. Safety. People are naturally dissatisfied and spend their lives
searching for intangibles.

At its simplest, writing good copy is a matter of showing people how a particular product,
service, or cause fulfills one or more of their needs.

10. People buy “direct” because of convenience and exclusivity

If people could easily find the things you offer at a nearby store, that‘s probably where many
would buy them. So if they are not buying from you directly for sheer convenience, they‘re
doing it because they can‘t find the item elsewhere (or just don‘t know where to look).
That‘s why it‘s wise to emphasize the convenience and exclusivity of what you wish to sell.

11. People like to see it, hear it, touch it, taste it, or smell it before they buy it

Some people never buy online because they can‘t examine the merchandise. Some items, such as
books and CDs, are tangible and familiar enough to sell easily online because there is little doubt
about the physical quality.

Other items, such as clothing or food, may be a harder sell — at least until people have a
satisfactory buying experience — because quality may be variable.

Think about how people buy things in stores and ask yourself if there is some element of that
sensory experience that is missing from your sales message.

12. Most people follow the crowd

Most of us are imitators.

We look to others for guidance, especially when we are uncertain about something. We ask,
―What do others think about this? What do others feel? What do others do?‖ Then we act
accordingly.

This is why testimonials and case histories are so influential.

Of course, this barely scratches the surface. Psychology is a deep and eternally revealing line of
study. And while I don‘t believe in making things more complicated than they have to be, I think
there is great benefit in knowing not only what people do, but also why they do it.

Buying Situations

Consumer Behaviour is the study of individuals, groups, or organizations and the processes
they use to choose, expend, and dispose of products, services, experiences, or ideas to satisfy
their needs and the impacts that these processes have on the consumer and society (Noel,
2009). Consumer behaviour mixes elements from psychology, sociology, social anthropology
 and economics and it also intends to understand the buyer decision making process, both in
individual and in groups (Noel, 2009). There are various elements which can influence consumer
behaviour, recent research implies that it may vary depending on the buying situation. This essay
is going to define the main types of buying situations, outline the characteristics of them and
explain factors which are likely to impact customer involvement in each situation.

In general, there are three major types of buying situations (BE, 2005).

 The new task is a business buying situation in which the buyer purchases a product or service
for the first time.
 The modified rebuy is defined as a business buying situation in which the buyer wants to
modify product specifications, prices, terms, or suppliers.
 Straight rebuy is a buying situation in which the buyer routinely reorders something without
any modifications.

The three types of buying situations could be significantly different. Various factors may work in
different situations. Every time when the buyer is to take a purchase decision, buying situation
can be different, it may or may not be the same as the previous one. The differentiation between
the two buying situations may be caused by the absence of any or all of the following factors
(LME, 2006).

 Awareness about competing brands in a product group.

 Customer has a decision criterion.
 Customer is able to evaluate and decide on his choice.

According to the factors above, the three major types of buying situation could be obviously
different.

The New task could also be defined as extensive problem solving situation (LME, 2006). In this
situation, the buyer has no past experience for products and he is totally new to buy the products
which require some and extensive efforts for a buyer to decide about the product purchase. It
may take customers longer time to make a decision because it could have a greater risk or cost
and take more time in getting know of the new products.
Modified rebuy could also be called as limited problem solving situation in which supplies a
change and gives the customer with new experience and new preference (CM, 2005). It gives a
chance to the customer to try something new. If the introduction of a new brand or a product
shows many advantages to the customer, it could require a change in the customers‘ decision
criterion. For example, a housewife decides to buy a soap and she sees a new liquid toilet soap
which promises to keep her skin soft and moisturized, the brand also promises to give vitamin E,
which the manufacturer claims is required in temperate conditions. The liquid toilet soap brand is
available in four fragrances .The pack can be refilled every time the soap gets fully consumed
.Now this introduction is likely to change her decision and may be the choice criterion. If she
spends some time in evaluating the liquid toilet soap against the normal bar soap and then
decides to try it, we conclude that for her it was a limited problem solving situation (CM, 2005).
As can be seen, modified rebuy might often lead to a trial purchase. The customer may even
decide to continue with her current product choice. Generally it has been admitted that brand
extension strategy helps the customer to reduce the elements of newness in the purchase
decision.

Straight Rebuy is also known as extensive problem solving situation and it is characterized by
the presence of all three criterion for differentiation (CM, 2005). In other words, customers are
aware of his or her choices, they know what they are searching for, as his or her choice, what
exactly his need is and which is based on personal experience of either self or others might be
relatives, friends or the customers have heard about it that is known to be called as good
messages.

