SALES MANAGEMENT AND MARKETING FORECASTING Cold calling - contacting a lead for the first time Commission – a form of sales force compensation in which the amount paid is in direct proposition to the accomplishment of specific objectives. Company sales forecast - a prediction of unit or dollar sales for the given period in total or broken down by product, segment or other categories’ and based on the marketing strategy that will be put in place A Prospect - a potential buyer interested in the seller’s product Quotas are quantitative objectives used to direct sales force activity and evaluate performance. Sales territory – all the actual and potential customers often within a specific geographic area, for which the salesperson has responsibility Sales management is the management of Personal Selling function. Personal Selling is a person to person process by which the seller learns about the prospective buyers want and sees to satisfy them by offering suitable goods or services and making a sale. (Keokemoer 2005) Selling is convincing the prospect to convince him or her to buy a product or service. Buyers can buy without a salesman being presented but they tend to buy minimum quantities and to confine their orders to known lines. Importance of Salespeople in management A sales function covers such activities 1. The presentation, demonstration and sale of company goals, negotiation on quality price and delivery etc 2. The continuous examination of the market and reporting on competitive methods , profits and prices. Reporting on shortages oversupply and changes in trading conditions 3. The maintenance of adequate stocks of his company ‘s good by distributors and users. Care in ensuring that customer keep the goods under suitable storage conditions 4. They advice and instruct dealers and their staff in the sale and display of his company ‘s products 5. The continuous acquisition of knowledge of his company’s profits and their application, selling points and benefits of the user 6. Prospecting for new outlets and new business and extension of company influence on his territory 7. The maintenance of good customer relations 8. The handling of complaints by distributors and users etc Why are sales people important in a company? Is there really a need for company to have a sales person? Advantages of Personal Selling Qualifications and Personal Attributes of a Salesman 1. Personality – enthusiasm, integrity, intelligence, friendliness, self control, confidence, industrious, diligent (someone who works without close supervision) reliability, courage, initiative. 2. Knowledge Company, product, service, competition, trade information, human relation, training, territory 3. Judgment Judgment can cover the kind of sales arguments likely to appeal to indigenous buyers, the methods of presenting different sales arguments, the moment when it is opportune to ask for an order 4. Power of persuasion Sales offering similar prices and it is the sales man with the greatest power of persuasion who is likely to book the order. Sales Management Cycle (S.M. C) The major activities that sales Management personal do can be summarized in what is known as the S.M.C. Analyzing planning Control Directing 1. Analysis - analysis of the environment a) Competitors strength b) Industry trends c) Internal sales records ) parastatals, lowest , highest sales achiever d) Sales reports 2. Planning - involves settings sales objectives for the firm and mapping out strategies and tactics and achieving these objectives 3. Directing - involves staffing and supervision of the day to day implementation of sales policies, programs and plans 4. Control and Evaluation -involves caring out performance comparison of actual and planned outcomes of sales results. Examination of the reasons for observed divergence and examination are need for planning 5. Organizing - setting up structures and procedures for smooth execution of sales programmers’ and plans Primary responsibilities of Sales Manager It is to staff the organization with the right people for the job. Other related responsibilities include: and effective Perf revaluation Motivation supervision Strategic planning Organising the sales force comm control intergration and Training and Dvpt Recruiting , selection and assimilation of people Coordination- of personnel, marketing department and sale people e.g if there are as in taste production should be informed Communication -with all departments Control- Sales forecasts, sales budget any expenditure within the department and need to be monitored Skills a Sales Manager should have 1. Teacher – trainer, coach , recruiter, employer, counselor 2. Leader, implementer , decision maker who accept responsibilities for his decisions 3 A communicator, analyst , planner, skillful manipulator 4 Teammate, referee, advisor, friend 5 Innovator creator of new ideas Roles of Sales Manager 1 . Prepare sales plans and budget 2. Set sales force goals and objectives 3. Estimate demand and forecast sales 4. Determine the size of the sales force 5. Designs sales territories, set sales quotas and defines sales force performance standards 6. Conducts sales volume, costs and profit analysis 7. Monitor the ethical and social conduct 3. PERSONAL SELLING PROCESS Selling as a process according to Smith goes through 7 steps ( 7P approach) Prospecting Identify prospect and qualify Preparation Presentation -customer research -Need probing - Objective setting -convincing prospects Possible Problems - handling objections Post - Sales Follow up Pen on Paper Please Give me order - Recording details -closing a sell Step 1: Prospecting This involves identifying potential customers and qualifying them to determine if they are valid prospects. It involves defining the market, generating sales leads and qualifying prospects. How do salespersons get prospects? From friends , sales people , previous customers, suppliers, social and professional contacts , spotters, satisfied customers provide names, contacts, spotters, use of referrals, direct marketing , telemarketing, direct mail, cold calls (without appointment), directories etc. Why is prospecting necessary? a) Existing accounts are lost to competitors b) Clients go out of business or merge with other business c) An organization may have the goal of profits or increasing customer-base d) New products may be better suited to new customers rather than to present customers Qualifying prospects One can use the M.A.N approach i.e. Money, Authority and Need Once sales people have a list of leads they must identify or qualify the prospects The salesperson needs information about customer needs, buying authority and ability to buy. The salesperson needs to ask these questions such as ‘Does the prospect have an unsatisfied need and will that product or service be able to satisfy the need? Does the prospect have the authority to make a commitment therefore identifying the decision marker? Does the prospect have the money or resource to buy? 2. Preparation Two key activities involved at this stage are: a) Pre- approach / Customer research/ Fact finding What is the customer’s dominant motive behind buying? Personal motives include the need for respect, approval, power and recognition A respect-oriented buyer wants to demonstrate and prove his or her expertise. They are interested in research that not only supports your product / service but also reinforces the work they have already done. A buyer focusing on approval wants to be sure that others affected by the decision to buy are pleased ( sell profits that reduce conflict and provide minimum risk e.g. family car) A buyer interested in power is looking for ways to gain greater control over some real practical aspect of their situation e.g. in an African setup, this would involve politics, money, knowledge, innovative products, flags/ business ideas. A buyer interested in recognition is interested in products /services that