UNIT-5

Sales Display:

By sales display, the manufacturer shows the goods or services in an attractive manner to catch
the eye of customers. In fact, display is the silent salesman that calls the prospective buyer's
attention to the product and hopefully makes him to purchase. In the past, sales display was the
only media for exhibiting products and including prospects to buy the same. At present, sales
display occupies an important place in marketing. Sales display acts as advertising at the point
of purchase. The objectives of sales display are enlisted as below:

*It presents the product or service to the potential buyers.

* It gives an idea about every detail of the product such as variety, quality, size, colour, design
etc.
* It assists the customer to see and examine the goods before they actually buy them.
* Sales display appeals visually to the prospects and stimulates them to purchase.
* Sales display reminds the buyers about their need and they are attracted to buy.
* It supplements the advertising efforts of the manufacturer.
* Wholesalers and retailers are satisfied by display tactics undertaken by the manufacturers they
buy the goods without hesitation.

Forms of Sales Displays

There are three forms of display:

1.Interiordisplay
2.Exteriordisplay
3. Display at other places

Interior Display
As the name indicates, interior displays or demonstration are arranged inside the shop. It
includes displays on the floor, walls, in the show cases and show boxes. Goods should be neatly
arranged and displayed inside the retail outlet (shop). In this type of display, proper lighting and
colour matching should also be made so that overall effect of interior display becomes pleasing
and attractive. The principles of cleanliness and orderly arrangement of stock in a neat manner
are the basic necessities of interior display. Further, the display should provide the customers
and sales personnel adequate space to allow movement. The stock should be kept in such a way
that it remains free from dust. Protection should be given to the displayed items so that they are
not destroyed. It is also desirable to place related items together. For instance, vests and briefs,
shirts and ties, shoes and socks etc. This creates a favourable impression. In case, the buyer is
expected to handle the article it should be kept within reach. In other words, if there is
possibility of damage and spoilage to the goods by handling, such types of goods should be kept
away from the customers.

Advantages

 Interior display helps the shop owner to hold attention of the buyers once he enters into
the shop.
 Interior display helps to sell related items.
 Interior display makes the selling task bright and attractive with selected and systematic
use of light and colour. It also makes the inside atmosphere of the shop pleasing,
cheerful and congenial.
 With the help of interior display, the buyer is able to find and select the article easily.
 Occasional change of interior display helps to arouse interest of customers visiting such
shops.
 If the customer is satisfied or fascinated with the display, he becomes a regular customer
and there is every possibility of his patronizing that shop.

Exterior Display

Exterior display is the display of product in the show window of the retail outlet. It creates that
long lasting first impression. It also attracts the attention of passers-by as well as prospects and
invites them in this way to enter the establishment. Window dressing, shop front (shop joint) and
shop sign (sign board) are the major examples for exterior display.

Shop front

It is the face of the shop. It should clearly indicate the class and variety of products that the shop
sells. The shop front should be designed in such a way that it will remain readily identified from
among various shops. Therefore it should possess some unique features.

Shop sign

Like shop front, it is also the face of the shop. It should have the name of the shop, the brands it
deals with and the name of the owner. The sign board be hung in such a place where it must be
visible to the passerby. Either it may be kept at a high place or above the shop's entrance as
found suitable for clear vision. The sign board should possess the characteristics of
distinctiveness and attractiveness. Both the sign board as well as the shop front should be
properly lighted.

Shop Window (Window Dressing)

It is an art of dressing windows by attractive display of articles inside the shop window. The
idea behind window dressing is not only to display products to the prospects but also to induce
them into the store by creating adequate interest among them. By creating favourable image or
impression upon the prospects the window display also creates the desire to buy. Thus it creates
and maintains the goodwill of the shop.

Importance points in window dressing

 Selection of proper site and position of the window is important.

 Window position should lead the prospects to the entrance of the store.
 Window which opens on a busy square and leads the prospects into the shop is most
effective.
 Adequate space should be allocated to windows.
 Projections of the shop window at the entrance should be avoided.
 Window should be neat and clean.
 Arrangement of the articles should be artistic and pleasing.
 Window should not be overcrowded.
 Adequate provision of space should be made inside the window.
 No glaring glasses which dazzle the eyes of prospects should be used.
 Proper lighting, attractive decorations, rotating stands, decorative materials etc., should
be placed.
 The lighting should be bright not glaring.
 Shaded lights which do not affect the eyes of the prospects can be used.
 Lighting should focus on goods displayed instead of onlookers.
 Window displays needs to be changed at regular intervals.
 Changing of the arrangement of goods should be done during off hours and holidays not
on business hours.