Generally, the customers spend little or no time choosing alternatives of the product and the
substitutes of the product .Brand loyalty is relatively higher here. Moreover, this is a buying
situation where a customer perceives a low risk in buying the product and/or the brand. For
example, a housewife goes to the shop or a supermarket and spends much less time in choosing
her toiletries, drinks like tea or coffee and other food products. For each time she goes to buy the
things for family requirements and needs, she generally finishes up buying the same brand.

As it is shown above, the three factors which make the differentiations between the buying
situations appear different in each situation. Thus, there could be different factors which affect
 customer involvement in each situation. In general, there are four of them (Song, J.H. and
Adams, C.R., 1993):

 Capacity: What it does for a buyer;

 Quality: How well or poorly it does the specified functions;
 Price: The amount paid by the buyer;
 Effort: The time and energy expended by the buyer.

These four factors are most likely to affect customers to make the decision when they are doing a
purchase, which could participate differently in the three buying situations.

In the new task buying situation, because customer has no experience for the products, it may
have more factors affecting the customer involvement. The customers could consider all the
factors: capacity, quality, price and also brand, it could take the customers more time than other
buying situations. It could be the buying situation which is most likely to affect customer
involvement. The firms have to set all the factors right if they want to attract new customers or
they want to develop a new product. In the modified rebuy situation, customers may contrast the
previous products with the new ones. As the customers understand what they need and what the
products can do, the factors like quality and price are important to affect the customer
involvement. Sometimes, a good introduction of the capacity is important as well. In this
situation, the brand loyalty could also act as an important factor of affecting the customer
involvement. It also may take customers quite a long time before making a decision. In the
straight rebuy situation, the customers know exactly what they need, they have already know the
information about the products they want. Therefore, the most likely factors which could affect
the customer involvement are the capacity and the quality. Once the firms have done well on the
quality of their products and also make a good introduction of the capacity of products, it could
make customers spending less time on making a decision. It may let customers feel easy to be
involved in the consuming.

In conclusion, there are three major types of buying situations, which are new task, modified
rebuy and straight rebuy. Three factors make the buying situations be different from the others,
customers may face different problems in these situations. Thus, there are four main factors
which are likely to affect customer involvement. Each situation could also have different types of
factors which effect the customer involvement. All of the above suggests that consumer
behaviour do vary depending on the buying situation. More research could be done on what
firms can do to improve the customer involvement while choosing their products.

THEORIES OF SELLING

Old Approach

Generally the selling theories emphasized ‗What to do‘ and ‗How to do‘ rather than ‗Why to do‘.
The theories are based upon the practical and experimental knowledge accumulated from the
years of ― living in the market‖, rather than on a systematic, fundamental body of knowledge.
The second or the new approach made use of the findings of the behavioural sciences. Theories
according to the new approach :

1. AIDAS theory of selling – seller oriented

2. ‗Right set of the circumstances‘ Theory of Selling – Seller – oriented.

3. ‗Buying Formula‘ Theory of Selling – Buyer -oriented

4. ‗Behavioural Equation‘ theory – Buyers‘ decision process.

1. AIDAS Theory of Selling : In this theory AIDAS stands for

A - Attention I - Interest D - Desire A – Action S - Satisfaction

This theory tells about the consumer readiness stage. It is a psychological theory of selling which
tells us about the consumer mind – the stages through which the mind passes. These stages are
attention, interest, desire, action and satisfaction. This theory tells about the fact that the
salesman should make the consumer pass through these five stages so that the purchase should
occur.

Phase – I – Securing Attention

1. Get the appointment with the consumer

2. Salesperson must show mental alertness and be a skilled conversationalist.

3. He should establish a good rapport at once and should be a conversation opener.

4. He should do his homework properly.

5. Good conversation opener causes the prospect to relax and sets stage for the overall
presentation.

Phase –II – Gaining Interest

This deals with the evolvement of the strong interest of the consumer in the product, to develop a
contagious enthusiasm for the product and to give facts and figures about the product. There
should be a strong selling appeal to make their interest in the product. There should be a strong
selling appeal to make their interest in the product very effective. Also the attitudes and the
feelings toward the product should be clarified. Sales – person must take all these into account in
selecting the appeal to be emphasized.

Phase III –Kindling Desire

Here the interest of the consumer is to be converted into the desire for buying the product. The
ways should be found to face and dispose of the sales obstacles, the consumer objections,
external interruptions, digressive remarks, etc. The consumer should be satisfied in all respects
and all of his doubts should be cleared.

Phase IV – Inducting Action

The perfect presentation results in the readiness of the consumer to buy the product. All this
requires experience of the sales personnel as the buying is not automatic and it should not be
closed until the sales persons are positive that the right time has come. Most prospects find it
easier to shy away from the hints than from frank requests for an order.

