Chapter 1 sales management strategy sales and distribution management

Block: B as i c s o f S ale s M an ag e m e n t
I Ch-1 Sales Management Strategy

C h ap te
1
r S ale s
M an ag e m e n t S trate g y

Copyright © 2010, S L Gupta

1-1 Sales and Distribution Management Text & Cases (2nd Edition) S L Gupta Excel Books


Introduction
Sales management is defined as “the planning, direction and control of personal
selling, including recruiting, selecting, equipping, assigning, routing, supervising,
paying and motivating as these tasks apply to the personal sales force”.

Definition Committee of the American Marketing Association.

Sales force is responsible for the sale of products of a company and to add profit
to the business operations and fulfill social obligations. Sales force should be
hardworking, result oriented, well educated and competent to handle changing
situations. Technical developments which are taking place at a rapid speed have
made the task of sales force more challenging.



Nature and Importance of Sales Management
 Sales management helps to achieve the organizational objectives.
 The main objectives of sales management is that products should be sold at
that price which realizes profits.
 Buyers and sellers both have same types of business relationships. This
relationship is based on exchange of goods, services and money.
 Sales person develops a positive relationship with the customers. The role of
sales team is interdependent and success of one team member depends on
the other.
 The sales team continuously monitor the customer preference, competitors‘
situation, government policy and other regulatory bodies.
Cont….



Relationship-based selling

 Relationship-based selling works because people would rather buy what they
need to buy anyway from those they have come to relationship.

 Relationship-based selling means doing business in such a way that
company is worthy of the customer's trust.

 Relationship selling is mainly personal not institutional, and buying is heavily
personal as well.

 It is not selling centric. It's buyer-based.

 The objective of relationship selling is to help the buyer do the right thing for
the buyer.




Managing the Sales Force
Successful sales force management means:

 The right organisation and aggregation against product lines and
geographies.

 The right strength and qualification.

 The right compensation and incentive system.




Steps in Designing and Managing a Sales Force
2. Objective Setting

3. Training for Sales Policies

4. Designing Sales Force: Structure and Size

5. Deciding Sales Force Compensation

6. Recruiting and Selecting Sales Force

7. Guiding and Motivating Sales Force

8. Performance Rating of Sales Force




Sales Manager’s Duties and Responsibilities
The sales manager is the most important person in a sales organisation. All
activities are based on his functions and responsibilities. The following are some
of the principal duties of a sales manager:

3. Organising sales research, product research, etc.

4. Getting the best output from the sales force under him.

5. Setting and controlling the targets, territories, sales experiences, distribution
expenses, etc.

6. Advising the company on various media, sales promotion schemes, etc.

7. Monitoring the company’s sales policies. Cont….




In the table that follows, Al Reid gives the steps necessary for getting success in
selling:
Territory Sales Manager’s Job Responsibilities

To yourself To your company To your customers
Increase basic selling skills. Be proud of your association Work closely with decision-
with your company. takers and influencers in each
Develop management abilities. account.
Maintain the company standing
Keep pace with changes, trends and standards with all Point out the advantages of an
and developments in your customers. association with your company.
territory.
Inform the headquarters and Keep accounts current and up-
Study the latest products, your supervisors, through to-date on all company
promotion policies and established channels, about advertising and promotional
procedures. changes and developments in activities.
your territory.
Be alert to new sales and Suggest ideas, methods,
merchandising ideas. Be prompt in handling records, techniques and tips that can
reports, correspondence, etc. stimulate sales.
Cont…. Copyright © 2010, S L Gupta



Grow, so that you can assume Cut selling costs by economical Inform the customers about the
greater responsibilities as routing, good use of time, trends in their areas.
opportunities permit. planning and greater awareness
of opportunity. Handle complaints effectively
Maintain the appearance and and to the complete satisfaction
goodwill expected of a territory Check demand and movement of the complainants.
sales manager. of products in the territory.
Suggest the best technique for
Analyse your weak and strong Report activities of the selling your products to the
points and then think about competitors. customers.
them.
Strive to reach the best goals. Organise presentations to
inform and save time.
Ask for help, when you need it.
Make the customers aware of
Cooperate with other the changes in the company’s
departments of the company. policies or procedures.

