MM303-SALES AND DISTRIBUTION

MANAGEMENT

MARKETING SPECILIZATION

Mr.LALIT TANKAsst. Professors, MBA Department,

Bhagawan Mahavir College of Management, SuratEmail id: lalittank@gmail.com

COURSE CONTENTS

Module-1Introduction to Sales & Distribution Management

Module-2Personal Selling Process, Sales Territories & Quotas

Module-3Sales Force Management

Module-4Distribution Management

Module-5Market logistics and supply chain Management

Module-1Introduction to Sales &

Distribution Management

What is sales management

American Marketing Association defined as Sales management is “The planning, direction, and control of personal selling, including recruiting, selecting, equipping, assigning, routing, supervising, paying and motivating as these tasks, apply to personal sales force.

Nature of sales management

• Its integration with marketing management • Relationship selling • Varying sales responsibilities

Importance of sales management

• Sales is most exiting, rewarding and challenging careers.

• More position available then other professional occupations.

• Sales career is one of the fastest and surest route to the top management.

• Sales management only function that generates revenue, all other department spend the money.

• Financial result of an organization depends on sales management.

Objectives of sales management

Corporate objectives

Sales volume Profitability Growth

Marketing management

Sales management

Personal selling objectives

• Building product awareness • Creating Interest • Providing information • Stimulating demand• Reinforcing the brand

Types of sales management positions

SALES TRANNE/SALES PERSON/SALES REPRESENTATIVE

BRANCH/AREA/DITRICT SALES MANAGER

REGIONAL/ZONAL /DIVISION SALES MANAGER

NATIONAL SALES MANAGER

V.P SALES/V.P MARKETING

CEO/PRESIDENT

STRATEGIC/TOP LEVEL MANAGERS

TACTICAL /MIDDLE-LEVEL SALES MANAGERS

OPERATION/FRIST-LEVEL SALES MANAGERS

Theories of Personal Selling

• AIDAS Theory • Right set of circumstances theory• Buying formula theory • Behavioral Equation theory

AIDAS THEORY

• A Potential customer undergo five sequential mental states before he becomes an actual customer, by buying the product.

• A-Attention• I-Interest• D-Desire• A-Action• S-satisfaction

Right set of circumstances theory

• In this theory the salesman induces the right type of “stimuli” in the customer which leads to the right types of “response”.

• This theory is based on the psychological frame called “ stimuli-Response”

Buying formula Theory

• This is theory given by late E.K. Strong.• This theory focus on buyers- the prospects.

buyers needs and problems are being solved.• The salesman acts as a catalyst in satisfying

the customer.• Need(Problem) -> Solution -> Purchase -

>Satisfaction

Behaviour Equation Theory

• B=P x D x K x V• B= Response, the act of purchasing a brand of

product.• P= Predisposition or force of habit• D= Drive or amount of motivation.• K=Incentive potential or its potential satisfaction

to the buyer.• V=Intensity of cues or these are weak stimuli

which determine when to buy.

Personal selling strategies

• To address all the unique needs customers, you have to design your personal selling strategy to have three key elements: a knowledgeable salesperson or sales team, an understanding of your client, and a sales structure designed to give the salesperson enough power to make an irregular sale but still get rewarded for it.

• The Salesperson The salesperson is the key to your personal sales

strategy. So when you're recruiting salespeople, you should be willing to recruit the best and expect to pay them a premium.

• The Client Throughout the marketing section, we've used the phrase "Know your client." It is just as important here as anywhere else. By understanding what your client needs in a product, you can better give the salesperson the tools they can use to fulfill that need. By understanding what a customer wants in a salesperson, you can tune your sales team to be just that.

• The Sales Structure In personal selling strategy your sales person is your best friend. But, depending on the system you've set up for them, that person can also be your worst enemy. Determining an appropriate incentive system for a sales force can be the most difficult job you'll have as a business person.

Emerging trends in sales management

• Global perspective• Revolution in technology • Customer relationship management (CRM)• Sales force diversity • Team selling approach • Managing multi-channels• Ethical and social issues • Sales professionalism.

Sales Forecasting and

Budgeting Decisions

What is sales forecasting

• Sales forecasting according to cundiff and still, is “ An estimate of sales during a specified future period which is tied to a proposed marketing plan and which assumes a particular set of uncontrollable and competitive forces.”

Types of sales forecast

Types of sales forecast

Product level

Time period

Geographic Area

Total sales, Industry sales, company sales, product line sales, product form sales, product item sales.

Long Rang, Medium Range, short range.

