MM303SALES AND DISTRIBUTION
MANAGEMENT
Mr.LALIT TANK
Asst. Professors, MBA Department,
Bhagawan Mahavir College of Management, Surat
Email id: lalittank@gmail.com
MARKETING SPECILIZATION
COURSE CONTENTS
Module-1
Introduction to Sales & Distribution Management
Module-2
Personal Selling Process, Sales Territories & Quotas
Module-3
Sales Force Management
Module-4
Distribution Management
Module-5
Market logistics and supply chain Management
Module-1
Introduction to Sales &
Distribution Management
What is sales management
American Marketing Association defined as
Sales management is “The planning, direction,
and control of personal selling, including
recruiting, selecting, equipping, assigning,
routing, supervising, paying and motivating as
these tasks, apply to personal sales force.
Nature of sales management
• Its integration with marketing management
• Relationship selling
• Varying sales responsibilities
Importance of sales management
• Sales is most exiting, rewarding and challenging
careers.
• More position available then other professional
occupations.
• Sales career is one of the fastest and surest route
to the top management.
• Sales management only function that generates
revenue, all other department spend the money.
• Financial result of an organization depends on
sales management.
Objectives of sales management
Corporate objectives
Sales volume
Profitability
Marketing management
Sales management
Growth
Personal selling objectives
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Building product awareness
Creating Interest
Providing information
Stimulating demand
Reinforcing the brand
Types of sales management positions
CEO/
PRESIDENT
STRATEGIC/TOP
LEVEL MANAGERS
V.P SALES/V.P MARKETING
NATIONAL SALES MANAGER
REGIONAL/ZONAL /DIVISION SALES MANAGER
BRANCH/AREA/DITRICT SALES MANAGER
SALES TRANNE/SALES PERSON/SALES REPRESENTATIVE
TACTICAL
/MIDDLE-LEVEL
SALES MANAGERS
OPERATION/FRISTLEVEL SALES
MANAGERS
Theories of Personal Selling
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AIDAS Theory
Right set of circumstances theory
Buying formula theory
Behavioral Equation theory
AIDAS THEORY
• A Potential customer undergo five sequential
mental states before he becomes an actual
customer, by buying the product.
• A-Attention
• I-Interest
• D-Desire
• A-Action
• S-satisfaction
Right set of circumstances theory
• In this theory the salesman induces the right
type of “stimuli” in the customer which leads
to the right types of “response”.
• This theory is based on the psychological
frame called “ stimuli-Response”
Buying formula Theory
• This is theory given by late E.K. Strong.
• This theory focus on buyers- the prospects.
buyers needs and problems are being solved.
• The salesman acts as a catalyst in satisfying
the customer.
• Need(Problem) -> Solution -> Purchase >Satisfaction
Behaviour Equation Theory
• B=P x D x K x V
• B= Response, the act of purchasing a brand of
product.
• P= Predisposition or force of habit
• D= Drive or amount of motivation.
• K=Incentive potential or its potential satisfaction
to the buyer.
• V=Intensity of cues or these are weak stimuli
which determine when to buy.
Personal selling strategies
• To address all the unique needs customers,
you have to design your personal selling
strategy to have three key elements: a
knowledgeable salesperson or sales team,
an understanding of your client, and a sales
structure designed to give the salesperson
enough power to make an irregular sale but
still get rewarded for it.
• The Salesperson
The salesperson is the key to your personal
sales strategy. So when you're recruiting
salespeople, you should be willing to recruit the
best and expect to pay them a premium.
• The Client
Throughout the marketing section, we've
used the phrase "Know your client." It is just as
important here as anywhere else. By
understanding what your client needs in a
product, you can better give the salesperson the
tools they can use to fulfill that need. By
understanding what a customer wants in a
salesperson, you can tune your sales team to be
just that.
• The Sales Structure
In personal selling strategy your sales person
is your best friend. But, depending on the
system you've set up for them, that person
can also be your worst enemy. Determining an
appropriate incentive system for a sales
force can be the most difficult job you'll
have as a business person.
Emerging trends in sales management
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Global perspective
Revolution in technology
Customer relationship management (CRM)
Sales force diversity
Team selling approach
Managing multi-channels
Ethical and social issues
Sales professionalism.
Sales Forecasting
and
Budgeting Decisions
What is sales forecasting
• Sales forecasting according to cundiff and still,
is “ An estimate of sales during a specified
future period which is tied to a proposed
marketing plan and which assumes a particular
set of uncontrollable and competitive forces.”
Types of sales forecast
Types of
sales
forecast
Product level
Total sales, Industry sales, company
sales, product line sales, product form
sales, product item sales.
Time period
Long Rang, Medium Range, short range.
Geographic
Area
World – Nation – Region – Territory –Customer
Basic Terms Used In forecasting
Market potential :
• It is the best possible estimated sales of a
given product or service for the entire industry
in a given market for a specific period of time.
