Sales Management Sales Management as defined by:Sales Management is planning, direction, and control of personal selling including recruiting, selecting, equipping, assigning, routing, supervising, paying and motivating the sales force. Objectives of Sales Mgmt.:- achieve- Sales volume/targets - Contribution to profits - Continuing growth - Top management delegates - Marketing Mgmt. Further delegates to - Sales Management Sales Management – Cont’d.. Sales Executives as Coordinator:- Production Department –sales deptt. - Advertising Department-sales deptt.Sales Department - HRD-sales deptt. Coordinating with Advertising Marketing Advertising Sales Sales Management – Cont’d.. What is Personal Selling? Involves – oral conversations, either by telephone or face to face, between sales persons and customers. Contribution to Personal Selling:• Sales generate revenue • Sales people provide market research and customer feedback • Sales people provide solutions to problems • Sales people provide expertise and serve as information resources • Sales people serve as advocates for the customer when dealing with the selling organization. The four sales channels:• Field selling • Tele marketing • Inside selling – relying on phone, mail, e-commerce. Sales & Distribution Management Theories of Personal Selling:A) Is selling an `Art’ or a `Science’. B) AIDAS Theory of Selling:where, Satisfaction A = Attention I = Interest Actions D = Desire A = Action Desire & S = Satisfaction Interest Attention Sales & Distribution Management –Cont’d.. C) “Right set of circumstances” Theory of selling. “Situation – response, theory.” D) “Buying Formula” Theory of selling. need (or problem) Solution Purchase need product end/or trade purchase satisfaction/dissatisfaction or service Adequacy Adequacy problem Need or problem Product Service Pleasant Feeling and/or trade name Pleasant Feelings Purchase satisfaction Sales & Distribution Management –Cont’d.. E) “Behavioural Equation” Theory:B = P x D x KxV where, B = Response or the internal response tendency, that is the act of purchasing a brand or patronizing a supplier. P = Predisposition or the inward response tendency, that is, force of habit. D = Present drive level (amounts of motivation) K = “Incentive potential”that is, the value of the product or its potential satisfaction to the buyer. V = Intensity of all cues: triggering, product or informational. Sales & Distribution Management –Cont’d.. Personal Selling Processes Learning objectives:• To understand about the steps in personal selling process • To know the mistakes that can be done in sales. Steps in Personal Selling Process • Consists of creating new customers, and maintaining existing customers. Sales people follow a series of steps in identifying prospects and turning them into customers. The Sales Cycle 1. Prospecting Appointment making Compensation 2. Pre-approach 6. Follow up 3. Presentation 5. Closing the sale 4. Negotiations & handling objectives Sales & Distribution Management –Cont’d.. Compensation Includes:1. Straight wages or salary 2. Straight commission 3. Wages or salary plus bonus, and 4. Wages or salary plus commission Mistakes in Sales 1. Not understanding selling 2. Expecting things to improve by themselves 3. Tacking too much and not listening enough 4. Using words that kill sales 5. Not knowing when to close the sale 6. Not knowing how to close the sale 7. Lack of sincerity 8. Not paying enough attention to details 9. Letting yourself slump 10. Not keeping in touch with markets about latest developments. Sales & Distribution Management –Cont’d.. Tasks involved in Sales Management • Determining and achieving firm’s personal selling objectives • Formulating sales policies • Structuring the sales force • Designing sales territories • Developing sales forecasts and sales budgets • Fixing sales quotas/targets for individual sales territories/salesmen Creating the sales force - selection - recruitment - induction/orientation Sales & Distribution Management –Cont’d.. Managing the sales force - Compensation - Motivation - Morale building - Sales coaching/supervision - Evaluation/Appraisal - Training & Development • Managing the marketing channels • Ensuring growth and developing new accounts • Sales communication & report writing • Sales coordination and sales control,including sales expense control • Building sales organization • Assisting market management in aspects like product mix, pricing, distribution, advertising and sales promotion • Creating and maintaining the right image for the company and its products in the market. Sales & Distribution Management –Cont’d.. Areas where personal selling objectives have to be set:• Sales volume and sales growth • Share of each product in the total volume • Market share • Profits • Selling expenses • Key accounts • New accounts • Addition of new dealers and expansion of channel • Proportion of cash & credit sales • Collection of sales proceeds/amounts due • Pre sale and after sales service • Training of dealers & customers • Assistance in sales promotional measures • Supplying market intelligence Sales & Distribution Management –Cont’d.. Areas where sales policies have to be set:Product - Appraising the product line on a regular basis and effecting necessary rationalization and