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INTRODUCTION TO SALES
MANAGEMENT
INTRODUCTION TO SALES MANAGEMENT

NATURE OF SALES MANAGEMENT

Originally, the term ‘sales management’ referred to the direction of sales force personnel. But, it
has gained a significant position in the today’s world. Now, the sales management meant
management of all marketing activities, including advertising, sales promotion, marketing
research, physical distribution, pricing, and product merchandising.

The American marketers association (AMA’s) definition, takes into consideration a number of
these viewpoints. Its definitions runs like: the planning, direction, and control of the personnel,
selling activities of a business unit including recruiting, selecting, training, assigning, rating,
supervising, paying, motivating, as all these tasks apply to the personnel sales-force. Further, it
may be quoted: it is a socio-scientific process, involving’ group-effort’ in the pursuit of common
goals or objectives, which are predetermined. Co-ordination is its key, though, no doubt, it is a
system of authority, but the emphasis is on harmony and not conflict.

Sales-management differs from other fields of management, mainly in different aspects: the
selling operation of a business firm does not exist in isolation. Thus, simultaneous with the
changes taking place in the business, as well as marketing-orientation, a new concept of sales
management has evolved. The business, is now society-oriented, on human-welfare aspects. So,
sales-management has to work in a broader and newer environment, in co-existence with the
traditional lines. The present emphasis is now on total development of human resources.

RELATIONSHIP BETWEEN SALES MANAGEMENT AND MARKETING

MANAGEMENT

Sales and marketing always have had a close relationship, so close that many people have
confused the two being the same.

1. Marketing is a method of bringing customers to a business as well as making others aware of the
business product and brand. Sales is selling the product the company offers.it can be achieved
through phone, interaction as well as web page.
2. Marketing sells the idea of product and services to everyone whereas sales sells the actual product
one on one through personal interaction.
3. Marketing generates interest but sales brings in money.
4. Marketing does everything it can to reach and persuade prospective buyers while sales does
everything it can to close the sale and get assigned an agreement/contract.
5. Marketing responsibility is selling the idea while selling has a responsibility of selling the product and
can be achieved through sales making.
6. Selling is only a part of firm marketing activities and refers to personal communication of information
to persuade a prospective buyer to buy something.
7. Marketing refers to the process of planning, exchanging, the process, concept/idea, pricing,
promotion and distribution of goods and services and ideas to satisfy companies or individuals. Sales
excludes all this.
8. Marketing has led to the emergence of marketing concepts (philosophies that aim at satisfying
customer needs) while selling has led to the emergence of selling concepts (a philosophy that
encourage organizations to undertake a large scale selling promotion effect.
9. Sales people usually sells to customers the products while the marketing meets the organization with
customers. The major objectives of sales department is responsible for activities like promotion.
Marketing ignores all this.

IMPORTANCE OF SALES MANAGEMENT TO AN ORGANIZATION

To enable the top-management, to devote to more time in policy making for the growth and
expansion of business.

(ii) To divide and fix authority among the sub-ordinates so that they may shirk work.

(iii) To avoid repetition of duties and functions so that there may not be any confusion among
them.

(iv) To locate responsibility of each and every employee so that they can complete the whole work
in stipulated time; if not then the particular person must be responsible.

(v) To establish the sales-routine in the business unit.

(vi) To stimulate sales-effort.

(vii) To enforce proper supervision of sales-force.

(viii) To integrate the individual in the organization.

SALES MANAGEMENT FUNCTION

A sales organization performs the following functions:

 Analysis of markets thoroughly, including products and market research.

 Adoption of sound and defensible sales-policy.
 Accurate market or sales forecasting and planning the sales[1]campaign, based on relevant data or
information supplied by the marketing research staff.

(iv) Deciding about prices of the goods and services; terms of sales and pricing policies to be
implemented in the potential and existing markets.

 Labelling, Packaging and packing, for the consumer, who wants a container, which will satisfy his
desire for attractive appearance; keeping qualities, utility, quantity, and correct price and many other
factors in view.
 Branding or naming the product(s) and/or services to differentiate them from the competitors and to
recognise easily by the customer.
 Deciding the channels of distribution for easy accessibility and timely delivery of the products and
services.
 Selection, training and control of salesmen, and fixing their remuneration to run the business
operations efficiently and effectively.
 Allocation of territory, and quota setting for effective Selling and to fix the responsibility to the
concern person.
 Sales-programmes and sales-promotion-activities prepared so that every sales activity may be
completed in a planned manner
 Arranging for advertising and publicity to inform the customer about the new products and services
and their multiple uses.
 Order-preparation and office-recording to know the profitability of the business and to evaluate the
performance of the employees.
 Preparation of customer s record-card to the customer loyalty about the products.
 Scrutiny and recording of reports to compare the other competitors and to compare with the past
period.
 Study of statistical-records and reports for comparative analyses in terms of sales, etc.
 Maintenance of salesman’s records to know their efficiency and to develop them.