• Market potential is also called as industry
sales forecast.
• Market forecast: It is the expected industry sales
of a given product or service at one specific level
of industry marketing expenditure, in a given
market, for a specific period of time. market
forecast is also called as market size.
• Sales potential : it is the best possible estimated
sales of a given product or service for a company
in a given geographic area for a specific period of
time. sales potential is also defined as the
maximum share of market potential that is
expected to be achieved by a company.
• Sales forecast: it is the estimated company
sales of a given product or service, under a
proposed marketing plan, in a given market,
for a specific period of time. a company may
make sales forecast for an entire product line.
• Sales budget: it is the estimate of expected
sales volume in unites or revenues from the
company’s product and services and the
selling expenses.
• The sales budget goes into complete details of
expected sales of each product item.
• Sales quota: it is a sales goal set for marketing
unit for a specific period of time. The
marketing unit may be a salesperson, a
branch, a region, a dealer, or a distributor.
Forecasting approaches
• Top down/ Break-down approach: in this
approach, typically the company sales forecast
is developed at the business unit level, by
using suitable forecasting methods.
• The head of sales then breaks down the co.
sales forecast into region, district. Territory,
sales person.
Two major methods for top-down
approach
• Market – buildup method: The first steps in
this method is to identify existing and
potential business buyers in the geographical
territory. The second steps is to find out their
potential purchases of the product under
study. The final step is to add-up the business
potential of all the buying firms to obtain a
fairly accurate estimate of market potential for
the product or service for a specific
geographical territory.
• Multiple-factor index method:
• This method first identifies the factors that
influence the sales of a product or service.
• Generally, there are more than one sales
factors such as population and income that
influence sales.
• These factors are given certain weights,
corresponding to the degree of sales
opportunity.
Bottom-up/ Build up approach
• Bottom up or build up approach starts with
the company’s area or branch managers
asking its salespersons to estimate or forecast
the sales in their respective territories.
Combined into company sales forecast
Combined into Regional /zonal sales forecast
Combined into area/ branch sales forecast
Salespersons sales forecast of individual customer
Sales Forecasting Methods
 Qualitative methods
1.
2.
3.
4.
5.
Executive opinion
Delphi method
Sales force composite
Survey of buyer’s intentions
Test marketing
 Quantitative Methods
1.
2.
3.
4.
5.
6.
Moving averages
Exponential smoothing
Decomposition
Ration method
Regression analysis
Econometric analysis
Qualitative Methods
1. Executive opinion method
 The oldest, simplest and most widely used method.
 The research study said that 86% of cos. Used this method for sales
forecast.
 The methods includes getting views of top executives of the co. regarding
future sales.
 The sales forecasts are made either by taking the average of all the
executives’ individual opinion or through discussions among the
executives.
 The executives’ give their opinion based on experience, judgment, and
intuition.
 Advantages : 1. forecasting can be done quickly and easily. 2.less
expensive then other.3. very popular for small and medium size cos.
 Disadvantages: 1. unscientific 2.subjective 3.difficult to break down
forecast in subunit (Like region , branches)
2.Delphi Method
• This method is similar to the executive opinion method.
• This method developed by RAND CORPORATION During the last 1940s.
• The difference is that the members of expert panel do not meet or discuss in
a committee.
• The selection of panel of experts from within and outside the organization.
• The coordinator asks each expert separately to make a forecast on some
matter.
• Each member of the expert panel submits in writing his/her forecast
anonymously.
• The coordinator summarizes these forecasts into a report that is sent to each
panel member.
• The experts are asked to make another prediction separately on the same
matter, with knowledge of the forecast of the other expert on the panel.
• This process is repeated until the panel of experts arrive at some consensus.
• The basic belief in this methods is that experts, without any pressure or
influence will develop a more accurate prediction of the future.
Delphi Method ………….Cont.
• Advantages :
1.
Objective forecast that is accurate
2.
Useful for technology, new product, industry sales forecast.
3.
Both long and short-term forecasting possible.
• Disadvantages
1.
Difficulty getting a panel of experts.
2.
Longer time for getting consensus.
3.
Break-down of forecast into products or territories is not possible.
Sales force composite method
• This method involves sales people to estimate their future
sales.
• It is an example of bottom-up approach and is also called a
“grass roots” approach.
• Each salesperson estimates in his/her territory how much
quality or value existing and potential customers will buy of
each of the cos. product
• This methods is often used by industrial or business
marketing cos.
• S.R. make the sales estimate in consultation with customers
and sales supervisors based on their experience.
• The cos. Sales forecast is made up composite of all the sales
persons ‘ sales forecast.
Sales force composite………….Cont…
• Advantages
• Forecasting is done by sales people who are closest to
the market have batter insight in sales trends.
• Detailed sales estimate broken down by customer,
product, S.R. and territory.