give them greater visibility and provide opportunities to demonstrate their leadership abilities e.g. Chiyangwa. It is however difficult to identify these personal motives but it can be done through identifying their actions and taking statements they say into consideration. E.g. ‘isu takaita maMasters kare kare’ b) Planning for a call. You need to write down what you will say. Clearly identify yourself and your company. The activities include; i) Defining the objectives of our visit. You need to write down what you would say for example, are you there to attend to complaints, for restocking or to acquire a new order ii) Developing a strategy (how to present) for example use of demonstrations, visual aids, role plays, testimonials, guarantees etc. iii) Making an appointment. When making an appointment, you need to give the prospect a choice, prepare brief sales message, and present enough information to stimulate interest. Reasons for making an appointment i) To know whether the prospect will be available. ii) To know what additional data or information is required by the prospect iii) To show concern about work schedules Time of arrival Arrive on time for the interview, because arriving late suggests lack of respect of the prospect’s time and arriving early puts pressure on the prospect. Step 3: Presentation Exercise: In sets of two, I would like you to get to know more about your classmate Presentation refers to the face to face meeting between the prospect and the salesperson. It is not just important but very crucial. There are two main approaches to presentations: 1) It aims to stimulate interest and attention (AIDA approach). AIDA stands for Attention, Interest, Desire and Action. Activities include self-introduction, stating purpose of visit, establishing an understanding and motivating the prospect to built better interest in the topic. A prominent salesperson; John Molly once wrote that “a salesman fails not when he or she opens their mouth but before they open mouth”. His argument is that their appearance conveys that they are not likeable or that they are not honest, sincere, and trustworthy. When the buyer is not well-known to the salesman, or is a complete stranger, the salesman must immediately try to establish a relaxed atmosphere. The first few minutes of an interview with the stranger are important. Each individual is sizing up the other and there is probably a slight air of tension. A good technique for a salesman to follow is to make some agreeable and pleasant general remarks which refers to the business. The remark should not be provocative although starting the interview with an argument will undoubtedly get the buyer’s attention; it is unlikely to benefit the salesman. Examples of the kind of general opening remarks are; ‘I noticed on my way in, that you had an attractive window display featuring…’ ‘Your workshop looks very busy…’ The kind of opening remark which a salesman makes will obviously depend upon his judgment of the buyer and may be influenced by the buyer’s own conversation. If the buyer starts off by saying, ‘I am a busy man, you have five minutes, now what do you want?’, the sales man must react according and in this case, he may pointedly look at his watch and say, ‘Right Mr Blank, I will just tell you the main points and show you our best selling line.’ It may be advisable to make an appointment and return at a more convenient time. If the salesman ahs handled the situation well, it is almost certain that the buyer will grant an extension of time because he is sufficiently interested in the proposition. If suppose the buyer and the salesman are well known to each other, their opening remarks will be both personal and friendly. As such the interview will get off to a good start. According to Alan Gillam (1982): The Principles and Practices of Selling Therefore, salesmen must know that; i) The first impression is essential therefore they must wear neat and conservative clothes ii) Be clean and carefully groomed iii) Know the prospect’s name and be able to pronounce it properly. iv) Be alert and let the prospect offer to shake hands. v) Forget about him or her and concentrate on the prospect vi) Avoid smoking or chewing gum vii) Avoid issuing a damaged business card viii) Use a properly maintained car (avoid using cars that require hill start/push start. The car should be kept clean because you may need to take the prospect out to lunch/dinner. Other Do’s and Don’ts Avoid discussions on; Encourage discussion on; Organizational Challenges (especially you Products and services you offer organization) Politics Weather Health and wealth Sport Marital Status Religious discussions NB the issues outlined as discussion issues to avoid represent zones of uncomfortable debate. Techniques for getting favorable attention from the prospect a) Ask questions that relate to the sales presentation and avoid questions like how the prospect’s business because it dampens the mood b) Use a referral i.e. using someone’s name to catch the attention of the prospector. This could be someone the prospector is connected to. Use the good name of our company to sell accounts e.g. saying Comet purchased … Check the people whom you know that the prospect might also know. c) Offer a benefit. For example something like; ‘Mr. Paraiwa, I have an idea that could save you some money on your budget. You could….’ d) Compliment the prospect. For example saying “Ms Ngwenya, congratulations on …’ e) Giving something of value. Offer a small gift from the company usually a product that you are selling. You must know that however, in some communities, this act may be viewed as bribe. Usually accepting a gift is associated with an obligation to reciprocate with a gift as well. As such, know beforehand the guidelines of giving gifts as they vary between cultures. One area of importance in cross cultural awareness is in the different gift giving etiquettes of the world. Understanding gift giving and the etiquette surrounding it can help international business people cement better relationships with foreign colleagues, clients or customers. Cross cultural gift giving etiquette involves considering the following points: a) Who is receiving the gift? b) Is it a person or a group? c) What is the status of the receiver(s)? d) What types of gifts are acceptable or unacceptable? e) What is the protocol associated with gift giving and receiving in the country? f) Should gifts be reciprocated? In North America, UK amongst other like-cultured countries, gift giving is rare in the business world. In fact, it may carry negative connotations such being construed as bribery. On the other hand, in many Middle East and Asian countries, gift giving and its etiquette have a central place in business practices. Highlights of the different aspects of cross cultural gift giving etiquette; Gift Giving Etiquette in China It is the proper etiquette for gifts to be exchanged for celebrations, as thanks for assistance and even as a sweetener for future favors. It is however important not to give gifts in the absence of a good reason or a witness. When the Chinese want to buy gifts it is not uncommon for them to ask what you would like. It would be wise to demonstrate an appreciation of Chinese culture by asking for items such as ink paintings or tea. Business gifts are always reciprocated. Not to do so is bad etiquette. When giving gifts, do not give cash. Do not be too economical with your choice of gift otherwise you will be seen as an 'iron rooster', i.e. getting a good gift out of you is like getting a feather out of an iron rooster. Depending on the item, avoid giving one of something. Chinese philosophy stresses harmony and balance, so give in pairs. Gift Giving Etiquette in Japan Gift-giving is a central part of Japanese business etiquette. Bring a range of gifts for your trip so if you are presented with a gift you will be able to reciprocate. The emphasis