SALES MANAGEMENT FUNCTION

A sales organization performs the following functions:

 Analysis of markets thoroughly, including products and market research.

 Adoption of sound and defensible sales-policy.
 Accurate market or sales forecasting and planning the sales[1]campaign, based on
relevant data or information supplied by the marketing research staff.
 Deciding about prices of the goods and services; terms of sales and pricing policies to be
implemented in the potential and existing markets.
 Labelling, Packaging and packing, for the consumer, who wants a container, which will
satisfy his desire for attractive appearance; keeping qualities, utility, quantity, and correct
price and many other factors in view.
 Branding or naming the product(s) and/or services to differentiate them from the
competitors and to recognise easily by the customer.
 Deciding the channels of distribution for easy accessibility and timely delivery of the
products and services.
 Selection, training and control of salesmen, and fixing their remuneration to run the
business operations efficiently and effectively.
 Allocation of territory, and quota setting for effective Selling and to fix the responsibility to
the concern person.
 Sales-programmes and sales-promotion-activities prepared so that every sales activity
may be completed in a planned manner
 Arranging for advertising and publicity to inform the customer about the new products
and services and their multiple uses.
 Order-preparation and office-recording to know the profitability of the business and to
evaluate the performance of the employees.
 Preparation of customer s record-card to the customer loyalty about the products.
 Scrutiny and recording of reports to compare the other competitors and to compare with
the past period.
 Study of statistical-records and reports for comparative analyses in terms of sales, etc.
 Maintenance of salesman’s records to know their efficiency and to develop them.

DUTIES AND RESPONSIBILITIES OF SALE MANAGERS

1. Environmental analysis and marketing research-this usually involves monitoring and
adapting to external factors that affect success or failure such as the economy and
competition and collecting data to resolve specific marketing issues.
2. Broadening an organizations/individuals scope-this involves deciding on the emphasis to
place as well as the approach to take on societal issues and international marketing.
3. Consumer analysis-this involves examining and evaluating consumer characteristic
needs and purchase processes; and selecting the group(s) of consumers at which to aim
marketing efforts.
4. Product planning-this includes goods,services,organisations,people,places,and ideas-
developing and maintaining products, product assortments(a set o all products and items
that a particular seller offers for sale to buyers),product images, brands, packaging and
optional features and deleting faltering products.
5. Distribution planning-this involves forming relations with distribution intermediaries,
physical distribution, inventory management, warehousing, transportation, the allocation
of goods and services, wholesaling and retailing.
6. Promotion planning-this involves communicating with customers, the general public and
others through some form of advertising, public relations, personal selling and or sales
promotion.
7. Price planning-this involves determining price level and ranges, pricing techniques, terms
of purchase, price adjustments and the use of price as an active or passive factor.
8. Marketing management-this involve planning, implementing, and controlling the
marketing program(strategy) and individual marketing functions; appraising the risks and
benefits in decision making; and focusing on total quality.

DUTIES AND RESPONSIBILITIES OF SALES MANAGER

1. Knowledge of: firm’s long and short-run goals and objectives, production process,
consumer behavior, competitors
2. Functional skills: market forecast, design of sales organization, recruiting and selecting
salesperson, training, budgeting, compensation, territory and quota design, sales
analysis, developing sales approach, customer service, order processing, credit and
collection, promotion
3. Administrative ability: planning, organizing, coordination, motivating, evaluation and
control, communication
4. Leadership ability

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SALES FORECASTING AND PLANNING

SALES FORECASTING AND PLANNING

Sales Forecasting
Sales forecasting is the prediction of future performance based on available information about past
performance.

This forecast is done for a particular period of a time in the near future, usually the next fiscal
year. Sales forecasting is easier for established companies that have been operating for a few years
than for newer companies. Businesses that use sales forecasting tend to perform better than those
that don’t.

Sales planning and forecasting are extremely important processes for any company, because they
form the basis for allocating resources.

Importance of Sales Forecasting

Sales Planning

When your sales reps make their forecasts, they are also planning their future activities, providing
each of them with a business plan for managing their territory. Assuming that each of them has a
proportion to fill, forecasting is the tool that helps them identify the customers to meet their
objectives.

Demand Forecasting

The sales forecast is the best tool to get a good estimate of the demand for the products you sell.
The sales team is the front line for your business and best positioned to gather information about
expected demand.

Higher OTIF Delivery

With accurate sales forecasting, you can achieve a higher rate of on time in full, or OTIF, delivery.
The information from sales forecasts guarantees that sufficient product will be manufactured or
ordered to service customers on a timely basis, resulting in happier customers and fewer
complaints.

Inventory Controls

The more accurate the sales forecast, the better prepared your company will be to manage its
inventory. This is by avoiding both overstock and stock-out situations. Stable inventory also
means better management of your production.