World – Nation – Region – Territory –Customer

Basic Terms Used In forecasting

Market potential :• It is the best possible estimated sales of a

given product or service for the entire industry in a given market for a specific period of time.

• Market potential is also called as industry sales forecast.

• Market forecast: It is the expected industry sales of a given product or service at one specific level of industry marketing expenditure, in a given market, for a specific period of time. market forecast is also called as market size.

• Sales potential : it is the best possible estimated sales of a given product or service for a company in a given geographic area for a specific period of time. sales potential is also defined as the maximum share of market potential that is expected to be achieved by a company.

• Sales forecast: it is the estimated company sales of a given product or service, under a proposed marketing plan, in a given market, for a specific period of time. a company may make sales forecast for an entire product line.

• Sales budget: it is the estimate of expected sales volume in unites or revenues from the company’s product and services and the selling expenses.

• The sales budget goes into complete details of expected sales of each product item.

• Sales quota: it is a sales goal set for marketing unit for a specific period of time. The marketing unit may be a salesperson, a branch, a region, a dealer, or a distributor.

Forecasting approaches

• Top down/ Break-down approach: in this approach, typically the company sales forecast is developed at the business unit level, by using suitable forecasting methods.

• The head of sales then breaks down the co. sales forecast into region, district. Territory, sales person.

Two major methods for top-down approach

• Market – buildup method: The first steps in this method is to identify existing and potential business buyers in the geographical territory. The second steps is to find out their potential purchases of the product under study. The final step is to add-up the business potential of all the buying firms to obtain a fairly accurate estimate of market potential for the product or service for a specific geographical territory.

• Multiple-factor index method: • This method first identifies the factors that

influence the sales of a product or service.• Generally, there are more than one sales

factors such as population and income that influence sales.

• These factors are given certain weights, corresponding to the degree of sales opportunity.

Bottom-up/ Build up approach

• Bottom up or build up approach starts with the company’s area or branch managers asking its salespersons to estimate or forecast the sales in their respective territories.

Combined into company sales forecast

Combined into Regional /zonal sales forecast

Combined into area/ branch sales forecast

Salespersons sales forecast of individual customer

Sales Forecasting Methods Qualitative methods 1. Executive opinion2. Delphi method 3. Sales force composite4. Survey of buyer’s intentions5. Test marketing

Quantitative Methods 1. Moving averages2. Exponential smoothing 3. Decomposition 4. Ration method 5. Regression analysis6. Econometric analysis

Qualitative Methods 1. Executive opinion method The oldest, simplest and most widely used method. The research study said that 86% of cos. Used this method for sales

forecast. The methods includes getting views of top executives of the co. regarding

future sales. The sales forecasts are made either by taking the average of all the

executives’ individual opinion or through discussions among the executives.

The executives’ give their opinion based on experience, judgment, and intuition.

Advantages : 1. forecasting can be done quickly and easily. 2.less expensive then other.3. very popular for small and medium size cos.

Disadvantages: 1. unscientific 2.subjective 3.difficult to break down forecast in subunit (Like region , branches)

2.Delphi Method • This method is similar to the executive opinion method.• This method developed by RAND CORPORATION During the last 1940s.• The difference is that the members of expert panel do not meet or discuss in

a committee.• The selection of panel of experts from within and outside the organization.• The coordinator asks each expert separately to make a forecast on some

matter.• Each member of the expert panel submits in writing his/her forecast

anonymously.• The coordinator summarizes these forecasts into a report that is sent to each

panel member.• The experts are asked to make another prediction separately on the same

matter, with knowledge of the forecast of the other expert on the panel.• This process is repeated until the panel of experts arrive at some consensus.• The basic belief in this methods is that experts, without any pressure or

influence will develop a more accurate prediction of the future.

Delphi Method ………….Cont.

• Advantages :

1. Objective forecast that is accurate

2. Useful for technology, new product, industry sales forecast.

3. Both long and short-term forecasting possible.

• Disadvantages

1. Difficulty getting a panel of experts.

2. Longer time for getting consensus.

3. Break-down of forecast into products or territories is not possible.

Sales force composite method • This method involves sales people to estimate their future sales.• It is an example of bottom-up approach and is also called a “grass

roots” approach.• Each salesperson estimates in his/her territory how much quality

or value existing and potential customers will buy of each of the cos. product

• This methods is often used by industrial or business marketing cos.

• S.R. make the sales estimate in consultation with customers and sales supervisors based on their experience.

• The cos. Sales forecast is made up composite of all the sales persons ‘ sales forecast.