Stimulate and maintain
enthusiasm for your products.
Build and maintain goodwill.



Problems of Sales Management
2. Designing and Managing Sales Force

Actual supervision of, and guidance to, individual salesmen is also a sine
qua non of a sound sales manager.

4. Sales Force Authority

sales force requires delegation of authority with respect to the following:

 Changing or fixing prices

 Credit facilities to old and existing customers

 Assurance regarding quality and after-sale service
Cont….
 Payment terms and settlement of claims. Copyright © 2010, S L Gupta



1. Target-setting

Sales targets are fixed on the basis of past experience, time period and
brand positioning in the market. The targets should be fixed in such a manner
that they are achievable.

3. Sales Forecasting

Sales forecasts must change as conditions change. Accuracy depends on
meticulous planning and dynamic strategies.




Sales Management — Formulation of Sales Strategy
The following are key decision areas in sales management which are particularly
relevant to strategy formulation:
 Determining the size of the sales force
 Decision regarding type and quality of sales force required
 Designing the sales organisation
 Territory designing
 Recruitment and training procedures
 Task allocation
 Compensation of sales force
 Performance appraisal and control system
 Feedback mechanism to be adopted
 Managing channel relationships
 Coordination with marketing departments. Copyright © 2010, S L Gupta



Different Sales Strategies

Relationship Strategy

 In this strategy, a major key to success in selling is the ability to establish
working relationships with customers in which mutual support, trust and goals are
nurtured over time.

 The sales force that builds effective relationships with the customer and
provides valuable service are usually high performers and top achievers.

Cont….



A Selling Partner
P - Prepares strategically for a long-term, high-quality relationship that
solves customer’s problems.
A - Asks questions to get on the customer’s agenda.
R - Restates customer needs with confirmation questions.
T - Teams with support people to provide the customer with solutions.
N - Negotiates double-win solutions with joint decision making.
E - Exceeds customer expectations whenever possible.
R - Re-examines the ongoing quality of the relationship frequently.
In this model, a customer is treated as a partner. Therefore, maintaining a good
relationship with the customer is important.
Cont….



The Double-Win Strategy

 In this strategy, both the customer and the salesperson come out of the sale
with a sense of satisfaction. The salesperson not only obtains the order but
sets the stage for a long-term relationship, repeat business and future referrals.

 They both come out of the sale feeling satisfied, knowing that neither has
taken advantage of the other and that both have profited, personally and
professionally, from the transaction.

 However, some salespeople have still not accepted the merits of the win-win
approach. They have adopted a win-lose approach which means that the
salesperson wins at the buyer’s expense.

Cont….



Win – Lose approach vs. Win – Win attitude
The starting point to the development of a double-win philosophy is to compare
the behaviour of persons who have adopted the win-lose approach with that of
persons who have adopted the win-win approach (Figure).
Double-Win Strategy

Win - Lose People Win - Win People
See a problem Help others solve their problem
Fix the blame Fix what caused the problem
Let life happen to them Make life a joyous happening for others
and themselves
Live in the past Learn from the past, live in the present
and set goals for the future
Make promises they never keep Make commitments to themselves and
to others and keep both of them Cont….



Instant Service
 It is in this context of providing almost “instant service” to the customer that
the concept of “supply chain management” has caught the imagination of
managements the world over.
 No matter how efficiently and effectively goods/services are produced, if they
cannot be delivered to the customer in the quickest possible time, all efforts
made earlier are in vain, particularly in the context of very short product life
cycle – counted in months rather than years.
 As depicted in Figure below, a combination of effective process plus supply
chain management is what is required to cope with the challenges of the
international market-place.
 One cannot survive in a highly competitive market without conforming to the
so called Q-C-D triangle – Highest Quality, Lowest Cost and Least Delivery
times. Cont….



Simplified Model for Ensuring Customer Delight

After sales service
Unique selling SUPPLY CHAIN
propositioning/brand management
equity

Exceeding customer
Customer expectations
Delight
On time delivery

Competitive price PROCESS
management
Reliability of product
or service
Novelty/uniqueness
of product/service

leading to customer
loyalty and lasting Cont….
relationship Copyright © 2010, S L Gupta



Hard Sell Versus Soft Sell Strategy

Strategies for Identifying Customers

Hard Sell Soft Sell
Concern for self Concern for customer
Canned presentation Questions for discussion
Talking Listening
Pushing product Providing buying opportunities
Presenting features Presenting benefits
Advocating without acknowledging Acknowledging needs

Cont….