Supply Chain Management

When you can predict demand and manage production more efficiently, you also have better
control over your supply chain. This affords you the opportunities to manage resources and take
full advantage of just-it-time ordering.

Financial Planning

Anticipating sales gives you the information you need to predict revenue and profit. Having good
forecasting information at your disposal also gives you the ability to explore possibilities to
increase both revenue and net income.

Internal Controls
Having an idea on the projected production rates for your business makes it possible for you to
have better control of your internal operations. By anticipating future sales you can make
decisions about hiring – permanent or temporary – marketing and expansion.

Continuous Improvement

Continuous improvement is a goal of many if not most businesses. By forecasting sales and
continually revising the process to improve the accuracy, you can improve all aspects of your
business performance.

Price Stability

With solid forecasting, the good levels of inventories that you maintain will prevent the need for
panic sales to rid your business of excess merchandise. Sales may be managed on a thoughtful
planned basis.

Marketing

Sales forecasting gives marketing an advanced look at future sales and offers the opportunity to
schedule promotions if it appears sales will be weak. In extreme cases, sales forecasts may lead to
discontinuing slow-moving products.

Cash Flow

Knowing whether your revenues are likely to grow or shrink in coming months keeps you from
spending at a time when you should be conserving cash to survive a recession. It also allows you
to take advantage of special deals or expansion opportunities that come along, knowing you will
have enough cash to support your business.

Planning

Having a good idea of future revenues and where they will be generated in your business allows
you to plan the best way to take advantage of future changes in the economy. Uncertainty is a
roadblock to besting your competition by expanding at just the right moment. Detailed and deep
research into the economy, customer buying trends, new products and your company’s past
revenue production experience creates a reliable sales forecast that provides a strong basis for your
future planning.

Cost of Sales

Cost of sales refers to how much you are spending on products or components for each sale you
make. This is really the core of sales forecasting. By predicting sales patterns, you can more
accurately plan for what products or components you need. You definitely don’t want to miss an
opportunity by running out of materials during a busy season and having to scramble or pay extra
to order what you need. On the other hand, you don’t want to overstock and have products go bad
or have to recoup your expenses over a long, drawn-out period. Sales forecasting allows you to
make informed decisions about what you need, how much you need and when you need it.

Staffing

Sales forecasting helps you manage your staffing needs, keep scheduling in order and maintain an
open and respectful dialogue with your employees. This allows you to be more organized and
minimize time spent on scheduling. it also improves your relationship with your staff: You can
allow for the scheduling needs of your employees and be able to give ample notice when you
expect to cut or expand employee hours.

Strategic Advertising

Detailed sales forecasting should help you develop the strategy and character of your advertising.
A sales forecast will show you how much revenue you can expect and what kind of money is
available for your advertising budget. It helps you track and predict the behavior of consumers,
which is the basis for successful advertising. This information can help you break into new
customer bases, address unmet consumer needs and abandon or scale down trends that are on the
wane.

Classification of forecasting

Short-term forecasts are usually made for tactical reasons that include production planning and
control, short-term cash requirements and adjustments that need to be made for seasonal sales
fluctuations. Such forecasts are for periods of less than one year, with a normal range between one
and three months.

Medium-term forecasts are made for minor strategic decisions in connection with the operation
of the business. They are important in the area of business budgeting for the operating budget, and
it is from this forecast that company budgets are built up. Incorrect forecasting can have serious
implications for the rest of the organization, for if it turns out to be over-optimistic, the
organization will be left with unsold stock and will have overspent on production. This forecast is
used for such matters as the staffing levels that are required to achieve expected sales, the amount
of money to be spent on sales effort, and short-term capital requirements for such items as
machines to be purchased to meet increased production. The time period for a medium-term
forecast is normally one year.

Long-term forecasts are for major strategic decisions to be taken within an organization, and they
very much relate to resource implications. They deal with general rather than specific items, and
rely more heavily in their computation upon such factors as government policy, social change and
technological change. They are, therefore, concerned more with general trends, and in the light of
these trends, attempt to predict sales over periods greater than two years. In some strategic,
heavily capitalized industries, predictions might be needed for a decade or more. The problem is
that for these lengths of time the forecast cannot be more than vague, and planners in retrospect
blame the forecast when things go wrong and forecasting thus receives criticism.

MOTIVATION AND TRAINING

MOTIVATION AND TRAINING

Introduction

Creating and maintaining a well-motivated sales force is a challenging task. The

confidence and motivation of salespeople is usually out washed by the inevitable
 rejections they suffer from buyers as part of everyday activities. Sales managers do not
motivate salespeople but should provide the circumstances that will encourage
salespeople to motivate themselves.

An understanding of motivation lies in the relationship between needs, drives and goals:
The basic process involves needs (deprivations) which set drives in motion (deprivations
with direction) to accomplish goals (anything that alleviates a need and reduces a drive).