in Japanese business culture is on the act of gift-giving not the gift itself. Expensive gifts are common. The best time to present a gift is at the end of your visit. A gift for an individual should be given in private. If you are presenting a gift to a group of people have them all present. The correct etiquette is to present/receive gifts with both hands. Before accepting a gift it is polite to refuse at least once or twice before accepting. Giving four or nine of anything is considered unlucky. Give in pairs if possible. Gift Giving Etiquette in Saudi Arabia Gifts should only be given to the most intimate of friends. Gifts should be of the highest quality. Never buy gold or silk as a present for men. Silver is acceptable. Always give/receive gifts with the right hand. Saudis enjoy wearing scent. The most popular is oud which can cost as much as £1000 an ounce. It is not bad etiquette to open gifts when received. It is advisable to try and ascertain some facts about the gift giving etiquette of any country you plan to visit on business. By doing so, you maximize the potential of your cross cultural encounter. Probing of need It involves asking questions to find out what the prospect really needs. A SPIN approach is used. This is a selling approach that teaches a salesman to ask questions in a logical series of questions to identify the needs of the prospect. SPIN stands for; S -Ask situational questions to obtain background and factual information. P -Define the specific problem or find the needs I -Ask implication questions to help the prospect understand the seriousness of the need. N -Need payoff questions to show the prospect how you can solve problems at hand? Problem-solving will be effective only if the salesperson understands the prospect’s needs and concerns which means that he has to learn how to probe for needs very carefully. Only then can the salesperson focus only on those problems that are most important to the prospect. The SPIN approach discussed For example, if the prospect’s company produces gas cylinders using welding machines and you are a sales representative of a company that services welding machines, using the SPIN approach, you can ask the prospect questions such; Situational questions Are asked to obtain factual and background information. Such questions could include; i) The name of the prospect’s company ii) Their production capacity at present iii) Their objectives for the next six months iv) How many welding machines they have etc Problem questions These are more focused on difficulties, dissatisfactions and problems which the customer is currently experiencing and which the salesperson can solve with his or her product or service. Such questions could be; i) How satisfied are you with the current welding operations? ii) What prevents you from achieving your quality standards? iii) What problems are you experiencing in moving cylinders from the stores to the welding bays? Implication questions These are questions about the effects or consequences of the customer’s problem. Such questions allow the customer to see that the problem is serious. Implication questions could include; i) What effect does the level of re-work have on your production schedule? ii) How will this problem affect your welding productivity? iii) Could that lead to an increase in your production costs? Need pay-off questions NB These are a mirror image of an implication question These questions are designed to get the customer to tell you about the benefit that the solution offers rather than forcing you to explain the benefits to the customer yourself. Such need pay-off questions could be; i) If you had a reliable welding machine delivery service, would that allow you to reduce your productions cost or re-work? Reasons for asking questions includes i) To maintain control ii) To learn more about the prospect need iii) To involve the prospect iv) To build relationships v) To establish trust NB the salesperson should show that he has sincere interest in the prospect needs Convincing the prospect The seller should make sure that the prospect is aware of the benefits of the product. Benefits of a product can be further stressed using demonstrations or testimonials or referring to someone who used the product and was satisfied. Salesperson must use personal skills to convince the prospect to purchase the product. Demonstrations and Presentation Where there is a product to be demonstrated the salesman; Should make himself an efficient operator in the technical sense Product should be carefully examined and major selling points and advantages over competitor product should be listed The method of demonstration should be planned so that the major selling points and advantages are clearly placed before the customer The plan should be simple and the sequence of operation should be in a logical order The salesman should preface/ introduce the demonstration with a simple explanation of the principle by which the product works, how it operates and results which can be expected. During explanation various features of the product can be shown so that the buyer gets to know something about it before the actual demonstration starts Customer cannot absorb at the same time as they watch it in an action Let the customer use the product Non-verbal communication when making presentations In the early 1900 Sigmund Freud (psychologist) noted that people cannot keep a secret, even if they do not speak. A person’s gestures and actions reveal hidden feeling about something. The four major non-verbal communication channels i) Physical space between the buyer and the seller ii) Appearance iii) Hand shake iv) Body movements The concept of space Territorial space refers to the area around the self that a person will not allow another person to enter without consent. a) Intimate space This is two feet, arms length. It is for loved ones or someone who is close to. In a buyerseller relationship, this space is socially unacceptable and possibly offensive. During presentation, one should carefully listen and look for signs that indicate that the buyer feels uncomfortable, perhaps the salesperson is too close for comfort. b) Personal space It is two to four feet. It is the closest zone a stranger or business acquaintance is normally allowed to enter. Even at this one, there may be discomfort. Barriers such as desks are used to reduce the threat implied when someone enters this zone. c) Social zone It is four to twelve feet, six arms length. It is normally used for presentations d) Public space It is 12 feet and above. It is used by a salesperson making a presentation to a group of people A salesperson who pulls up a chair, learns over the prospect desk, picks up objects on the prospect’s desk runs the risk of invading a prospect’s territory. However should you feel some friendliness between yourself and the prospect, use territorial space to your advantage. Be careful not to create defensive barriers Handshake It is said to have evolved as a gesture of peace between warriors a) A prolonged handshake is more intimate than a brief one can cause discomfort b) A loosely clasped, cold or limp handshake is usually interpreted as indicating aloofness and unwilling to become involved, unfriendly and unaffectionate. c) Maintain eye-contact with the customer during the handshake, grip the hand firmly. These actions will help you establish an atmosphere of honesty and mutual respect, starting the presentation on the positive manner. At times you may want your customer to initiate the gesture Step 4 Possible problems/handling objections Objections are a natural part of any sales presentations and should be viewed by a salesperson as an opportunity rather than a hurdle. When prospects raise objections, they are actually showing more interest and are asking for more information Objections come as a result of doubt or negative feeling. The most difficult prospect is one