The following are the two types of window display:

o Sole display: A single article may be displayed in the window, which is called as
sole display.
o Related display: In related display, many articles are displayed.

Advantages of Window display

 Window display attracts the passers by into the shop.

 It presents the product in real life through models.
 Window displays demonstrate the products the shop is selling.
 Importance of particular shop can easily be estimated by the nature and contents of
window display.

4. Display at Other Places - Show rooms, show cases, glass boxes, cupboards, etc. form
part of display. They are used not only to sales display but also act as a publicity device
for increasing sales. The success of show rooms and show cases depends, to a great
extent, on the location, decoration, lighting and such other devices.
Show rooms and show cases

Show rooms and show cases are one of the latest types of advertising. Most durable and
industrial products are introduced in the market with the help of these mediums.

Show rooms are specially designed rooms in which the products are displayed. While people
pass through such show rooms, they get an opportunity to see, touch, handle and examine the
products at close range. Price tags may be attached to the product items. The show room may
be owner or hired. In general, the show rooms are opened by leading companies in important
cities and towns. Here the purpose is to exhibit the product items to the prospects. Sometimes,
the show room attendants also get the role of salesperson by providing information and clearing
the doubts /objections of the prospects.

Advantages

o Publicity device for increasing sales.

o Place where orders are collected.
o Customers are able to examine the things at close range.
o Customers are given freedom to see, touch, handle and examine the products at
close range.
o Given opportunity to the newly recruited salespeople to train themselves.
o Provide after sale services to customer.

Show cases are glass boxes or cupboards displaying a wide range of product items manufactured
by a particular company. Usually transparent glasses are used on all sides and even at the shop.
Show cases form a part of interior display. But they can also be located at public places like bus
stands, railway stations, airports, cinema theatres and so on.

Advantages

o Publicity device for increasing sales.

o Meant to awaken the interests of the prospects.
o Customers are able to examine the things at close range.
 o Form a part of interior display
o Useful dealer-aid as prospects get adequate product knowledge before they decide
to purchase.

Exhibitions and Trade Fairs

An ancient and popular method of advertising is the use of exhibitions and trade fairs to display
product items. Exhibitions and trade fairs may be organized by an individual manufacturer or by
a group of manufacturers or association of manufacturers or even by the government. This can be
organized on local level, regional level, national level and international level also. Similarly
exhibitions and trade fairs may be intended for either members of general people or for trade
buyers of for trade members of one type only. In order to organize exhibitions and trade fairs, an
extensive vacant space is hired and sheds are rented out to producers who want to exhibit their
products in such exhibitions and trade fairs.

Exhibitions and trade fairs are meant to display product items before the general public,
demonstrate their uses and merits and create market for them. Exhibitions and trade fairs are also
useful to introduce new products and exhibit their uses. Sales literatures, folders, handbills,
notices are usually distributed to the general public and at times free samples are also given. At
times, government also encourages producers to exhibit their products in international
exhibitions and trade fairs in order to expand the export trade.

Advantages

o Exhibitions and trade fairs provide a scope for the producers to display their
product items to the general public in order to get a market for them.
o Exhibitions and trade fairs are the sources of amusement and recreation for the
general public.
o Exhibitions and trade fairs provide an opportunity for the manufacturers to
advertise their product extensively and thus create brand consciousness.
o Exhibitions and trade fairs help consumers to compare goods of various
companies.
 o Exhibitions and trade fairs usually draw huge gatherings which consist of general
public, trade representatives, middlemen etc.
o International (Global) marketing is usually dependent to a great extent on creation
of consumer awareness through trade fairs and exhibitions.

The following are various classes of sales display:

1. Product unit display:

The product unit displays use merchandise that is identical in size, design, colour, shape, use,
etc. This type of display is used for bag, readymade garments, shirts, etc. Efficient
merchandising is of interest to both the dealer and the producer. The following would probably
matter to the dealer:

* Creation of a stocking point for his establishment based on an intelligent assessment of

profitability and turover.
* Careful planning of shop floor layout – placing of shelves, displays, cabinets, etc-and to ensure
maximum speed of the customer traffic during peak period, thus avoiding over crowding and
bottleneck.

