sales management strategy
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strategies for sales mgt.TRANSCRIPT
Copyright © 2010, S L Gupta
Excel BooksSales and Distribution Management Text & Cases (2nd Edition) S L Gupta1-1
Sales Management Strategy
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Chapter
1Sales Management Strategy
Copyright © 2010, S L Gupta
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Introduction
Sales management is defined as “the planning, direction and control of personal
selling, including recruiting, selecting, equipping, assigning, routing, supervising,
paying and motivating as these tasks apply to the personal sales force”.
Definition Committee of the American Marketing Association.
Sales force is responsible for the sale of products of a company and to add profit
to the business operations and fulfill social obligations. Sales force should be
hardworking, result oriented, well educated and competent to handle changing
situations. Technical developments which are taking place at a rapid speed have
made the task of sales force more challenging.
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Nature and Importance of Sales Management Sales management helps to achieve the organizational objectives.
The main objectives of sales management is that products should be sold at
that price which realizes profits.
Buyers and sellers both have same types of business relationships. This
relationship is based on exchange of goods, services and money.
Sales person develops a positive relationship with the customers. The role of
sales team is interdependent and success of one team member depends on
the other.
The sales team continuously monitor the customer preference, competitors‘
situation, government policy and other regulatory bodies.
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Relationship-based selling
Relationship-based selling works because people would rather buy what they
need to buy anyway from those they have come to relationship.
Relationship-based selling means doing business in such a way that
company is worthy of the customer's trust.
Relationship selling is mainly personal not institutional, and buying is heavily
personal as well.
It is not selling centric. It's buyer-based.
The objective of relationship selling is to help the buyer do the right thing for
the buyer.
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Managing the Sales Force
Successful sales force management means:
The right organisation and aggregation against product lines and
geographies.
The right strength and qualification.
The right compensation and incentive system.
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Steps in Designing and Managing a Sales Force
1. Objective Setting
2. Training for Sales Policies
3. Designing Sales Force: Structure and Size
4. Deciding Sales Force Compensation
5. Recruiting and Selecting Sales Force
6. Guiding and Motivating Sales Force
7. Performance Rating of Sales Force
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Sales Manager’s Duties and Responsibilities
The sales manager is the most important person in a sales organisation. All
activities are based on his functions and responsibilities. The following are some
of the principal duties of a sales manager:
1. Organising sales research, product research, etc.
2. Getting the best output from the sales force under him.
3. Setting and controlling the targets, territories, sales experiences, distribution
expenses, etc.
4. Advising the company on various media, sales promotion schemes, etc.
5. Monitoring the company’s sales policies.
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In the table that follows, Al Reid gives the steps necessary for getting success in selling:
To yourself To your company To your customers
Increase basic selling skills.
Develop management abilities.
Keep pace with changes, trends and developments in your territory.
Study the latest products, promotion policies and procedures.
Be alert to new sales and merchandising ideas.
Be proud of your association with your company.
Maintain the company standing and standards with all customers.
Inform the headquarters and your supervisors, through established channels, about changes and developments in your territory.
Be prompt in handling records, reports, correspondence, etc.
Work closely with decision-takers and influencers in each account.
Point out the advantages of an association with your company.
Keep accounts current and up-to-date on all company advertising and promotional activities.
Suggest ideas, methods, techniques and tips that can stimulate sales.
Territory Sales Manager’s Job Responsibilities
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Grow, so that you can assume greater responsibilities as opportunities permit.
Maintain the appearance and goodwill expected of a territory sales manager.
Analyse your weak and strong points and then think about them.
Cut selling costs by economical routing, good use of time, planning and greater awareness of opportunity.
Check demand and movement of products in the territory.
Report activities of the competitors.
Strive to reach the best goals.
Ask for help, when you need it.
Cooperate with other departments of the company.
Inform the customers about the trends in their areas.
Handle complaints effectively and to the complete satisfaction of the complainants.
Suggest the best technique for selling your products to the customers.
Organise presentations to inform and save time.
Make the customers aware of the changes in the company’s policies or procedures.
Stimulate and maintain enthusiasm for your products. Build and maintain goodwill.
