‘The Perspective for Sales Management 1.7 OE a In any organisation, there are different functions or departments ~ manufacturing, market ing and sales, finance, HR etc, Among these functions or departments, marketing, and more directly sales, is the only department which comes into direct contact with the market and the customers and generates revenue. This indicates the role of sales and sales management ina business enterprise. ROLE OF SALES MANAGEMENT IN AN ORGANISATION The health, performance and growth of a corporate organisation depend on, or are deter- mined. by, its sales or sales turnover. This may appear simplistic, but it conveys a funda- mental fact or truth. The growth of a company is defined or measured in terms of growth of total revenue. And more than 90 percent (it can be 100 percent also) of the total revenue is contributed by sales turnover or revenue. The rest comes from interest income or returns on investments (bonds, FDRs etc). This shows the significance of sales or sales revenue in the performance and growth of a corporate entity. The level of, or increase in, sales is the final outcome of organisational efforts — strategic planning, budgeting, resource allocation, manufacturing, marketing etc, Closely linked to the level or increase in sales is the market share of a company. Sales ~ increase or decrease —show the absolute level of performance or growth of a company, but market share reflects relative performance and growth - relative to the industry and/or competitors, To sustain and increase sales and market share (which is the real indicator of performance of a company), sales management becomes a key factor or process. So, sales management, along with other forms of organisational planning and management, becomes a direct and critical determi- nant of performance and growth of a company. But this is not always understood well and, therefore, not appreciated. This often happens because sales management is not always seen in all its ingredients or dimensions. Therefore, certain conceptual and topical clarifications in the beginning may put the subject in the right perspective. This is one of the objectives of the present introductory chapter. We may start by distinguishing between selling and sales management. Selling is a job or a task or one side of a transaction, the other side being buying (like two sides of a coin). Sales. management is a process ~ it involves almost everything which makes possible a sale, increase in sales, improvement in sales performance, sustaining or increasing market share, better cus- tomer service etc. These also imply, or rather involve, policy or principles on selling, selling tools or techniques and sales strategies ~ formulation, implementation and evaluation and control. All these contribute to better results or success in selling, As we talk of sales and selling, salespersons or the sales force and sales manage come into reckoning, Broadly speaking, sales managers organise, guide and lead the sales force, and salespersons conduct or execute selling in the field or in their respective areas or territories. Salespersons can be of various types in terms of characteristics and skills, The nature of jobs, types of sales managers and the characteristies of salespersons are analysed in detail in Ch. 5. For effectiveness and better results, the sales force has to be properly or- ganised, and their jobs or tasks have to be clearly defined or spelt out. This involves, first, al- location of sales jobs or quotas or territor' he nature of job and territory allocation would be different for consumer goods (FMCGs and consumer durables) and industrial produc! Simultaneously with allocation of jobs and responsibilities, suitable compensation packagesF 1 lanagement a | i 4,8. Sales and Distribution Mi essary training schemes need to be designed for salespeople, nec oF ski have to be offered oe riate motivational programmes have to be developed to inspin development 3 eave eificency and optimise performance. All these will be diseusseq'* salespersons to increa: it viforent chapters which follow. oe a ae onmanisaton sales or selling is inseparable from, or rather intrinsically related jy in any organisation, s fa some direct selling/marketing by companies like Amway) or yy” erate Ce the company. This particularly applies to FMCGs. Both sales and die ciefon, in tarn, have to be understood or viewed in a logical operational system in relation keting, — i ° ny ‘ rganisations; the relationship between sales and marketing is not clearly un. | derstood or emphasised. Sometimes, too much focus is given on selling almost overlookin the marketing perspective or the role of marketing in the success of selling. Therefore, the relationship between selling and marketing needs to be made more clear to remove any con. ceptual ambiguity. But before we do that, let us look into the evolution of selling and sales management over centuries to its present form. SALES MANAGEMENT: EVOLUTION AND DEVELOPMENT The origin of selling is almost as old as human civilisation. In the Bronze Age, the traveing salesman used to sell axes, swords, blades, buttons etc. In the Medieval Age, enterprising traders, mostly Britishers, started going across countries to destinations like India. Over the centuries, the business of buying and selling has gone through various phases of evolution and development. Evolution in terms of distinct phases since the 1950s from simple con- sumer selling to relationship selling is shown in Fig. 1.1. Consumer Selling Industrial Seting Non-Profit and : So Modern i cietal Selling ase t i Services Manage- ' | Selling ment ' ' Relationship it | Selling i} _ tot t 1 1960s 1960s 19708 1980s 1990s Fig.aa Evolution of Selling and Sales Management Initially, sel . system) 2 Senet Pare transactional approach — exchange of goods for goods (bartet concept of a ‘customer’ evolved, money: The concepts were of a ‘buyer’ and a ‘seller’, Te _ Period (1950s and some earli only over time as the competition increased. During this wSY Years), selling consisted predominantly of consumer eeodse ‘The Perspective for Sales Management 1.9 Companies like Procter é& Gamble in the US Pioneers in selling soaps, detergents etc. In the 1960s, selling of industrial products started and slowly gathered momentum. The eeu ion and development of selling continued. The 1970s saw the emergence of non-profit an ota Selling. During the early 1980s, ‘service’ as a product was getting recognised and trent of (hang flourished during the decade. The evolutionary process led to the develop- ind the emphasis was laid on relationship selling during and retaining them. The objective of companies was to ty through better sales management and customer service. and Anglo-Dutch, Unilever were among the the 1990s ~ developing customers build customer loyal Professional Sales Management Relationship selling was developed through professional sales management ~ also known as modern sales managenient. Professional sales management owes a lot to Henry Patterson, known as the architect or father of modern sales management. Patterson modified and im- Proved upon some of the existing tools/techniques and introduced newer methods of selling and sales management. He laid emphasis on sales quotas and territories for salespersons. This made fixation of both responsibility and compensation and rewards of salespersons more objective and transparent. Patterson was an innovator who demonstrated how a simple sales force can be transformed into a cohesive team for improving sales and profit through skill development and application of situational strategies. Partly following Patterson's directions in the 1980s and 1990s, many companies renewed focusing on management of territories and identifying and treating ‘territory accounts’ as Profit centres. Because of increasing competition, successful management of a profit centre also required effective cost management. In many companies, this was/has been made pos- sible by greater use of management information system (MIS) and linking or integrating pro- curement, logistics and sales operations with MIS. Companies like Walmart have successfully done this. The above discussion shows that sales management has undergone many structural and strategic changes; these also include technological changes. The salesperson has long abon- dened the old transactional approach, and plays many roles vis-a-vis the customer — pro- viding information about the market and products/brands, receiving feedback on quality, price, competition, and making, and receiving suggestions for better service. This is done to improve the salesperson’s own effectiveness or operating results and also the company’s performance. All this goes much beyond just closing a sale. This relational approach has almost transformed the nature of sales management with simultaneous focus on incidence of cost or cost management. Research has shown that it costs five times more to enlist a new customer than to sell to an existing customer.' Empirical research (j.e., study of company experiences) has also shown that a satisfied customer brings five new customers (through word of mouth) and a dissatisfied customer drives away ten customers. Inthe evolutionary process, sales managers’ roles have also undergone significant changes. The sales