who does not say anything during the presentation, refuses to buy or gives no reason for the decision. It is important that salespersons distinguishes between real and pseudo/excuses a) Real objections are likely to be about i) Time- I don’t have to make a decision now. There is plenty of time ii) Price objections- Your competitor is much cheaper iii) Source – I have heard that our company has poor reputation for sales service. iv) Competition e.g. I like Geisha why change ? Pseudo/Excuse objections These are objections designed to hide the fact that the prospect just doesn’t want to show his or her hand or make the decision yet. People often fear change and many not trust their own decisions. Examples include I will get back to you I am too busy right now Our budget is tight this year We have no room to store it A suggestion for responding to the above excuses could be; If you are busy now, may I see you for half an hour this afternoon, at 3pm or would tomorrow at 9am be better How to handle real objections Wilson Learning Corporation suggested a method for handling objections that it refers to by the acronym LSCPA. This stands for Listen, Share, Clarify, Problem and Ask Listen to the buyer’s feelings e.g. I am here to help you. Exercise empathy and put yourself in the customer’s shoes. Share the concerns without judgment. Don’t be defensive because it is a personal opinion Clarify the real issue with a question e.g. Let me see if I get this correct, it seems to me that you are saying… Problem- solve by presenting options and solutions. Quality, convenience and value for money Ask for action to determine the commitment Listening and sharing steps help to reduce tension by helping the buyer get objections out into the open and that shows that you care enough to acknowledge and try to understand. Listening and sharing takes maturity, energy and patience. Clarifying takes the form of questions such as “ it seems to me you are saying ... It will uncover misinterpretations Problem solving will depend on the type of objection. You can provide pros and cons of the action requested or admit objection is valid and point out compensate for the objective. A case history could be the advantage that presented describing how another prospect purchased the offering and benefited. For example, a customer might still have 90% of the product you sold to him last time. So suggest ways in which the customer can push stock by price discounts, displays and advertising in order to meet customer needs best (political sales person) Step 5 Please give me order / closing the sale Having made a presentation there is needed to close the sale. Closing occurs when the salesperson asks for the order or closes the sale. a) When to close Body language gives you clues i) Acceptance signals These indicate that your buyer is favorably inclined towards you and your presentation. while this may not end in a sale, at the very least the prospect is saying “ I am willing to listen” What you are saying is both interesting and acceptable. NB acceptance signals indicate that the buyer’s perceive that they may have a need that your product might meet. You have obtained their interest and attention. You are free to continue with your planned presentation. Body angle- learning forward/ up right at attention, face smiling, pleasant expression, relaxed, eyes examining, direct eye contact, positive voice tones. Arms relaxed and generally open Hands- relaxed and generally open perhaps performing business calculations on paper, firm handshake Legs- crossed and pointed towards you or uncrossed ii) Caution signals Body angle- learning away from you Face- puzzled, little / no expression, averted eyes, saying little Arms- crossed and tense Hands- moving, fidgeting with something, clasped, weak handshake Legs- moving, crossed away from you Adjust to the situation by slowing up or departing from planned presentation. Use open-ended questions to allow buyer to talk and express attitude and beliefs e.g. “ have you have been interested in improving efficiency of your workers?’ NB you need to change caution signals to go ahead signals because if you continue to have caution statements, you need to proceed carefully. iii) Disagreement signals It tells you immediately to stop your planned presentation and quickly adjust to the situation. Anger or hospitality may develop. If one decides to continue with the presentation, it results in pressure. Body angle - retracted shoulders, learning away from you, moving the entire body away from you or wanting to move away. Face - tense, showing anger, very little eye contact, negative voice tones, may became suddenly silent Arms- tense, crossed over the chest Hands- there is motion of rejection or disapproval, tense and clenched, weak handshake Legs- crossed and away from you How to handle disagreement 1st step is to stop your planned presentation. 2nd step is to temporary eliminating putting pressure on the prospect. Let the buyer relax 3rd let the buyer know that you are aware that something upsetting has occurred. Show that you are there to help, not to sell at any cost. E. g have I said something you do not agree with? Although a prospect may say no to make a purchase, body movements may indicate uncertainty. Richard Dreyfuss says in ’The goodbye girl’, your lips say no, no , no but your eyes say yes, yes, yes! This phrase sometimes holds true for marketers NB you need to have a cluster or pattern of actions to come up to a judgment Importance of body language a) Be able to recognize non verbal signals b) Be able to interpret them correctly c) Be prepared to alter a selling strategy by slowing, changing/ stopping a planned presentation d) Respond verbally/ none verbally to a buyer’s non-verbal signals. When one observes a possible signal, a trial close should be made. Trial closes are questions that ask for opinion that will serve as indicators of how close the buyer is to making a purchase. An example is ‘how does this look to you? How important is this to you? Is this what you had in mind? Will this equipment be consistent with what you have now? If the prospect makes a positive response to one of these questions, the sales person can assume that the customer is leaning towards buying and can move direct to the final close. ABC’s of Selling. Charles Futrell (2005; 2nd Edition) B) How to close Closing is simply asking for an order and it can be done using various techniques i) Alternative proposal close Would you accept rail or ship, cash/ credit? Its asks for a choice between details i.e. colors, models, number of cases that would suit you. ii) Assumptive close Make an assumption that the prospect will accept the offer and make a commitment therefore the salesperson writes an order form and asks the prospect to sign. iii) Action close The sales representative takes action to close the sale e.g. ‘Can I arrange an appointment with your bank to work out the details of the transactions?’ iv) One more ‘Yes’ close The sales representative reinstates the benefit of the product in a series of questions that result in positive response then ask for an order. The final questions ask the prospect complete the sale. Salesperson ‘George, you have said that our word processor has no memory, better graphics and is easy to use than other machines you have seen is that correct?’