• Involvement of sales people.
• Disadvantages
• Sales forecast are often pessimistic or optimistic as sales
people are not trained in forecasting.
• Sales people may deliberately underestimate the
demand.
• Many sales persons are not interested in sales
forecasting.
Survey of buyers’ intentions method
• This method is sometimes called as market
research or market survey.
• It includes asking existing and potential
customers about their likely purchases of the
cos. Product and service for forecast period.
• Several research organization conduct periodic
survey of consumer buying intention. They
combine various bits of information into
consumer confidence measure.
Survey of buyers’ intentions cont……
• Advantages
• Useful in forecasting sales for industrial products, consumer
durables, new product.
• It also gives customers’ reasons for buying or not buying
• Relatively inexpensive and fast when only the few customers
involved.
• Disadvantages
• Sometimes buyers are unwilling to reveal their plans.
• Buyers some times over optimistic.
• Expensive and time consuming in consumer non durable
market where consumers are very large in number.
Test marketing method
• This method is useful for forecasting sales for
new product, which has no historical sales
figures.
• It can also be used for estimating sales for an
established product in a new territory .
• Full blown test markets
• Controlled test marketing
• Simulated test marketing
Full blown test markets
• It consists of the co. choosing a few (two to six )
representative cities. in which full promotion
campaign is introduce.
• The duration of test market varies from a few
months to one year, depending on new the
repurchase period of the new product.
• Buyers surveys are carried out to get information
about consumer attitude, usage and satisfaction
towards the new product.
Controlled test marketing
• The co. with the new product hires a research
firm and get a panel of stores at specified
geographic location.
• The research firm delivers the new product to the
panel of stores, arranges promotion at the stores,
and measures the sales of the new product.
• The research firm also interview sample
consumers to get their perception on the new
product.
• Both full-blown test markets and controlled test
marketing expose the new product to the
competitors.
Simulated test marketing
• In this method, about 30-40 consumers are selected, based
on their brand familiarity and preferences in a particular
product category such as baby care and soft drink products.
• These consumers are shown commercials or print
advertisements of well known products and also the new
product, without any specific mention.
• These consumers are given a small amount of money and
asked to buy any items in a store.
• The researcher of the company notes how many consumer
buy the new product and competing product
• These consumers are interviewed to find reasons for buying
or not buying, and later, after usage of the new product.
Quantitative Methods
1.Moving average method :
• This is a relatively simple method that develops a
co. forecast by calculating the average co. sales
for previous years.
• Sales forecast for next year : actual sales for past
3 or 6 years /number of years (3 or 6)
• Advantages: 1.Simple method 2. easy to calculate 3.widely
used for short term and medium term sales forecast.
• Disadvantages: 1.unable to predict a downturn 2.can’t
predict long term sales forecast accurately 3.historical data
needed.
Exponential smoothing method
• This method is closely related to the moving
averages method for sales forecasting.
• By using the exponential smoothing equation,
the forecaster can allow sales in certain
periods to influence the sales forecast more
than sales in other period.
• Sales forecast for next = (L) (actual sales this
year + (1-L) (This year’s sales forecast)
L= probability weighing factor
Exponential smoothing…..Contn….
• Advantages
• Simple to operate
• Forecaster’s knowledge or intuition can be used in
forecasting.
• Useful method when sales data have a trend or
seasonal pattern.
• Immediate response to a upturn or downturn in sales
and used by many firms.
• Disadvantages
• Smoothing constant is somewhat arbitrary
• Long term and new product forecasting are not
possible.
Decomposition method
• In this method the company previous periods sales
data is broken down into four major components such
as TREND, CYCLE, SEASONAL AND ERRATIC event.
• These components are then recombined to produce
the sales forecast.
• Advantages
• This method is that it is conceptually a sound method.
• Disadvantages
• Difficult and complex statistical methods are needed to
break down sales data into various components.
• Historical data is needed.
Ration method
• Ration method is a time series method of
forecasting.
• Which is based on the assumption that what
happened in the immediate past will continue
to happen in the immediate future.
• Sales forecast for next year=
Actual sales of this year* Actual sales of this year/
Actual sales of last year
Ration method…….cont……
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Advantages
Simple to calculate
Requires less data
Accuracy is for short-term forecast
Disadvantages
It can not be used for forecasting sales for long
term periods and new product.
• Accuracy of sales forecast would be less, if past
sales fluctuate considerably.
Regression analysis
• This is a statistical method that is used to predict sales.
Called as dependent variable “Y”.
• The co. then identifies cause and effect relationship
between the co. sales and the independent variable or
factor. Which influence the sales.
• Advantages
• High forecasting accuracy. If relationship between variable
are stable.
• Objective method
• Can predict turning points of the co’s sales.
• Disadvantages
• Technically complex
• Can be expensive and time consuming.