managers have a challenging task in cost management and competitive relational | LK. Panda andS. Sahadev, Sales and Distribution Management, Oxford University Press, New Delhi, 2005, p. 6.4,412. Sales and Distribution Management . RELATIONSHIP BETWEEN MARKETING AND SELLING onyplementarity of selling and marketing, ‘Th; + This neds We have just mentioned about the ¢ right perspective. be elaborated and understood in the We start with the marketing function and its major aspects or constituents y bearing on selling. "DICH hang Marketing Mix and Selling” Some call it marketing mix; some call it 4Ps. McCathy described this i t 3s a 1s. McCa s in ten Product, Price, Promotion and Place (distribution): Product isthe most cruciate eth rarketing mix, followed by ‘price’, ‘promotion’ and ‘place’ (distribution), These fan ments of the marketing mix are equally critical for selling. ine ee The genesis of the market ting mix o : ne APs is: If a company manages t0 achieve . with the rig) . ,, keting or selling programme wuld ee Promotion and right place or distributio’ ing a managing the marketing mix is the ase and successful. Therefore, assert ca a wi arketi Nis i ing ik ilo a winning combination ea narkting or sling task and blending ‘This section is entirely ba of strategy. Marketing suct i. ee ae Sed on A. Nag, Strategic Marketing (Second Edition.) Macr™l™" die’ mg (Second Edition,) Ma‘The Perspective for Sales Managemant 1.13 depend, to a large extent, on the choice and balance of the marketing mix and the strategy which depend on this, Itis not only a matter of blending or balancing the four Ps, It is more than that because each P has a number of sub-components or sub-elements which are actually extensions of the main Ps. The sub-elements, among themselves, apply more to either industrial products or consumer goods or services, The Ps along with the sub-elements are shown in Table 1.2 Table 1.2 Four Ps and their elements Product [Price Promotion Place * Brand + Sensitivity * Communication |+* Customer location * Quality * Paymentterms |+ Advertising * Outlet location + Features + Installments * Sales promotion | + Channels + Packaging + Discounts * Publicity * Delivery * Warranties * Commissions + Test selling + Stocks + Service Source: A. Nag, Strategic Marketing (2008), Macmillan India, p. 137 (Box 91!) Alll the sub-elements are relevant to selling. But some of these apply to selling more di- rectly; for example, sales promotion, warranties, service, payment terms, channels, test sell- ing etc. The problems of balancing the different elements, however, would still remain. Sales promotion, distribution channels and delivery, for instance, have to be properly balanced. An example is given here of how wrong balancing in the marketing mix can result in mar- keting or selling failure, In 1987-88, Parle Exports (maker of Thums up, Limca and Gold Spot) made a high profile launch of Big Bite which was like a burger ~ a bun with vegetables or chicken or mutton filling topped with different sauces. The launch was preceded by several campaigns in Mumbai, which had tantalising punchlines. Mumbaites responded very enthu- siastically, and, in the first month of the launch, 90 percent of the target customers had tried Big Bite. But, thereafter, the sales declined and in less than six months, it was reduced to 10 percent. Big Bite was a big failure, and Parle had to withdraw the product. Research revealed that Big Bite did not live up to customers’ expectations. Customers found it dry compared to its nearest rival ‘Rolls’ and perceived it to be like any other burger. Their expectations were raised by the Big Bite ads, but the product failed to rise to those lev- els. This was a case of product-promotion mismatch. The Big Bite case shows that the marketing manager (and, by coroXary, the sales manager) should ensure the compatibility of the marketing mix factors or elements and synergise them into cohesive marketing or selling strategy for effectiveness or success. In doing so, two fac- tors should be particularly considered: a. Consumer trends factor b. Reach factor Consumer tastes and preferences or consumer choice keeps changing; this means changing consumer trends. Environmental scanning helps to identify and monitor the changing trends and enables a company to develop the right marketing mix. Changing consumer trends alsoBs oS 1.14 Sales and Distribution Management o offer opportunities to companies for product development, positioning and establishing ay {PPropriate product-price combination. For example, Charms cigarettes were Positioned ea berticular price segment because there was no other brand in that range when it was launched. Besides pricing, lifestyle advertising was also used in tune with the emergin, culture. Maruti’s new product development in just a few years to suit the consumer trend has sustained its competitive advantage in the market in spite of intensifying competition The emergence of foreign brands in the ready-made garments market (Peter England, Van Heusen, Wrangler, Arrow, etc.) has created a customer segment which attaches great value oF prestige to the brand name or image (more focus on the product in the marketing mix), Consumer trends on the used to economies have given rise to ‘value for money’ brands in Soaps, detergents, two wheelers and moulded luggage. New types of channels are being created to increase the consumer reach and for marketing et Selling new product categories. Reliance Fresh, with its newly created channel, is mal ing fresh fruits and vegetables readily available to urban consumers. Pepsi, already capitalising on the expanding soft drink market, has the fountain channel for its drinks. Titan has created a new ambience with its exclusive channels to provide a new kind of shopping experience for ifs Consumers in metropolitan and large cities. Asian Paints has well synergised its produet line advantage with its vast network of channels for different types of consumers to create the Push effect for various product types/ categories. Computer education institutes, food chains and ready-made garment brands are using the franchising route to reach the consumers, INTEGRATING SELLING AND MARKETING Understanding or establishing the relationship between marketing and selling may not be enough. Organisations need to go one step further and integrate the two functions for prop- er/ better results. One can start with the conventional view or approach to the two functions or departments and move towards the integrated relationship. Conventional Approach to Integrated Relationship Let us start with the selling function or approach. It has been mentioned earlier that the salespeople sell the product the company makes. Therefore, the starting, point in selling is the product or production. The sales process can be viewed as a chain ending in profit with its own focus and means or method. This is shown in Fig, 1.2. Starting Means! End al Point Foous, Method Result Objective Sales Sales Production Product. Promotion Proftt Distribution Volume Fig. 1.2 The Selling ApproachThe Perspective for Sales Management 1.15 « Marketing, in comparison to selling, is concerned with offering the product (in terms of quality, price etc.) the customer wants and the company makes that product. Therefore, the starting point in marketing is the market and the focus is on the customer, The marketing process is presented in Fig. 1.3. Starting | | go, Means/ End Final Point us Method Result Objective Acvorteht Sales! Market Customer promotion’ Market Profit Distribution Share L Fig. The Marketing Approach The selling approach and the marketing approach shown in Figs. 1.2 and 1.3 are not re- ally divergent or very different. There is an underlying relationship between the two, This can be made explicit by combining Figs. 1.2 and 1.3 through organisational integration. The integrated marketing-selling approach is depicted in Fig. 1.4. Starting Means! Final Point Focus Method Resutt | | Objective oe Sales/ Market | |Customer |-> | Product] Promotion’ Maral Profit Distribution ial Fig. 1.4 Integrated Marketing-Selling Approach Marketing and Selling: Structural Integration We have just mentioned about organisational integration. Organisational integration hap- pens best through organisational structure or organisational restructuring, Like other porate functions, this applies to marketing and selling also. One of the marketing and selling is through organisational structure or, more the company with respect to these two and related functions or act 7 In ine conventional sales-oriented company (ald model), istinct functions reporting directly to the MD or CEO. The other three functione ¢ ventional organisational structure, with marketing and selling as two sone TRE con ai tet. Ss two separate functions, is T cor best ways to integrate correctly, by restructuring tivities, }, marketing and selling are two1,16 "Sales and Distribution Management MDICEO Production Marketing| . Sales Markot Aaverisiea] | prometion | | Research Sales Administration | Management Field Sates Force! Fig. 1.5 The Sales-orlented Company: Sales and Marketing are Separate Functions In the professional or modern marketing-oriented company (new model), marketing and selling are integrated functions. In this type of organisatinn, cales reports to