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Problems of Sales Management
1. Designing and Managing Sales Force
Actual supervision of, and guidance to, individual salesmen is also a sine
qua non of a sound sales manager.
2. Sales Force Authority
sales force requires delegation of authority with respect to the following:
Changing or fixing prices
Credit facilities to old and existing customers
Assurance regarding quality and after-sale service
Payment terms and settlement of claims.
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3. Target-setting
Sales targets are fixed on the basis of past experience, time period and
brand positioning in the market. The targets should be fixed in such a manner
that they are achievable.
4. Sales Forecasting
Sales forecasts must change as conditions change. Accuracy depends on
meticulous planning and dynamic strategies.
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Sales Management — Formulation of Sales StrategyThe following are key decision areas in sales management which are particularly relevant to strategy formulation:
Determining the size of the sales force
Decision regarding type and quality of sales force required
Designing the sales organisation
Territory designing
Recruitment and training procedures
Task allocation
Compensation of sales force
Performance appraisal and control system
Feedback mechanism to be adopted
Managing channel relationships
Coordination with marketing departments.
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Different Sales Strategies
Relationship Strategy
In this strategy, a major key to success in selling is the ability to establish
working relationships with customers in which mutual support, trust and goals are
nurtured over time.
The sales force that builds effective relationships with the customer and
provides valuable service are usually high performers and top achievers.
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A Selling Partner
P - Prepares strategically for a long-term, high-quality relationship that
solves customer’s problems.
A - Asks questions to get on the customer’s agenda.
R - Restates customer needs with confirmation questions.
T - Teams with support people to provide the customer with solutions.
N - Negotiates double-win solutions with joint decision making.
E - Exceeds customer expectations whenever possible.
R - Re-examines the ongoing quality of the relationship frequently.
A Selling Partner
P - Prepares strategically for a long-term, high-quality relationship that
solves customer’s problems.
A - Asks questions to get on the customer’s agenda.
R - Restates customer needs with confirmation questions.
T - Teams with support people to provide the customer with solutions.
N - Negotiates double-win solutions with joint decision making.
E - Exceeds customer expectations whenever possible.
R - Re-examines the ongoing quality of the relationship frequently.
In this model, a customer is treated as a partner. Therefore, maintaining a good
relationship with the customer is important.
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The Double-Win Strategy
In this strategy, both the customer and the salesperson come out of the sale
with a sense of satisfaction. The salesperson not only obtains the order but
sets the stage for a long-term relationship, repeat business and future referrals.
They both come out of the sale feeling satisfied, knowing that neither has
taken advantage of the other and that both have profited, personally and
professionally, from the transaction.
However, some salespeople have still not accepted the merits of the win-win
approach. They have adopted a win-lose approach which means that the
salesperson wins at the buyer’s expense.
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Win – Lose approach vs. Win – Win attitude
The starting point to the development of a double-win philosophy is to compare
the behaviour of persons who have adopted the win-lose approach with that of
persons who have adopted the win-win approach (Figure).
Win - Lose People Win - Win People
See a problem Help others solve their problem
Fix the blame Fix what caused the problem
Let life happen to them Make life a joyous happening for others and themselves
Live in the past Learn from the past, live in the present and set goals for the future
Make promises they never keep Make commitments to themselves and to others and keep both of them
Double-Win Strategy
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Instant Service
It is in this context of providing almost “instant service” to the customer that the concept of “supply chain management” has caught the imagination of managements the world over.
No matter how efficiently and effectively goods/services are produced, if they cannot be delivered to the customer in the quickest possible time, all efforts
made earlier are in vain, particularly in the context of very short product life cycle – counted in months rather than years.
As depicted in Figure below, a combination of effective process plus supply chain management is what is required to cope with the challenges of the international market-place.
One cannot survive in a highly competitive market without conforming to the so called Q-C-D triangle – Highest Quality, Lowest Cost and Least Delivery times.