Phase V – Building Satisfaction

After the purchase generally the customer passes through the state of mental cognitive
dissonance in post – purchase anxiety. Now this is the job of the sales person to relieve him of
this tension and convince him that him decision was correct. Building satisfaction means
thanking the customer for the order and also to make the customer feel delighted and also to
assure him of the promises made by the salesman.

2. „Right set of circumstances‟ Theory of Selling : This theory is the ‗situation response‘
theory which tells that everything was right for the sale. It also states that the skills of the sales
persons have a lot of effect on the sales to take place. Also, if the sales persons have a lot of
effect on the sales to take place. Also, if the sales person presents the proper stimuli or appeals,
the desired response will result. This theory tells about two types of factors which constitute the
set of circumstances. The factors are internal and external. This theory stresses the external
factors at the expenses of the internal factors. This is a seller – oriented theory and stresses the
importance of the sales persons in the process of selling of a product. The major drawbacks of
this theory are :

1. It does not take care of the internal factors.

2. It fails to attach appropriate weight to the response side of the situation – response interaction.

3.„Buying Formula‟ Theory of Selling

This theory is buyer –oriented theory. This is a psychological theory and takes care of the buyer
– related problems and revolves round the buyer. This theory explains the cognition process
which goes on in the mind of the buyer when he has to take the decision regarding to buy or not
to buy. This theory has come through various stages of its development and thus has taken its
present picture. When a buying habit is being established, the buyer must know why the product
or service is an adequate solution to the need or problem, and why the trade name is the best one
to buy.

This theory tells that :

1.The need should be created/ Emphasized.

2.The relation between the need and the product or service should be emphasised.

3.The brand image should be created.

4. The need, product/ service and the trade name / brand image should be associated with each
other.
5. The brand loyalty and the customer delight should be emphasized.

4.„Behavioural Equation‟ Theory

This theory takes care of the buyer‘s decision making process and goes in the detail of the
process at the micro / internal level. The buyer goes through various stages of learning process.
The essential elements of the learning process are :

1. Drive ( Motivation )
2. Cue
3. Response
4. Reinforcement
Drives are strong internal stimuli which impel the buyers‘ response. These drives are of two
types. They are 1. Innate drives – psychological or biogenic drives and 2. Learned drives – social
drives. Cues are the weak stimuli that determine when the buyer will respond. There are 2 types
of cues :

1. Triggering cues – activate the decision process.

2. No triggering cues- influence but does not activate the decision process.

Response is what the buyer does.

Reinforcement strengthens the buyer‘s tendencies to make a particular response. Hence this
theory takes care of the behavioral aspects of the buyer and how it influences his decisions and
his learning process. This also tells about the sales person‘s role in all this to make it happen and
at the same time it reduces buyer dissonance.

Sales Process

The selling process consists of several steps; there are few basic steps, which need to be followed
for all types of products. The selling process can be for short time or long time, depending upon
the nature of the product. A product, which needs huge investment, may take longer time to
complete the selling process whereas in case of daily products where the customer is aware of
the nature of the product, the selling process ends in shorter time. Example: Door to door sales,
where the salesperson explains all the steps.

Prospecting

The initial step of selling process starts with prospecting or searching for potential customers.
Apart from retail sales, it‘s very rare when customers reach out to the salesperson. It‘s the
salesperson who reaches out to customers in order to sell the product. The following are the two
major activities under prospecting:
1. Find the Prospects or the Potential Customers-Finding the prospect is not an easy step
for a sales person because consumers would not even like to listen to the presentation
regarding the product they do not need. The rate of saying ―No‖ is very high. In few
consumer goods, the identification of customers comes from sources like friends,
relatives, colleagues etc. The following are some of the best sources.
 Existing Customers: One of the good sources of prospects is an existing customer. For a
salesperson, it is very easy to sell the products to an existing customer instead of selling
to the new customers.
 Never-ending Chain: This is a competing strategy to find out prospects. The salesperson
reaches many new customers with the help of existing customers. The salesperson selling
the product to existing customers asks to provide referral to friends or relatives and the
salesperson reaches the new customers. This chain goes on and on.
 Cold Call: In this technique, the salesperson has to visit door to door to sell the products.
The sales process starts from introduction but in this case, the rejection rate is high.
 Directories: The salesperson tries to find out prospect customer contact with the help of a
directory. The salesperson can also collect the information through membership
directories of trade associations, social organization etc.
 Mailing: The companies promote their product through mails by sending advertisements.
The advantage is that it‘s cheap and the company targets many customers by sending
mass mailers.
 Exhibition: The salesperson could target the prospective customers through tradeshows
and exhibitions. It‘s one of the simplest ways and the salesperson could also practically
show the use of the product and the features. Announcement is advance, before the
exhibitions starts, is very helpful to attract more customers.
2. Train/Educate the Prospects -After the salesperson has identified the potential
customers, he should find out if they are valid prospects. After finding the valid
prospects, the salesperson has to give the presentation. There are several approaches for
qualifying customers and the prominent approach is MAN, i.e., Money, Authority and
Need.
Money: The salesperson should know the financial status of the customers because money
matters a lot, and, without it, the prospect cannot purchase the product. The consumer or the
prospect should be able to pay money in return of the product.