. Prospect ‘Yes’ Sale person ‘ Well, I recommend that you lease off our machines for 3 months and lease payment will apply to the purchase price if you decide to keep it.’ v) Balance sheet close Some prospects delay in making the order. Analyze the reasons for delay and give reasons for immediate action which will outnumber the reasons for delay. Trying to point out the advantage of prompt action therefore the sales person should build a persuasion case in order to outweigh reasons for delay vi) Direct close It is suitable when all prospects needs have been identified and addressed. The sales person only asks for action e.g. ‘Can you take the order now or shall I wrap that for you now. Step 6 Pen on paper Checking the details accurately of the order For example the quantities, color, models etc Step7 Post Sales service follow - up After sales service is done to ensure customer satisfaction in order to obtain repeat business. One can also uncover other needs to supply if you keep selling to an organization One salesperson said, ‘I will be there after sales because after I have sold something to someone I can sell them many more ,I just do not disappear ,I want to make sure my competitor doesn’t get in the door’. Post sales Activates include: Installation Training on how to use the product Send congratulatory messages welcome to the world of Derby Handling customer concerns promptly Maintaining contact with customer by inviting them to sales and special events e. g MSU invites captains of industries on their graduations. Send them Christians cards Remind them that they are still the companies valuable customers Wilson learning corporation identified for pillars of sales support involved in after sales service follow -up Sales support Support the buying Decision Manage implementation the Deal with dissatisfaction Enhance the R/ship The 4 pillars of sales support i) Support the buying Decision How? Some buyers have cognitive dissonance after buying a product Therefore as a sales representative you need to make follow up calls, write a card/ letter thanking the buyer for the order or congratulating them for the splendid decision they have in buying the product. ii) Managing the implementation How? Offering support service, assisting in any personal training and reporting implementation and utilization progress iii) Dealing with dissatisfaction How? -responding in an empathetic prompt manner to any problems that arises iv) Sales people should always be on the alert to enhance the relationship by being available, ensuring that the quality of offering is maintained and being a source of information, help and ideas. NB It is important to perform these activities successfully to ensure repeat business. Other types of selling methods a) Key account selling b) Team selling c) Electronic selling d) Tele selling Ethical issues in selling Diversities of Personal Selling situations Mc Murray and Arnold come up with three different groups of sales positions which are; Group a (Service selling) It aims at obtaining sales from existing customers whose habits and patterns of thought are already conducive to such sales. i) Inside order takers - they wait on customers ii) Delivery sales person – e.g. pizza or bread people iii) Route or merchandising - they operate an order taker but work in the field e.g. soap sales person calling on retailers iv) Missionary –it aims only to build goodwill or to educate the actual or potential users, they are not expected to take an order v) Technical sales person. They emphasis on technical knowledge e. g engineering salesperson, who is primarily a consultant for a company. Group B Developmental selling It aims at converting prospects into customers vi) Creative salesperson of tangible- e.g. selling automobile, vacuum cleaners etc. the salesperson has to make the prospect dissatisfied with his/her present appliance or situation then begin to sell the product. vii) Creative salesperson of tangible - e.g. insurance sales person selling insurance, advertising services, educational programs etc. it is more difficult than tangibles because people cannot feel, touch, smell or taste making the intangibles more difficult to comprehend. The sales person needs to be persistent and must possess a high need to achieve success. Group C Basicaly developmental selling but requires unusual creativity viii) Political, indirect or backdoor salesperson Positions that require the political, indirect or back door sales of big ticket items that have no truly competitive features . Here it is not the product primarily that is sold, it is the salesperson who sells her/ himself, hence the political connotation (underlying meaning) e. g sales of flour to a bakery. The product is made to precise specifications. Quality and service offered by all the suppliers are essentially uniform, price is standard everywhere. There is no price advantage or special features to offer. The only thing being sold is oneself as one who can offer something to the buyer which is needed. If a salesperson can satisfy the need then the product follows almost automatically. ix) Salesperson engaged in multiple sales It involves sales of big ticket items where presentation to several individuals the salesperson must make in the customer organization probably a committee, only one of which one can say yes/ no. 3. Planning and organizing the Sales force Why planning is necessary for sales Management It provides direction and focus for organizational purpose Improves moral when the entire organization participates in the process Improves cooperation and coordination of sales efforts Develops individual and collective standards by which sales force performance can be measured and deviations in time to take corrections It increases the sales organization’s flexibility in dealing with unexpected developments Therefore, planning help decrease inefficient and wasteful actions and better coordinate efforts towards achieving desired goals Sales Management Planning Process (SMPP) The SMPP is a never completed, it is continuous because as soon the 1st plan is prepared something else has changed in the environment. Managers should make sure that they adopt a proactive approach rather than a reactive one. A proactive manager needs to be going through the following questions? i) Diagnosis - where are we now? ii) Prognosis- where are headed if no changes are made iii) Objective - what do we want to achieve? iv) Strategy - what is the best way to get there? v) Tactics- what specific action is needed to be taken by who, when, where? vi) Control - what measures should be put in place To do this or answer these questions, a sales manager has to go through a series of steps in the sales management process. Selling and Sales Management. David Jobber and Geoffrey Lancaster (2009) a) Situational analysis b) Setting Objectives c) Determining the market and Sales potential d) Selecting Strategies e) Developing activities or tactics f) Allocating necessary resources g) Implementing the plan h) Controlling the plan a) Situational analysis Conduct a market analysis, number, type, actual or potential buyers, the buying patterns, needs, attitudes, demographics. Conduct a competitor analysis to find out the number, type of competitors in your market, product, price, market share etc. establish their weaknesses and strengths Conducts business environment analysis. Review the macro environment and see how supportive it is to the company strengths and opportunities. PESTLEG Conduct a company analysis to find out where we are right now Identify the resource you have; your workforce demographics, management style, policies, selling styles etc b) Setting goals and objectives Goals are broader than objectives therefore for one to achieve a goal; you need to have several objectives. In trying to determine objectives, one should therefore look at the ultimate goal as a guiding principle and selling objectives should come from that goal. Objectives should be SMART. There are 3 general objectives i) Sales volume ii) Contribution to profit iii) Continuing growth Objectives form the basis for selection of marketing strategies and tactics. c) Determine the market potential Market potential is an estimate of the maximum possible sale opportunities present in a particular market segment and open to all sellers of a good or service during a stated future period. A sales potential is an estimate of the maximum possible sale opportunities present in a particular market segment and open to a specified