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Simplified Model for Ensuring Customer Delight
Customer Delight
After sales service
Unique selling propositioning/brand equity
Exceeding customer expectations
Competitive price
Reliability of product or service
On time delivery
Novelty/uniqueness of product/service
SUPPLY CHAINmanagement
PROCESSmanagement
leading to customer loyalty and lasting relationship
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Hard Sell Versus Soft Sell Strategy
Strategies for Identifying Customers
Hard Sell Soft Sell
Concern for self Concern for customer
Canned presentation Questions for discussion
Talking Listening
Pushing product Providing buying opportunities
Presenting features Presenting benefits
Advocating without acknowledging Acknowledging needs
Hard Sell Soft Sell
Concern for self Concern for customer
Canned presentation Questions for discussion
Talking Listening
Pushing product Providing buying opportunities
Presenting features Presenting benefits
Advocating without acknowledging Acknowledging needs
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Product-centered Selling and Client-centered Selling
Product-centred Selling Client-centred Selling
1. Seller puts in efforts for research and development of product.
1. Seller puts in efforts on research and development of relationship with clients.
2. Product centred selling emphasises knowledge of product.
2. Client centred selling emphasises knowledge of client.
3. Selling strategies and tactics tend to be most influenced by past performances of products and competition and present situations.
3. Strategies and tactics tend to be directed more to considerations of future growth and developments in the client’s world.
4. Representative seeks to be accepted as a reliable, credible source of information and service.
4. Representative strives to raise client’s expectations of personal excellence.
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Selling Process The selling process is defined as a process by which a salesperson identifies
and locates the prospects, separates the prospects from the suspects approaches them and makes a sales presentation, handles their objections. He also follows up the existing customers to identify further sales leads and measures the success and customer satisfaction level of the current products and service offerings. Selling concept refers to the exchange of goods or services for an amount of
money or its equivalent in kind. Selling helps an organization achieve its organizational goals. Thus, managing sales in an organization is a critical activity. A sales manager needs to ensure that the salesman are motivated to give their best performance. The sales team continuously look out the changes taking place in the external environment regarding competitors, customers, government policy and other regulatory agencies, advances in technology, and industry trends. This provides the sales personnel a vital information regarding trends in product sales, product development, and budgets.
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The economic slowdown is receding and budgets of companies are increasingly receptive to alternative direct marketing tools to sell their products. Telemarketing (TM), that is marketing products and services on the telephone, a direct marketing tool, which has touched a high in the last three years. Apart from professional TM service outfits, many companies, including MNCs, have set up their in-house TM cells. A TM outfit works through a well networked team of trained telemarketers who make calls to potential clients and customers and establish direct contact with them. The key lies in convincing the customer about the value of the product or service and fixing up an appointment. Direct customer marketing system allows customers complete flexibility to purchase our products. Orders can be placed via the Internet, over the phone, by mail, through our catalogue or through the company personnel.”
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Mail Order Sales
Mail order houses are retail trading organisations engaged in the mail order
business.
This is also known as carrying on business through post or mail. In this
method, customers do not visit the seller’s business premises, nor do they
make a personal examination of the goods before they are purchased. In this
system, orders are received from customers by post and the goods are
dispatched usually by VPP (Value Payable Parcel) or registered post.
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In case of the mail order business, the selling function is performed without
the intervention of the personal salesman.
The goods should be known for their utility so that there is no need of
convincing prospective buyers about their usefulness.
They must fetch a sufficient price to have a wide profit margin.
They must command wide demand.
They must not be easily perishable.
They should be available in large quantities throughout the year.
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Sales through Large Scale Fixed Shop Retailers
Concentration of population in urban areas, increasing flow of manufactured goods and improved methods of organising business have led to the expansion of retail business. This expansion was effected in different ways, giving rise to different types of retail establishments, which operate on a large scale. More prominent among them are the following:
Departmental stores
Chain stores
Mail order houses
Hire purchase shops
Super markets
Fixed price shops
Cooperative stores
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Sales through Wholesalers and Retailers
Wholesalers perform a number of functions in the marketing of goods as
listed below
Assembling and buying
Storing or warehousing
Transporting
Financing
Risk-bearing
Grading, packing and packaging
Providing market information.
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In the process of acting as a link between the wholesaler and the consumer,
a retailer performs many functions. The more important of them are given
below:
Buying and assembling
Warehousing or storing
Selling
Grading and packing
Financing
Supply of market information
Advertising.