Improving motivation is important to sales success since high levels of motivation lead to:

 Increased creativity;
 Working smarter and a more adaptive selling approach;
 Working harder;
 Increased use of win–win negotiation tactics;
 Higher self-esteem;
 A more relaxed attitude and a less negative emotional tone;
 Enhancement of relationships.

Definition of Motivation

Motivation is basically the collective set of ideas and forces that influence people to
think in certain ways or do certain things. It can be defined then, as an internal or
external factor that might rouse /incite an individual to work towards a goal. There are a
variety of ways to motivate people, including the fear of losing a job, financial incentives,
self- fulfillment goals and goals for the organization or groups within the organization.

Motivational theories

A number of theories have evolved that are pertinent (relevant) to the motivation of
salespeople.

Maslow’s hierarchy of needs theory

This theory proposes a tiered system of importance for factors of motivation; them being
physiological (basic necessities), safety, love (inclusion into society), esteem (recognition
in society), and self-actualization–i.e. the completion of the individual. Maslow advanced
the following propositions about human behavior:

 Man is a wanting being.

 A satisfied need is not a motivator of behavior, only unsatisfied needs motivate.
 Man’s needs are arranged in a series of levels – a hierarchy of importance. As soon as
needs on a lower level are met those on the next, higher level will demand satisfaction.
Maslow believed the underlying needs for all human motivation to be on five general
levels from lowest to highest, shown below. Within those levels, there could be many
specific needs, from lowest to highest.
 Physiological – the need for food, drink, shelter and relief from pain.
 Safety and security – once the physical needs of the moment are satisfied, man concerns
himself with protection from physical dangers with economic security, preference for the
familiar and the desire for an orderly, predictable world.
 Social – become important motivators of his behavior.
 Esteem or egoistic – a need both for self-esteem and the esteem of others, which
involves self-confidence, achievement, competence, knowledge, autonomy, reputation,
status and respect.
 Self-fulfillment or self-actualization – is the highest level in the hierarchy; these are the
individual’s needs for realizing his or her own potential, for continued self-development
and creativity in its broadest sense.

Herzberg’s dual factor theory

This theory distinguished factors which can cause dissatisfaction but cannot motivate
(hygiene factors) and factors which can cause positive motivation.

Motivating (hygiene) factors included physical working conditions, security, salary and
interpersonal relationships. He assumed that directing managerial attention to these
factors would bring motivation up but would not result in positive motivation. If this were
to be achieved, attention would have to be given to true motivators. These included the
nature of the work itself which allows the person to make some concrete achievement,
recognition of achievement, the responsibility exercised by the person, and the interest
value of the work itself. The inclusion of salary as a hygiene factor rather than as a
motivator was subject to criticisms from sales managers whose experience led them to
believe that commission paid to their salespeople was a powerful motivator in practice.
Herzberg accommodated their view to some extent by arguing that increased salary
through higher commission was a motivator through the automatic recognition it gave to
sales achievement.

The salesperson is fortunate that achievement is directly observable in terms of higher

sales (except in missionary selling, where orders are not taken, e.g. pharmaceuticals,
beer and selling to specifiers). However, the degree of responsibility afforded to
salespeople varies a great deal. Opportunities for giving a greater degree of responsibility
to (and hence motivating) salespeople include giving authority to grant credit (up to a
certain value), discretion to offer discounts and handing over responsibility for calling
frequencies.

This theory has been well received in general by practitioners, although academics have
criticised it in terms of methodology and oversimplification.

Vroom’s expectancy theory

This theory assumes that people’s motivation to exert effort is dependent upon their
expectations for success. Vroom based his theory on three concepts – expectancy,
instrumentality and valence.

1. Expectancy: This refers to a person’s perceived relationship between effort and

performance, i.e. to the extent to which a person believes that increased effort will lead to
higher performance.
2. Instrumentality: This reflects the person’s perception of the relationship between
performance and reward; for example, it reflects the extent to which a person believes
that higher performance will lead to promotion.
3. Valence: This represents the value placed upon a particular reward by a person. For
some individuals promotion may be highly valued; for others it may have little value.

According to the theory, a salesperson believes that by working harder they will achieve
increased sales (high expectancy) and that higher sales will lead to greater commission
(high instrumentality) and higher commission is very important (high valence), a high
level of motivation should result.
 It can be noted that different salespeople will have different valences (values) for the
same reward. Some might value increased pay very highly; while for others higher pay
may have less value. Also, different salespeople may view the relationship between
performance and reward, and between effort and performance, in quite different ways. A
task of sales management is to specify and communicate to the salesforce these
performance criteria, which are important in helping to achieve company objectives, and
to relate rewards to these criteria. Further, this theory supports the notion that for
performance targets (e.g. sales quotas) to be effective motivators they should be
regarded as attainable (high expectancy) by each salesperson. This model provides a
diagnostic framework for analysing motivational problems with individual salespeople and
an explanation of why certain managerial activities can improve motivation. Training in
sales skills, for example, can improve motivation by raising expectancy levels.