• Use of computer and software packages are essential.
Econometric Analysis
• In this method, many regression equations are built to
forecast industry sales, general economic conditions, or
future events.
• To find out which factors or variable influence sales and
the relationships between sales and factors as well as
the interrelationships between the factors, develop a
number of regression equations representing these
relationship.
• A forecast is prepared by solving these equations on a
computer.
• Advantages –this method is that accurate forecast of
economic condition and industry sales are possible.
• Disadvantages- Large volume of data is required
representing the various factors.
How to improve sales forecasting
Accuracy
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Use multiple forecasting methods
Identify suitable methods
Develop a few factors
Obtain a range of forecasts
Use computer hardware and software tools
Sales Budgets
• A sales budget consists of estimates of
expected volume of sales and selling expenses.
• The sales volume part of the sales budget is
based on sales forecast.
• Sales budgets are generally set slightly lower
than the sales forecast to avoid excessive risk.
• The Sales budget includes a detailed estimate
of sales revenue as well as selling expenditure.
• The selling expenditure budget consists of the
selling expense budget and sales department
administrative budget.
• Selling expense budget: Includes expenditures for
personal selling activities, such as the salaries,
commissions and other expenses for the sales
force.
• The administrative budget: of the sales
department should includes the salaries of the
territory sales manager, sales supervisor, their
secretaries and office staff. The budget should also
includes operating expense like rent, power, office
equipment.
The sales manager is responsible for
preparing three budgets
Sales volume
budget
Selling-expense
budget
Administrative
budget
PURPOSES OF THE SALES BUDGET
• Planning
• Coordination
• Control
Methods used for sales expenditures
budget
• Percentage of sales method
• Executive judgment method
• Objective and task method
Sales budget process
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Review situation
Communication
Subordinate budgets
Approval of the sales budget
Other departments
Module -II
Personal Selling Process,
Sales Territories & Quotas
Personal Selling Process
• Sales people perform many activities which can
be a selling and non-selling activities.
• The selling activities consist of the various steps
of selling process.
• The non selling activities includes preparation of
sales reports, collecting payments, obtain market
information etc.
• There is no magic formula to make sale. if the
sales person follows the selling steps the chances
of success are greatly improve.
Selling process steps
Prospecting and qualifying
Pre approach (precall planning )
Approach
Presentation and demonstration
Overcoming objections
Closing the sale
Follow-up and services
1.Prospecting
• A prospect is an individual, a family or an
organization who needs the product or the
service a salesperson is selling and also has the
ability to buy.
• A prospect is not the same as a sales lead.
• A sales lead generates the name of a person or a
business firm that is a probable prospect.
• Once it is found that the sales lead wants the
product and has the ability to buy, the sales lead
becomes a prospect or potential customer.
Prospecting/ Lead Generating Method
Sr.
No
Prospecting Method
Brief Description
1
Referrals from existing customers
Requesting existing customers to suggest
the names of prospects.
2
Referrals from internal company
sources
Co. advertising, direct mail, website, trade
shows, and tele prospecting activities
3
Referrals from external sources
Suppliers, intermediaries, bankers, trade
associations.
4
Networking by salespersons
Sales persons become members of social
orgn. Like lion club, rotary club, to meet
new people who may be prospects.
5
Industrial directories
Yellow pages published by govt. and Pvt.
Publishers.
6
Cold canvassing
Unannounced call by salespeople on firms
that may need the product/service the
salesperson sells.
Qualifying
• It is important that the lead, or probable prospect
is qualified.
• The necessary conditions for the probable
prospect or the lead to get qualified to the
prospect or potential customer are.
- The probable prospect has need for the
product/service being sold.
- The probable prospect can afford to buy the
product or service.
• The prospects, after qualifying are placed in three
groups.
Types of prospects
• Hot prospects: These prospects have good
requirements of the co’s. products/services and are
financially sound.
• Warm prospects: This group of prospects have
medium or average requirements of the co’s. product
or service and are financial sound. this prospect give to
co. tele marketing team for follow ups.
• Cool prospects: These prospects have low
requirements and their financial capacity may or may
not be good. these are handed over to the co’s.
intermediaries like dealer/distributors.
2.Preapproach
• This step generally includes two tasks.
1. Information gathering : The salesperson
needs to collect as much information as
possible about the prospect. the in-depth
information about the customer makes the
salesperson confident.
2. Planning the sales call:
-Setting call objectives
-Planning the sales strategy
3.Approach
• After collecting the prospect’s name and
other relevant information, as mentioned in
pre approach the next step to make an
appointment to see the prospects.
• The approach takes a few minutes of a call,
but it can make or break a sale.
• When a salesperson meets first time, the first
impression should be favourable.
Approach techniques used in sales
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Introductory approach
Customer benefit approach
Product approach
Question approach
Praise (Congratulations)approach
Some approaches like free gift or dramatic
alternatives may not liked by some prospects as
these approaches may violate ethical guidelines.