company selling a product or service during a stated future period. Why do marketers need this information? Such that organizations can plan for the future Elements that make up the market potential and sales potential; a) Items being marketed b) Sales for the industry or company in dollars or units of product c) A specific market denoted either geographically or by type of customer. Techniques for estimating market and sales potential a) Market factor derivation b) Survey of buyer’s intensions c) Test market Market Factor Derivation It is any item or element in the market that pose a rise in the demand of a particular product or service. Example; the number of births increases the demand for pumpers. Number of dual sim phones will increase the demand for sim cards therefore using dual sim phones a market factor, the market and sales potential can be determined as follows; Estimated number of dual sim phones in 2012= 300000. Percentage of dual sim phone users=70% Econet market share =60% Therefore market potential for 2012 = Estimated number of dual sim phones x percentage of dual sim phone users =300000 x 0.70 =210000 units Sales potential = Market share x Estimated number of dual sim phones =0.60 x300000 =180000 units Test Market It is a method of establishing market and sales potential through introducing and marketing a new product in a market that is similar to the company’s other markets. The demand of the product in the test market is used to forecast sales of the product in other markets. It measures sales in selected area, and then projects the results into a broader area. Survey of buyer’s intensions Conduct a field research to find out who buys the product? Who uses it? Who are the prospective buyers and users? The survey will reveal the characteristics that differentiate the market segment making up the product’s market potential. Survey provides customer data on factors such as purchase frequency, searching time, unit of purchase and seasonal buying habits. When assembled and analyzed, this data helps in establishing market and sales potential d) Selecting strategies Looking for best way to achieve your objective, one can use the Ansoff matrix BCG; Cost strategy, Differentiation strategy etc. this step in the process is complicated by the fact that there are often many alternative ways in which each objective can be achieved. Although several strategies may be evaluated, only one strategy can be applied. This gives rise to the formula; one strategy per objective. e) Developing activities or tactics These are detailed plans of what needs to be done. When, whom, where, what communication tools, how much to spend, marketing mix etc f) Allocating necessary resources Once tactics are developed, resources must be allocated to carry out the plans. 5 Ms (machinery, minutes, material, manpower, money) g) Implementing the plan The procedure so far would have resulted in the preparation of detailed document setting out what is to be done, when it will be done, who is responsible and estimated cost and revenues as well as agreed time frames for the various activities in the plan. It requires close monitoring, some companies use full time project coordinators to see who does what and at what time. For example, if you are using different communication tools, is the message being delivered single and consistent. It should seek to achieve a distinctive voice of one clear message. Details of the marketing plan should be communicated to everyone involved. Many companies have elaborate marketing plans that are not implemented because key people have not been informed or have not agreed to the proposed plan. h) Controlling the plan It is necessary that during planning you put down control measures in case of deviations. Details of major objectives and key parameters in the measurement of the degree of success in achieving the objective should be included, enabling corrections and modifications to be made as the plan unfolds. The control part of marketing plan should specify what should be measured, how it should be measured and what data will be required for measurement. It may also include details of what action is to be taken in the light of deviations from the plan. This contingency planning is a key feature of any planning process, recognizing as it does that plans need to be flexible in order to accommodate possible unforeseen and unpredictable changes in the market. Performance measures usually used as sales volume, new account, selling costs, sales force turnover, market share and profit margins. 4. Sales Forecasting Still R ( 2005) defines sales forecast as an estimate of sales, in dollars or physical units, in a future period under a particular marketing programmer and an assumed set of economic and other factors outside the unit for which the forecast is made. It maybe for a single or the entire product line. Therefore, sales forecast can be said to be a prediction of how much of a company particular product / product line can be sold during a future period under a given marketing program and an assumed set of outside factors. Short term forecasts are usually up to three months ahead are of use for tactical matters such as production planning. Medium term forecast are normally for one year ahead. Medium term forecasts have a direct implication for planners and they are of most importance in the area of business budgeting ie if the sales forecast is incorrect, then the entire budget is incorrect. If the forecast is over optimistic, then the company will have unsold stocks which must be financed for out of working capital. If the forecast is pessimistic, then the firm may miss out on marketing opportunities because it is not geared up to produce the extra goods required by the market. Long term forecasts are usually for periods of three years and upwards depending on the industry being considered. They are worked out form macro environmental factors such a government policies, economic trends etc. Such forecasts are needed mostly by financial accountants for long term resource implications and are generally the concern of the Board of Directors. Why it is important to do sales forecasting? 1. Production need to know about sales forecasting so that they arrange production planning. 2. Determine budget, sales quotas and compensation for sales people 3. A sales forecast will enable the purchasing department to be more effective from a price and delivery viewpoint when acquiring materials. 4. Human resource management is interested in the sales forecast from the staffing view point. 5. Financial accounts would want to make provision for capital items such as plant and machinery needed in order to replace to replace old plant and machinery to meet anticipated sales in the long term. Sales forecasting techniques: Qualitative methods; 1. Jury of executive opinion 2. The Delphi technique 3. Pull of sales force opinion Quantitative techniques 1. Moving averages 2. smoothing exponential 3. Regression analysis The Jury of executive opinion There are two steps in this method. i) high ranking executives estimates probable sales ii) An average estimate is calculated The assumption is that the executives are well informed about the industry outlook and the company market position, capabilities and marketing program. Such people can come from the company eg marketing or financial personnel, and or outside the company eg management consultants who operate within the particular industry. Sometimes, external people can include customers who are in a position to advise from a buying company’s view point. All should support their estimates with factual material and explain their rationales. Individual stances may be altered following such discussions. In the end, if disagreement results, mathematical aggregation may be necessary to arrive at a compromise Advantages a) It is quick and easy to develop b) It is a way to pull the experience and