Authority: The prospect that is purchasing the product should have the authority to make
decision. This is important while dealing with government agencies, corporate etc.

Need: This is one of the most important points because if the prospect has money and also
the authority but there is no need of the product, he or she will not purchase the product. The
salesperson has to find out about these aspects before proceeding to the selling process.

3. Preparationfor the Sale of Product Once the prospect has been identified and qualified
as discussed in first step, the salesperson has to prepare for the sales of product or service.
The following are the two stages involved in preparation:
 Pre-approach- This step involves collecting all the information important to learn
about the prospects and their needs. The following are the four steps of pre-approach:
Prospect need and ability should be disclosed. All the required information, which
would help the salesperson to prepare the presentation Relevant information, which
helps salesperson not create any errors during presentation Confidence to tackle the
questions of the prospect
 Call Planning- Call Planning includes a particular planning sequence. The salesperson
calls the customer and explains the objective of the call and explains the product to
makes appointments. The first objective of the salesperson is to get an order from the
customer. Some objectives may also be required in the mid-of-the-call progress,
depending on the call. Following are a few objectives for call planning:
 Collect more information from the customer
 Find out the need of the customer and link with the features of product
 Take permission from customer before presentation of product
 Suggest a new distributor
 The salesperson has to develop a strategy and plan accordingly to achieve the
objective or goal. The salesperson should be very careful while checking the
 background of the customers and obtaining details. This helps to frame a strategy and
develop a plan. The calls made by salesperson are costly, so they have to take prior
appointment.

4. Presentation- In this step, the salesperson has to give the presentation regarding the
product to the customer. She/he should explain the features of the product and how it will
fulfill the needs. The presentation should be clear and understandable by the customer. It
should also be interesting to keep the customer involved in the conversation. A
presentation can be classified into the following categories:
Fully automated
Semi-automated
Memorized
Organized
Unstructured
1. Fully Automated In this approach, the salesperson gives the presentation with the
help of slides in a structured manner. He also explains and clears the doubts of the
customers. Example: Life Insurance.
2. Semi-Automated The salesperson reads out the company brochures and adds
comments as per requirement or queries from the client. Example: Pharmaceutical
products.
3. Memorized The company presents its message, which is short and crisp, and
which can be easily memorized by the customer.
4. Organized One of the most attractive, effective and often-used approaches is
organized presentation. The salesperson can make changes in the presentation as
required but based on the company‘s pre-defined outline. In this approach, the
sale person covers the four steps, i.e., Attention, Interest, Desire and Action.
5. Unstructured The salesperson and the customer together try to resolve the
problems. Hence this approach is also known as problem solving. This type of
presentation is not well focused many a times; some points are missed and time is
wasted. Also the salesperson has to face many queries from the customers and if
the salesperson is new in the field, he/she will not be able to answer the queries in
 an effective manner. Thus, we can conclude that the presentation to the
established customers should be done by an effective salesperson.
5. Handling Objections

The salesperson has to struggle to sell the product to the customers. During the sales
process, the prospects raise objections, which can be stated or hidden. Prospects
maystate the reason for objections and give a chance to salesperson to answer. This is
an absolute situation because the prospect is informed regarding the objections.
Unfortunately, in many cases, the prospects do not provide the reason for objection of
the product. They hide their real reason for not buying the product. If the salesperson
is unable to know the real reason, he/she will not be able to resolve the problem. To
resolve this, there are two techniques to find out the objections.

To allow the prospect to talk to find out the hidden objection. The observation
gained by experience and mixing with the knowledge of the prospects. Many times,
the objection is due to high price of the product. That objection can be answered
when the salesperson has the knowledge of the competitor‘s products as well. Also, in
many cases, the prospects do not understand the technical aspects and are
misinformed. The salesperson should provide additional information in this case.
Now we can conclude that the objection can be resolved by providing an alternative
product to the prospects.