2. Assortment display:

In this type of display a retailer puts a large range of products for display. It can be classified
into the following two types:

* Open display(e.g. super bazaar)

* Close display(e.g. shoes ,electronics)

3.Videotape displays:

This is the latest development in the field of displays. These displays make use of technology to
"speak" to and show shoppers the available merchandise. These pre-recorded audio/video
devices include "shelf talkers" and "rear screen projection" thus adding a new dimension to
products which need demonstrations.
4. Life-style displays:

Using the market segmentation approach life style displays are used by retail stores/outlets
focusing on life styles of customers. The purpose here is to make the retail store appear homely
for target customer and give him the feeling that he has come to the right place to shop.(eg;
retail store of Bajaj Two wheelers)

5. Rack displays:

Clothing and household goods retailers for neatly hanging or presenting the products items
mainly use this type of display. A variety of vertical chrome or steel tubing racks in circular and
side-wards shapes as well as mobiles are used for displays.

6. Point of sale display

Marketers design special advertising vehicles, called point-of-sale displays, which are found
near, on or next to a checkout counter. This is meant to entice the customer into buying more
products, or products that are on a special offer. Such displays are colorful, to distract the
customer while waiting in line, and to look at the product. They are meant to stand out from
other items. They can also be related to a special event, either one going on in a shop, or a
holiday-time sale.

Common items that may be there year-round are batteries, video tapes or writable CDs and
DVDs, drinks, tobacco, ice cream, candy, chewing gum and magazines/comics. These displays
are also useful in places with limited floor space, as there tends to be a lot of wasted room around
counters.

The displays are normally covered with branding for the product they are trying to sell, and are
made out of cardboard, and/or covering over a plastic stand. This means they are easily
replaceable and disposable. This also means the designer can make full use of color and printing
to make the box appealing to the eye. Some displays are fixed or non-disposable. These may
contain lighting to make the display more visible. It may also contain a cooler, such as for drinks
or ice cream. Some are like a metal basket, and have no design on the outside, and simply show a
price. These types of displays are easier to refill.

Process of Sales Display Management

In order to get the maximum advantage from sales display it is essential that they are organized
and managed effectively. The process of sales display can be divided in to two parts: Part – I
(Planning of sales displays) and Part – II (Planning of sales displays).

Fig. Process of Sales Display Management

In therefore, it requires the use of experts as well as search for newer materials to attain a distinct
edge in product display. MNC's are well-known to change their displays quite frequently and
for this purpose even employ interior decorators and designers. Some MNC's even have an in-
house merchandising and display department/division.

Role of Retailers in Sales Displays

Retailer acts as a link between the wholesaler and the customer. Since retailers handle the sales
displays, they do require training and motivation. Thus retailers have to manage sales display
task in an effective manner. In order to do this, a retailer requires space in his outlet. Effective
management of sales display has tow major aspects which are given below:

1. Training to Retailers

A retailer can make the sales display a success or a failure. Therefore, if any company wants to
make it successful, it has to impart training to its retailers. The following are some important
areas in which retailers can be offered training in connection with sales display.

 How to put up complicated display fixtures and materials?

 How to replace old and monotonous displays?
 How to set up creative displays?
 How to manage incomplete display kits?
 How to attract consumers by sales displays?

This involvement on the part of the retailer becomes essential in the organization to conduct
sales displays. The training to retailer and his staff for the purpose of making a display a success
is always needed.

2. Motivating the Retailer

The retailers should be adequately motivated by the sponsoring organization, so that they can put
their best efforts into the sales displays. the following are the few directions in this context:

 Conducting display contests among retailers.

 Publicity through newsletters mentioning the name of the retailer.
 Provision of display goods and fixtures at special subsidized prices
(reduced prices).
 Photo-flashing of retailer's display to other retailers.
 Cooperative advertising and sales promotion, i.e., promoting the retail
store as well as the produer's product on cost-sharing basis.
For instance, Bata India Limited in India attaches considerable importance to the retail trade.
The company spends nearly 25-50 percent more money on shelf space than almost any other
company in India.

MERCHANDISING

In the broadest sense, merchandising is any practice which contributes to the sale of products to
a retail consumer. At a retail in-store level, merchandising refers to the variety of products
available for sale and the display of those products in such a way that it stimulates interest and
entices customers to make a purchase.

