MODULE 3 : ENVIRONMENTAL INFLUENCES ON SALES PROGRAMMES AND PERFORMANCE
Relationship among Environmental Factors, Marketing Plans and the Sales Programme
(i)
To be successful, a firm’s marketing plans must be adapted to the influences and constraints
imposed by both the external and internal corporate environments. As those environments
change, appropriate adjustments must be made in the firm’s marketing strategy.
(ii)
A firm’s sales program is only one part of an integrated marketing strategy. As changes are
made in other parts of the marketing strategy, the sales programme must be adjusted if it is
to remain effective.
(iii)
The implementation of a sales programme depends on the willingness and ability of
individual members of the sales force to carry out its policies and procedures. Factors in the
external and corporate environments can directly influence a salesperson’s actions in the
field and the rep’s ability to achieve the desired level of performance.
A HIERARCHY OF STRATEGIES
(i)
Corporate Strategy
(ii)
Business Strategy
(iii)
Functional Strategy
The Corporate Strategic Plan
Specifies the range of activities to be included in the firm’s mission, spells out corporate objectives
and establishes broad strategies for new business development, acquisitions and divestitures. Also
involves financial analysis and projections that determine the allocation of corporate resources
across the firm’s various divisions or business units.
Strategic Business Units or Division Plans
Include the specific objectives of the SBU and how the business plans to compete in its business or
the way it plans to achieve a sustainable competitive advantage. It also coordinates the various
functional plans – usually including finance, operations, and marketing plans – that determine how
the unit will implement its competitive strategy and achieve its objectives.
Marketing Plans
Outline the specific marketing objectives for each product or product line, analyse marketing
opportunities, identify target markets and integrate the various elements of the marketing mix into a
consistent marketing strategy.
Programmes for Individual Marketing Functions
Include strategies, policies and activities to be followed by each functional area in implementing a
marketing plan. How firms assign responsibilities for developing these plans varies considerably
according to company size, the complexity of its formal planning procedures and management’s
preferences.
IMPACT OF THE ENVIRONMENT ON MARKETING AND SALES PLANNING
Internal and external environmental factors can influence marketing strategies and programmes in
four basic ways:
(i)
Environmental forces can constrain the organisation’s ability to pursue certain marketing
strategies or activities.
(ii)
Environmental variables, and changes in those variables over time, help determine the
ultimate success or failure of marketing strategies.
(iii)
Changes in the environment can create new marketing opportunities for an organisation, as
when a new technology allows development of new products.
(iv)
Environmental variables are affected and changed by marketing activities, as when new
products and promotional programmes help to change lifestyles and social values.
THE EXTERNAL ENVIRONMENT
Components of the External Environment
(i)
The Economic Environment
GNP (potential demand)
Disposable Income (level of income/taxes)
Competition (number of competing firms and their relative strengths in the marketplace)
Distribution Channels (number, types, and availability of wholesalers, retailers, and other
intermediaries a firm might use to distribute its products)
(ii)
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Social/Cultural/Ethical
Changing population demographics
Cultural diversity
Ethical values : Ethics is concerned with the development of moral standards by which
actions and situations can be judged. Two sets of ethical dilemmas are of particular concern
to the sales manager :
(a)
Sales Manager’s dealings with the salespeople : including such things as fairness
and equal treatment of all social groups in hiring and promotion, respect for the
individual in supervisory practices and training programmes, fairness and integrity in
the design of sales territories, assignment of quotas, and determination of
compensation and incentive rewards.
(b)
Interactions between salespeople and their customers : only indirectly involve the
sales managerbecause the manager cannot always directly or indirectly observe or
control the actions of the salesforce. Their responsibility is to establish standards of
ethical behaviour for their subordinates, commuincate them clearly and enforce them
vigorously.
Consequences of Unethical Selling Practices
Unethical selling practices make buyers reluctant to deal with a supplier and are likely to result in
the loss of sales and profits over time.
Pressures leading to Unethical Behaviour
Such pressures arise because the sales reps, or sometimes their managers, believe a questionable
action is necessary to close a sale or maintain parity with competition.
Some examples of unethical behavious include :
(a)
Gifts to current customers
(b)
Puts own interest first
Quote higher than normal price for product during temporary shortage situation
Lets it be known he has information about a competitor if purchasing agent is interested
Hints if order is placed, price might be lower on next order, when it is not so
Only stresses positive aspects of the product, omitting possible problems purchasing agents’
firm might have with it
Grants price concession to purchasing agent of company in which he owns stock
Attempts to sell product to purchasing agent that has little or no value to buyer’s company
Uses “back door” selling instead of going through purchasing department
(c)
(d)
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Gifts to Prospects
Pressure or Coercion :
In reciprocal buying situation, salesperson hints unless order is forthcoming, prospect’s sales
to firm might suffer
Attempts to use economic power of firm to obtain concessions from the buyer
Attempts to get purchasing agent to reveal competitor’s bid in low bid buying situation
Exaggerates how quickly order will be delivered to get sale
(e)
-
Preferential Treatment :
In shortage situation, allocates product shipments to purchasing agent he personally likes
Grants concessions to purchasing manager depending on how much he likes the manager
-
Gives preferential treatment to customers who are also good suppliers
The Value of Formal Ethical Policies
Two philosophical traditions are commonly used as bases for evaluating the ethics of a given
action:
(a)
Deontology
(b)
Teleology
Unfortunately, these two traditions can lead managers to conflicting conclusions about whether a
given action is ethical or about what ethical standards are appropriate for a firm’s sales people.