marketing and the marketing head Teports to the CEO, In most of the modern organisations, MIS is a new function or department which generates information flow and helps to integrate the other functions including marketing and selling functions, The modern organisational structure, with marketing and selling as an integrated function, is presented in Fig. 1.6 [Production] [Finance] [Marketing] [Rm Sales] Market Research Sales Field ‘Administration’ | Sales Fores] | Management Fig. 1.6 The Marketing oriented Company: Marketing and Seles are Integrated Functions Marketing and Selling: Operational Integration The integration of marketing and selling through the or, l u Banisational structure is the starting Point. This gives the policy perspective or policy direction of the top management. This sets‘The Perspective for Sales Management 1.17 the way for integration at the operational level and also at the strategic level. Most of the issues and problems arise at the operational level and, therefore, integration at this level is essential for efficient organisational functioning. Important operational issues involve fixation of periodic sales targets (salespersonwise/ territorywise) within the overall sales or revenue target set by the company (through the marketing department), Issues related to customer or market feedback (price, quality, com- petition etc.), cost, sales and margin management are included here. Problems faced by sales managers and salespersons in implementing, sales plans and strategies are also included. Many of these issues go beyond pure selling. Therefore, simultaneous involvement of mar- keting within an integrated framework is essential. Marketing and Selling: Strategic Integration The integration of marketing and selling at the strategic level is required to support opera- tional integration and also for future planning, growth and direction in sales or revenue. Marketing strategies can be long term or short term (also includes medium term). Long- term strategies include new market development for existing products or new product de- velopment (along with manufacturing) for existing markets or both, i., diversification (both new product and new market). Short-term strategies are more concerned with marketing mix. application to increase sales or market share in the immediate future. The integration of marketing and sales functions is more relevant and required for the formulation and implementation of short-term strategies which are essentially based on mar- keting mix applications. Strategy formulation takes place more at the marketing level, and implementation and feedback at the sales level. The integration of marketing and sales strate- gies is shown in Fig. 1.7. Tangier Market Development Strategy Marketing VA, Diversification srsieey. i Product ‘Short-term — "9 Strategy Strategy rang | Strategy Sales: Strategy Promotion Strategy Distnibution Stratogy Fig. 1.7. Integrated Marketing and Sales Strategies The integration of marketing and selling ~ at the organisational level, operational level and. strategic level — discussed above is presented in a consolidated form in Fig, 1.8.4.18 "Sales and Distibution Managoment [Marketing Operational | [Organisational Sratoge Level Level Level (CSaiina Fig. 1.8 integration of Marketing and Selfing: Consolidated Form LINKING SALES AND DISTRIBUTION MANAGEMENT So far, we have not mentioned about distribution management, It is time to do that, Distri- bution is inseparable from selling except for industrial products sold to original equipment manufacturers (OEMs). Most of the consumer durables are sold through distributors or au- thorised dealers or retail chains. Dell Computer is one of the few exceptions who adopt a direct selling model. The vast range of FMCGs is sold through the distribution channel with very few exceptions like Amway. There are a few companies like Eureka Forbes who use a blend of the direct model and the distribution channels. The role of distribution in sales man- agement will be discussed in Ch. 12. The distribution system consists of C&F agents, distributors, wholesalers and retailers. The carrying and forwarding agents (C&FAs) provide the most immediate link between the man- ufacturers and the distribution system or channels. C&FAs also include transportation and warehousing or stocking. The distributors are generally exclusive to a company; wholesalers are independent traders. Roles of distributors and wholesalers will be analysed in Ch. 15. Logically speaking, the distribution system complements or completes selling through its various forms or channels, Distribution management can be handled by the company itself or it can be outsourced from professional distribution agencies. Companies like HUL, B38 and Eureka Forbes themselves manage their distribution channels. There are many other companies - LG, Maruti, Nestle etc. ~ who outsource distribution. It is difficult to say which ‘of these methods/ alternatives is better. But in direct management of the distribution channel, the company generally exercises better control over the distribution system, Whatever may be the management system (in-house or outsourced), the complementary role of distribution remains. Selling involves targets, tasks and responsibilities in various forms, In many of these, distribution management has its own role to complete the selling process. Major sales tasks and responsibilities and role of distribution management are me? tioned in Table 1.3. ‘The Perspective for Sales Management 1.19 COCO eee Table 1.3 Sales Management Targets/Tasks and Role of Distribution Management Sales largets/iasks/respansibiltios Role of distribution management a. Achievement of sales targets + Movement and storage of goods closest to the customers/markets + Keeping high stock pressure at all selling points b. Coverage of outletstterritories/markets -» * Following sale plan/call plan designed by sales management + Pushing all products, brands, packs in every outlet c. Managing competition and market -»_ + Regular and written reports share + Follow-up on competition d. Managing institutional business and ~~» * Getting orders and executing them key accounts + Extending attractive payment terms/credit faciltios ©. Market feedback and reporting -) + Both for own products and compalition + Report on good practices of competing companies 1. Handling customer complaints! + + Direct interface with customers for prompt customer service action + Informing sales management if problems. persist + Ensuring wide and equitable distribution g. Implementing marketing/selling + + Making every promotion a success in terms plans - product launches, consumer of objective and trade promotions + Ensuring success of new products/pack launches + Organising and participating in fairs, exhibitions etc. ‘Source’ Adapted from KK Havaldar and VM Cavale, Sales and Distribution Management, Tata McGraw-Hill, New Delhi, 2007, p.1.15 (Table 1.4). INTEGRATION OF MARKETING, SALES AND DISTRIBUTION The integration of marketing and selling and also sales and distribution are two important steps towards effective sales management, The third or final step in this direction is the inte- gration of all the three activities ~ marketing, sales and distribution. The integrated roles of marketing, sales and distribution functions should be clearly per ceived/understood by individual company management, the marketing department, the sales department and the distributors, particularly the exclusive distributors, The comple- tmentarity adds value to the selling process both for the company (in terms of margin) and for the customers (in terms of satisfaction), We have mentioned above about operational and strategic integration of marketing and selling. For the fulfilment of the corporate or marketing objective, this also requires integra-1.20 Sales and Distribution gement cen with distribution plans and strategies. This is particularly important for the vast ran, of FMCGs whose sale is heavily dependent on channel network or distribution management This can be explained with an example. A company’s objective may be to increase marke, share by 5 percent. This can be done either through penetration in the existing markets ang extracting share from competitors or generating additional sales in new markets or Tegions, In either case, to fulfil the objective, certain sales targets have to be set and achieved. For this, commensurate sales plans and strategies have to be formulated and implemented, For stra. feBic success of marketing and sales plans, appropriate distribution support is indispensable in terms of timely delivery or replenishment of stocks to all outlets, ensuring timely/constant availability of the complete product range of the company, handling customer complaints/ feedback etc. Best results can be obtained if the marketing, sales and distribution plans and Strategies are perfectly coordinated and integrated. phe integration of marketing, sales and distribution with focus on customer is summarised in Fig. 1.9, ‘Marketing AN Selling Distribution Customer Customer Service Customer |=) Relationship FIg.1.9 Integration of Marketing, Sales and Distribution Effectiveness to efficiency Multidisciplinary approach Internal marketing Increasing use of the Internet Customer relationship management (CRM) . Professionalism