In retail commerce, visual display merchandising means merchandise sales using product design,
selection, packaging, pricing, and display that stimulates consumers to spend more. This includes
disciplines and discounting, physical presentation of products and displays, and the decisions
about which products should be presented to which customers at what time.

Merchandising helps to understand the ordinary dating notation for the terms of payment of an
invoice.Codified discounting solves pricing problems including markups and markdowns. It
helps to find the net price of an item after single or multiple trade discounts and can calculate a
single discount rate that is equivalent to a series of multiple discounts. Further, it helps to
calculate the amount of cash discount for which a payment qualifies.

Promotional merchandising

The annual cycle of merchandising differs between countries and even within them, particularly
relating to cultural customs like holidays, and seasonal issues like climate and local sporting and
recreation. Events such as Chinese festivals and Japanese festivals are incorporated in an annual
cycle of shop decorations and merchandise promotion.

In the United States, the basic retail cycle begins in early January with merchandise
for Valentine's Day, which is not until mid-February. Presidents' Day sales are held shortly
thereafter. Following this, Easter is the major holiday, while springtime clothing and garden-
related merchandise is already arriving at stores, often as early as mid-winter (toward the
beginning of this section, St. Patrick's Day merchandise, including green items and products
pertaining to Irish culture, is also promoted). Mother's Day and Father's Day are next,
with graduation gifts (typically small consumer electronics like digital cameras) often being
marketed as "dads and grads" in June (though most college semesters end in May; the grads
portion usually refers to high school graduation, which ends one to two weeks after Father's Day
in many U.S. states). Summer merchandise is next, including patriotic-themed products with the
American flag, out by Memorial Day in preparation for Independence Day (with Flag Day in
between). By July, back-to-school is on the shelves and autumn merchandise is already arriving,
and at some arts and crafts stores, Christmas decorations. (Often, a Christmas in July celebration
is held around this time.) The back-to-school market is promoted heavily in August, when there
are no holidays to promote. By September, particularly after Labor Day, summer merchandise is
on final close out and overstock of school supplies is marked-down some as well,
and Halloween (and often even more of the Christmas) merchandise is appearing. As the
Halloween decorations and costumes dwindle in October, Christmas is already being pushed on
consumers, and by the day after Halloween retailers are going full-force with advertising, even
though the "official" season doesn't start until the day after Thanksgiving. Christmas clearance
sales begin even before Christmas at many retailers, though others begin on the day after
Christmas and continue on at least until New Year's Day but sometimes as far out as February.

Merchandising also varies within retail chains, where stores in places like Buffalo might
carry snow blowers, while stores in Florida and southern California might instead carry beach
clothing and barbecue grills all year. Coastal-area stores might carry water skiing equipment,
while ones near mountain ranges would likely have snow skiing and snowboarding gear if there
are ski areas nearby.

Trading industry

In Eastern Europe, particularly in Russia, the term "merchandising" is commonly used within the
trading industry and denotes all marketing and sales stimulation activities around PoS (point of
sale): design, creation, promotion, care, and training of the sales staff. A merchandiser is
someone who is continuously involved in business promotion by buying and selling of goods. In
Asian countries, such as India, this term is more synonymous with activities right from sampling
and idea conception to dispatching of the shipment. It is a job description that involves leading
and working with different departments within the organization, suppliers and buyers to deal
with timely deadlines and accepted quality levels.

Retail supply chain

Merchandising at a Walgreens in Chicago

In the supply chain, merchandising is the practice of making products in retail outlets available to
consumers, primarily by stocking shelves and displays. While this used to be done exclusively by
the stores' employees, many retailers have found substantial savings in requiring it to be done by
the manufacturer, vendor, or wholesaler that provides the products to the retail store. In the
United Kingdom there are a number of organizations that supply merchandising services to
support retail outlets with general stock replenishment and merchandising support in new stores.
By doing this, retail stores have been able to substantially reduce the number of employees
needed to run the store.

While stocking shelves and building displays is often done when the product is delivered, it is
increasingly a separate activity from delivering the product. In grocery stores, for example,
almost all products delivered directly to the store from a manufacturer or wholesaler will be
stocked by the manufacturer's/wholesaler's employee who is a full-time merchandiser. Product
categories where this is common are Beverage (all types, alcoholic and non-alcoholic), packaged
baked goods (bread and pastries), magazines and books, and health and beauty products. For
major food manufacturers in the beverage and baked goods industries, their merchandisers are
often the single largest employee group within the company. For nationwide branded goods
manufacturers such as The Coca-Cola Company and PepsiCo, their respective merchandiser
work forces number in the thousands.