4.Presentation and Demonstration
• For this step the sales person has to understand
the following aspects.
1. Understanding the buyer’s needs
• The best way to understand the prospects needs
is by asking questions.
• Situational questions
• Problem identification questions
• Problem impact questions
• Solution value questions
• Confirmations questions
2.Knowing sales presentation methods
• Stimulus response method
• Formula method (AIDA)
• Need satisfaction method
• Team selling method
• Consultative (Problem-solution)selling method
3.Developing an effective presentation
• Planning
• Use technology
• Adapt presentation
• Don’t overload
• Prospect’s language
• Convincing
Demonstration
• Demonstration is one of the important selling
tools of a salesperson.
• Sales presentation can be improved by
demonstration.
• D prove the benefits of the product and
reduce the risk of a wrong purchase to the
buyer.
Benefits of demonstration
• Buyer’s doubts or objections are cleared and
their questions are answered. This improves a
buyer’s purchasing interest.
• It provides a good support in the selling process.
• It helps the salesperson to find out specific
benefits of the prospective customer..
• Planning and conducting demonstration
• Matching presentation methods with situations
Overcoming objections
• Sales objections, resistances or oppositions may
typically take place during sales presentation.
• Objection should be welcomed because they
show that the prospect has some interest.
• That if the objections can be answered
satisfactorily it would result in sales.
• Two types of objections happen 1.psychological
(or hidden) and logical (practical)
• Psychological objections: include
predetermined ideas or beliefs, preference for
established brand, dislike of making decision,
resistance to spend money.
• Logical objections: are tangible such as
quicker delivery schedule, high price, product
quality, or product availability.
Method of handling and overcoming
objections
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Ask question
Turn an objection into a benefit
Deny objections tactfully
Third-party certificate
Compensation.
Trail close/ closing the sale
• Trail close is one of the selling techniques it
checks the attitude or asks the opinion of the
prospect. trail close does not ask the decision
of the prospect to buy. It used after an
objection is answered or before closing the
sale. Some trail close example
• To what extent this product meets with your
needs?
• Which of these benefits are important to you?
Closing the sale
• Closing the sale mean asking for the order.
• Closing is the process of helping the buyers to
make a decision that will benefit him/her.
• Some of the buying signals for closing sale
• Examines the product
• Asks another persons opinion
• Asks questions
• Becomes friendly
Closing techniques
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Alternative –choice close
Minor point close
Assumptive close
Summary of benefits close
T-account or balance sheet close
Special offer close
Probability close
Negotiation close
Follow up and service
• Sales people must understand that their job is
not over after the order.
• Successful salespeople follow-up a number of
related tasks like..
• Check customer order
• Plan follow up visit at the time of delivery
• Account penetration
• Relationship marketing
Designing Sales
Territories &
Sales Quotas
Defining sales territory
• A sales territory consists of existing and potential
customers assigned to a salesperson.
• The territory may or may not have geographic
boundaries.
• A salesperson is assigned to a geographic area
consisting of present and potential customers.
• The basic concept of a sale territory is that a
territory or a market is made up of present and
potential customers, rather than a geographical
area
Reasons for setting up sales territories
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Increase market coverage
Control selling expenses
Better evaluation of sales force performance
Improve customer relations
Increase sales force effectiveness
Improve coordination
Benefit salespeople and the company
Reasons for not setting-up sales
territories
• A small company with one or few salesperson
• Selling in a local market
• The salespeople are demotivated due to
restrictions of sales territories.
• Management of the co. may not be aware of
the advantages or benefits of developing sale
territories.
• May not know how to set up sales territories.
Procedure for designing sales
territories
SELECT A CONTROL UNIT
FIND LOCATION AND
POTENTIAL OF CUSTOMERS
DECIDE BASIC TERRITORIES
USED BUILD-UP
METHOD
USED BREAKDOWN
METHOS
1.Select a control Unit
• The first step in territory design is to select a
geographical territorial base called control unit
that will be used in the territory analysis.
• Commonly used control units are
• States
• Metros
• Cities
• Districts
• Talluka, towns and villages
2.Find location and potential of
customers
• Find the potential of present and prospective customers in
each control unit.
• Information of present customers available from co’s sales
analysis.
• The information of prospective customers can be obtain
from telephone directories and market research studies.
• After the present and potential customers are identified
the co. should estimate the total sales potential for all
customers in each geographical control unit.
• After the sales potential of control units are calculated it is
necessary to classify the customers based on their sales
and or profit potential.
• Many company used ABC analysis method.
3.Decide basic territories
• This can be done by using either build up or
breakdown method.
• Buildup method equalises the workload of
salespeople and commonly used by
manufacturers of industrial products and service
or by the cos. That want to selective distribution
strategy.