in selling Also see Fig. 1.10. me Bagge‘The Perspective for Sales Management 1.21 Environmental’ Driving Forces Increasing Speed in Customer Competition Operation Focus Now Trends’ Developments Etectiveness Dent Internat |) Uso of tho Professionalism (0 Efficioncy ae Marketing internot | | CRM in Selling Fig. 1.10 New Trends/Developments in Sales Management Effectiveness to Efficiency Effectiveness means plan-output relationship, i.e., how much of the plan has been fulfilled or realised, Efficiency, on the other hand, is input-output relationship, ive., how much has been produced or achieved per unit of input or cost. Effectiveness, therefore, focuses on contribu. tion in relation to target or objective, and efficiency means contribution in relation to cost. Even if both input and output are low, efficiency can be high. Similarly, output are high, efficiency can still be low. Effectiveness is important, but the final focus should be on efficienc or achievement has to be assessed in terms of cost. To counter incr competition, companies are now concentrating on improving efficien Petitiveness, even if input and 'y because every result easing or intensifying cy to secure price com- Efficiency can be achieved in two ways: first, by increasing productivity and, reducing cost through better cost management, The improvement in producti the manufacturing level (essentially labour or worker productivity) and also during all sub. sequent operations ~ logistics, distribution and selling, Cost management or cost reduction can take place at various stages right from procurement of raw materials through the entire supply chain, Many companies are now working back from price (decided by competition or market) and setting cost targets to achieve greater efficiency. Japanese companies - Toyota, Honda, ete ~ are foremost among them. | secondly, by ivity can be at Multidisciplinary Approach The focus on efficiency is forcing the companies to ado} marketing and selling. In manufacturing, increase in pro\ four different functions or departments - R&D, pt a multidisciplinary approach to ductivity or cost reduction involves Procurement, production process and quality1.22 Sates and Distabution Management Tonttol or management - each of these being handled by different eens and iin Logistics, operations, advertising and sales promotion areall specialised jobs and rede fandled by appropriate specialists in the field. So, the ‘total’ markatng © selling actiiyy function becomes multidisciplinary in approach, MIS is offen sed fe orselling coordinate or integrate different functions involved in successful ma 16 OF selling, Internal Marketing internal marketing is increasingly becoming a necessity and practice in many companies Philip Kotler has mentioned about three roles of successful marketing (selling) in relation to the customer: internal marketing, external marketing and interactive marketing, Internal marketing relates to the marketing selling department's interaction with employees (mostly managers) of the organisation to explain to them and to convince them about their role in marketing and selling and to motivate them to set ve customers. Exierual marketing ig marketing as conventionally understood; this involves making attractive offers to customers and inducing them to buy the company’s Products, Interactive marketing relates to employees (who have something to do with customers) interactions with customers and building tela. tionships with them. This is illustrated in the marketing triangle (Fig. 1.11). Company Internat x External Marketing Marketing Inieractve Marketing Employoos Customers Fig.t.11 The Marketing Triangle For external marketing to be successful, both internal marketin have fo play their role. Internal marketing, in particular, Noe moi ~ manufacturing, finance, logistics - on which, marketing depen alise and appreciate that they have a vital role in the suse of happened. In many companies, the general feeling withig theo: 's the marketing department's job, and others are Pariment needs to do necessary ‘internal marketing’ to change This change, however, is taking place. Companies selling may be the final contact point with the eusta to play their complementary roles for the achiews becoming the trend, ig and interactive marketing re critical role. Departments \ds to a large extent must re- marketing. So far, this has not “Banisation is that ‘marketing’ are also now realising that marketing ot mers, but the rest of the organisation has ment of sales targets. This is increasingly Increasing Use of the Internet Companies use the internet for two Teasons: first, for sellin, ce " st, \ On the internet or e-commel and, second, for information management or MIS, Both uses incorporate speed in operation‘The Perspective for Salos Management 1.23 ee OO and faster reach to the customer. Internet selling will be discussed in Ch. 9. The other use, ie. MIS, which is more critical from the operational point of view, is explained here. MIS, in relation to sales management, ralates to collection, storage (i. creating/develop- inga database), analysis and dissemination of information to required destinations (corporate sales managers, territory sales managers, distributors etc) in relation to sales. Through MIS, companies have developed /are developing appropriate monitoring and control systems so that the entire sales operation is/can be managed with speed, consistency and reliability. This implies that MIS also enables, rather facilitates, integrated sales communication. This means communication within the entire sales team — between corporate sales management and field sales management and within the field sales management for faster implementation and results. Walmart is one of the best examples of how MIS can be effectively or successfully used for fast and efficient business operation, Walmart has MIS staff of about 1200 and system links with about 5000 manufacturers. Walmart, in fact, leads the industry in MIS/IT. Says Scott, Senior VP and Chief Information Officer of Walmart, ‘With this technology, we are getting better, quicker and more accurate information to manage and control every aspect of our business,’ Walmart’s computer networking system is directly linked to over 200 vendors to make supplies faster. Walmart has one of the world’s largest private satellite communication systems to manage ils distribution operation. Customer Relationship Management (CRM) Companies have been always conscious, or rather concerned, about the customer because customers provide them their bread and butter or earnings. But the manner in which they have been handling the customer has changed over time with increase in competition and knowledge of the market, Over time, focus on customer has evolved like this (Fig, 1.12). ‘Customer Customer Customer Relationship Customer Focus Relationship. Management Loyalty Fig. The final objective or target is customer loyalty. Every company strives to achieve it, But not many companies have been successful. One of the most successful companies is Colgate Palmolive. Because the company has been able to establish unmatched customer loyalty, Colgate has been the market leader in the toothpaste market for a number of decades now. Customer relationship marketing or selling combined with IT or MIS has led to customer relationship management (CRM). CRM aims at building “mutually satisfying relations” with key customers/accounts, distributors and suppliers to create and sustain their preference for the company and its business. Not only in consumer goods but in business-to-business (BtoB) marketing or selling also, managing buyer relationship is becoming a major marketing challenge and a matter of strat- egy. In BloB markets, the traditional markeling mix is getting replaced by the buyer relation- ship mix. In these markets, closer customer-supplier relationship is also developing through total quality management (TQM) and Just-in-time (JIT). Hewlett-Packard, IBM, Xerox and 42. Evolution of Customer Focuso~\ 4.24 Salon and Distebution vagement BHEL are good examples of building or enhancing the buy’ ee aes through, TOM and JIT ~ relationship between an original Slap calliicvendattiees rine ts Suppliers of components and accessories. At Aree call it’vendorship partnerships sang at Philips in Europe, they describe it as ‘co-makership’, ; CRM as an IT-based too! is finding increasing use among oe of Beto-B Produ consumer goods and services, But because CRM is predominantly tec! = Ry OF IT-based, it oes not often emphasise relationship as people-based or ae earns CRN Teal Perspective may be lost. Many companies/managers tend to equal change anal Biving technology precedence ‘Over customers and business, This trend Must cl nee. 8 Rigby ang Ledingham have rightly pointed out in designing and evaluating CRM systems, busines Ought to be given Precedence over technology. Managers should not be distracted by What CRM software can do; they should rather concentrate on what it should do for theit compa, nies as well as their customers* Professionalism in Selling New trends or developments in sales management discussed so far — focus on @ multidisciplinary tal marketing, increasing use of MIS/IT ~ imp trend, ic., sales management. In fact, the implementation ofessional management