6. Closing the Sale- After answering the objections made by prospects, the salesperson asks
for the prospect to order the product. If the prospect does not agree to buy the product,
the entire effort gets waste. The following are some effective techniques to close the sale:
 Gift Close In this technique, the customers get an incentive for immediate
buying action. The salesperson informs regarding the benefits of the product
to the prospects. Example: A company provides an option to the prospect that
if the bill exceeds Rs.3000, he can buy a bed sheet worth 2000 for just Rs.200.
Here, if the customer has made a purchase of Rs.2500, he will check out to
buy something else to reach 3000. This helps the company to sell two extra
 products — one for Rs.500 or more to reach 3000 and another, bed sheet for
Rs.200.
 Direct Close This is one of the simplest techniques to close the sales. This
happens when the buyer has positive approach to buy a product. The
salesperson summarizes the important points that were made prior to sale.
Example: A prospect needs beauty cream and steps into a shop. The
salesperson offers the products; if required, shows the demo. Once the
prospect is satisfied, he/she will buy it. If the salesperson is experienced,
he/she will try to close it as early as possible because he/she would understand
if the prospect is inclined to buy the product. A good salesperson makes sure
that he has completed all the steps during sales process. Thus, closing is an
important step in sales process. The other steps are meaningless without
closing.
7. Follow-up: After making the sale, the salesperson has to follow up with the prospects.
After sales activities are important parts of the selling process. This helps in reducing any
doubt by the customer regarding the product or service. There is also a chance that the
buyer with buy again in future. There are specific policies by a company for after sales
activities. Even though the company provides good products, there will be few
complaints from customers. The complaints should be taken seriously and the company
should try to resolve. This helps the company to improve in terms of product or service.
An experienced salesperson tries to provide the best service to its customers. As a part of
handling complaints, they also keep the prospect informed regarding the latest products
or services and also provide other types of assistance. The salesperson should build good
rapport with the customer. This helps to get more customers because the existing
customer will refer to his friends and relatives. The salesperson should thank the
customer for the business and offer small gifts.

Transactional Selling

It is a sales strategy that involves focusing on achieving quick sales without a deliberate attempt
to form a long term customer relationship. Here the representative seeks out prospects, develops
a relationship and then tries to close a sale. The sales rep finds out what the customer needs and
then tries to provide it for that specific sales as he is not concerned to develop a long term
relationship with the customer.

This strategy tends to be more common for a business which offers generic products or services,
with an objective of making profit by high volume sales. It is a short term solution with primary
concern on promotion and selling of the product and no emphasis on customer needs. Hence it is
all about the single sale.

Here customer knows what he needs hence little product knowledge is required. Buying criteria
typically depends on price or ease of acquisition.

Various other type of selling are-

1. Consultative Selling – A complex process in which both buyer and seller are involved. Here
seller first develop an understanding of customer‘s needs and then develops a solution

2. Relationship Selling – Strategy which focuses on relationship building. The sales rep first tries
to know his/her customer, his needs and wants and then tries to make a sale

3. Transitional Selling – Passive form of selling in which sales rep approach the customer with
an intention of checking the existing service and then during the conversation transitions into a
sales opportunity

Sales Forecasting, Sales Budget.

Sales Forecasting: Meaning, Factors, Importance and Limitations!

Meaning
Future is uncertain. Man thinks about future. He may be a businessman, a broker, a
manufacturer, a commission agent etc. All guess about the future in their respective field of
interest. We try to know, through a clear imagination, what will be happening in the near
future—after a weak, month or year. It can be called forecast or prediction. The process of
forecasting is based on reliable data of past and present. Forecasting is not new, as it has been
practiced from time immemorial.

Forecasting is one of the important aspects of administration. The comer-stone of successful

marketing planning is the measurement and forecasting to market demand. According to
American Marketing Association, ―Sales forecast is an estimate of Sales, in monetary or physical
units, for a specified future period under a proposed business plan or programme and under an
assumed set of economic and other forces outside the unit for which the forecast is made.‖

A sales forecast is an estimation of sales volume that a company can expect to attain within the
plan period. A sales forecast is not just a sales predicting. It is the act of matching opportunities
with the marketing efforts. Sales forecasting is the determination of a firm‘s share in the market
under a specified future. Thus sales forecasting shows the probable volume of sales.

Factors affecting sales forecasting

1. General Economic Condition:It is essential to consider all economic conditions relating to
the firm and the consumers. The forecaster must see the general economic trend-inflation or
deflation, which affect the business favorably or adversely. A thorough knowledge of the
economic, political and the general trend of the business facilitate to build a forecast more
accurately. Past behavior of market, national income, disposable personal income, consuming
habits of the customers etc., affect the estimation to a great extent.