Sales force composite………….Cont…

• Advantages • Forecasting is done by sales people who are closest to the

market have batter insight in sales trends.• Detailed sales estimate broken down by customer,

product, S.R. and territory.• Involvement of sales people.

• Disadvantages • Sales forecast are often pessimistic or optimistic as sales

people are not trained in forecasting.• Sales people may deliberately underestimate the demand.• Many sales persons are not interested in sales forecasting.

Survey of buyers’ intentions method

• This method is sometimes called as market research or market survey.

• It includes asking existing and potential customers about their likely purchases of the cos. Product and service for forecast period.

• Several research organization conduct periodic survey of consumer buying intention. They combine various bits of information into consumer confidence measure.

Survey of buyers’ intentions cont……

• Advantages • Useful in forecasting sales for industrial products, consumer

durables, new product.• It also gives customers’ reasons for buying or not buying • Relatively inexpensive and fast when only the few customers

involved.

• Disadvantages• Sometimes buyers are unwilling to reveal their plans.• Buyers some times over optimistic.• Expensive and time consuming in consumer non durable market

where consumers are very large in number.

Test marketing method

• This method is useful for forecasting sales for new product, which has no historical sales figures.

• It can also be used for estimating sales for an established product in a new territory .

• Full blown test markets• Controlled test marketing• Simulated test marketing

Full blown test markets

• It consists of the co. choosing a few (two to six ) representative cities. in which full promotion campaign is introduce.

• The duration of test market varies from a few months to one year, depending on new the repurchase period of the new product.

• Buyers surveys are carried out to get information about consumer attitude, usage and satisfaction towards the new product.

Controlled test marketing

• The co. with the new product hires a research firm and get a panel of stores at specified geographic location.

• The research firm delivers the new product to the panel of stores, arranges promotion at the stores, and measures the sales of the new product.

• The research firm also interview sample consumers to get their perception on the new product.

• Both full-blown test markets and controlled test marketing expose the new product to the competitors.

Simulated test marketing • In this method, about 30-40 consumers are selected, based on

their brand familiarity and preferences in a particular product category such as baby care and soft drink products.

• These consumers are shown commercials or print advertisements of well known products and also the new product, without any specific mention.

• These consumers are given a small amount of money and asked to buy any items in a store.

• The researcher of the company notes how many consumer buy the new product and competing product

• These consumers are interviewed to find reasons for buying or not buying, and later, after usage of the new product.

Quantitative Methods 1.Moving average method :• This is a relatively simple method that develops a

co. forecast by calculating the average co. sales for previous years.

• Sales forecast for next year : actual sales for past 3 or 6 years /number of years (3 or 6)

• Advantages: 1.Simple method 2. easy to calculate 3.widely used for short term and medium term sales forecast.

• Disadvantages: 1.unable to predict a downturn 2.can’t predict long term sales forecast accurately 3.historical data needed.

Exponential smoothing method

• This method is closely related to the moving averages method for sales forecasting.

• By using the exponential smoothing equation, the forecaster can allow sales in certain periods to influence the sales forecast more than sales in other period.

• Sales forecast for next = (L) (actual sales this year + (1-L) (This year’s sales forecast)

L= probability weighing factor

Exponential smoothing…..Contn….

• Advantages• Simple to operate• Forecaster’s knowledge or intuition can be used in

forecasting.• Useful method when sales data have a trend or seasonal

pattern.• Immediate response to a upturn or downturn in sales and

used by many firms.• Disadvantages• Smoothing constant is somewhat arbitrary • Long term and new product forecasting are not possible.

Decomposition method

• In this method the company previous periods sales data is broken down into four major components such as TREND, CYCLE, SEASONAL AND ERRATIC event.

• These components are then recombined to produce the sales forecast.

• Advantages • This method is that it is conceptually a sound method.• Disadvantages • Difficult and complex statistical methods are needed to

break down sales data into various components.• Historical data is needed.

Ration method

• Ration method is a time series method of forecasting.

• Which is based on the assumption that what happened in the immediate past will continue to happen in the immediate future.

• Sales forecast for next year= Actual sales of this year* Actual sales of this year/

Actual sales of last year

Ration method…….cont……

• Advantages• Simple to calculate • Requires less data • Accuracy is for short-term forecast• Disadvantages• It can not be used for forecasting sales for long

term periods and new product.• Accuracy of sales forecast would be less, if past

sales fluctuate considerably.

Regression analysis • This is a statistical method that is used to predict sales. Called as

dependent variable “Y”.• The co. then identifies cause and effect relationship between the

co. sales and the independent variable or factor. Which influence the sales.