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Direct Selling
Direct selling identifies the unfulfilled needs of ordinary customers.
Direct marketing companies have an advantage over conventional marketers
in that the relationship between the company and the customer starts
building even before a sale is made.
Lessons From Direct Selling
THE STRATEGY: Eureka Forbes structures its demos according to the time
at the customer’s disposal.
The Lesson: Keep the process flexible enough to accommodate individual
needs.
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How to Add Value Through Direct Selling
Create directselling
process
Is salesmanempowered to be
flexible?
Ensureincrease in
customer value
Follow up salewith prompt
service
Close dealquickly
Ensure productPerformance
at demo
Choose suitabletime for demo
and pitch
Makeappointment
with customer
Identify thecustomer
Is the process clearly
structured?
Yes
No
YesYes
Yes
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THE STRATEGY: Oriflame uses multilevel marketing to enlist direct sales
agents from its customer base.
THE LESSON: Use your customer to sell your product to other customers.
THE STRATEGY: Some Companies empowers its sales force to take
pricing decisions on the spot when closing sales.
THE LESSON: Ensure that your direct seller can conclude a deal
immediately.
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National Sales ManagerIn carrying out these responsibilities, sales mangers do the following things:
1. Prepare sales plans and budgets
2. Set sales force goals and objectives
3. Estimate demand and forecast sales
4. Determine the size and structure of the sales force organization
5. Recruit, select and train sales people
6. Design sales territories, set sales quotas and define performance standards
7. Compensate, motivate and lead the sales force
8. Conduct sales volume, cost and profit analysis
9. Evaluate sales force performance
10. Monitor the ethical and social conduct of the sales force.
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Sales Manager
Regional Manager(North)
Regional Manager(South)
Regional Manager(East)
Regional Manager(West)
Regional Manager(Staff)
BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM
Field Staff Field Staff Field Staff Field Staff Field Staff
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Stand Points of Sales Representative
The stand points of sales representatives and the managers are as follows:
1. To protect drastic fluctuations in income so that regular monthly expenses for
home mortgage, food and utilities can be paid/balanced without hardship.
2. Expenses in direct relations to the amount of effort
3. Earnings to be equitable in terms of experience, ability, cost of living.
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Organization uses two types of compensations:
1. Financial
2. Non-Financial
Financial includes compensation, salary, incentives and fringe benefits.
Non-financial includes motivation and its implications to sales management.
But monetary compensation is one of the most direct and least ambiguous ways
of communicating to sales people about their performance.
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Reasons for Providing Financial Compensation
The compensation plan is undoubtedly to reward the salesman for his
performance. The plan includes.
1. The plan should provide a regular income at least at minimum level. In
addition to this regular income, it should provide adequate incentive to induce
minimum performance from the salesman.
2. The plan should be simple and easy to understand for the salesman.
3. It should be economical and should induce competition amongst salesman.
4. It should be fair to both the sales force and management.
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Methods of Remuneration
The sales force can be remunerated in the following ways:
1. A straight salary
2. A straight commission on sales
3. Salary and commission on sales
4. Salary and commission on sales above a certain amount
5. Salary and different rate of commission on varying totals or for different types
of goods
6. Salary and share in the profits
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Expenses AccountsThe major sales expenses accounts are categorized as follows:
1. Salary accounts
2. Commission accounts
3. Bonuses
4. Meals and entertainment
5. Air travel
6. Automobiles rentals
7. Lodging
8. Travel accounts
9. Tour expenses accounts (Advance accounts)
10. Communication and services expenses accounts.
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Fringe Benefits
Types of fringe benefits are:
1. Company Car
2. Supplemental life insurance and medical insurance
3. Tax-return preparation
4. Personal tax and financial planning
5. Low or no interest loans
6. Deferred compensation
7. Supplemental retirement benefits
8. Air travel and First class A.C. for Train Travel
9. Relocation allowance
10. Stationary facilities
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11. Laundry benefits, while on the tour
12. Special perquisites for outstanding performance by getting travel prizes
recognition for outstanding performance
13. Medical expenses
14. Special business associations membership
15. Exclusive developmental programs by IIM, Ahmedabad, by Shiv Khera,
etc.