2. Consumers:
Products like, wearing apparel, luxurious goods, furniture, vehicles; the size of population by its
composition-customers by age, sex, type, economic condition etc., have an important role. And
trend of fashions, religious habits, social group influences etc., also carry weights.

3. Industrial Behaviours: Markets are full of similar products manufactured by different firms,
which compete among themselves to increase the sales. As such, the pricing policy, design,
advanced technological improvements, promotional activities etc., of similar industries must be
carefully observed. A new firm may come up with products to the markets and naturally affect
the market share of the existing firms. Unstable conditions—industrial unrest, government
control through rules and regulations, improper availability of raw materials etc., directly affect
the production, sales and profits.

4. Changes within Firm:

Future sales are greatly affected by the changes in pricing, advertising policy, quality of products
etc. A careful study in relation to the changes on the sales volume may be studied carefully.
Sales can be increased by price cut, enhancing advertising policies, increased sales promotions,
concessions to customers etc.

5. Period:
The required information must be collected on the basis of period—short run, medium run or
long run forecasts.

Importance of Sales Forecasting:

1. Supply and demand for the products can easily be adjusted, by overcoming temporary
demand, in the light of the anticipated estimate; and regular supply is facilitated.

2. A good inventory control is advantageously benefited by avoiding the weakness of under

stocking and overstocking.

3. Allocation and reallocation of sales territories are facilitated.

. It is a forward planner as all other requirements of raw materials, labour, plant layout, financial
needs, warehousing, transport facility etc., depend in accordance with the sales volume expected
in advance.

5. Sales opportunities are searched out on the basis of forecast; mid thus discovery of selling
success is made.

6. It is a gear, by which all other activities are controlled as a basis of forecasting.

7. Advertisement programmes are beneficially adjusted with full advantage to the firm.
8. It is an indicator to the department of finance as to how much and when finance is needed; and
it helps to overcome difficult situations.

9. It is a measuring rod by which the efficiency of the sales personnel or the sales department, as
a whole, can be measured.

10. Sales personnel and sales quotas are also regularized-increasing or decreasing-by knowing
the sales volume, in advance.

11. It regularizes productions through the vision of sales forecast and avoids overtime at high
premium rates. It also reduces idle time in manufacturing.

12. As is the sales forecast, so is the progress of the firm. The master plan or budget of a firm is
based on forecasts. ―The act of forecasting is of great benefit to all who take part in the process,
and is the best means of ensuring adaptability to changing circumstances. The collaboration of
all concerned leads to a unified front, an understanding of the reasons for decisions, and a
broadened outlook.‖

Sales Forecasting Methods

Qualitative Methods

1.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 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

8. Sales force Opinion: Salesmen are in close contact with 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.

Demerits

1. All markets are not homogeneous.

2. It is time consuming process.
3. 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. 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.

Quantitative Methods
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.

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.

(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.

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.

Sales Territory Design

 Sales Territory is the customer demographic or the geographical area assigned for sales activity
to either a salesperson or a sales team. In these cases, a sales manager generally assigns the
territory among members of the sales team. Often retailers, franchisees, and
distributors operate under specific territories.
Territory planning is a critical area in order to acquire the right results for you as well as for your
team. The building blocks of sales forecasting are based on territory planning. To provide a
proper direction to the team both in present and the future, it is necessary to have a good idea of
sales staff members and their respective prospects. This process relies on efficient management
of time and resources.

The factors that determine Sales Territory Planning

 The number of consumers or their households in appropriate vicinity of the store.

 The average sales volume/unit area for similar-sized shops in the same location.
 The annual expenses of the customers in that region on the product.

The best way for a company to achieve success is by creating stronger teams all over the
organization. You may have been in a number of industries and may have access to a wide range
of sales channels to use. This may fall anywhere within the field of internal sales (tele sales),
distributors and self-dependent reps (indirect workers of your company and are typically paid on
a commission basis.

Some of the most usual ways are by

 Geography− By state/province, Postal Zip code, Area of the country, etc.

 Industry− Selling to steel industry, pharmaceuticals industry, etc.
 Product Lines− Selling A, B, or C products.
 Assignment− If you contact a prospect, he should be assigned to you only.
 Major Prospects− Separation of prospects that maybe over a specific size.
 Global Prospects− Separating global structures and local prospects.
 Unforeseen factors− Various unique scenarios.
These are some of the many possibilities for companies to try out various combinations and
integrations of the various channels of sales. Furthermore, the determination of what is sold by
whom and to whom (usually termed as the sales territory) can be done in numerous ways.

Reasons for Establishing Territories

The main motive of establishing sales territories is to simplify the planning and controlling of the
selling function.