• Advantages• High forecasting accuracy. If relationship between variable are

stable.• Objective method• Can predict turning points of the co’s sales.• Disadvantages• Technically complex • Can be expensive and time consuming.• Use of computer and software packages are essential.

Econometric Analysis

• In this method, many regression equations are built to forecast industry sales, general economic conditions, or future events.

• To find out which factors or variable influence sales and the relationships between sales and factors as well as the interrelationships between the factors, develop a number of regression equations representing these relationship.

• A forecast is prepared by solving these equations on a computer.

• Advantages –this method is that accurate forecast of economic condition and industry sales are possible.

• Disadvantages- Large volume of data is required representing the various factors.

How to improve sales forecasting Accuracy

• Use multiple forecasting methods• Identify suitable methods• Develop a few factors • Obtain a range of forecasts• Use computer hardware and software tools

Sales Budgets

• A sales budget consists of estimates of expected volume of sales and selling expenses.

• The sales volume part of the sales budget is based on sales forecast.

• Sales budgets are generally set slightly lower than the sales forecast to avoid excessive risk.

• The Sales budget includes a detailed estimate of sales revenue as well as selling expenditure.

• The selling expenditure budget consists of the selling expense budget and sales department administrative budget.

• Selling expense budget: Includes expenditures for personal selling activities, such as the salaries, commissions and other expenses for the sales force.

• The administrative budget: of the sales department should includes the salaries of the territory sales manager, sales supervisor, their secretaries and office staff. The budget should also includes operating expense like rent, power, office equipment.

The sales manager is responsible for preparing three budgets

Sales volume budget Selling-expense

budget

Administrative budget

PURPOSES OF THE SALES BUDGET

• Planning • Coordination • Control

Methods used for sales expenditures budget

• Percentage of sales method • Executive judgment method• Objective and task method

Sales budget process

• Review situation• Communication • Subordinate budgets • Approval of the sales budget• Other departments

Module -II

Personal Selling Process, Sales Territories & Quotas

Personal Selling Process

• Sales people perform many activities which can be a selling and non-selling activities.

• The selling activities consist of the various steps of selling process.

• The non selling activities includes preparation of sales reports, collecting payments, obtain market information etc.

• There is no magic formula to make sale. if the sales person follows the selling steps the chances of success are greatly improve.

Selling process steps Prospecting and qualifying

Pre approach (precall planning )

Approach

Presentation and demonstration

Overcoming objections

Closing the sale

Follow-up and services

1.Prospecting

• A prospect is an individual, a family or an organization who needs the product or the service a salesperson is selling and also has the ability to buy.

• A prospect is not the same as a sales lead.• A sales lead generates the name of a person or a

business firm that is a probable prospect.• Once it is found that the sales lead wants the

product and has the ability to buy, the sales lead becomes a prospect or potential customer.

Prospecting/ Lead Generating Method Sr.No

Prospecting Method Brief Description

1 Referrals from existing customers Requesting existing customers to suggest the names of prospects.

2 Referrals from internal company sources

Co. advertising, direct mail, website, trade shows, and tele prospecting activities

3 Referrals from external sources Suppliers, intermediaries, bankers, trade associations.

4 Networking by salespersons Sales persons become members of social orgn. Like lion club, rotary club, to meet new people who may be prospects.

5 Industrial directories Yellow pages published by govt. and Pvt. Publishers.

6 Cold canvassing Unannounced call by salespeople on firms that may need the product/service the salesperson sells.

Qualifying

• It is important that the lead, or probable prospect is qualified.

• The necessary conditions for the probable prospect or the lead to get qualified to the prospect or potential customer are.- The probable prospect has need for the product/service being sold.- The probable prospect can afford to buy the product or service.

• The prospects, after qualifying are placed in three groups.

Types of prospects

• Hot prospects: These prospects have good requirements of the co’s. products/services and are financially sound.

• Warm prospects: This group of prospects have medium or average requirements of the co’s. product or service and are financial sound. this prospect give to co. tele marketing team for follow ups.

• Cool prospects: These prospects have low requirements and their financial capacity may or may not be good. these are handed over to the co’s. intermediaries like dealer/distributors.

2.Preapproach

• This step generally includes two tasks.1. Information gathering : The salesperson needs

to collect as much information as possible about the prospect. the in-depth information about the customer makes the salesperson confident.

2. Planning the sales call:-Setting call objectives -Planning the sales strategy

3.Approach

• After collecting the prospect’s name and other relevant information, as mentioned in pre approach the next step to make an appointment to see the prospects.

• The approach takes a few minutes of a call, but it can make or break a sale.

• When a salesperson meets first time, the first impression should be favourable.