judgment of well informed people. c) It is a feasible approach if the company is still young i.e. it has not yet accumulated the experience to use other forecasting methods Disadvantages of Jury of executive opinion 1) The finding are based primarily on opinion and factual evidence to support the forecast is often sketchy 2) It leads to workload of key executives; it requires spending time they would otherwise spend in their areas of main responsibility 3) A forecast made by this method is difficult to break down into estimates of probable sales by product, time intervals, by markets, by customers etc, because the forecasting method is termed a top=down method whereby a forecast is produced for the industry and then the company determines what its share will be of the overall forecast because the statistics have not been collected from basic market data ie from bottom-up. The Delphi Technique It involves using expert panelists to make forecasts by individually and anonymously sending them to a moderator. After moderation, the average forecast is sent back to each panelist for another forest. This is repeated until a consensus has been reached. Advantages 1) Its more accurate 2) The technique eliminates bandwagon effect of majority opinion. 3) Objectivity. You feel ownership of the forecast Disadvantages 1) Time consuming 2) Minimum value to application to various territories 3) There is non-compliance. 4) Others may be influenced by average Pull of sales force opinion Individual sales personnel forecast sales for their territories. Then individual forecasts are combined to form the company’s sales forecast. It is sometimes termed the grass root approach. The sales person produces figures broken down by product and customer and the area manager produces figures for the sales person territory. They then meet and reconcile any differences in figures. Advantages 1) Forecasting responsibility is assigned to those who produce results 2) There is also a merit in utilizing the specialized knowledge of those in closest touch with marketing conditions 3) Sales people have greater confidence in individual quotas assigned to them because they participate in developing the quotas (quantitative objective are expressed in absolute terms and assigned to the specific marketing unit) Disadvantages Sales people are not trained in forecasting therefore they tend to be either optimistic or pessimistic. The Sales person may underestimate their forecast so as they reach their forecast more easily. Quantitative techniques Moving averages Sales for the coming period are assumed to be equal to those in the past period. Because of minor changes that may occur from period to period, it is necessary to take an average of sales from several periods to construct the sales forecast for the following years Data 2008: 7m F (t + 1) St + St-1 S t-1 St- n n 2009: 5m 2010: 9m F (t + 1) = forecast for the next period 2011: 10m St= sales in current period 2012 Sales t-1= past sales n= no of periods in the moving average F (t+1) = 10 + 9m + 5m +8 = 32 4 Therefore Ft+1 for 2012=8m Exponential Smoothing 4 It is a type of moving average that represents a weighted sum of all past numbers in a time series. Sales for different periods are given different weights and do not have the same impact on future sales. The impact of the period is determined by the smoothing constant (A) determined by the forecaster The forecasting equation in other words would be; St+ 1 = a (St) + (1-a) (Ft) next year sales = a (this year’s sales)+(1- a)(this year’s forecast) a- Represents the smoothing constant and is set between 0.0 and 1.0. Example; 2011 actual sales = 320 units of product Sales forecast for this year = 350 units Smoothing constant= 0, 3 Next year’s sales = 0, 3 (320) + (0, 7) (350) = 341 units of products a is estimated by trying several values and making retrospective test of associated forecast errors. Historical data is used to see which (a) forecasts better Regression analysis The relationship between sales (y) and independent variable (x) can be represented by a straight line. Past sales are plotted for each past time; (time plotted on the X- axis and sales one the Y- axis) and a straight line can be fitted within the points. The equation for the line is Y = a+ bx a= intercept value i.e. the y value when x=0 b= shows the average increase of sales changes or the impact of the independent variable x = is the independent variable (Unit of time) y = dependent variable which is sales Using this formula, the statistical procedure involves determining the average increment of changes in y (sales, the dependant variable) resulting from one increment of change in time (time/independent variable). The relationship identified in the first step is the used to predict sales. An estimate of independent variable is then used to project further sales. For example, sales of 2010 and 2011 (on the x axis) are 280 and 300 respectively (on the y axis). Then within the points, the analyst can draw a straight trend line. The line can then be extended to project sales in future periods. A more accurate method of estimating this line is the use of mathematical least squares procedure which minimizes error between actual and predicted sales. It is given by the equation; y= a+ bx Where a= ∑y – b (∑x) n b= n (∑x y) - ∑x (∑y) N ( ∑x2) - ( ∑x) 2 DATA Units 2008 250 2009 220 2010 280 2011 300 2012 ? Y XY X2 1 250 250 1 2 220 440 4 3 280 840 9 4 300 1200 16 N=4 ∑y=1050 ∑xy=2730 ∑x2=30 X ∑x=10 y 300 250 Sales 200 1 2 3 4 Calculation for value of b; 4 (2730) – 10(1050) 4 (30) - (10) 2 = 10 920 - 10 500 120- 100 = 420 20 Therefore: b = 21 Calculation for value of a; a= 1050 - 21(10) 4 = 1050 – 210 4 = 840 4 Therefore a = 210 Y = 210 + 21 (5) = 210 + 105 Y = 315 units Sales budget It is the blue- print for making profitable sales. It details who is going to sell how much of what during the operating period and to which customers or classes of trade. It is therefore a projection of what a given sales programme means in terms of sales volume, selling expense and net profit. The sales forecast is the source for the sales volume portion of the sales budget. The sales volume objective is broken down into; Quantities of profits that are sold Sales personnel / districts that are to sell them Customers or classes of trade that are to buy them Quantities that are to be sold during different time segments in the operating period. As these breakdowns are made, the selling expenses that will be incurred in implementing this sales programme are estimated thereby coming up with a budget. A sales budget is expressed in financial terms, can be called a financial plan of financial statement of revenue and expense flows. Sales budgeting is concerned with cost reduction and improved selling efficiency. Budgeting types to choose from; a) Zero-based budgeting. In a dynamic business, it often makes sense to start afresh when developing a budget rather than basing ideas too much on past performance. In this way, change is built into budget thinking. b) Strategic budgeting This involves identifying new, emerging opportunities and then building plans to take full advantage of them. c) Rolling budget Given the speed of change and general uncertainty in the external environment, shareholders see quick results. Rolling budgets involves evaluating the previous twelve months performance on an ongoing basis and forecasting the next three months. d) Activity based budgets This examines individual activities and assesses their contribution company success. They can then be ranked and prioritized and be assigned appropriate budgets. Purpose of the sales budget 1) Mechanism of control Sales budget serves as a yardstick against which progress is measured. Comparison of accomplishments’ with relevant breakdown of the budget measures the quality of performance of individual sales personnel, sales regions, products, marketing channels and customers. With current and complete information on sales volume and selling expense, the sales manager spots variations from the budget and takes corrective actions before they get further out of line. 2. Instrument of planning The sales forecast shows where it is possible for the business to go and during the budgeting process, planners determine ways and means for the business to get from where it is to where it wants to go. Through sales budgeting, sales management can reconcile these revenues and expenditure with the firms’ hierarchy of objectives. 