Product-centered Selling and Client-centered Selling

Product-centred Selling Client-centred Selling
1. Seller puts in efforts for research and 1. Seller puts in efforts on research and
development of product. development of relationship with clients.
2. Product centred selling emphasises 2. Client centred selling emphasises
knowledge of product. knowledge of client.
3. Selling strategies and tactics tend to be 3. Strategies and tactics tend to be directed
most influenced by past performances of more to considerations of future growth and
products and competition and present developments in the client’s world.
situations.
4. Representative seeks to be accepted as a 4. Representative strives to raise client’s
reliable, credible source of information and expectations of personal excellence.
service.




Selling Process
 The selling process is defined as a process by which a salesperson identifies
and locates the prospects, separates the prospects from the suspects
approaches them and makes a sales presentation, handles their objections.
He also follows up the existing customers to identify further sales leads and
measures the success and customer satisfaction level of the current products
and service offerings.
 Selling concept refers to the exchange of goods or services for an amount of
money or its equivalent in kind. Selling helps an organization achieve its
organizational goals. Thus, managing sales in an organization is a critical
activity. A sales manager needs to ensure that the salesman are motivated
to give their best performance.
 The sales team continuously look out the changes taking place in the
external environment regarding competitors, customers, government policy
and other regulatory agencies, advances in technology, and industry trends.
This provides the sales personnel a vital information regarding trends in product
sales, product development, and budgets. Cont…. Copyright © 2010, S L Gupta



 The economic slowdown is receding and budgets of companies are
increasingly receptive to alternative direct marketing tools to sell their products.
 Telemarketing (TM), that is marketing products and services on the
telephone, a direct marketing tool, which has touched a high in the last three
years.
 Apart from professional TM service outfits, many companies, including
MNCs, have set up their in-house TM cells.
 A TM outfit works through a well networked team of trained telemarketers
who make calls to potential clients and customers and establish direct contact
with them. The key lies in convincing the customer about the value of the
product or service and fixing up an appointment.
 Direct customer marketing system allows customers complete flexibility to
purchase our products. Orders can be placed via the Internet, over the phone,
by mail, through our catalogue or through the company personnel.”




Mail Order Sales

 Mail order houses are retail trading organisations engaged in the mail order
business.

 This is also known as carrying on business through post or mail. In this
method, customers do not visit the seller’s business premises, nor do they
make a personal examination of the goods before they are purchased. In this
system, orders are received from customers by post and the goods are
dispatched usually by VPP (Value Payable Parcel) or registered post.

Cont….



In case of the mail order business, the selling function is performed without the
intervention of the personal salesman.

 The goods should be known for their utility so that there is no need of
convincing prospective buyers about their usefulness.

 They must fetch a sufficient price to have a wide profit margin.

 They must command wide demand.

 They must not be easily perishable.

 They should be available in large quantities throughout the year.

Cont….



Sales through Large Scale Fixed Shop Retailers
Concentration of population in urban areas, increasing flow of manufactured
goods and improved methods of organising business have led to the expansion of
retail business. This expansion was effected in different ways, giving rise to
different types of retail establishments, which operate on a large scale. More
prominent among them are the following:
 Departmental stores
 Chain stores
 Mail order houses
 Hire purchase shops
 Super markets
 Fixed price shops
 Cooperative stores Cont….



Sales through Wholesalers and Retailers

Wholesalers perform a number of functions in the marketing of goods as listed
below

 Assembling and buying

 Storing or warehousing

 Transporting

 Financing

 Risk-bearing

 Grading, packing and packaging
Cont….
 Providing market information.



In the process of acting as a link between the wholesaler and the consumer, a
retailer performs many functions. The more important of them are given below:

 Buying and assembling

 Warehousing or storing

 Selling

 Grading and packing

 Financing

 Supply of market information

 Advertising.
Cont….



Direct Selling

 Direct selling identifies the unfulfilled needs of ordinary customers.

 Direct marketing companies have an advantage over conventional marketers
in that the relationship between the company and the customer starts
building even before a sale is made.