Approach techniques used in sales

• Introductory approach• Customer benefit approach• Product approach • Question approach• Praise (Congratulations)approach

Some approaches like free gift or dramatic alternatives may not liked by some prospects as these approaches may violate ethical guidelines.

4.Presentation and Demonstration

• For this step the sales person has to understand the following aspects.

1. Understanding the buyer’s needs • The best way to understand the prospects needs is by

asking questions.• Situational questions• Problem identification questions• Problem impact questions • Solution value questions • Confirmations questions

2.Knowing sales presentation methods • Stimulus response method • Formula method (AIDA)• Need satisfaction method • Team selling method • Consultative (Problem-solution)selling method

3.Developing an effective presentation • Planning • Use technology • Adapt presentation • Don’t overload • Prospect’s language• Convincing

Demonstration

• Demonstration is one of the important selling tools of a salesperson.

• Sales presentation can be improved by demonstration.

• D prove the benefits of the product and reduce the risk of a wrong purchase to the buyer.

Benefits of demonstration

• Buyer’s doubts or objections are cleared and their questions are answered. This improves a buyer’s purchasing interest.

• It provides a good support in the selling process.• It helps the salesperson to find out specific

benefits of the prospective customer..• Planning and conducting demonstration • Matching presentation methods with situations

Overcoming objections

• Sales objections, resistances or oppositions may typically take place during sales presentation.

• Objection should be welcomed because they show that the prospect has some interest.

• That if the objections can be answered satisfactorily it would result in sales.

• Two types of objections happen 1.psychological (or hidden) and logical (practical)

• Psychological objections: include predetermined ideas or beliefs, preference for established brand, dislike of making decision, resistance to spend money.

• Logical objections: are tangible such as quicker delivery schedule, high price, product quality, or product availability.

Method of handling and overcoming objections

• Ask question• Turn an objection into a benefit • Deny objections tactfully• Third-party certificate • Compensation.

Trail close/ closing the sale

• Trail close is one of the selling techniques it checks the attitude or asks the opinion of the prospect. trail close does not ask the decision of the prospect to buy. It used after an objection is answered or before closing the sale. Some trail close example

• To what extent this product meets with your needs?

• Which of these benefits are important to you?

Closing the sale

• Closing the sale mean asking for the order.• Closing is the process of helping the buyers to

make a decision that will benefit him/her.• Some of the buying signals for closing sale • Examines the product • Asks another persons opinion • Asks questions • Becomes friendly

Closing techniques

• Alternative –choice close• Minor point close• Assumptive close• Summary of benefits close • T-account or balance sheet close• Special offer close • Probability close • Negotiation close

Follow up and service

• Sales people must understand that their job is not over after the order.

• Successful salespeople follow-up a number of related tasks like..

• Check customer order • Plan follow up visit at the time of delivery • Account penetration• Relationship marketing

Designing Sales Territories & Sales Quotas

Defining sales territory

• A sales territory consists of existing and potential customers assigned to a salesperson.

• The territory may or may not have geographic boundaries.

• A salesperson is assigned to a geographic area consisting of present and potential customers.

• The basic concept of a sale territory is that a territory or a market is made up of present and potential customers, rather than a geographical area

Reasons for setting up sales territories

• Increase market coverage • Control selling expenses • Better evaluation of sales force performance• Improve customer relations• Increase sales force effectiveness • Improve coordination• Benefit salespeople and the company

Reasons for not setting-up sales territories

• A small company with one or few salesperson• Selling in a local market • The salespeople are demotivated due to

restrictions of sales territories.• Management of the co. may not be aware of

the advantages or benefits of developing sale territories.

• May not know how to set up sales territories.

Procedure for designing sales territories

SELECT A CONTROL UNIT

FIND LOCATION AND POTENTIAL OF CUSTOMERS

DECIDE BASIC TERRITORIES

USED BREAKDOWN METHOS

USED BUILD-UP METHOD

1.Select a control Unit

• The first step in territory design is to select a geographical territorial base called control unit that will be used in the territory analysis.

• Commonly used control units are• States• Metros• Cities • Districts• Talluka, towns and villages

2.Find location and potential of customers

• Find the potential of present and prospective customers in each control unit.

• Information of present customers available from co’s sales analysis.• The information of prospective customers can be obtain from

telephone directories and market research studies.• After the present and potential customers are identified the co.

should estimate the total sales potential for all customers in each geographical control unit.

• After the sales potential of control units are calculated it is necessary to classify the customers based on their sales and or profit potential.

• Many company used ABC analysis method.