3. Coordination Budgeting enables sales executives to coordinate their expenses with their sales and with their other departments. Budgets also restrict sales executives from spending more than their share helps prevent expenses from getting out of control. Factors to consider when organizing a budget Plant Sales estimate Orders in hand Proposed expansion / discontinuous of product Seasonal fluctuations Potential market Availability of material and supply Financial aspect Nature and degree and competition within the industry Costs of distributing goods capacity Political and economic, legal environment Determining the sales department budget The sales department budget is merely the budget for running the marketing function for the budget period ahead. It can be split into i) The selling expense budget which includes those costs directly attributed to the selling process eg sales personnel salary and commission, sales expense and training. ii) The advertising budget includes those expenses directly attributed to the above the line promotion (eg television advertising), and below the line promotion (eg a coupon redemption scheme). iii)The administrative budget represents the expenditure to be incurred in running the sales office. Such expenses cover the cost of marketing research, sales administration and support staff. Methods of ascertaining the level of such budget are as follows; a) Percentage of sales. The sales manager uses his/ her own experience or feelings or published industry averages. Sales forecast are multiplied with various percentages of each category of expenses e. g product, customers or territories. For example, if an organization wants to achieve 200 units, the sales budget will therefore be; Sales forecast x percentage of any category of expenses. E.g. visiting customer = 15% and sales forecast = 200 units. The sales budget = 200 x 0.15 Budgeting by objective and task method Objectives can be to increase sales volume by 10% by end of the year. Activities to achieve the objective are 1$x 2$x2 3$x3 4$ x4 5 $ x5 Total cost of Activity $ xxx sales Steps taken when budgeting using the Task or Objective Method List the activities which should be done and then cost the activity Sales objectives are outlined and task determined which must be accomplished in order to achieve the objectives Estimate cost for performing the task are projected Based upon the marketing plan ahead, the marketing manager decides what portion of the sales department budget must be allocated to each of the three parts of the budget described above. Sales budgeting procedure Sales Forecast Sales Budget Sales Department Budget Cash Budget Revenue Expense Production Budget Administration Budget Profit Budget Revenue Expense (Adapted from David Jobber and Geoffrey Lancaster (2005) Selling and Sales Management) Budgeting procedure normally begins in the sales budget.. The nature and amount of predicted flow of sales revenue impacts directly upon the activities of other departments. The sales budget is thus the revenue earner for the company and the other budget represents expenditure in achieving the sales. For example the production department takes its cue from the sales budget in preparing budgets for manufacturing expenses and inventory as well as planning production schedules (unit sales), finance department in preparing budgets for capital expenditure, earnings and cash positions and administration expenses. The management of the sales budget requires involvement of sales people, sales manager and the finance. Once approved, budgets are redirected to all organizational units, and budgetary control feature go into operation. For control purpose, each sales manager receives budgetary progress reports. In this way corrective action is indicated before actual performance moves too far from budgeted performance. Sales Quotas A quota is a quantitative objective expressed in absolute terms and assigned to a specific marketing unit. Terms can be expressed in dollars or units of product. Marketing unit may be a sales person or a territory. Sales quotas guide the representatives activities and if accurately determined on boost their morale. However because quotas are performance standards, sometimes sales representatives view them as threat to their well being. Sales forecasts is a estimate of what the firm expects to sell during a time period using a particular marketing plan. Sales Quotas are related to Sales Potential and Sales Forecast but are used for entirely different purposes. Reasons for establishing quotas for sales people a) To help management motivate salespeople – achievement- oriented people want specific and challenging goals, with regular feedback on the performance. b) To direct sales people where to put their efforts - when companies assign quotas for each product in their total line of products , they are trying to communicate to their sales force which products should be given priority. c) To provide standards for performance evaluation - management can assess the performance of people who are exceptional above or below the quota Types of quotas 1. Sales volume quotas They can be expressed in dollars or unit of product sold, usually set per territory over a monthly, quarterly or yearly period. They are specific volume targets for each territory and possibly for each product line or marketing channel for a specific period of time (usually month, quarterly, yearly). 2. Profit based quotas Similar to sale quotas in that they focus on sales force perfomance but focus on profits generated instead of just volume Usually based on gross margin (net sales - cost of goods sold) or contribution margin (gross margin – direct selling expenses) They are used when sales people make decisions that dramatically affect the profit of company Profit based quotas are more common among large firms which probably have better information systems. Activities quotas Activity quotas set targets on specific activities that are considered important to meeting a firm’s sales and profit objectives. Some of the activity quotas include; a) Temporary point of purchase b) Calls of new accounts c) Dealer sales meetings held d) Product demonstration An advantage of an activity quota is that they are based on behaviors that are largely under the control of the sales person. As a result, a sales person can be held more accountable for the results and may be more motivated to achieve these quotas. 4. Expenses quotas Sales manager use this standard to control the relation of selling expense to volume. Selling expenses are set individually for each person on the sales force because of different territories they operate in. Practices however differ as to what is counted as selling expenses eg travel and subsistence salaries, advertising, sales department expenses etc. The advantage is that it encourages sales representatives to cut costs Administering quotas In order for the quota system to be successful, the quota must be realistically attainable therefore they need to SMART 1) Include the sales person in quota setting. 2) Keep the sales force updated on its performance relative to quotas. Maintain control ie performance is monitored continuously for instance some companies prepare weekly, monthly performance charts to show how their representative is performing toward the quota. This can also be used to rank the sales force.