Concepts of sales management

CONCEPT OF SALES MANAGEMENT

1 | D e b a y a n D u t t a

Sales Management

Sales management is a business discipline which is focussed on the practical application of sales

techniques and management of a firm’s sales operations. It is an important business function as net

sales through sale of products and services and resulting profit drives most commercial business.

Marketing Approaches

Marketing Strategy deals with company orientation towards market place. It deals with mainly 4

concepts.

1. Production Concept: The idea that the consumers will favour products those are available

and highly affordable. Example Lenovo

2. Product Concept: The idea that the consumers will favour products that offers most in

quality performance and innovative features.

3. Selling Concept: The idea that the consumers will not buy enough of the firm’s products

unless it undertakes a large scale selling and promotion effort. Example insurance

4. Marketing Concept: The marketing concept holds that achieving organizational goals

depends on knowing the needs and wants of target markets and delivering the desired

satisfactions better than the competitors do.

Marketing Vs Sales

Sales as a process implies exchanging the products or services in exchange for money in such a

manner that what you get from it is more than what you put into it. In other words, difference

between the realized sales price and the cost of manufacturing is the profit for the organisation from

sales.

Marketing on the other hand includes understanding the value proposition in the minds of the

customer and designing products and services accordingly.

Coordinating Marketing and Sales

Ideally the sales force and the firm’s other marketing functions should work together closely to

jointly create value for both customers and the company.

Unfortunately however some companies still treat marketing and sales as separate functions. When

this happens often the two separated functions don’t get along well.

When things go wrong, the marketers (marketing planners, brand managers and researchers) blame

the sales force for its poor execution of an otherwise splendid strategy. In return the sales team

Marketing Strategy

Production Concepts

Product Concept

Selling Concept

Marketing Concept



blames the marketers for being out of touch for what really going on with the customers. The

marketers sometimes fee that the sales people have their “feet stuck in the mud”, whereas

salespeople feel that the marketers have their “heads stuck in the clouds”.

A company can take several actions to help brings its marketing and sales functions closer together.

At the most basic level it can increase communication between the two groups by arranging joint

meetings and creating joint assignment.

Fig: 2.1

Components of Marketing Mix

Fig: 2.2

Profits through customer

satisfaction

Integrated Marketing

Customer Needs Market

Profits through sales

volume

Selling and Promoting

Existing Products

Factory

Marketing Mix

Product Price Promotion

Advertising Public

Relations

Personal Selling

Sales Promotion

Place

Starting

Point Focus Means Ends

The selling concept

The marketing

concept

SALES MANAGEMENT



Personal Selling

Personal Selling consists of interpersonal interactions with customers and prospects to make sales

and maintain customer relationships. Personal selling is the interpersonal arm of the promotion mix.

A company’s sales people create and communicate customer value

through personal interaction with customers.

Example:

One of the oldest examples of personal selling is LIC.

NATURE OF PERSONAL SELLING

Personal Selling is one of the oldest professions in the world. The people who do the selling go by

many names: salespeople, sales representatives, agents, sales engineers, sales consultants etc.

People may hold many stereotypes of sales people – including some unfavourable one. However

modern salespeople are a far cry from these unfortunate

stereotypes. Today most sales people are well educated, well

trained professionals who add value for customers and maintain

long term customer relationships. They listen to their customers,

assess customer needs, and organize the company’s efforts to

solve the customer problems.

Robert Louis Stevenson once noted that “everyone lives by selling

something”. Sales are longer the avenue of choice for washouts. In

today’s hypermarkets, “buying is not about transactions

anymore”.

The term salesperson covers a wide range of positions. At one

extreme a salesperson might be largely an order taker, (ex: retail

store person standing behind the counter) at the other extreme

are order getters, whose positions demand creative selling and

relationship building.

ROLE OF SALES FORCE

The sales force serves as a critical link between a company and its customers. In many cases the

salespeople serves both masters – the seller and the buyer. First, they represent the company to the

customers at the same time they represent customers to the company.

In fact to many customers the salesperson is the company – the only tangible manifestation of the

company they see. Hence customers become loyal to sales people as well as to the company and the

product they represent. This concept of “salesperson owned loyalty” lends even more importance to

the salesperson’s customer relationship building abilities.



Managing Sales Force

The definition of sales force management is the analysis, planning, implementation and control of

sales force activities.

There are broadly 6 sales force activities …

Fig: 2.3

Sales Force Structure

A company can divide sales responsibilities along any of several lines. There are broadly 4 sales force

structures

Territorial Sales Force Structure: A sales force organization that assigns each salesperson to

an exclusive geographic territory in which the salesperson sales the company’s full line.