including. profession, agement. Companies like Procter f Gamble, HUL and ITC have amp Selling has moved far away from tr Approach because of competitive choices lomers, Today, a successful salesperson uses « combinatio skills, the ability to conclude a business A study on what buyers like most in sales People identified qu. such as product knowledge, integri - credibility, reliability important." The role of skill development and training also comes here. For the development of proper attitudes, “kills and techniques, salespersons, and exes sales managers, require ap- Pirpriate training. Many companies have setup theit ews ma nagement development centres for training in professional sales management. Different new trends/developments mentioned above in the relevant chapters later. ficiency, ly one more of these new al sales man. demonstrated this, Honal transactional approach to alities or characteristics and professionalism as the most Will be discussed in greater detail THE COMPLETE SALES MANAGEMEN The perspective for sales management is almost complete, Definitional issues, role of sales pranagement. process or stages of evolution, ion between sales and marketing integration of marketing, sales and distribution, and Rew trends/, developments in sales man- sed. The stage is now set to mention the complete sales man- in terms of plan and development of the Present text/book. The Done Right,” Harp, IT PROCESS/MODEL agement process or model —_—— {DK Rigby and D Ledingham, “CRM. “PAs Examine the people who sell to theme p.39Sales Manager and Salesperso’ oles, Types and Charact In selling or the sales management process, both sales managers and salespeople play impor- tant roles. But the roles are different, The sales managers play more a supervisory and guid- ing role; the salespeople play more field or implementation roles. It is necessary to clearly understand the roles, jobs and responsibilities of sales managers and salespeople. Also, sales managers and salespeople can be of different types and may have different characteristics. ‘These also should be clearly understood. ROLES OF SALES MANAGERS AND SALESPEOPLE We shai discuss the roles of sales managers and salespeople separately. Roles/Functions of Sales Manager The sales manager is generally conceived to be the head of sales. But this is not totally stan- dardised or uniformly adopted by companies. This happens also because, in many compa- nies, marketing and sales designations are combined, ie., marketing designations include sales. Therefore, the head of sales is variously designated as: Director (Marketing), Presi- dent (Marketing), General Manager (Marketing). Director (Sales), Vice-President (Sales) or National Sales Manager. Designations may vary, but the role of or job expectations from a sales manager are gener- ally the same, Because there are different stakeholders of sales of a company, expectations are also varied from major stakeholders like owners/shareholders, consumers, employees of the company and business associates, For example, owners or shareholders always expect higher sales and more profit; consumers demand more value for money and greater satisfaction; staff/employees want the sales manager to deliver the best; and business associates expect profit levels to be sustained through consistent growth. See Fig. 5. lOwners/Shareholders|| Consumers Employees _| [Business Associated '* Higher Sales » Value for Money * Sales Manager to |* Profit Levels = More Prolit «Greater Satisfaction | Deliverthe Best | to be Sustained} |e Consistent Growth U____—_-., Sales Manager }~—_____J Fig. 5.1 Stakeholders’ Expectations from the Sales Manager Source: Adapted from R. Kapoor, Fundamentals of Sales Management, Macmillan India, New Delhi, 2005, p. 20 (Fig. 2-2) To fulfil the expectations of different stakeholders, the sales manager has to assume certain major responsibilities and preform various functions. These functions are actually performed by the sales management team of which the sales manager is the leader. Some of the functions Hiei.o—~\ 5.4 Solos and Distribution Management Performed by the sales manager are operational; some are strategic: some function 7 Short-term results; and others have long-term impact or implications, BHI major functions or responsibilities of a sales manager are as follows: a. Market analysis and sales forecasting ; b. Determining the sales force size and organisation and allocation of sales terito quotas "s ©. Planning sales operations and implementation d. Selecting, recruiting and training the sales force ©. Designing compensation plans and incentives/rewards for the salespeople £. Motivating and leading the sales force 8 Managing sales channels and channel members h. Developing monitoring, control and evaluation systems for the sales force, apters. Therefore, these ate Most of these functions will be discussed in detail in later cl not elaborated here, Roles/Functions of Salesperson As from sales managers, there are also expectations from salespeople from different stake holders. Three major stakeholders are: the organisation, the trade associates( distributors, Wholesalers and retailers) and the customers. Salespeople have distinct roles to play or jots to perform or obligations to discharge for these stakeholders. The success of a salesperson depends on how well he(she) performs his(her) role or function. See Fig. 5.2. Salesperson’s Role Organisation Trade Associates, Customers, Salesperson's Success Fig. 5.2 Salesperson’s Roles for Stakeholders A salesperson’s foremost role is to serve the organisation he(she) belongs to. This ae clearly understanding and fulfilling the organisational objectives, working in close coor tion with the sales manager or the sales management team and successfully completing targets and tasks assigned to him(her). The complete role of a salesperson with refer® the organisation also includes the following:Sales Manager and Salesperson: a, Implementation of organisational policies on sales b, Contribution to increase in market share c. Cost-effective performance with focus on profitability d, Collecting market information (competition, new products/brands) and giving feedback to the sales management team ¢, Business/sales development-finding prospects new customers Important trade associates for a salesperson are distributors, dealers/stockists, wholesal- ersand retailers. The primary role of a salesperson vis-a-vis trade associates is to be a profes sional link between them and the organisation, The salesperson has a twin role to ensure that the associates serve the interests of the organisation, and also to make sure that the associates remain happy so that mutual relationship is maintained so that sales or business grows. The salesperson has a key role in stock replenishment and inventory management. In this, he (she) may generally follow the principle of first-in-first-out (FIFO) so that the lead time for stock replenishment and also the inventory level is minimised This also means a useful service to customers because this ensures regular and timely availability of goods to them. In fact, this is one of the most important roles or functions of a salesperson. The company image or reputation is also, to a large extent, linked to this. In case where a salesperson books an order from a customer, it should be processed in close coordi- nation with the sales department to make sure that the product is delivered on time. Also, the salesperson’s dealing with the customer should be fair and transparent to build or sustain mutual trust or confidence. This also gives the customer more value for money and satisfaction. Fair and transparent dealing means that the salesperson should be true and honest about the following: a. Product quality and features compared to competing products/brands b. Price of the product in relation to that of competitors ¢. Price discounts and benefit schemes available 4. c |. Bulk buying benefits, if available Lead time required for supply/delivery (applicable for consumer durables, and industrial products) £. Cash payment benefits, credit facilities ete. g. After-sales service facility available (if applicable) Sometimes, salespeople may have to conceal or overstate or understate matters for strate- sic reasons to complete a sale, but this should not become a regular practice. Such practices give short-term results, but not long-term benefit. There are diverse ways to look at a salesperson’s role or functions, Robert McMurry in his famous HBR article “The Mystique of Super Salesmanship” mentions seven such way’ 1. Role in which a salesperson is predominantly an order taker and works in the field selling mostly fast moving consumer goods (FMCG) 2. Role in which a salesperson is predominantly an internal order taker, eg., the counter salesperson 3. Role in which a salesperson’s job is predominantly to deliver a product, e.g,, milk, bread, pizza, gas (LPG) eteSs 5.6 Sales and Distribution Management 4 Role in which a salesperson does not take an order but is required to build . Boodwill oy to educate an actual or potential user, e.g. medical representative Role in which selling requires technical knowledge, e.g. equipment Role which involves selling of tangible products (consumer durables Tefrigerators, washing machines, vacuum cleaners ete Role which requires special skill for