improvements. • Which products should find a place in the product line • Whether some of the existing products are to be dropped • Whether any new products are to be added • Whether product design or product quality needs to be changed • What models, size, colours and packing are to be sold • How product service is to be provided • What kind of product guarantees are to be given Sales & Distribution Management –Cont’d.. Distribution • Channel design and channel types • Channel remuneration, motivation and training • Channel- principal relations. • channel costs Pricing • Whether prices should match competition or whether those should be above or below competition • Pricing method to be followed for each class of customer or order • Discounts and rebates to be given • Teams of delivery/dispatch and terms of payment. Sales & Distribution Management –Cont’d.. Topics to be discussed:1. Structuring the sales force 2. Deciding sales force size 3. Designing sales territories a) What is a sales territory? b) Why sales territories? c) Criteria for territory design Territory size Territory shape - Two common methods of designing - equal workload method - equal potential method Sales & Distribution Management –Cont’d.. 4. Reviewing territory design 5. Assigning right territories to right salesman 6. Maintaining database on territories Sales & Distribution Management –Cont’d.. Fixing Sales Quotas And Targets:• A participative approach desirable • Activity quotas- no. of sales calls, no. of dealer contacts, no. of displays and demonstrations, no. of new accounts,dealers added, cost &profit targets. Creating the Sales Force • Proper recruitment is the ABC of good sales management Managing the Sales Force * Sales Force Compensation:• Characteristics of a good sales compensation plan:i) Directs salesmen’s activities towards company objectives ii)Correlate efforts, results and rewards of salesmen Sales & Distribution Management –Cont’d.. iii) Stimulate the salesmen to put in their best efforts iv) Help control salesmen’s activities v) Enthuse efficient salesmen and help remove inefficient ones. vi) Preferably provide two components of income: An assured income and additional reward for superior performance vii) Be fair and just to the firm and to the salesmen viii) Reflect the current needs of the firm (a plan that was sound yesterday may not be sound today) ix) Be flexible and also stable x) Be simple and easy to administer xi) Be economic and competitive Sales & Distribution Management –Cont’d.. Steps involved in designing a sales compensation mgmt. • Describe the job(develop job description/ job evaluation) • Consider overall compensation structure of the firm • Make industry comparisons (what competitor’s salesmen get) • Solicit suggestions from sales force/field sales managers • Decide the compensation level • Decide the compensation mix Financial compensation:a) Direct payment of money (salary, commission, etc.) b) Indirect payment of money (medical care, paid vacations, company financed insurance,stock options, etc.) Sales & Distribution Management –Cont’d.. Non-Financial Compensation a) Opportunity for advancement (promotions, higher responsibilities, better designations, etc. b) Recognition & fulfill of esteem needs • Decide the weightage of the different elements • Put the plan into operation, watch, review and improve The compensation mix • Straight salary plan • Straight commission plan • Salary plus commission combination plan • Salary plus group commission plan • Commission plus approved expenses plan Travel compensation plan Sales & Distribution Management –Cont’d.. Straight-Salary and Straight-Commission Plans: Merits and Demerits Straight Salary Plan Merit • Simple to design and easy to administer • Provides a sense of security and a base of motivation to salesmen. • Helps the firm control the salesmen better • Ensures salesmen sell all products of the firm and not just those that give them better commission • Ensures salesmen attend to the long-term marketing concerns of the firm • Helps avoid unhealthy rivalry/jealousy among salesmen • Is particularly useful when the firm Has chosen the pull strategy for creating sales Has a set of fresh salesmen to the compensated Goes into fresh territories Sells a technical product involving long negotiation and a long purchase cycle Sales & Distribution Management –Cont’d.. Sells a new product Sells in a market that is yet to be developed In situations where sales efforts and actual sales are not closely correlated (e.g. sales depend on climate and the seasonal products). Demerits • It does not offer incentive for salesmen to increase sales • Salary is a fixed cost, unrelated to sales volume or margin; the company has to incur it irrespective of results/profits Straight Commission Plan Merits • Provides incentive to perform better, as it rewards the salesmen according to their performance. Sales & Distribution Management –Cont’d.. • Commission is a variable cost, related to the sales volume or the margins/profits brought by the salesman . • Is particularly useful when The firm has chosen the push strategy for creating sales High incentive is needed to get the sales Not much non-selling work (such as setting up displays in stores) is involved The company is financially weak and