Following are some reasons for establishing sales territories −

To obtain thorough coverage of the market

According to the division of sales territory, the activities are assigned to salesperson. This helps
in market coverage, rather than the salesperson selling the product according to his ambition. It
helps the sales manager to monitor and take updates accordingly from different sales managers.

To establish the salesperson‘s job and responsibilities

It‘s very important to establish jobs and responsibilities for salespersons. Sales territories help in
doing so because the task is assigned to the salesperson and he is responsible and answerable for
the same.

Once the task is assigned, frequent checks are done to monitor the calls; it helps to determine the
work of each salesperson. If the sales manager finds the workload for a particular person is more,
the work is divided and reassigned equally. This creates motivation and interest to work.

To evaluate sales performance

In an organization, the sales territory is compared from the previous years to current to find out
the difference, i.e., the increase or decrease in sales volumes. It helps to work on the difference
accordingly. This is done with the help of sales territory as the activities are assigned in a proper
manner and gathering of data and evaluation becomes easy.
 The comparison to evaluate sales performance is done on the following basis −

 Individual to District
 District to Regional
 Regional to Entire Sales Force

By this comparison, we can evaluate and determine where the sales force is contributing for high
volume of sales.

To improve customer relations

As we know, salespersons have to spend most of their time on road to sell the products but if the
sales territory is designed in a proper way, the salesperson can spend more time with the
customers (present and potential). This helps in building rapport and understanding the needs
better.

Sales of a company can increase when a customer receives regular calls and the salesman has to
visit the customers on the basis of calls. The salesman and the customer get time to understand
each other and resolve their issues regarding demand and supply. This also helps in increasing
the brand value of the company.

To reduce sales expenses

Once the geographical areas are decided, the company gets a proper picture as to the areas that
can be assigned to the salespersons. He/she needs to cover that area so that there is no
duplication of work by sending two salespersons in the same area.

The selling cost of the company gets reduced and leads to increase in profits. There is also an
advantage to the salesperson for few travels and overnight trips.

To improve control of the sales force

The performance of a salesperson can be measured on the basis of calls made to customers, the
routes taken and the schedules. In this case, the salesperson cannot deny if the results are not
positive.

The salesperson has to work on the same routes, schedule and everything is predetermined. This
results in better control of the sales force.

To coordinate selling with other marketing functions

If the sales territory is designed properly, it helps the management to perform other marketing
functions as well. It is easy to perform an analysis on the basis territory as compared to the entire
market.

The research done by the management on marketing on territory basis can be used to set sales
quotas, expenses and budgets. The results can be satisfactory if the salesperson helps in
advertising, distribution and promotion when the work is assigned on territory basis instead of
the market as a whole.

Procedure for Designing

At the time of designing the territory, the manager has to keep in mind the size of the territory
that is going to be assigned to the salesperson. It should be neither too small nor too large. If the
territory is geographically too small, the salesperson would keep calling the same customers
repeatedly. In contrast, in a too large geographical area, the salesperson will not be able reach the
scattered customers as most of his time will be utilized in travelling. Hence the territory should
not be too large or too small; it should be such that all potential customers can be visited as per
the requirement.

The procedure of designing sales territories is the same for all companies, whether setting the
territories for the first time or revising the existing territories.

Select Control Point

As the name suggests, the management has to select a geographical control point. The control
points can be classified on the basis of district, pin codes, areas, states and cities.

At the time of selecting the control unit, the management should aim to select as small a control
unit as possible.

The following are the reasons behind selecting small control units.

Reason 1

If the control unit is too large, the areas with low sales potential will be hidden by the areas with
high sales potential. The areas with high sales will be concealed if the areas with low sales
potential will be included.

Reason 2

In case of any changes required in future, they can be done smoothly. Example − A company
wants to allot some territory to Mr. A. This part of territory had earlier been assigned to Mr. B. It
can be done easily, as the unit is small.

If the sales potential for the company is located in urban areas, the city can be used as a control
point. But there are some disadvantage also, as the adjacent areas to cities also possess sales but
they are covered by paying additional cost to the salesperson.

The control point can also be set up according to the trading areas. It is a sensible decision to set
up the control point according to the trading area. It is based on the flow of goods and services
rather than economic boundaries. Example − The wholesaler or retailer use trading area as the
control point.

Trading area can be considered as the geographical region that consists of a city and the
surrounding areas; this region works as the main retail or wholesale center of the region.
Generally, the customers from one trading area do not go outside the boundaries to buy goods.
Even an outsider customer will not enter the trading area to purchase a product. The main
advantage of the trading area is that the salesperson is aware of the buying habits of the
customers and the pattern of trade. It also helps the management in planning and control.