Adams’s inequity theory

Feelings of inequity (unfairness) can arise when an individual’s effort or performance on

the job exceeds the reward they receive. Salespeople who feel they contribute more than
others to the organisation expect to receive proportionately greater rewards. This is the
essence of Adams’s inequity theory.

For a salesperson, inequity can be felt in the following areas:

 monetary rewards;
 workload;
 promotion;
 degree of recognition;
 supervisory behaviour;
 targets;

The outcome of a salesperson perceiving significant inequities in any of these areas may
be reduced motivation as a result of the feeling of unfairness.

The implication is that sales managers must monitor their sales force to detect any
feelings of unfairness. This can be done informally during sales meetings or through the
use of questionnaires. Some sales organizations survey their sales representatives
periodically to measure their perceptions of inequity and the effectiveness of the
company’s motivational programme in general.

Motivation is often equated with incentives but Adams’s work emphasizes that the
elimination of disincentives (e.g. injustices, unfair treatment) may be an equally powerful
influence.

Likert’s sales management theory

Unlike Herzberg, Maslow and Vroom, who developed ‘general’ theories of motivation,
Likert based his theory on research that looked specifically at the motivation of
salespeople. His research related differing characteristics and styles of supervision to
performance. One of the hypotheses he tested was that the sales managers’ own
behaviours provide a set of standards which, in themselves, will affect the behaviour of
their salespeople. He found that there was a link. High performing sales teams usually
had sales managers who themselves had high performance goals.
 SALES ORGANIZATION
SALES ORGANIZATION

Organizational structure

Def: This defines how activities such as task allocation, coordination and supervision are
directed towards the achievement of organizational aims.

This is a system that is used to define the hierarchy within an organization. It identifies
each job, its function and where it reports to within the organization.

This is a diagrammatic representation showing how departments or divisions in an

organization, as a large corporation, are related to one another along lines of authority.

Forms of Organizational structures

 Geographical structure
 Product specialization structure
 Industry – based structure
 Account size structure

Geographical structure

 This is a structure where each salesperson is assigned a territory over which to have sole
responsibility for sales achievement.
 Salesperson close geographical proximity to customers encourages the development of
personal friendships which aids sales effectiveness.
 Compared with other organizational forms, e.g. product or market specialisation,
travelling expenses are likely to be lower.
 This form has an advantage of its simplicity.

Weaknesses

 Salesperson is required to sell the full range of the company’s products

 Sales person may be very different technically and sell into a number of diverse markets.
 Salespeople in disconnected geographical territories are relatively weak in interpreting
buyer behaviour patterns and reporting changes in the operational circumstances of
customers compared with salespeople organised along more specialised lines.

Product specialization structure

This can be along;

1. Along product lines

 This structure is conducive to a firm offers a wide range of technically complex and
diverse products and where key members of the decision-making unit of the buying
organizations are different for each product group.
 Incase company’s products sell essentially to the same customers, problems of route
duplication, higher travel costs and customer annoyance can arise.
 Improper use of the method can lead to a customer being called upon by different
salespeople representing the same company on the same day.

NB: A move from geographic to a product-based structure raises costs as keeping the
same number of salespeople means increased territory size.

Functional Specialization

 This is where sales force are divided according to new and existing products
 In industrial selling, firms sometimes separate their sales forces into development and
maintenance sales teams.
 The development salespeople are highly trained in handling very technical new products.
They spend considerable time overcoming commercial, technical and installation
problems for new customers.
 Companies move to a development/maintenance structure is belief that one of the
causes of new product failure is the inadequacy of the salesforce to introduce the
product. The cause of failure is the psychological block each salesperson faces in terms
of possible future problems with buyer–seller relationship if the product does not meet
expectations.
 Employment of a development sales team can reduce this problem, although it is often
only large companies that can afford such a team.
 This approach allows salespeople to specialise in the skills needed to sell new products,
ensures that new products receive the attention needed to sell them, and eliminates
competition for a salesperson’s time between the selling of new and existing products
providing clarity of purpose. Some pharmaceutical companies use this form of salesforce
organisation.

Industry based structure

Customer-based structures

 This structure has a problem of the same customer being served by product divisions of
the same supplier or company
 There is the complexity of buyer behaviour, which requires not only input from the sales
function but from other functional groups (such as engineering, finance, logistics and
marketing).
 Due to centralisation of purchasing and the immense value of some customers, the
supplying firms have been forced to rethink how they organise their salesforce.
 Companies are increasingly organising around customers and shifting resources from
product or regional divisions to customer-focused business units.

Market-centered structure

 Another method of specialization is by the type of market served.