Deontology : This focuses on the welfare of individuals and emphasizes means and intentions for
justifying an act. Deontologists believe that features of the act itself make it right or wrong. Their
thinking rests on two fundamental principles – the rights principle and the justice principle.
The rights principle or the entitlements model focuses on two criterai for judging an action :
Universality : every act should be based on principles which everyone could act
Reversibility : Every act should be based on reasons that the actor would be willing to have
others use, even as a basis for how they treat the actor.
The justice principle reflects three categories of justice :
(i)
Distributive : where resources are distributed according to some evaluation of just desserts
(ii)
Retributive : whereby the wrong doer is punished proportionately to the wrong-doing,
provided it was committed knowingly and freely
(iii)
Compensatory : whereby the injured party is restored to his or her original position
Teology : focuses on society as a unit of analysis and stresses the consequences of an act in
evaluating its ethical status rather than the intentions behind it. It emphasises the consequences an
action may have on all those directly or indirectly affected by it. It holds that the correct action is
one that promotes “the greatest good for the greatest number”.
Utilitarianism requires that a social cost/benefit analysis be conducted for the contemplated action.
If the net result is positive, the act is morally acceptable, otherwise not.
(iii)
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The Legal/Political Environment
Antitrust laws : aimed primarily at preserving and enhancing competition among firms in
an industry. They restrict marketing practices that would tend to reduce competition and
give one firm a monopoly through unfair competition. The restrictions on anticompetitive
behaviour spelled out in the antitrust laws apply to firms selling goods or services to
intermediaries, business users or ultimate consumers.
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Consumer protection laws
Selected antitrust and consumer protection laws relevant to formulating sales programs and
policies
Antitrust Provisions
Conspiracies among competing firms to control prices or to allocate markets among
themselves, are per se illegal under the Sherman Act.
The Robinson-Patman Act prohibits a firm and its representatives from discriminating in the
prices or services offered to competing customers. However, some quantity discounts are
legal.
Typing agreements, where a seller forces a buyer to purchase one product to gain the right to
purchase another, are illegal under the Clayton and Sherman Acts.
Reciprocal dealing arrangements are illegal where the effect is to injure competition.
The Federal Trade Commission prohibits “unfair methods of competition” in general. Thus,
deceptive product claims, interfering with the actions of a competitor’s sales representative,
and other unfair acts are illegal.
Consumer Protection Provisions
Unfair or deceptive packaging or labeling of certain consumer commodities is illegal.
Full disclosure of all finance charges on consumer credit agreements is required.
Contracts signed with door-to-door sellers may be cancelled within a limited number of days
after agreeing to such contracts.
Door-to-door salespeople who work for companies engaged in interstate commerce are
required to clearly announce their purpose when making calls on potential customers.
Many cities and towns have so-called Green River Ordinances, which require all door-todoor salespeople to obtain a license.
(iv)
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The Natural Environment
Resource availability
Environmental impact
(v)
-
The Technical Environment
New product technologies
Changing information
Commuincation technology
THE ORGANIZATIONAL ENVIRONMENT
Variables in the organizational environment can be goruped into five broad categories :
(i)
Goals, objectives and culture
(ii)
Personnel
(iii)
Financial resources
(iv)
Production capabilities
(v)
Research and development capabilities
Organizational goals, objectives and culture
A well-defined mission together with a successful corporate history and top management’s values
and beliefs leads to the developments of a strong corporate culture. Such cultures shape the attitudes
and actions of employees and help determine the kinds of plans, policies and procedures managers
can implement.
Personnel
The number of people in an organisation, together with their skills and abilities, constrains making
strategies and sales programs.
Financial Resources
An organisation’s financial strength constrains the firm’s ability to develop new prioducts as well as
the size of its promotional budget and salesforce.
Production Capabilities
The organisation’s production capacity, the technology and equipment available in its plants, and
even the location of its production facilities can influence its marketing and sales programmes.
Research and Development Facilities
Excellence in engineering and design can serve as a major promotional appeal in a firm’s sales and
marketing programme.
ENVIRONMENTAL CONSTRAINTS ON SALES FORCE PERFORMANCE
Organisational variables that can cause differences in the expenditure in performance include :
(i)
Regional variations in the expenditure of money and effort on other elements of the firm’s
marketing and promotional mix
(ii)
Variations in the firm’s past experience in different territories
(iii)
Regional variations in sales management practices
External factors that may vary from one region to the other include:
(i)
(ii)
(iii)
(iv)
Intensity of competition
Total market potential
Concentration of potential sales
Geographic dispersion of customers
The Effects of Organisational Factors on Sales Productivity
Variations in company marketing efforts
When the firm’s marketing efforts are more intensive in one region than in others, salespeople in
that region have an advantage.
Variations in Past Experience
Salespersons in firms that enjoy a strong market position in some regions have a easier job.
Variations in Sales Managers’ Span of Control
Span of Control means the number of sales persons supervised by a field sales manager. The more
subordinates a sales manager must supervise, the less time can be spent training, advising and
monitoring the performance of each salesperson.
The Effect of External Environment on Sales Productivity
Variations in the Intensity of Competition
Salespersons in different territories face competitive efforts of varying intensity. Those who face
well-entrenched and aggressive competitors are likely to have a more difficult time attaining a given
sales volume than those with weaker competition.
Variations in Sales Territories
Since population density ivaries among geographic regions, the total sales potential for some
consumer goods and services is greater in some areas than in others. Even when the total market
potential is the same, differences in consumer characteristics can cause variations in sales
productivity.
Implications for Sales Managers
Such factors account for between 30 to 80 % percent of the variation in the dollar sales volume
produced by a firm’s sales force.