has to relate its compensation expenses directly to sales/margins The market is highly competitive and sales are closely correlated to sales effort. Sales & Distribution Management –Cont’d.. Demerits • Difficult to design and administer, sometimes commission plans can become too complex, involving complicated formulae, frustrating the salesmen. • May not be of much use when the salesmen are absolutely new. • It is difficult to control straight-commission people, as they are freelancers, it is especially difficult to make them perform tasks for which no commission is paid, e.g. they may not care to provide the firm the needed market intelligence. • Difficult sales territories may suffer under such a plan. • May lead to unhealthy rivalry/jealousy among salesmen. Sales & Distribution Management –Cont’d.. • If the product is highly seasonal, the income of salesmen will be highly skewed, month-to-month and between offseason and season. • Similarly, if the market becomes unduly depressed due to some reason, the income of the salesmen would go down drastically. • May result in excessive pushing of products without caring out for the value satisfaction to the customers. Sales & Distribution Management –Cont’d.. Sales Force, Motivation Mix:1. Compensation Plan - Financial compensation - Non-financial compensation 2. Recognition - Awards such as trophies, certificates, appraisal letters and encouragement, job enrichment 3. Promotions 4. Proper performance evaluation 5. Good Sales Coaching 6. Good supervision (in person, by mail, by telephone) 7. Sales meetings and conventions 8. Sales contests Sales & Distribution Management –Cont’d.. 9. Training programmes (induction and continuation) 10. Sales planning elements - Good forecasting - Good budgeting - Fair quotas - Fair territories 11. General management elements, organizational structure and climate, management’s leadership style. 12. Sensible management Sales & Distribution Management –Cont’d.. Morale Building Reasons for poor morale • A variety of factors may contribute to poor morale of salesmen. • The sales territories might not be properly designed, with the result that unequal burden is cast on salesmen. • Some salesmen might be given territories with very little potential, with the result that they can never feel the pride of achievement. • The compensation plan may be faulty • Performance evaluation is not done with fairness and objectivity. • Unfair treatment in rewards, transfers and promotions Sales & Distribution Management –Cont’d.. • The organization is immersed in vexatious rules, regulations and restrictions. • Whatever be the reason, poor morale of sales force will seriously affect sales performance. It will also affect customer service, channel relations and public relations of the firm. Symptoms of poor morale • Minor complaints get magnified • Unionism suddenly shows its head • Anti-management attitude, vocal criticism of company policies –strong retaliation at every suggestion of management and viewing the company as an adversary may become common. Sales & Distribution Management –Cont’d.. Symptoms of good morale • When salesmen show pride, loyalty and enthusiasm about the company, its products, the sales organization and its policies, it means that the sales force morale is high. Ways of morale building • Basically, sales force morale depends on the organizational climate. For morale to be good, the organizational climate must be good and the firm should follow sound principles of management. • Good sales force morale results when the organization gives the right treatment to the salesmen. The organization should also give them proper responsibility and authority. • Fair play builds up morale. Sales managers and top management must practice fair play towards salesmen. Sales & Distribution Management –Cont’d.. • Management must have proper appreciation of the unique environment in which salesmen work. Salesmen are `loners’ on the job, working all by themselves. The psychological comfort of working in a group is denied to them in their day-to-day work. They travel all the time, living away from their families. They lead a life that is different from that of the factory workers or office staff. Special efforts, therefore, are needed on the part of the sales manager to make the salesmen feel a sense of belonging to the company. Sense of belonging promotes morale. • The sales executive should strongly support his salesmen whenever they deserve it. His men should view him as a dependable boss. Sales & Distribution Management –Cont’d.. • Good communication promotes morale effective communication is a key ingredient in morale building. In many firms, salesmen do not know what the management is trying to do and the reasons behind its actions; and the management does not know what the salesmen think and feel about various policies, decisions and actions. Effective communication is the answer. • To a large extent, sales force morale depends on how the organization looks at the selling job and the sales force. • Morale building, a continuous job. Morale building should start right at the recruitment stage; during induction, it should be carefully built up; and as the salesmen grow on the job, morale building should continue; proper avenues must be created for them