 Often industrial selling the market is defined by industry type where the range of products
sold is essentially the same.
 Examples of such industries are banking, manufacturing companies and retailers where
different industry groups have widely varying needs, problems and potential applications.
 This structure allows salespeople to gain greater insights into these factors for their
particular industry
 It also enables them to monitor changes and trends within the industry that might affect
demand for their products.
 The cost of increased customer knowledge is increased travel expenses compared with
geographically determined territories.

Account-size structure

 This structure is employed in many trade and industrial markets that experience
importance of a few large customers and leads to establishment of a key or major
account salesforce.
 The team comprises senior salespeople who specialise in dealing with large customers
that may have different buying habits and demand more sophisticated sales arguments
than smaller companies.
 The team needs to be conversant with negotiation skills since they are likely to be given
a certain amount of discretion (judgement) in terms of discounts, credit terms, etc., in
order to secure large orders.
 Some organisations adopt a three-tier system, with senior salespeople negotiating with
key accounts, ordinary salespeople selling to medium-sized accounts, and a
telemarketing team dealing with small accounts.

Advantages for a key account salesforce structure

1. Close working relationships with the customer – The salesperson knows who makes
what decisions and who influences the various players involved in the decision. Technical
specialists from the selling organisation can call on technical people (e.g. engineers) in
the buying organisation and salespeople can call upon administrators, buyers and
financial people armed with the commercial arguments for buying.
2. Improved communication and co-ordination – The customers know that a dedicated
salesperson or sales team exists hence know who to contact when a problem arises.
3. Better follow-up on sales and service – Due to extra resources devoted to the key
account mean there is more time to follow up and provide service after a major sale has
been made.
4. More in-depth penetration of the DMU (Decision Making Unit) – There is more time to
cultivate relationships within the key account. Salespeople can ‘pull’ the buying decision
through the organisation from the users, deciders and influencers to the buyer, rather
than the more difficult task of ‘pushing’ it through the buyer into the organization.
5. Higher sales – Most companies who have adopted key account selling claim that sales
have risen as a result.
6. The provision of an opportunity for advancement for career salespeople – A tiered
salesforce system with key account selling at the top provides promotional opportunities
for salespeople who wish to advance within the salesforce rather than enter a traditional
sales management position.

New/Existing account structure

 A further method of sales organisation is to create two teams of salespeople. The first
team services existing accounts, while the second concentrates on seeking new
accounts.

This structure recognizes the following:

1. Gaining new customers is a specialised activity demanding prospecting skills, patience,
ability to accept higher rejection rates than when calling upon existing customers, and the
time to cultivate new relationships.
2. Placing this function in the hands of the regular salesforce may result in its neglect since
the salespeople may view it as time which could be better spent with existing customers.
3. Salespeople may prefer to call upon long-established customers whom they know, rather
than prospects where they might face rejection and unpleasantness.

 New account salespeople spend more time exploring the prospect’s needs and provide
more information to management regarding buyer behaviour and attitudes than
salespeople working under a conventional system.
 The deployment of new account salesforces is applicable for large companies with many
customers
 Can also be deployed where continual turnover of key accounts have to be replaced.
 This structure allows better planning of this vital function and eliminates competition
between prospecting and servicing.

BUDGETING AND EVALUATION

BUDGETING AND EVALUATION

The purpose of Planning is to allocate company resources in such a manner as to

achieve these anticipated sales.

BUDGETING

Def: This is an estimation of the revenue and expenses over a specified future period
of time.

This is establishing a planned level of expenditures, usually at a fairly detailed level. A

company may plan and maintain a budget on either an accrual or a cash basis.

Purpose of budgeting

 It forces managers to do better forecasting – managers should be constantly scanning

the business environment to spot changes that will impact the business
 Budgeting motivates managers and employees by providing useful yardsticks for
evaluating performance
 Budgeting can assist in the communication between different levels of management
 Budgeting is essential in writing a business plan
 Budgeting ensures that organizations expenditures does not exceed planned income
 Budgets states the limits of spending therefore act as a means of control

Types of budgeting

1. Zero based budgeting- In a dynamic business it often makes sense to ‘start afresh’
when developing a budget rather than basing ideas too much on past performance. This
 is appropriate because the organization is continually seeking to innovate. Each budget
is therefore constructed without much reference to previous budgets. In this way, change
is built into budget thinking.
2. Strategic budgeting – This involves identifying new emerging opportunities, and then
building plans to take full advantage of them. This is closely related to zero based
budgeting and helps to concentrate on gaining competitive advantage.
3. Rolling budgets – Rolling budgets involve evaluating the previous twelve months’
performance on an ongoing basis, and forecasting the next three months’ performance.
US companies typically report to shareholders every three months, compared with six
months in the United Kingdom. Given the speed of change and general uncertainty in the
external environment, shareholders seek quick results.
4. Activity based budgeting – This examines individual activities and assesses the
strength of their contribution to company success. They can then be ranked and
prioritized, and be assigned appropriate budgets.