3.Decide basic territories

• This can be done by using either build up or breakdown method.

• Buildup method equalises the workload of salespeople and commonly used by manufacturers of industrial products and service or by the cos. That want to selective distribution strategy.

• Breakdown equalises the sales potential of territories, and is popularly used by mafg. Of consumer product and service or by firms that want to adopt intensive dist.strategy .

Build up method • In this method the basic territories are set up by

building up from the control units .• The objective to be achieved is to equalise the

workload of salespeople.• Build up method procedure :1. Decide call frequencies2. Calculate the total no. of calls in each control unit3. Estimate workload capacity of salesperson4. Make tentative territories 5. Develop final territories

Breakdown method

• Procedure for breakdown method 1. Estimate co. sales potential for total market2. Forecast sales potential of each control unit 3. Estimate the sales volume expected from

each salesperson.4. Make tentative sales territories 5. Develop final territories

Assigning salespeople to territories

• The sales manager should consider two criteria

1.Relative ability of salespeople 2.Salesperson’s effectiveness in a territory

Managing territorial coverage

• This consist if three activities 1. Planning of efficient routes for salespeople2. Scheduling the salespeople’s time3. Using time management tools

Sales Quotas

• After finalizing the sales forecast and the sales budget, the next logical step for a co. is to set up the sales goals or sales quotas, for marketing units, such as regions, sales territories, sales persons, distributors, and dealers.

What are sales quotas

• Sales quotas are sales goals set by co. for its marketing unit for a certain period of time.

• Sales quotas (also called quotas) can be set on sales volume (rupees or dollar sales and unit volume) expense, profit margin, activity, customer satisfaction and combination .

• Annual sales quotas for each marketing unit is broken down to quarterly and monthly basis

• Sales quotas are developed from the annual marketing plan of co.

Objectives of quotas

• Making available performance standards • Controlling performance • Motivating people • Identifying strengths and weaknesses

Types of quotas

• Companies set many types of quotas. The most comman types of quotas are.

• Sales volume quotas • Financial quotas• Activity quotas• Combination quotas

1.Sales volume quotas

• Most of the cos. Sales volume quotas for individual salespersons, dist. Retailers, geographical areas, or product, for a specific period of time.

• For effective control, it is proper to set sales volume quotas for the smallest marketing unit.

• Setting quotas for regions, it is better to set quotas for branches or dist. Within a region.

• Management can achieve better direction and control by setting quotas for individual product items and brands, it for entire product line.

• Annual sales volume quotas are broken down to quarterly and monthly quotas.

Form of sales volume quota

• Rupees/ dollars sales volume: • Unit sales volume • Point sales volume

Financial quotas

• Financial quotas are the goals set to control gross margin or profit contribution, and expenses of various marketing or sales units , such as sales territories, sales people, and products.

• Gross-margin or profit contribution quotas • Expense quotas• Activity quotas• Combination quotas

Methods for setting sales quotas

• Territory potential • Past sales experience• Total market estimates • Executive judegment • Salespeople’s estimates • Compensation plan

Insights into setting and administration of sales quotas

• Set realistic quotas • Understand problem in setting quotas • Ensure salespeople understand quotas

-Participation in quota setting • Continuous feedback• Flexibility in administering quotas • Purpose of quotas • Understand relationship between quotas selection

and marketing environment.

Sales organization structures

Concepts of sales organization

• An organization structure defines relationship among job, and amongst the people, in a company.

• The aim is to arrange the activities or job in such a manner that the people involved can perform effectively and efficiently and act together rather than individually.

Basic concepts of sales organization

• Degree of centralization • Degree of specialization• Line and staff positions• Marketing orientation• Effective co- ordination • Span of control.

Basic types of Sales organization structures

• Line sales organization• Line and staff sales organization• Functional sales organization• Horizontal organization

Line sales organization • It is the simplest sales organization structure• All the manager, from top sales manager to middle level

managers, have line authority.• Line authority means people in management positions have

formal authority to direct and control immediate subordinates.

• This structure is widely used in small firms and in cos. Having a small no. of salespeople.

• The advantages of line sales organization are clear authority and responsibility, quick decision making and low cost.

• The disadvantages are too much depends on the head of sales, the sales head does not have adequate time to do planning and analysis.

Line sales organization structure

Head Marketing

Sales Manager

Area sales manager -1

Sales people

Area sales manager -1

Sales people

Area sales manager -1

Sales people

Line and staff organization

• A group of specialists are made available to the top sales or marketing executive.

• These specialists called staff are experts in certain support activities such as MR, sales training etc.