Licensing

In marketing, one of the definitions of merchandising is the practice in which the brand or image
from one product or service is used to sell another. Trademarked brand names, logos, or
character images are licensed to manufacturers of products such as toys or clothing, which then
make items in or emblazoned with the image of the license, hoping they'll sell better than the
same item with no such image.[1] For the owners of the IP (intellectual property) in question,
merchandising is a very popular source of revenue, due to the low cost of letting a third party
manufacture the merchandise, while the IP owners collect the merchandising fees.

Children

Merchandising for children is most prominently seen in connection with films and videogames,
usually those in current release and with television shows oriented towards children.

Merchandising, especially in connection with child-oriented films and TV shows, often consists
of toys made in the likeness of the show's characters (action figures) or items which they use.
However, sometimes it can be the other way around, with the show written to include the toys, as
advertising for the merchandise. The first major example of this was the TV show "G.I. JOE A
Real American Hero.," produced by Hasbro in the early 1980s, but this practice has been
common in children's broadcasting ever since.

Sometimes merchandising from a television show can grow far beyond the original show, even
lasting decades after the show has largely disappeared from popularity. In other cases, large
amounts of merchandise can be generated from a pitifully small amount of source material
(Mashimaro).

Adult

The most common adult-oriented merchandising is that related to professional sports teams (and
their players).
A smaller niche in merchandising is the marketing of more adult-oriented products in connection
with similarly adult-oriented films and TV shows. This is common especially with the science
fiction and horror genres. (Example: McFarlane Toys) Occasionally, shows which were intended
more for children find a following among adults, and you can see a bit of a crossover, with
products from that show oriented towards both adults and children. (Gundam model kits) An
early example of this phenomenon was the cartoon character Little Lulu, who became licensed to
products for adults, such as Kleenex facial tissue.[2]

Sometimes a brand of non-media products can achieve enough recognition and respect that
simply putting its name or images on a completely unrelated item can sell that item. (An example
would be Harley-Davidson branded clothing.)

Prop replicas

Another way companies sell merchandise is the prop replica market. Mainly focused on fan-
made articles, prop replicas are becoming more and more famous as users tend to collect those
pieces of movie memorabilia that big companies do not mass-produce, reaching even higher
levels of quality than certain 'licensed' replicas.

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 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.

Types of Sales Quotas:

This can include many things from cold calling, Marketing emails, advertisements, invitation to
executives for events and many more things. It’s always in the interest of the sales team as to
how they should get the stuff out.

1. Sales volume quota: This always includes sales in monetary terms or units sold for a specific
period of time. This type of sales quotas is always set for a given year. The sales teams are then
assigned their yearly quotas to be accomplished. These quotas are set in the areas mentioned
below:
(i). Product line

(ii). Product range

(iii). Branch offices

(iv). Individual sales person

2. Profit quotas: This type of quotas is very useful for FMCG companies as various products
add to varying levels of profits. The advantage of this type of sales quota is that the sales person
can use his time optimally. Hence he/she can strike a balance between high and low profit
yielding products.
3. Expense Quotas: These are linked to selling costs with a realistic time frame. Few companies
set quotas for expenses to different sales levels achieved by the sales person. The sales team may
be given an expense budget which is a percentage of a particular region’s sales volume. He/She
should spend only that sum as expenses.
4. Activity Quotas: Under such quotas the sales team is required to execute other activities that
will have a long term bearing on the company’s goodwill. Here certain objectives related to the
job are set in attaining the performance targets of the sales force. When it comes to the Indian
companies we have few common types of these quotas as mentioned below:
Sponsored

(i). Quantity of sales presentation made

(ii). Amount of calls made

(iii). Number of dealer visits

(iv). Recovery calls made

(v). New clients procured

The given below graph represents the percentage of sales by using cold calling methods. We can
easily find out the number of attempts with percentage success. It is relevant from the picture
that more the number of attempts more are your success percentage.

Now let us see the various methods to calculate Sales quotas:

 Any previous year’s regional sales numbers.