to achieve their full potential. • By ensuring good morale, sales managers can convert a `high potential salesman’ into a `high performing salesman’ and an `average potential salesman’ into an `above average performer’. Sales & Distribution Management –Cont’d.. Steps involved in designing and organizing sales training:• Spelling out the aims of training • Determining the training needs of the sales force as a whole • Determining the special training needs of individual salesmen • Deciding the nature of the training and the type of programmes required • Deciding the context • Choosing the methods • Developing the instructional material and training aids • Timing the training • Evaluating the effectiveness of the training • Training the trainer Sales & Distribution Management –Cont’d.. Aims of Sales Training • Increasing sales • Getting new accounts • Faster turn around of stocks • Selling a complete product line instead of just fast selling items. • Better merchandising and sales promotion • Better product knowledge/technical expertise • Improving sales presentation and sharpening sales skills • Customer education on products, their use and benefits • Improving customer relations and dealer relations Sales & Distribution Management –Cont’d.. Objective & Scope of Personal Selling - Sales managers - Drastic corporate downsizing - Sales executive:-expectations by: - a) top management – holds sales executive responsible for:1. Obtaining sales volume 2. Providing profit contribution 3. Continuing Business Growth b) Customers – consumers, wholesalers, retailers, dealers, distributors c) Society i) looks to them to assume delivery of goods & services ii) that final buyers want at price iii) of increasing importance iv) to market eco-friendly products. Sales & Distribution Management –Cont’d.. Type of Sales Training • In-company training • External training • Individual training • Group training • On-the-job training • Off-the job training The choice will depend on the context, the firm’s requirements and the costs involved Content/topics of training:The basic topics on which salesmen are to be given training are listed below:• Knowledge about the company policies • Knowledge about the product range • Knowledge about market • Knowledge about competition • salesmanship Sales & Distribution Management –Cont’d.. Instruments of sales control:• Sales targets and sales reports • Sales expenditure budget and expenditure reports • Travel plans and tour reports • Watching the salesmen in the field • Information gathered from dealers and major customers • Inspection of depots/warehouses • Sales conferences/meeting, monthly The unique role of field sales manager:• Clear cut and highly visible job • Fellow on the firing line • Uniquely positioned with reference to company and customer • Man management; his key job. Physical Distribution & Marketing Logistics & Supply Chain Management Importance • Ensures the physical flow of the product from the producer to the consumer without this flow marketing cannot take place. • Confers place and time utility on products • Helps build clientele • Where production locations and markets are distanced, physical distribution becomes all the more crucial. • A promising area for cost reduction. Component Functions of Physical Distribution & Marketing Logistics • Planning the overall PD system • In plant warehousing • Transportation • Field warehousing • Receiving • Handling secondary transportation, secondary handling and sub-distribution Cont’d…. Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. • Inventory management at each level in the chain • Order processing/execution • Accounting/record keeping • Communication Steps involved in designing a physical distribution system • Articulating distribution objectives and specifying the minimum service level desired in product delivery • Finding out what the customers want in product delivery • Finding out what competitors do • Keeping the costs of the system as low as possible, without sacrificing the minimum guaranteed service level. • Keeping the system sufficiently flexible Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. Main tasks in Transportation management • Assessment of transportation requirement • Choosing the `mix’ of transportation modes • Deciding the routing • Development of operational plans • Implementation/review • Control of transportation costs Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. Role & Importance of warehousing • Like transportation, warehousing too vests the product with the time utility and place utility • In case of some products, ware housing vests the product with `form utility’ as well. • It is common knowledge that a certain level of storage is in escapable in marketing of most products • For products with high seasonality, storage is needed on a larger scale. • In some cases, sub-distribution realities necessitate extra storage • Storage reduces the need for instant transportation, which often difficult and costly • Storage is also a competitive advantage, as with better storage, better servicing of the channel and consumer is possible. • Storage also helps in balancing demand and supply and in stabilizing prices • In case of some products, storage by itself acts as a stimulant of demand. Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. Elements of Inventory Management • Interest on capital tied up in the inventory • Warehouse rent • Staff salaries • Insurance • Rates and taxes • Stationery • Postage and communication charges • Administrative overheads • Costs of handling, unloading, loading and stacking setting up of goods in godown • Loss due to damage and deterioration while on storage • Cost order processing/record keeping accounting Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. Functions performed by Marketing Channels • Facilitate selling by physically close to customers • Provide the distributional efficiency by bridging the manufacturer with the user, efficiently and economically. • Break the bulk and cater to tiny requirements of buyers • Assemble products into assortment to meet buyer’s needs; match `segment of supply’ with `demand’. • Look after a part of physical distribution/marketing logistics. Sub-distribution a) Reselling b) Retransport c) Handling d) Accounting Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. Stock Holding a) Providing warehouse space b) Storing the stocks c) Bearing risks d) Transforming static stocks into operational stocks, thereby aiding the sale process e) Share the financial burden of the principal; provide deposits; finance the stocks till they are sold to the ultimate consumers; extend credit to retailers/consumers. f) Provide salesmanship g) Provide pre-sale & after sales service h) Assist in merchandising i) Assist in introducing new product Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. • Assist in implementing he price mechanism, assist in price negotiations • Assist in developing sales forecasts/sales plans for the territory • Provide market intelligence and feedback • Maintain records • Take care of liaison requirements • Act as change agents and generate demand • Channels acquire their importance by their functions • Channels cannot be eliminated • Channels/middlemen are no parasites. • Channel decisions have a bearing on other marketing decisions Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. Alternative Channel Patterns:• Manufacturer – manufacturer’s salesmen user • Manufacturer – “showrooms/depots – user • Manufacturer – retailer – user • Manufacturer – franchisees – user • Manufacturer – wholesaler (stockist)/Distributor – Retailer – user • Manufacturer – wholesaler (stockist)/Distributor semiwholesaler – retailer – user • Manufacturer – marketer – wholesaler – distributor – semiwholesaler- retailer – user. Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. • Manufacturer – sole-selling agent – wholesaler-(stockist_/Distributor – semi-wholesaler – retailer – user Types of Intermediaries:• Sole-selling agent or a marketer • C&F agents (CFAs) • Redistribution stockist • Stockist/distributor/wholesaler • Semi-wholesaler • Retailer/dealer • Broker • Franchisees • Authorized representatives • Commission agents • jobbers Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. Steps involved in designing a channel system:• How does the firm make the choice? How does it determine which one is the best? • Should it go for own channels – company owned showrooms and depots/exclusive company dealer or prefer conventional intermediaries I.e. wholesale/retail trade? • How many levels/tiers should there be in the chosen channel design? • How many wholesale points should it have to ensure satisfactory market coverage? Why should they be located? • How many retail points should it have? Which are the places where it should have them? • What should be the relationship between the wholesalers and retailers • Formulating the channel objectives • Identifying the functions to be performed by the channel. Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. • Analyzing the product and linking the channel design to the product characteristics. • Evaluating competitor’s channel design • Evaluating company resources and matching the channel design to the resources • Generating alternative designs, evaluating them and selecting the one that suits the firm best Objectives Firms commonly seek from channels • Effective coverage of the target market. • Efficient and cost-effective distribution • Ensuring that consumers incur minimum exertion in procuring the product • Helping the firm to carry on manufacturing un-interrupted `confident that the channels will take care of sales • Partnering the firm in finance and sub-distribution tasks Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. Distinctive Characteristics of Industrial product • Buyers are few • Purchased only once in a while, as their replacement rate/re-demand is low. • Have high unit value • Size at the time of a purchase is large • They are complex, technical and often custom made as per buyer’s specification requirements Physical Distribution & Marketing Logistics & Supply Chain Management – Cont’d.. Industrial Products: Amenability for marketing through channels. • Only some industrial products lend for selling through channels • The product must have a sizeable customer base • It must be a reasonably standard item; not a totally custommade item • It must a stockable item • The unit value of an item should not be too high In any case; industrial products need specialist distributors.