• Staff managers have the role of advising or assisting line sales managers.

• This structure used in medium and large sized cos.• High cost, slower decision, conflict may arise in

line authority are disadvantages.

Line and staff organizationHead –Marketing

Marketing services manager

Sales manager

Marketing research manager

Promotional manager

Area sales manager-1

Area sales manager-1

Area sales manager-1

Area sales manager-1

Sales people Sales people Sales people Sales people

Functional sales organization

• The principle of specialization is fully used.• Each staff specialist manager has functional

authority of his/her function over sales people.

• A few large cos. With many product may use functional sales organization structure.

• It is administrative simplicity.

Functional sales organization structure Head –Marketing

Marketing services manager

Sales manager

Marketing research manager

Promotional manager

Area sales manager#4

Sales people

Horizontal sales organization

• This removes management levels and also departmental boundaries.

• The support functions like strategic planning, human resources and finance are looked after by a small team of senior executives.

• All the other people in the organization are the members of cross functional teams.

• Reduction in supervision, unnecessary tasks and cost improve in efficiency.

Horizontal sales organization structure Research and design team•Customer research •Product/service design

Operating team •Production operation•Quality assurance•System engineering

Customer satisfaction team •Sales and marketing •Pricing, promotion•Channels , logistics

Customer support team

•Service •Training •Information

Planning team •Strategic planning •Accounts, finance•HR •Chief operation officer

Specialization within sales organization

• Generally many medium and large sized cos. Expand one of the basic sales organization structures in some specialized design, in order to increase the effectiveness of their sales force.

• Geography • Product • Market • Functional • A combination of these factors

Sales Force Management

Module-3

Recruiting the sales force

• Recruiting includes activities to get individuals who will apply for the job. The general purpose of recruitment is to provide a pool of job candidates from where a co. Selects the right persons.

• This means recruitment activities do not include the selection of people.

• If the co. want to recruit a large number of sales people, recruiting and selection process should be done continuously.

Identify the sources of recruiting sales people

• Internal source 1. Employee referral programmes 2. Current employees3. Promotion and transfers

• External sources1. Advertisements2. The internet 3. Educational institutes4. Employment agencies 5. Job fairs 6. Other cos. (competitors, customers, non-competitors)

Selecting the sales force

• The selection process 1. Screening resumes 2. Application blank 3. Initial interview4. Intensive interview 5. Testing 6. Reference check 7. Physical examination

Hiring stage

• The hiring process should be implemented properly so as to give a positive impression of the co. to the candidates. Who look for good work environment, where people are made to feel important.

• Two activities in hiring stage:1.The co.making the job offer 1.Acceptance of the job offer by the applicant

Sales force Training

Managing the sales training process

• Sales training is expensive and sales managers should take special care to ensure that time and money are wisely spent.

• The training needs is to understand the specific goals of training for individual salespeople, such as improving product knowledge, selling techniques, or relationship building.

Sales training process

1.Assess sales training needs

2.Design and execute sales training programme

3.Evaluation and reinforcement of sales training

programme

1.Methods used for assessing training needs

• Some of the methods used to decide the training needs are.

• Sales manager’s observation• Sales force survey• Customer survey• Performance testing • Job description • Sales force audit

Popular sales training needs

• Product knowledge • Customer knowledge • Competitive knowledge • Sales techniques or selling skills• Company knowledge

Design and execute sales training programme

• ACMEE method of sales training programme.Aims (Why ?)

Content (What?)

Methods (How?)

Execution (who, when, where, what )

Evaluation

Designing the sale training programme

• Aims/objectives of sales training (why is sales training needed)

• Content of training programme (what should be the content of sales training)

• Sales training methods (how will the sales training be conducted)

Sales training methodsClass room/conference training •Lectures•Demonstrations•Group discussion

Self study training •Audio cassettes•Manual, books •CD-ROM

On the job training •Mentoring •Job rotation

Online training •EPSS•Interactive multimedia training •Distance learning

Sales training method

Behavioral learning•Role playing•Case studies•Simulation games

Organizational decision for sales training

• Who will be the trainees ?1. New and existing sales people 2. Intermediaries 3. Sales managers• Who will conduct the training? 1. Line sales personnel 2. Staff trainers3. Outside training specialists • When should the training take place?• Where should the training be done?

-Centralized training -Decentralized training • What would be the budgeted expenditure?

Execution of the sales training programme

• Execution or implementation of the sales training programme is the most tedious part of the sales training process.

• Preparation of training time table, arraigning the conference hall and many other details have to be arranged.

• A list of all activities helps in proper execution of training programme.