 Cost to the company administration plus gross margin.
 Revenue goals dedicated in the beginning.
 Top sales person’s percentage achieved in his region.
Most companies use a permutation of these quotas. The best combined quotas are usually Sales
volume and activity quota. Such combination influences selling and non selling activities. The
above methods are only time tested from year to year to achieve the sales quota as these quotas
are promised to vendors, investors and banking firms. They are also influenced by external
factors and expenses which are not in the hands of sales personnel. It is advised not to have too
many sales quotas as the sales person may not be able to equally concentrate on them.

What is After Sales Service ?

After sales service refers to various processes which make sure customers are satisfied with
the products and services of the organization.

The needs and demands of the customers must be fulfilled for them to spread a positive word of
mouth. In the current scenario, positive word of mouth plays an important role in promoting
brands and products.

After sales service makes sure products and services meet or surpass the expectations of the
customers.

After sales service includes various activities to find out whether the customer is happy with the
products or not? After sales service is a crucial aspect of sales management and must not be
ignored.

Why After Sales Service ?

After sales service plays an important role in customer satisfaction and customer retention. It
generates loyal customers.

Customers start believing in the brand and get associated with the organization for a longer
duration. They speak good about the organization and its products.

A satisfied and happy customer brings more individuals and eventually more revenues for the
organization.
After sales service plays a pivotal role in strengthening the bond between the organization
and customers.

After Sales Service Techniques

 Sales Professionals need to stay in touch with the customers even after the deal. Never
ignore their calls.
 Call them once in a while to exchange pleasantries.
 Give them the necessary support. Help them install, maintain or operate a particular
product. Sales professionals selling laptops must ensure windows are configured in the
system and customers are able to use net without any difficulty. Similarly organizations
selling mobile sim cards must ensure the number is activated immediately once the
customer submits his necessary documents.
 Any product found broken or in a damaged condition must be exchanged
immediately by the sales professional. Don’t harass the customers. Listen to their
grievances and make them feel comfortable.
 Create a section in your organization’s website where the customers can register
their complaints. Every organization should have a toll free number where the
customers can call and discuss their queries. The customer service officers should take a
prompt action on the customer’s queries. The problems must be resolved immediately.
 Take feedback of the products and services from the customers. Feedback helps the
organization to know the customers better and incorporate the necessary changes for
better customer satisfaction.
 Ask the customers to sign Annual Maintenance Contract (AMC) with your
organization. AMC is an agreement signed between the organization and the customer
where the organization promises to provide after sales services to the second party for a
certain duration at nominal costs.
 The exchange policies must be transparent and in favour of the customer. The customer
who comes for an exchange should be given the same treatment as was given to him
when he came for the first time. Speak to him properly and suggest him the best
alternative.
 Defining Performance Standards

Performance standards provide the employee with specific performance expectations for each
major duty. They are the observable behaviors and actions which explain how the job is to be
done, plus the results that are expected for satisfactory job performance. The purpose of
performance standards is to communicate expectations. Keep in mind that good performance
typically involves more than technical expertise.

Performance standards are:

 Based on the position, not the individual

 Observable, specific indicators of success
 Meaningful, reasonable and attainable
 Used to describe a "fully satisfactory" performance once an employee is trained
 Expressed in terms of quantity, quality, timeliness, cost, or outcomes

In determining performance standards, consider the following:

 What does a good job look like?

 How many or how much is needed?
 How long should it take?
 When are the results needed?
 How accurate or how good is acceptable?
 Are there budget considerations?
 Are there safety considerations?
 Are there legislative or regulatory requirements that require strict adherence?
 Are there behaviors that are expected in your department to promote teamwork,
leadership, creativity, customer service?
 What results would be considered satisfactory?
 What condition will exist when the duty is well performed?
 What is the difference between good and poor performance?
Quota Ratio

Many sales organizations reflexively apply the industry standard of a 3x sales pipeline-to-quota
ratio. Since this number has been bandied about among sales organizations for decades, many
companies unthinkingly adopt it, treating that ratio as a one-size-fits-all blanket solution. By
looking at historical conversion rates, companies can gain a clearer picture of what their true
sales pipeline-to-quota ratio is. A sales manager looking at this report, in conjunction with the
overall won/loss report for each quarter, can determine how much revenue resulted from the
corresponding pipeline value that quarter and with some simple division, come up with an
accurate sales pipeline-to-quota ratio that is more accurate than a blanket 3-to-1.