• Breakdown equalises the sales potential of
territories, and is popularly used by mafg. Of
consumer product and service or by firms that
want to adopt intensive dist.strategy .
Build up method
• In this method the basic territories are set up by
building up from the control units .
• The objective to be achieved is to equalise the
workload of salespeople.
• Build up method procedure :
1. Decide call frequencies
2. Calculate the total no. of calls in each control
unit
3. Estimate workload capacity of salesperson
4. Make tentative territories
5. Develop final territories
Breakdown method
• Procedure for breakdown method
1. Estimate co. sales potential for total market
2. Forecast sales potential of each control unit
3. Estimate the sales volume expected from
each salesperson.
4. Make tentative sales territories
5. Develop final territories
Assigning salespeople to territories
• The sales manager should consider two
criteria
1.Relative ability of salespeople
2.Salesperson’s effectiveness in a territory
Managing territorial coverage
• This consist if three activities
1. Planning of efficient routes for salespeople
2. Scheduling the salespeople’s time
3. Using time management tools
Sales Quotas
• After finalizing the sales forecast and the sales
budget, the next logical step for a co. is to set
up the sales goals or sales quotas, for
marketing units, such as regions, sales
territories, sales persons, distributors, and
dealers.
What are sales quotas
• Sales quotas are sales goals set by co. for its
marketing unit for a certain period of time.
• Sales quotas (also called quotas) can be set on
sales volume (rupees or dollar sales and unit
volume) expense, profit margin, activity,
customer satisfaction and combination .
• Annual sales quotas for each marketing unit is
broken down to quarterly and monthly basis
• Sales quotas are developed from the annual
marketing plan of co.
Objectives of quotas
•
•
•
•
Making available performance standards
Controlling performance
Motivating people
Identifying strengths and weaknesses
Types of quotas
• Companies set many types of quotas. The
most comman types of quotas are.
• Sales volume quotas
• Financial quotas
• Activity quotas
• Combination quotas
1.Sales volume quotas
• Most of the cos. Sales volume quotas for individual
salespersons, dist. Retailers, geographical areas, or
product, for a specific period of time.
• For effective control, it is proper to set sales volume
quotas for the smallest marketing unit.
• Setting quotas for regions, it is better to set quotas for
branches or dist. Within a region.
• Management can achieve better direction and control
by setting quotas for individual product items and
brands, it for entire product line.
• Annual sales volume quotas are broken down to
quarterly and monthly quotas.
Form of sales volume quota
• Rupees/ dollars sales volume:
• Unit sales volume
• Point sales volume
Financial quotas
• Financial quotas are the goals set to control
gross margin or profit contribution, and
expenses of various marketing or sales units ,
such as sales territories, sales people, and
products.
• Gross-margin or profit contribution quotas
• Expense quotas
• Activity quotas
• Combination quotas
Methods for setting sales quotas
•
•
•
•
•
•
Territory potential
Past sales experience
Total market estimates
Executive judegment
Salespeople’s estimates
Compensation plan
Insights into setting and administration
of sales quotas
• Set realistic quotas
• Understand problem in setting quotas
• Ensure salespeople understand quotas
•
•
•
•
-Participation in quota setting
Continuous feedback
Flexibility in administering quotas
Purpose of quotas
Understand relationship between quotas selection
and marketing environment.
Sales organization
structures
Concepts of sales organization
• An organization structure defines relationship
among job, and amongst the people, in a
company.
• The aim is to arrange the activities or job in
such a manner that the people involved can
perform effectively and efficiently and act
together rather than individually.
Basic concepts of sales organization
•
•
•
•
•
•
Degree of centralization
Degree of specialization
Line and staff positions
Marketing orientation
Effective co- ordination
Span of control.
Basic types of Sales organization
structures
•
•
•
•
Line sales organization
Line and staff sales organization
Functional sales organization
Horizontal organization
Line sales organization
• It is the simplest sales organization structure
• All the manager, from top sales manager to middle level
managers, have line authority.
• Line authority means people in management positions have
formal authority to direct and control immediate
subordinates.
• This structure is widely used in small firms and in cos. Having
a small no. of salespeople.
• The advantages of line sales organization are clear authority
and responsibility, quick decision making and low cost.
• The disadvantages are too much depends on the head of
sales, the sales head does not have adequate time to do
planning and analysis.
Line sales organization structure
Head
Marketing
Sales
Manager
Area sales
manager -1
Sales
people
Area sales
manager -1
Sales
people
Area sales
manager -1
Sales
people
Line and staff organization
• A group of specialists are made available to the
top sales or marketing executive.
• These specialists called staff are experts in certain
support activities such as MR, sales training etc.
• Staff managers have the role of advising or
assisting line sales managers.
• This structure used in medium and large sized
cos.
• High cost, slower decision, conflict may arise in
line authority are disadvantages.