Evaluation of sales training programme

• Four components to measure programme1. Reaction2. Learning 3. Behavior4. Results

Reinforce sales training

• Most sales people would not change their behavior unless there is some reinforcement to the sales training.

• According to one training co. 4 or 5 coaching reinforcements are needed in 16 weeks periods after sales training.

• Many cos. Follow up or reinforcement trainings are not done because of various reasons.

• Training methods used to reinforce the training 1. Refresher training2. Senior sales people coaching new salespersons3. Web-based or online methods to reinforce formal

training

MOTIVATING THE SALES FORCE

Introduction

• Some salespeople are ambitious and self starters.

• They put forth their efforts without any special training or incentives from the management.

• Majority of salespeople need encouragement, training and incentives.

What is Motivation

• Motivation is originally derived from the latin word “movere ”, which mean “to move”.

• The desire to spend effort to fulfill a need is motivation.

• In a sales job, motivation is the effort the salesperson makes to complete various activities of the job.

Definition of Motivation

Motivation –

• The driving force within individuals by which they attempt to achieve some goal in order to fulfill some needs or expectation.

• The degree to which an individual wants to choose in certain behavior.

Dimensions of sales motivation

Intensity

Outcome

Persistence

Direction

• Intensity: refers to the amount of physical and mental effort the salesperson spend on given task.

• Persistence: describes how long the sales person continues to put forth effort.

• Direction: suggests the salesperson’s choice of direction of effort among various tasks.

Importance of motivation

• Changes in marketing environment• Conflicting company objectives • Unique nature of the sales job• Separate motivational package

Relevance of motivational theories to sales people

• Maslow’s hierarchy of needs theory • Hertzberg’s dual-factor theory • Vroom’s expectancy theory of motivation • Churchill, ford and walker model of sales force

motivation

Maslow’s Hierarchy of needs theory

• Needs were categories as five levels of lower-higher-order needs.– Individual must satisfy lower-level needs before

they can satisfy higher order needs.– Satisfied needs will no longer motivate.– Motivating a person depends on knowing at what

level that a person is on the hierarchy.

Hierarchy of Needs• Lover order ( External ) : Physiological and safety

needs• Higher order ( Internal ) : Social, Esteem, and

Self-actualization

Physiological needs

Safety Needs

Social Needs

Esteem Needs

Self-Actualization Needs

Herzberg’s Motivation-Hygiene Theory(2-factor theory), by Fredrick Herzberg (1957)

• Job satisfaction and job dissatisfaction are created by different factors.– Hygiene factors- Extrinsic ( Environmental ) factors

that create job dissatisfaction.– Motivation Factors- Intrinsic ( Psychological )

factors that create job satisfaction.

• Attempted to explain why job satisfaction does not result in increased performance– The opposite of satisfaction is not dissatisfaction

but rather no satisfaction.

• Expectancy Theory (Vroom)– States that an individual tends to act in a certain

way based on the expectation that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual.

– Key to the theory is understanding and managing employee goals and the linkages among and between effort, performance and rewards.• Effort: employee abilities and training/development• Performance: valid appraisal systems• Rewards (goals): understanding employee needs

Expectancy Theory of Motivation: Vroom Expectancy Theory

Valence - value or importance placed on a particular reward• The attractiveness/importance of the performance reward (outcome)

to the individual.

Expectancy - belief that effort leads to performance• The perceived probability that an individual’s effort will result in a

certain level of performance.

Instrumentality - belief that performance is related to rewards• The perception that a particular level of performance will result in

the attaining a desired outcome (reward).

VIE Theory of Work Motivation

3. Rewards-Personal goals relationship = Valence

1. Effort-Performance relationship = Expectancy

2. Performance-Rewards relationship = Instrumentality

IndividualEffort

IndividualPerformance

PersonalGoals

OrganisationalRewards

1 2

3

Expectancy Theory(Vroom)

Sales force Motivation Model

Performance RewardEffortEffort

Perceived effort–performance probability

Perceived value of reward

Perceived performance– reward probability

“If I work hard,will I get the jobdone?”

“What rewardswill I get when the job is well done?”

“What rewardsdo I value?”

Motivational tools in the motivational mix

• Financial rewards/compensation1.Financial compensation plan• Salary, Commission, bonus payment, fringe

benefits, combination.2.Sales contest • Non financial rewards /compensation• Promotion, recognisation, job security, sale

meeting and conventions, sales training programmes, job enrichment, supervision.

Guideline for motivating salespeople

• Difference between can’t do and won't do• Include individual needs into motivational

programmes• Pleateaued sales people • Proactive approach