However, even more worrying than adopting a 3-to-1 sales pipeline-to-quota ratio is the fact that
companies looking to increase quotas simply demand ever more pipeline, pushing the ratio up to
4x, 5x or more. This incessant demand for more – more revenue! more pipeline! – is indicative
of a failing sales philosophy.
 The truth is that companies don’t necessarily need more sales pipeline – they simply need better
sales pipelines, as well as more realistic quotas and improved conversion rates. Let’s break down
each of these three areas leading to improved sales pipeline-to-quota ratios.
Tighter Sales Pipelines

Research has shown that companies with philosophies demanding quantity over quality – 4x or
5x quota in their sales pipelines – unsurprisingly tend to have lower quality leads within their
sales pipelines. Instead of qualifying leads through marketing channels or other stringent ways of
making sure that these leads fit their ideal customer profile, these organizations simply cast as
wide a net as possible, in an attempt to boil the ocean.

This creates a lot of unnecessary work for your sales reps, putting a vast number of unqualified
leads on their plate This will drive down their activity efficiency ratios, as a majority of their
many calls will ultimately fall on deaf ears. Help your reps prioritize opportunities in their sales
pipeline – especially Marketing Qualified Leads (MQLs) – by implementing stricter
qualification methods at the top of the sales funnel. When your lead gatekeepers are more alert,
only the best prospects who are most likely to convert will trickle through the pipeline.

Selling Expense | Sales Expense

Definition: Selling expense (or sales expense) includes any costs incurred by the sales
department. These costs typically include the following:

 Salesperson salaries and wages

 Sales administrative staff salaries and wages
 Commissions
 Payroll taxes
 Benefits
 Travel and entertainment
 Facility rent / showroom rent
 Depreciation
 Advertising
 Promotional materials
 Utilities
 Other departmental administration costs

If the marketing function is merged into the sales department, then a number of additional
marketing costs may be included in the preceding list, such as the costs of developing advertising
campaigns and the artwork costs incurred to develop promotional materials.

The proportions of costs incurred can vary dramatically by business, depending upon the sales
model used. For example, a customized product will require considerable in-person staff time to
obtain sales leads and develop quotes, and so will require a large compensation and travel cost.
Alternatively, if most sales are handed off to outside salespeople, commissions may be the
largest component of selling expense. An Internet store may have few direct selling costs, but
will incur large marketing costs to advertise the site and promote it through social media.

There are varying treatments of selling expenses. Under the accrual method of accounting, you
should charge them to expense in the period incurred. Under the cash basis of accounting, you
should charge them to expense when paid.

You would normally report selling expenses in the income statement within the operating
expenses section, which is located below the cost of goods sold. However, under a contribution
margin income statement format, you would be justified in reporting commissions within the
variable production expenses section of the income statement, since commissions usually vary
directly with sales.

Expense ratio (expense to sales ratio) is computed to show the relationship between an individual
expense or group of expenses and sales. It is computed by dividing a particular expense or group
of expenses by net sales. Expense ratio is expressed in percentage.

Formula:
The numerator may be an individual expense or a group of expenses such as administrative
expenses, sales expenses or cost of goods sold.

Call-Frequency Ratio :

It is calculated by dividing the number of sales calls on a particular class of customers by the
number of customers in that class.

Sales Backlog Ratio/Order fall ratio

The sales backlog ratio compares the confirmed order backlog of a business to its sales. When
measured on a trend line, the measurement clearly indicates changes that will likely translate into
future variations in sales volume. For example, if the sales backlog ratio exhibits an ongoing
trend of declines, this is a strong indicator that a business is rapidly working through its backlog
without renewing the backlog, and so may begin to report sales reductions. The opposite trend of
an increasing sales backlog does not necessarily translate into improved future sales, if a
company has a bottleneck that prevents it from accelerating the rate at which it converts
customer orders into sales.

The customer order information needed for this ratio cannot be entirely derived from a
company's financial statements. Instead, it must be derived from internal reports that aggregate
customer order information.

To calculate the sales backlog ratio, divide the total dollar value of booked customer orders by
the net sales figure for the past quarter. Only quarterly sales are used, rather than sales for the
past year, in order to more properly reflect a company's short-term revenue-generating capability.
The formula is:
Total order backlog
Quarterly sales