The control point can be decided on the basis of states. A state may be a capable control unit
when the organization has small sales force that is covering the market selectively. Example− A
company sells its products in the country in all states; in this case, the territory boundaries could
be based on states.

It is less expensive and convenient to gather data and make evaluation.

Making an Account Analysis

The next step after selection of geographical control unit is to plan an audit of each geographical
unit. The reason for performing this audit is to analyze the customer prospects and find out the
sales volumes for each account.

Accounts can be recognized by names; in recent times, there are many sources to pull out the
data, for example, the yellow pages. We can also collect the data through the past sales of the
company. After collecting the data, the next step is to estimate the sales for each geographical
unit. The sales manager estimates the sales volume that the company is expected to get in the
following years.

There are many factors to contribute such as competition, advantage of the company in that
geographical area, etc. Now there are many software available for calculation and the final result.
This can be done much quickly as compared to when it is done by the sales manager manually.

After the sales potential estimates have been taken, the system divides into three types, which is
done through ABC analysis. This is one of the most common analyses used by companies.
Where the sales potential is greater than expected, it is classified as ―A Category‖. Average
potential is classified as ―B Category‖ and the sales potential below average is classified as ―C
Category‖.
 Developing a Salesperson Workload Analysis

The salesperson workload analysis is done on the basis of the time and effort taken by a
salesperson to cover a geographical unit.

The following are a few points needed to estimate workload −

 Frequency of calls
 Duration of calls
 Travel time

The estimates workload is calculated by considering these factors.

The most important factor is the duration of calls. These depend on the customers and issues. If
the problem is severe, it may take time to resolve and tackle the question from customers.

Another important factor is the travel time; this differs from one area to another depending on the
factors transportation, condition of roads, weather condition etc. The sales manager tries and
plans accordingly to reduce the travel time taken by the salesperson and utilizes the time to call
more number of accounts/clients.

Combining Geographical Control Units into Sales Territories

In the first three steps, the sales manager works on the geographical control units; now he has to
combine the control units into territories.

Initially the sales manager used to manually develop a list of territories by combining the control
units. It was a time consuming procedure and also the result was not accurate, as it was done
manually. Now computers handle this activity and complete it in a much shorter period of time
with accurate results. The operational error is reduced here.

All the salespersons cannot be considered equal and competitive; it depends on the basis of
experience and skills. The salespersons are assigned territories by the sales manager depending
on the basis of sales. The geographical areas with high sales are assigned to the salesperson with
 experience, who can handle the workload. The new or less effective sales people are assigned the
areas with less sales potential.

Territory Shape

The sales manager has to decide the shape of the territory. The territory shapes affects the selling
expenses and also helps for sales coverage. There are four types of shapes, which are used
widely.

 The wedge
 The circle
 Hopscotch
 The cloverleaf

Let us discuss these types one by one.

The Wedge

This shape is suitable for the territories, which contain both the urban and non-urban areas. The
radius starts from the most populated urban center. Wedges can be divided into many sizes and
the travel time can be maintained by balancing between the calls of urban and non-urban areas.

The Circle
When the clients are distributed evenly throughout an area, the sales manager chooses the circle
shape. The salesperson starts from the office, moves in a circle of stops until he reaches the
office again. This helps the salesperson to come near to the customer as compared to the wedge.

Hopscotch

In this shape, the salesperson begins from the last point from office and reach out the customers
while coming back to the office. While going, the salesperson does not stop anywhere and
attends calls in one direction while coming back to the office.

The Cloverleaf

When the accounts or client are located randomly in a geographical area, the cloverleaf shape is
used. This type of shape is more often found in industrial markets than in consumer markets.

Assigning Sales Personnel to Territories

Once the sales territory has been designed, the last step is to assign sales personnel to the
territories. All the salespersons are not equal in terms of ability, initiative, etc.; the workload of
one salesperson may be overload to another and may cause frustration.

The sales manager must rank the salespersons accordingly before assignment of territories. The
ranking should be done on the basis of ability, knowledge, communication, etc. The other points,
which the sales manager should look at, are the cultural characteristics of the salespersons and
how they match with the territory.

Example − If a salesperson is born and brought up in rural area, he would be able to do more
effective sales in that particular area as compared to urban area.

We can now conclude that the goal of a sales manager is to assign the geographical area to the
salesperson who would maximize the territory sales and where the customers are comfortable
with the salesperson.
Establishing the sales territory helps in planning and controlling the sales operations. A well
designed sales territory helps to increase sales volume and market coverage and provide better
services to customers. Once the sales territory is allocated to the salesperson, he is responsible
for making things happen.