selling intangibles (service Products) such es insurance mutual funds, education etc! 5. sale of engineering orcompuy 6. ) Such a uM J a eras hee ; 4 \t 1 j Basie” eel { Ly é i | \ \) ‘ \ Vasa ea ) ; ead ot ei \ i ‘ } \ ‘ \ Team Building for Sales Success af , ar TRobert N, McMurry, "The Mystique of Super Salesmanship", Haroand Business Rei 1961, p. 14.Sales Manager and Salesperson: Roles, Types and Characteristics 8.9 a__ Sales Manager and Salespe Qualities/Characteristics of Sales Manager The sales manager plays a pivotal role in an organisation. He is the focal or nodal point for sales, The top management looks to him for any important matter relating, to sales. The base revel sales managers and salespeople also look up to him for operational guidance for suc- (ose, Therefore, the sales manager should possess certain essential qualities or characteristics to effectively discharge his functions. Various qualities or characteristics of a sales manager can be classified into five major categories: a. Physical characteristics b. Psychological characteristics c. Character characteristics d. Intellectual characteristics e. Skill characteristics See Fig. 5.4. Sales Manager Qualities/Characteristics SS [__ Physical] [Psychological [ ‘Character Intellectual ] Skill Effectiveness/Success Fig. 5.4 Qualities(Choracteristics of a Sales Manager Physical characteristics indicate/ include sound health, agility and endurance, Sound health isa prerequisite or an essential requirement for efficient working in any field of management including sales management, Sound health gives the stamina ancl the ability to withstand pressure which te quite common in sales management, Agility and endurance contribute to this considerably Paychological characteristics, aso called mental characteristics, relate (0 initiative, tact, abil ity to inspire and leadership quality. To be an effective sales manager, a person should not only have sound physical characteristic, but should also be mentally strong. He should be—\ 5:10 _Satos and Distrbuion Management . ER Meisemeni cents eeywertow HRetEUT because tact is the essence of management including sales manageme thesales manager should be able to inspite other sales managers/salespeople Tem P6 (0 him. This also implios leadership qualities which are eaeneg team, In ali working witty for managing, Character characteristics are more an extension of Psychological or mental characteris Important character qualities are positive altitude, ipline and honesty/integrity Ty Suitude of a sales manager isa vital factor because attitude determin the approach ofa pe. saepeitve attitude leads to positive or productive approach to bu Bates has the opposite effect. Discipline or self iseip But the real test of character of a sale: is an essential characteristic to beco siness and sales; negative another important attribute S managers strong ethics, i, honesty or integrity, The me a role model for others, Iutellectual characteristics mean qualities like receptiveness, analytical abilities, soung judgement and the ability to communicate effectively. A good sales manager should both Speak and listen, He must be receptive to the problem gnc Suggestions of other sales manag Gis and Salespeople. He should use his analytical abilities sect ee ect judgement to distin Buish between what is good for sales operations or the organisation and what is not, and i wed, This implies that the sales manager should clarity of thought and Skill characteristics indicate Management skill, technical skill are implied in some of the characteristics already. applies to organising, motivating and controlling tt often require technical skill - knowledge ot skill skill, training skill etc. People skill relates to the Personal relationship. This always helps to improve the motivational level and performanct. Various qualities or characteristics discussed above may not be common rad cole a agers; or, in other words, many sales managers may not possess all the qualities or character istics, This happens in practice. But every sales ‘manager should try to cultivate these co to be more effective or successful, In highly professtona] companies, however, most of t sales managers may possess most of these characteris ics, HUL, ITC and Procter & Gane are good examples, and people skill. These skill mentioned. Management skill primatly he sales force. To do this, sales managers relating to technical produets, negotiation ability or art of managing people or inter For the qualities characteristics of an effective sales manage F, See ‘Sales Focus 3", SALES FOCUS 3 Who is an Effective Sales An effeetive sales manager is one wha knows the difference between ‘output’ and ‘te ut SOurput’ can be just quantity or volume, ‘Resulf means arhieneet oe target: it signif) attainment of goal; it leads to successo™ 11.10 Sates and Distribution Management * of the local market, the sales situation — problems and prospects, company’s, distributors (a applicable), the nature of competition or major competitors etc. s Assimilation within the company or with the company environment or working system is also very important. Every organisation is unique in terms of its values, working culturs systems and procedures. Therefore, to be successful in the company, it is essential for ever’ new employee, including those in sales, to familiarise himself (herself) with the operation,| and cultural system of the company. This involves developing inter-personal relations with the managers and staff, understand formal and informal management practices in the com, Pany, office discipline etc. How important is this will be clear with an example. MMTC, a super star trading house and a successful public sector company in India, had recruited fresh MBAs from IIMA, IIMB and IMC. They had a serious assimilation problem. They thought that they were much above the normal run of the existing managers and staff; the existing managers and staff felt that they were floating in the air, and their feet were not on the ground. The outcome was that, except very few, they almost turned out to be misfits. It took a long time for them to settle down. Some had left also. Assimilation also means socialisation in many ways. The new recruits have to soon feel as ‘insiders’, and not remain ‘outsiders’. This is the best way to succeed in a company. STRUCTURE OF THE SALES ORGANISATION The sales organisation in a company is a combination of different departments, products and sales areas or territories. Different combinations of departments, products/ product groups and areas or territories constitute different sales organisational structures. The sales organi- sation also has to be compatible with the corporate organisational structure of the company. This explains why actual sales organisations in different companies vary from one another, However, sales organisations can be grouped into five major structures: 1. Functional structure 2. Product-based or product specialisation structure 3. Market-based or market specialisation structure 4. Area or territory-based structure 5. Combination or hybrid structure Functional Sales Structure In this structure, different functions related to sales are shown in an interrelated organisa tional form. This is depicted in Fig. 11.3. The functional sales structure is similar to the corporate functional structure except that, in this case, different functions are confined to only marketing and sales. In this structure, the marketing research manager and the promotional manager give their inputs or feedback t0 the area sales manager who conveys them, after his analysis, to the salespeople. The market ing manager (operations) may sometimes interact directiy with the sales staff. This structure is quite suitable for smaller organisations which may be selling only one product, and some functions, say, marketing research and promotion, can be combined in one manager.Stafing, Organising and Managing the Sales Force 11.14 Head—Markeing anager canoer ant {Markat Research) || (Marketing Operations) Fadia ry addy area Saine Managor Salespeople 3 Functional Soles Organisation Fig. Product-based or Product Specialisation Structure ‘Asales organisation based on product specialisation is more applicable for multi-business companies with a large number of products/brands, Such a structure is presented in Fig, 11 4. [Head—Markoting saaneinyRowearch) [Prometon] [GeneralSales] [Sales Toning ‘Manager Manager | |_ Manager Manager Regional Sales Manager Rogional Sales Manager Product Group-A Product Groug-B ft Distnct Sales Managers District Sales Managers Product Group-A Product Group-B poopie ‘Salespeone prodet rau A prow Product-based Sales Organisation gd VIM. Kavele, Sales and Distribution Management. 