Lessons From Direct Selling

 THE STRATEGY: Eureka Forbes structures its demos according to the time
at the customer’s disposal.

 The Lesson: Keep the process flexible enough to accommodate individual
needs. Cont….



How to Add Value Through Direct Selling

Create direct Make Choose suitable Ensure product
Identify the Close deal
selling appointment time for demo Performance
customer quickly
process with customer and pitch at demo

Follow up sale
with prompt
service

Ensure
increase in
Is the Is salesman customer value
process clearly empowered to be
structured? flexible?
Yes Yes

No Yes
Cont….



 THE STRATEGY: Modi Telstra uses a clearly structured sales call process to
market its cell phone services.

 THE LESSON: Simplify the process of negotiation to save the customer’s
time.

 THE STRATEGY: Oriflame uses multilevel marketing to enlist direct sales
agents from its customer base.

 THE LESSON: Use your customer to sell your product to other customers.

 THE STRATEGY: INDAL empowers its sales force to take pricing decisions
on the spot when closing sales.

 THE LESSON: Ensure that your direct seller can conclude a deal
immediately.



National Sales Manager
In carrying out these responsibilities, sales mangers do the following things:
3. Prepare sales plans and budgets
4. Set sales force goals and objectives
5. Estimate demand and forecast sales
6. Determine the size and structure of the sales force organization
7. Recruit, select and train sales people
8. Design sales territories, set sales quotas and define performance standards
9. Compensate, motivate and lead the sales force
10. Conduct sales volume, cost and profit analysis
11. Evaluate sales force performance
12. Monitor the ethical and social conduct of the sales force.
Cont….



Sales Manager

Regional Manager Regional Manager Regional Manager Regional Manager Regional Manager
(North) (South) (East) (West) (Staff)

BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM

Field Staff Field Staff Field Staff Field Staff Field Staff

Cont….



Stand Points of Sales Representative

The stand points of sales representatives and the managers are as follows:

3. To protect drastic fluctuations in income so that regular monthly expenses for
home mortgage, food and utilities can be paid/balanced without hardship.

4. Expenses in direct relations to the amount of effort

5. Earnings to be equitable in terms of experience, ability, cost of living.

Cont….



Organization uses two types of compensations:

2. Financial

3. Non-Financial

Financial includes compensation, salary, incentives and fringe benefits.

Non-financial includes motivation and its implications to sales management.

But monetary compensation is one of the most direct and least ambiguous ways
of communicating to sales people about their performance.




Reasons for Providing Financial Compensation
The compensation plan is undoubtedly to reward the salesman for his
performance. The plan includes.

3. The plan should provide a regular income at least at minimum level. In
addition to this regular income, it should provide adequate incentive to induce
minimum performance from the salesman.

4. The plan should be simple and easy to understand for the salesman.

5. It should be economical and should induce competition amongst salesman.

6. It should be fair to both the sales force and management.




Methods of Remuneration
The sales force can be remunerated in the following ways:

3. A straight salary

4. A straight commission on sales

5. Salary and commission on sales

6. Salary and commission on sales above a certain amount

7. Salary and different rate of commission on varying totals or for different types
of goods

8. Salary and share in the profits




Expenses Accounts
The major sales expenses accounts are categorized as follows:
3. Salary accounts
4. Commission accounts
5. Bonuses
6. Meals and entertainment
7. Air travel
8. Automobiles rentals
9. Lodging
10. Travel accounts
11. Tour expenses accounts (Advance accounts)
12. Communication and services expenses accounts. Copyright © 2010, S L Gupta



Fringe Benefits
Types of fringe benefits are:
3. Company Car
4. Supplemental life insurance and medical insurance
5. Tax-return preparation
6. Personal tax and financial planning
7. Low or no interest loans
8. Deferred compensation
9. Supplemental retirement benefits
10. Air travel and First class A.C. for Train Travel
11. Relocation allowance
Cont….

12. Stationary facilities Copyright © 2010, S L Gupta



1. Laundry benefits, while on the tour

2. Special perquisites for outstanding performance by getting travel prizes
recognition for outstanding performance

3. Medical expenses

4. Special business associations membership

5. Exclusive developmental programs by IIM, Ahmedabad, by Shiv Khera,
etc.



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