Budget Determination

 Departmental budgets are not prepared by cost accountants, in conjunction with general
management; apportion overall budgets for individual departments. It is the departmental
manager who determines how the overall departmental budget will be utilized in
achieving the planned-for sales (and production).
 For instance, a marketing manager might decide that more needs to be apportioned to
advertising and less to the effort of selling in order to achieve the forecasted sales.
 The manager therefore apportions the budget accordingly and may concentrate upon
image rather than product promotion; it is a matter of deciding beforehand where the
priority lies when planning for marketing.
 Thus, the overall sales forecast is the basis for company plans, and the sales department
budget.

Sales department budget vs. Sales budget

The sales department budget is merely the budget for running the marketing function for
the budget period ahead. Cost accountants split this sales department budget into three
cost elements:

The selling expense budget that includes those costs directly attributable to the selling
process, e.g. sales personnel salaries and commission, sales expenses and training.

The advertising budget includes those expenses directly attributable to above-the line
promotion (e.g. television advertising), and below-the-line promotion (e.g. a coupon
redemption scheme).

Methods of establishing the level of such a budget are as follows:

1. A percentage of last year’s sales

2. Parity with competitors, whereby smaller manufacturers take their cue from a larger
manufacturer and adjust their advertising budget in line with the market leader
3. The affordable method, where expenditure is allocated to advertising after other cost
centres have received their budgets. In other words, if there is anything left over it goes
to advertising.
4. The objective and task method calls for ascertainment of the advertising expenditure
needed to reach marketing objectives that have been laid down in the marketing plan.
5. The return on investment method assumes that advertising is a tangible item that
extends beyond the budget period. It looks at advertising expenditures as longer term
investments and attempts to ascertain the return on such expenditures.
6. The incremental method is similar to the previous method; it assumes that the last unit of
money spent on advertising should bring in an equal unit of revenue.

1. The administrative budget represents the expenditure to be incurred in running the

sales office. Such expenses cover the costs of marketing research, sales administration
and support staff.

Sales Budget

 This can be described as the total revenue expected from all products that are sold.
 Note that sales budget comes directly after the sales forecast.
 Sales budget is the starting point of the company budgeting procedure because all other
company activities are dependent upon sales and total revenue anticipated from the
various products that the company sells.
 This budget affects other functional areas of the business, namely finance and
production, because these two functions are directly dependent upon sales.

Sales budgeting procedure

This figure represents the way that cost accountants view the budgeting procedure

From the sales budget comes the sales department budget. The production budget
covers all the costs involved in actually producing the products. The administrative
budget covers all other costs such as personnel, finance, etc., and costs not directly
attributable to production and selling.

The sales budget is thus the revenue earner for the company and other budgets
represent expenditures incurred in achieving the sales. Cost accountants also have cash
budgets and profit budgets, each with revenue provided from company sales. It is not
proposed to go into why they split into cash and profit budgets.

Budget Allocation to sales force

 The figure that reaches the individual salesperson is sometimes called the sales quota or
sales target and this is the amount that must be sold in order to achieve the forecasted
sales.
 Sales quotas or targets are therefore performance targets that must be reached, and
quite often incentives are linked to salespeople reaching such quotas or targets.
 Each salesperson knows the individual amount they must sell to achieve their quota, and
are effectively performance targets.
 Quotas need not necessarily be individually based, but can be group based, collectively
throughout a region – with everybody from the regional or area manager downwards
equally sharing the sales commission.
 Quotas may be for much shorter periods than the one year. The entire year’s budget may
be broken down in the same manner, say, month by month.
 For established firms the most common practice of budget allocation is simply to increase
(or decrease) last year’s individual budgets or quotas by an appropriate percentage,
depending on the change in the overall sales budget.
 It is sensible to review individual sales quotas to establish if they are reasonable given
current market conditions.

Budget Allocation procedure

1. Determine the sales potential of territories – For consumer products, disposable incomes
and number of people in the target market may be used to assess relative potential.
2. For industrial products, the number and size of potential customers may be used.
Another factor to be taken into account is workload.
3. Two territories of equal potential may justify different quotas if one is compact while the
other is more widespread.
4. By assessing sales potential for territories and allowing for workload, the overall sales
budget can be allocated in as fair a manner as possible between salespeople.

Sales force Evaluation

Salesforce evaluation is the comparison of sales force objectives with respective results.

The Purpose of Evaluation

 To attempt to attain company objectives – By measuring actual performance against

objectives, shortfalls can be identified and appropriate action taken to improve
performance.
 Evaluation can help improve an individual’s motivation and skills – Motivation is affected
since an evaluation programme will identify what is expected and what is considered
good performance.
 It provides the opportunity for the recognition of above-average standards of work
performance, which improves confidence and motivation.
 Evaluation allows identifying areas of skill weakness and effort to be directed to the
improvement of skills in those areas. Thus, evaluation is an important ingredient in an
effective training programme.
 Evaluation provides information that affects key decision areas within the sales
management function.