5.6). Fig. Source: K.K. Havaldar: Tata McGraw-Hill, 2099, P5-8 (FisoS 11.12 _ Sales ane Distribution Management ——riaton Menogement on mnot For all multi-business organisations like Hindustan Unilever, ITC, Procter & Gamble ang Godrej, product-based sales structure is quite advantageous because this can create value both for the company and the customer. A particular salesperson develops the sary knowledge and skill for selling a particular product. The salesperson $8 also expected ig acquire enough market information about the competitor's product/brand — quality Perep. tion, price structure, product/brand positioning ete. This helps better sales planning a strategy formulation, Neces. Market-based or Market Specialisation Structure ‘Market’ here means ‘market segment’ or ‘customer Segment’; it does not mean geographic market. For a company, different markets are: direct marketing or retail segment (this also in. flues BtoB); channels (wholesalers/retailers) and institutions and government. The market, based sales structure is given in Fig, 11.3, Large FMCG companies with a strong distribution network like HUL adopt a predomi. Tantly market-based (channels) sales organisation, Some ‘companies like Eureka Forbes cater to dual segments ~ both direct marketing and channels s have reorganised oF switched from product-hased to market-based Structure. Some of the examples are: Xerox, Crompton Greaves, GE, IBM and Hewlett-Packard (HP), Head—Marketing Sales Mgr Sales Mgr Channels Sales M Direct Marketing (Wholesales (insituteny (RetaivBtog) Retailers) Government) oa Sls ge TESA ——— inact M: Channels Area Sales Mgr eee” (Whatesaew (institutions! Retailers) Government) —— | T Salespeople Salespeople Salespeople | FI. 115 Market-based Soles Organisation Area-based or Geographic Structure Most of the large organisations w! hich cater to the nati Pedient to adopt an area-baserd oe . Rational market find it operationally © * The national market is dividede Staffing, Organising and Managing the Sales Force 11.13 regional markets; regional markets are subdivided into districts or local markets or sales terri- tories. Salespeople are assigned one or more territories; they sell all products of the company in the assigned territory or territories, The area-based structure is presented in Fig. 11 6. Head—Marketing Marketing Research General Sales Promotion Sales Training Manager Manager Manager Manager f + 1 Regional Sales Regional Sales Regional Sales Regional Sales Manager—North Manager—East Manager—West Manager—South District District District District Sales Managers Sales Managers Sales Managers Sales Managers L Salespeople Salespeople Salespeople Salespeople Fig. Source: K.K. Havaldar and V.M. Kavale (2009), P.5.7. (Fig. 5.5). Area-based or Geographic Sales Organisation Combination or Hybrid Structure Four different structures of sales organisation have been discussed so far. Each of these struc- tures has its own advantages and disadvantages. Also, the strengths of one structure are the weaknesses of another structure and vice versa. This implies that a combination of some of these structures can minimise the disadvantages/ weaknesses and maximise the advantages/ strengths of individual structures. Such a combination is possible because these structures are Not exclusive to each other. Also, many companies, in practice, adopt a combination structure for a more effective sales organisation. Two combination structures are more commonly used ~product-geographic combination and market-geographic combination. These are presented in Fig. 11.7 (A) and Fig. 11.7 (8).14.14 Sales and Distibution Management Head—Marketing | | Solos M Sales Mgr Sales Mor ‘Nonth East West Regional Sales Regional Sales Regional Sales Manager Manager Manager Product A Product 8 Product G | Salespeople Salespeopio Salospopin | Fig. 1.7 (A) Combination Sales Organisation: Product Geographic Head—Markoting [TF Sales Mor Sales Mor Sales Mgr Sales Mgr North East Wost ‘South Regional Sales Mgr Regional Sales Mgr Regional Sales Mar Direct Marketing Innels (Wholesale (institutions! (RetaivBt08) Retailers) Government) Salespeople Salespeople Salespeople Fig. 11.7(B) Combination Sales Organisation: Market-Ceographic is 11 For sales organisation/system at Hindustan Unilever Ltd. (HUL), see ‘Sales Foce Distribution: Role, Management and Strategy 12.5 Distribution (known as ‘place’ in marketing mix) is one of the four elements of the marketing, mix (other three elements being product, price and promotion) and plays a key role in mar- keting and sales management of a company (Fig. 12.1). Marketing management ] ‘Sales management Distribution management Fig. 12.1 Marketing Management, Sales Management and Distribution Management DISTRIBUTION CHANNEL Distribution channels (also called physical distribution channels or sales channels or trade channels) constitute an important factor or link in effective sales management. Sales or dis- tribution channel connects the producers to the ultimate consumers - it is the route through which goods move from the point of production to the point of ultimate consumption. It comprises a number of channel institutions through which the product moves. The distribu- tion channels usually include the producers, agents, dealers, distributors, wholesalers and retailers. These are called intermediaries or middlemen (except the producers). Direct J | Selling at] [Door to Door Manufacturer's} | selling Plant (Salesman) Manufacturer t 1 I [Mail order| Multiple”) [Wholesaler houses, [shops (Chain)| ae / Fatailer Fig. 12.2 Direct and indirect Selling System Source: P.K. Sahu, and K, C. Raut, Salesmanship and Sales Management, Vikas Publishing House. New Delhi. 2010. 0. 14. Indirect S | Retailer]When the manufacturer sells directly to the final consumers, it is called direct selling: when the goods move to the consumers through intermediaries, it is indirect selling, In indirect sel). ing, goods reach final consumers through the distribution channel. Different forms of direct and indirect selling, involving distribution channels, are shown in Fig. 12.2 In terms of distribution channels, direct selling is known as zero level. Then, there are one-level, two-level and three-level channels depending on the middlemen or intermediaries involved. This is more clearly shown in Fig. 12.3. Zero Level one Level Two Level Taree Love Manufacturer] [Manutactuer] | Manulacturer Manutactrer Agent! 5 - Customer Agee \moleasion a Wholealor Retaier suport [ Wholesaler Customer Retailer Customer Fig. 12.3 Different Distribution Channels Source: R. Saxeno, Marketing Management, Tata McGraw-Hill, 1997, p. 356. ROLE OF DISTRIBUTION ‘The role of distribution is through channels or intermediaries, Channels or intermediaries make possible the delivery of a product to final consumers whenever and wherever theY want, ie,, at the right time and right place. For example, Hindustan Unilever (HUL) mak detergents like Surf and Rin in its plant near Mumbai, but a consumer in Delhi can gett ther® ata place of his choice (near his residence) through retail channel, This gives him time willy and place utility, and through these two, also possession wility, i.e., getting possession Of or Rin detergent at the time and place he wanted. See Fig. 12.4.ribution: Role, Management and Strategy 12.7 Distribution Channels! Intermediarios Place —_|_,]_ Possession Timo utility wlity [7] utility Time Utility and Possession Utility Through Distribution much more vital for consumer goods, particularly FMCGs, than industrial inputs or intermediate products are sold directly to ., original equipment manufacturers (OEM). Finished industrial ducts like steel, non-ferrous metals, compressors, motors are ‘sold to the industrial con- aeeither directly (this forms the larger percentage of sales) or through the industrial ibutors. However, the vast range of consumer goods (FMCGs and consumer durables) smal to the final consumers through channels ~ finally the retailers — except a very small pexenlage of direct selling, Distribution plays the most vital role for FMCGs providing ac- testo these goods in remote villages and far-flung “ves. For example, HUL sells its soaps, saunpoos and detergents through more than one million retail outlets. mer goods are shown in Figures Fig. 12.4 Place Utility, therole of distribution is fyrindustrial products. All eindustrial consumers i pitibution channels for industrial products and consui S5(A) and 12.5(B). dustrial Products Producer Producer ‘Agent! Middleman industrial Tndusirial Distributor Distributor os industrial oe Caer Fig. 12.5A Distribution channels for industrial Products M12.8 Sales and Distribution Management -« ‘Consumer Products Producer Producer Producer Distributor Distributor Wholesaler Retailer Retailer Retailer Customer! Customer/ Customer/ Consumer Consumer Consumer Fig. 12.5B Distribution Channels for Consumer Goods Source: KK Havaldar and VM Cavale (2009), p. 8.18 For services or service products, ‘place’ is important but distribution has very little roles Play because of the service characteristic of ‘inseparability’, Inseparability means that pros. fon and consumption of a services is inseparable, i.e., those are simultaneous, For example, withdrawal of cash from a bank; production of service (delivery of cash) takes place in ow side of the counter and consumption (receipt of cash) takes place on the other side of the counter simultaneously. Other good examples of inseparability of service are eating ina taurant, seeing a movie in a theatre, delivering a lecture in a class room. However, place or location of a service is important; for example, location of a restaurant of a theatre, ¢ mel clinic, a beauty parlour etc. Channels or Intermediaries By now, it should be clear that di: 4 : ing Stribution channels or intermediaries add values t s"6 or the product and the consumer, , ity, time ; and the Value addition