Line and staff organization
Head –
Marketing
Marketing
services
manager
Area sales
manager-1
Sales people
Sales manager
Area sales
manager-1
Sales people
Marketing
research
manager
Area sales
manager-1
Sales people
Promotional
manager
Area sales
manager-1
Sales people
Functional sales organization
• The principle of specialization is fully used.
• Each staff specialist manager has functional
authority of his/her function over sales
people.
• A few large cos. With many product may use
functional sales organization structure.
• It is administrative simplicity.
Functional sales organization structure
Head –
Marketing
Marketing
services
manager
Sales manager
Area sales
manager#4
Sales people
Marketing
research
manager
Promotional
manager
Horizontal sales organization
• This removes management levels and also
departmental boundaries.
• The support functions like strategic planning,
human resources and finance are looked after
by a small team of senior executives.
• All the other people in the organization are
the members of cross functional teams.
• Reduction in supervision, unnecessary tasks
and cost improve in efficiency.
Horizontal sales organization structure
Research and
design team
Operating team
•Production operation
•Quality assurance
•System engineering
•Customer research
•Product/service design
Planning team
•Strategic planning
•Accounts, finance
•HR
•Chief operation officer
Customer support
team
•Service
•Training
•Information
Customer
satisfaction team
•Sales and marketing
•Pricing, promotion
•Channels , logistics
Specialization within sales organization
• Generally many medium and large sized cos.
Expand one of the basic sales organization
structures in some specialized design, in order to
increase the effectiveness of their sales force.
• Geography
• Product
• Market
• Functional
• A combination of these factors
Module-3
Sales Force
Management
Recruiting the sales force
• Recruiting includes activities to get individuals
who will apply for the job. The general purpose of
recruitment is to provide a pool of job candidates
from where a co. Selects the right persons.
• This means recruitment activities do not include
the selection of people.
• If the co. want to recruit a large number of sales
people, recruiting and selection process should
be done continuously.
Identify the sources of recruiting sales
people
• Internal source
1. Employee referral programmes
2. Current employees
3. Promotion and transfers
• External sources
1.
2.
3.
4.
5.
6.
Advertisements
The internet
Educational institutes
Employment agencies
Job fairs
Other cos. (competitors, customers, non-competitors)
Selecting the sales force
• The selection process
1.
2.
3.
4.
5.
6.
7.
Screening resumes
Application blank
Initial interview
Intensive interview
Testing
Reference check
Physical examination
Hiring stage
• The hiring process should be implemented
properly so as to give a positive impression of
the co. to the candidates. Who look for good
work environment, where people are made to
feel important.
• Two activities in hiring stage:
1.The co.making the job offer
1.Acceptance of the job offer by the applicant
Sales force Training
Managing the sales training process
• Sales training is expensive and sales managers
should take special care to ensure that time
and money are wisely spent.
• The training needs is to understand the
specific goals of training for individual
salespeople, such as improving product
knowledge, selling techniques, or relationship
building.
Sales training process
1.Assess sales training needs
2.Design and execute sales
training programme
3.Evaluation and
reinforcement of sales training
programme
1.Methods used for assessing training
needs
• Some of the methods used to decide the
training needs are.
• Sales manager’s observation
• Sales force survey
• Customer survey
• Performance testing
• Job description
• Sales force audit
Popular sales training needs
•
•
•
•
•
Product knowledge
Customer knowledge
Competitive knowledge
Sales techniques or selling skills
Company knowledge
Design and execute sales training
programme
• ACMEE method of sales training programme.
Aims (Why ?)
Content (What?)
Methods (How?)
Execution (who, when, where,
what )
Evaluation
Designing the sale training programme
• Aims/objectives of sales training (why is sales
training needed)
• Content of training programme (what should
be the content of sales training)
• Sales training methods (how will the sales
training be conducted)
Sales training methods
Class room/conference
training
•Lectures
•Demonstrations
•Group discussion
Online training
•EPSS
•Interactive
multimedia training
•Distance learning
Behavioral learning
•Role playing
•Case studies
•Simulation games
Sales training method
Self study training
•Audio cassettes
•Manual, books
•CD-ROM
On the job training
•Mentoring
•Job rotation
Organizational decision for sales training
•
1.
2.
3.
•
1.
2.
3.
•
•
Who will be the trainees ?
New and existing sales people
Intermediaries
Sales managers
Who will conduct the training?
Line sales personnel
Staff trainers
Outside training specialists
When should the training take place?
Where should the training be done?
-Centralized training -Decentralized training
• What would be the budgeted expenditure?
Execution of the sales training
programme
• Execution or implementation of the sales
training programme is the most tedious part
of the sales training process.
• Preparation of training time table, arraigning
the conference hall and many other details
have to be arranged.
• A list of all activities helps in proper execution
of training programme.