Salesforce Evaluation Process

1. Setting of salesforce objectives which may be financial, such as sales revenues, profits
and expenses; market-orientated, such as market share; or customer-based such as
customer satisfaction and service levels
2. Determine the sales strategy that must show how the objectives are to be achieved
3. Set the performance standards for the overall company, regions, products, salespeople
and accounts.
4. Measure the results and compare with performance standard
5. Take action to improve performance

Setting Standards of Performance

 Evaluation implies the setting of standards of performance along certain lines that are
believed to be important for sales success.
 The control process is based upon the collection of information on performance so that
actual results can be compared against those standards.
 For the sales team as a whole, the sales budget will be the standard against which actual
performance will be evaluated.
 This measure will be used to evaluate sales management as well as individual
salespeople. For each salesperson, their sales quota will be a prime standard of sales
success.
 Standards provide a method of fairly assessing and comparing individual salespeople.
 Simply comparing levels of sales achieved by individual salespeople is unlikely to be fair
since territories often have differing levels of sales potential and varying degrees of
workload.

EMERGING TRENDS AND ISSUES IN

SALES MANAGEMENT
EMERGING TRENDS AND ISSUES IN SALES MANAGEMENT

This refers to new issues that are coming up as far as selling is concerned.

 Use of advanced technology-computers which have come up with new changes ranging
from less paper work and many people are unemployed.
 E-Commerce
 E-Government-Application of advanced ICT to deliver government services
 E-procurement

NB Outsourcing- It is management strategy by which an organization outsources major

non-core functions to specialized, efficient service providers. The basic objective is
normally cost reduction and concentration on core activities.

Benefit of outsourcing

a) Time management

b) Reduced staff costs

c) Increased flexibility

d) Cost certainty

e) Reduction in staff management problems

f) Improved consistency of service

 g) Reduced capital requirements

h) Reduced risk

Problems of outsourcing

a) Redundancy costs

b) Quality of service maintenance problems

c) Long term commitment absent

d) Over dependence on suppliers

e) Lack of suppliers flexibility

f) Lack of management skills to control suppliers

g) Possible loss of competitive advantage particularly in the loss of skills and expertise of
staff

h) Insufficient internal investment and the passing of knowledge and expertise to the
supplier who may sieve the initiative.

 Emergence of automatic teller machines.

 Emergence of mobile banks.
 Emergence of customer care services department to handle financial matters only.
 Emergence of m banking
 Globalization-This is interaction and integration among people, companies and
governments of different nations.

It is a process whereby different systems and parts of a related trade, function as a

closely-knit system at the international level. Communication and transport have vastly
improved and affects many aspects of economics from competition policy to monetary
policy and agricultural policy.

 Mergers and joint ventures of institutions so as to increase the institutions capital base.
 Drug abuse menace.
 Pollution-air, water, noise and solid waste due to drastic economic changes.
 Environmental Corruption.
 Depletion of natural resources.
 Rogue economics-recent credit crisis shows how financial deregulation and globalization
has contributed to many new problems which leave economies vulnerable to financial
speculation.
 Pressure on commodities-the world is used to dealing with a situation of abundant supply
of raw materials, but diminishing supply and growing demand threatens to change that.
Oil prices are rising due to speculation and due to fact demand is simply rising faster than
supply.
 Shifting balance of global economy-in post war period, US economy was dominant. The
old phrase when America sneezes, the rest of the world catches a cold was very much
appropriate. Sleeping giants have risen.
 Dealing with commodity shortages there is the introduction of government quotas, tariffs,
protectionism etc.
 Growth of china economies.
 HIV aids menace.
 Emergence of consumerism movements-this is an organized movement of citizens and
government agencies to improve the rights and power of buyers in relation to sellers
 Destruction of environment e.g. lumbering, desertification etc.
 Emergence of fraudsters who produce counter fake products.
 Emergence of environmentalism movement-this is an organized movement of concerned
citizens and government agencies to protect and improve people’s current and future
living environment.
 Liberalization-this is removal of trade barriers-i.e. free trade.
 Regional economic integration- e.g. EAC, COMESA, PTA boundaries become irrelevant.
 Emergence of export processing zones-this are areas set aside by government where
industries can set up firms to process goods for export at little or no charge.
 Enactment of new government policies ranging from quotas, rules, regulations and law
enactment e.g. media bill, mututho law,traffic law and tobacco bill.
 Establishment of National Employment Authority(NEA) to address the issue of
unemployment in Kenya
 Infrastructural advancement-Red lines in Thika super highway to usher in Bus Rapid
Transit System, Direct flights to US( A major milestone)
 Crafting of National Addressing System to assist in dissemination of information.
 Emergence of drones in Rwanda to supply drugs in interior areas.
 . Business Ethics 1. Ethics: this is a set of moral principal that govern the action of an
individual or group
 Social Responsibility Refers to the roles undertaken by business organization on the
surrounding environment