takes place through place utility, oo ee antes non utility. Value addition to seting or the produc’ eed she consul vit these utilities is not tangible or measurable and not clearly visible. But value addi selling or the product can be perceived in terme cf ts 1 neh . d of hi s, and, to the constimet reflected in the satisfaction he (she) deriv ciate to hi ‘es from thi iliti i tually leads sales through more demand or consumption, atuities, which actually st Three or four intermediaries have i ifferent activi lice Played their roles or performed differen ye create these utilities by moving the goods fron ahr, manufvcturer’s plant to the Op These are the carrying and forwarding agent (C&FA), the distributor, the wholesale ot retailer. Sometimes, the distributors may d ers ate lives i retailers" involving wholesalers Thane chorehe y iver the products directly to the ers .T C&FA, distri and relat” “ut also called, or can be divided into, upstreane donne eers arena werake diDistribution: Role, Management and Strategy 12.9 asa channel level, C&FA and the company are upstream channel members and wholesalers and retailers are downstream members. Channel members closer to the producer ate Up~ stream and those closer to the consumer are downstream. Channels or intermediaries not only add value to selling but perform a number of other functions which are very useful to a company. Five such functions are mentioned below. a. Supply of information: Channels provide information to the company about the market ~new product/brand, new competitor, changes in customer preferences etc. b. Product Promotion: Promoting products/brands of the company in their areas of operation is another important role of channels/ intermediaries, ©. Financing of Operations: Some channel members finance producer's operations by marking advance payment for the company’s products. often help to maintain price stability in by the d, Maintaining Price Stability; Intermedia the market. ‘This is done by absorbing the whole or part of the price increas manufacturer. ©. Title of Goods: Many intermediaries take title of the goods from the manufactures and do selling in their name. This helps to distribute the market risk between the producer and the intermediary. Length of a Channel Channels can be long or short as shown in Figs. 12.3, 125A and 12.58. This means that the Tength of a distribution channel varies. There are a number of reasons for this, Four major reasons or factors which determine the length of a channel are: ofthe Market: Larger the size of the market, the longer usually is the length of the channel; the smaller the market, the shorter is the channel. b. Product Variety; More the varieties in a product category in terms of brands, substitutes and complementaries, the wider or longer is likely to be the channel to ability of all varieties. verage order lot size is small, it is advisable to have longer large or bulk. a ensure ava c. Onder Lot Size: If the a channel than if the siz Service Requirements: Ifa product (industrial products and consumer durables) requires a high level of service, itis likely that 2 company will maintain a shorter channel to meet complete service requirements!. LOGISTICS OF DISTRIBUTION We have mentioned above about the C&FAs. Strictly speaking, carrying and forwarding agents are facilitators oF part of the logistics of distribution rather than a channel member. ‘The role of C&F agents is to collect goods from the company’s plant and carry or transport them to different distributors, Sometimes, C&F agents also undertake warehousing of goods 'R, Saxena, (1997), p. 357.« nagement ses and Disviston Ma 16 hod for a market or ¢ : eth tomer-driy, 4 eta eeve? clist, ptive Mm A orevaluating the distribution stein Sturdivant’s pres cklist for evolViNS ired. Modifications can always i" an Se ad step by sep che ind as much requil ™Mady ar changes ne e, market situations. re re 7 in the approa ssnPain of Asia the Case i and many fee! th, Fehiee jbution Strate} . industry at this Distribution St Jeader in the Indian P: satateg The company had made tr Asian Paints tnennvatvecr igo ibis Sean Fainie distribu sie ir innova que tin Os marily due to their in F Sement init market ne Asan Ps me oe eee SP may be summa hing individual consumers: Bulk busi * Bupassing the bulk order sg nt eee nat eeand aay company would veg aaa ert e vonld hive usted to.this segments Bet acne Paints hag segment. Any new ee that this was nota growth segment, the ie faddet toes Peiorthe time being and, instead, go to individual consumers, This uae sitcartstaiege decision, which moulded almost every major subsequen, wi sraingy move in distribution. Shift to semi-urban and rural areas: Before Asian Paints’ entry, India was mostly concentrated in the urban area their distributors / wholesalers were clearly foresaw a large e decided to exploit it th the paint business in s. All the major paint companies and content with the urban market. But Asian Pains merging market for paints in semi-urb: design: going directly to retailers: next major strategic d broke with the pre ies were quite content with w distributors and/or wholesale distribution to hundreds of retailers for bett ish smaller pac retailers was the Paints totally other compani channels of Deciding to go directly to on of the company. And, in this also, sa i n Norm in the paint industry. While orking through a handful of intermedia 3 "s, Asian Paints decided to go for dirt ler market impact, Competing throu The introduction of ks was anol vations e - smaller packs w ¢ innovatic nin the marketing mix and helped market lifer, von through mor emtensive distribution, 69 far, other F : Proliferati 5 mland | 5 of companies were sellin enn fainers of 5 snoring requy Panies were Selling paints in cont an ‘ calised thie din smaller Packs for repleni shment der? ML and even 50 my This was rOUCed, for the first time, small packs of 200 Customer satisfaction "8 Sep towards larger market coverage and § * Open-d0or aealer i Oat Poly: Asian py vi reference 10 retailers, 4 ve ais followed pol tan oe eater policy "i Asian Paints decigeal 1M @leBy wag 10 make distrie eee teor_deale os poste —— Set t0 choose ay A member. Cisttibution as exclusive as ane W! nis HN Based on Vg Ram, NNT Of its retail chanel slmost any dia, 1408, C4, wast, “My and S. mills smakumari, Marketing He Management,f | to work as its dealer. Even af 7 willing ©. Even after achievi lity in dictei sean continued to oe a policy of regular expen ori in distribution, the pe challenge of channel management inc of its dealer network. In soins, handled the task quite effectively. Peal in! Distribautic . ‘bution: Role, Management and Strategy 12.17 sed tremendously, but Asian me jdeaistribution network: Effective ch «Nai wit onwide distribution network whichis See neauebeton tionwi c ‘er landmark in its distributi Big paint con followed a policy of limiting their Tenteton voithin the F es an Hi i ‘ a regional companies concentrated on selling their paints neighbour! ood territories. In contrast to this, Asian Paints had a 7,000-stronj work. And, on an average, the company adds 200 dealers every, year to ie Jer net deefgrowing newark. le : oe . ti ides the most vital link betwee: i is pjsitution provi a manufacturer and its customers. This is scl true of FMCG products. Therefore, distribution planning, choice of a distribution Band distribution strategy become critical factors in successful sales management. eee : 1 Distribution (known as ‘place’ in marketing mix) is one of the four elements of the marketing mix (other elements being product, price and promotion) and plays a ley role in marketing and sales management of a compiny. The distribution system works through the distribution channels. Distribution channels (also called physical ‘Tetrbution channels) are also known as sales channels or trade channels. ‘0 the ultimate consumers — 2 The sales or distribution channel connects the producer tc itis the route through which goods move from the point of production to the point of ultimate consumption. It comprises 2 number of channel insertions through which the product moves. The distribution channels usually include the producers, agents, dealers, distributors, wholesalers and retailers. “These are called intermediaries or middlemen (except the producers). 4 When the ni bcauee sells Seedy to the final consumers, it is called direct selling. When the goods move to the consumers through jntermediaries, it is indirect selling. Inindireet Selling, goods reach the final consumers T°" the distribution channels. In terms of distabution channels, known as zero-level. Then, there ate one-level, two-level and three depending on the middlemen or intermediaries involved. me or intermediaries make possi Hatter and wherever they ‘want, ier pyldustan Unilever (HUL) makes detergen! ii data he time a ue ine wy an direct selling i evel channels, very of a product to final consume's eight mC ea right place; For example, ts like Surf and Rinini's plantnear Mumbai, ince of his/her choice (near his/ place utility, et Tees a renee) through retail channel. Thi 4 24 through these two, also possession wilt mer goods, P thay pl of distribution is much Most vital for ConsuP A mediate Pro for industrial products. All Fndustrial inputs OF! articularly FMCGs, ducts are sold ~N