Evaluation of sales training programme
• Four components to measure programme
1. Reaction
2. Learning
3. Behavior
4. Results
Reinforce sales training
• Most sales people would not change their behavior
unless there is some reinforcement to the sales
training.
• According to one training co. 4 or 5 coaching
reinforcements are needed in 16 weeks periods after
sales training.
• Many cos. Follow up or reinforcement trainings are not
done because of various reasons.
• Training methods used to reinforce the training
1. Refresher training
2. Senior sales people coaching new salespersons
3. Web-based or online methods to reinforce formal
training
MOTIVATING THE
SALES FORCE
Introduction
• Some salespeople are ambitious and self
starters.
• They put forth their efforts without any
special training or incentives from the
management.
• Majority of salespeople need encouragement,
training and incentives.
What is Motivation
• Motivation is originally derived from the latin
word “movere ”, which mean “to move”.
• The desire to spend effort to fulfill a need is
motivation.
• In a sales job, motivation is the effort the
salesperson makes to complete various
activities of the job.
Definition of Motivation
Motivation –
• The driving force within
individuals by which they
attempt to achieve some goal in
order to fulfill some needs or
expectation.
• The degree to which an
individual wants to choose in
certain behavior.
Dimensions of sales motivation
Intensity
Direction
Outcome
Persistence
• Intensity: refers to the amount of physical and
mental effort the salesperson spend on given
task.
• Persistence: describes how long the sales
person continues to put forth effort.
• Direction: suggests the salesperson’s choice of
direction of effort among various tasks.
Importance of motivation
•
•
•
•
Changes in marketing environment
Conflicting company objectives
Unique nature of the sales job
Separate motivational package
Relevance of motivational theories to
sales people
•
•
•
•
Maslow’s hierarchy of needs theory
Hertzberg’s dual-factor theory
Vroom’s expectancy theory of motivation
Churchill, ford and walker model of sales force
motivation
Maslow’s Hierarchy of needs theory
• Needs were categories as five levels of lowerhigher-order needs.
– Individual must satisfy lower-level needs before
they can satisfy higher order needs.
– Satisfied needs will no longer motivate.
– Motivating a person depends on knowing at what
level that a person is on the hierarchy.
Hierarchy of Needs
• Lover order ( External ) : Physiological and
safety needs
• Higher order ( Internal ) : Social, Esteem, and
Self-actualization
Self-Actualization Needs
Esteem Needs
Social Needs
Safety Needs
Physiological needs
Herzberg’s Motivation-Hygiene Theory(2-factor
theory), by Fredrick Herzberg (1957)
• Job satisfaction and job dissatisfaction are
created by different factors.
– Hygiene factors- Extrinsic ( Environmental )
factors that create job dissatisfaction.
– Motivation Factors- Intrinsic ( Psychological )
factors that create job satisfaction.
• Attempted to explain why job satisfaction
does not result in increased performance
– The opposite of satisfaction is not dissatisfaction
but rather no satisfaction.
Expectancy Theory of Motivation: Vroom
Expectancy Theory
• Expectancy Theory (Vroom)
– States that an individual tends to act in a certain
way based on the expectation that the act will be
followed by a given outcome and on the
attractiveness of that outcome to the individual.
– Key to the theory is understanding and managing
employee goals and the linkages among and
between effort, performance and rewards.
• Effort: employee abilities and training/development
• Performance: valid appraisal systems
• Rewards (goals): understanding employee needs
VIE Theory of Work Motivation
Valence - value or importance placed on a particular reward
• The attractiveness/importance of the performance reward (outcome)
to the individual.
Expectancy - belief that effort leads to performance
• The perceived probability that an individual’s effort will result in a
certain level of performance.
Instrumentality - belief that performance is related to rewards
• The perception that a particular level of performance will result in
the attaining a desired outcome (reward).
Expectancy Theory
(Vroom)
Individual
Effort
1
Individual
Performance
2
Organisational
Rewards
3
1. Effort-Performance relationship = Expectancy
2. Performance-Rewards relationship = Instrumentality
3. Rewards-Personal goals relationship = Valence
Personal
Goals
Sales force Motivation Model
Effort
Effort
Perceived effort–
performance
probability
“If I work hard,
will I get the job
done?”
Performance
Perceived
performance–
reward probability
“What rewards
will I get when
the job is well
done?”
Reward
Perceived
value of reward
“What rewards
do I value?”
Motivational tools in the motivational
mix
• Financial rewards/compensation
1.Financial compensation plan
• Salary, Commission, bonus payment, fringe
benefits, combination.
2.Sales contest
• Non financial rewards /compensation
• Promotion, recognisation, job security, sale
meeting and conventions, sales training
programmes, job enrichment, supervision.
Guideline for motivating salespeople
• Difference between can’t do and won't do
• Include individual needs into motivational
programmes
• Pleateaued sales people
• Proactive approach