Product Sales Force Structure: A sales force organization under which the salespeople

specialize in selling only a portion of the company’s product lines. Ex: GE

Customer Sales Force Structure: A sales force organization under which salespeople

specialize in selling only to certain customers or industries. Ex: Sony has a separate sales

force structure to handle large organized retailers like E-Zone and Croma

Complex Sales Force Structure: When a company sells a wide variety of products to many

types of customers over a broad geographic area, it often combines several types of sales

force structure. Salespeople can be specialized by customer and territory, by product and

territory, by product and customer, or by territory, product and customer. No single

structure is best for all companies and situations. Each company select a sales force

structure that best serves the needs of its customers and fits its overall marketing strategy.

Sales management must also decide who will be involved in the selling effort and how various sales

support people will work together.

The company may have an outside sales force (or field sales force), an inside sales force, or both.

Outside Salespeople travel to call on customers in field. Inside Salespeople conduct business from

their offices via telephone, internet, or visits from buyers.

As products become more complex, and as customers grow larger and more demanding, a single

salesperson simply can’t handle all of a large customer’s needs. Instead most companies now use

team selling to service large, complex accounts. Such teams might include experts from any area or

level of the selling firm – sales, marketing, technical and support services, R&D, engineering,

operations, finance and others.

Designing sales force

strategy

Recruiting and selecting

salespeople

Training Salespeople

Compensating Salespeople

Sueprvising Salespeople

Evaluating Salespeople

Major Steps in Sales Force Management



Example: IBM, Xerox, P&G have used the team selling concept for a long time. P&G sales rep are

organized into “customer business development (CBD) teams”. Each CBD team is assigned to a major

P&G customer, such as Wal-Mart, Safeway, or CVS Pharmacy. These teams

consists of customer business development manager, several account

executives (each responsible for specific category of P&G products), and

specialist in marketing strategy, operations, information systems, logistics,

and finance. This organization places the focus on serving the complete

needs of each important customer.

Recruiting and selecting Salespeople

At the heart of any successful sales force operation is the recruitment and selection of good

salespeople. In typical sales force, the top 30% of the salespeople might bring in 60% of the sales.

What sets great salespeople apart from the rest?

In an effort to profile top sales performers, Gallup

Management Consulting Group, interviewed hundreds

and thousands of salespeople. Its research suggests that

the best salespeople possess four key talents: intrinsic

motivation, disciplined work style, the ability to close

sale, and perhaps the most important, the ability to build

relationships with customers.

Training Salespeople

New salespeople may spend anywhere from a week or months to a year or more in training. Then

most companies provide continuing sales training via seminars, sales meetings, and Web e-learning

throughout the sales person’s career. In all U.S. companies spend more than $ 7 billion annually on

training salespeople.

Training programs have several goals. First the salespeople need to know about customers and how

to build relationships with them. So the training program must teach them about different types of

customers and their needs, buying motives, and buying habits. And it must teach them how to sell

effectively and train them in the basics of the selling process. Salespeople also need to know and

identify with the company, its products and its competitors. So an effective training program teaches

them about the company’s objectives, organization, and chief products and markets, and about the

strategies of major competitors.

Compensating Salespeople

To attract good salespeople, a company must have an appealing compensation plan. Compensation

is made up of several elements – a fixed amount, a variable amount, expenses, and fringe benefits.

The fixed amount, usually a salary, gives the salesperson some stable income. The variable amount,

which might be commissions or bonuses based on sales performance, rewards the salesperson for

greater effort and success.



Active Selling

10% Prospectin

g 10%

Problem Solving

14% Personal

Downtime 17%

Travel Time 18%

Administration 31%

How salespeople spend their time

Management must decide what mix of these compensation elements makes the most sense for each

sales job. An American study of sales force compensation showed that the average salesperson’s pay

consists of about 67% salary and 33% incentive pay.

Fig: 2.4

Supervising and Motivating Salespeople

The goal of supervision is to help salespeople “work smart” by doing the right things in the right

ways. The goal of motivation is to encourage salespeople to “work hard” and energetically towards

sales force goals.

Companies vary in how closely they supervise

their salespeople. Many help their salespeople

to identify their target customers and set call

norms. Some may also specify how much time

the sale force should spend prospecting for

new accounts and set other time management

priorities.

One tool is weekly, monthly, annual Call Plan that shows

which customers and prospects to call on and which

activities to carry out. Another tool is time and duty analysis. Fig: 2.5

On an average the active selling time accounts for only 10% of the total working time.

Fixed

Component

Variable

Component



Beyond directing salespeople, sales manager must also motivate them. Selling can also be

frustrating. Salespeople often work alone and they must sometimes travel away from home. They

may face aggressive competing salespeople and difficult customers. Therefore salespeople often

need special encouragement to do their best.

Management can boost sales force morale and performance

through its Organizational Climate, Sales Quotas, and Positive

Incentives. Organizational Climate describes the feeling that

salespeople have about their opportunities, value, and rewards for a

good performance. Sales quota is a standard that states the amount

a salesperson should sell and how sales should be divided among the

company’s products. Companies also sponsor sales contests to spur

sales force to make a selling effort above what would normally be

expected.

Evaluating sales force and salespeople performance

Management gets information about its salespeople in several ways. The most important source is

sales report, including weekly or monthly work plans and longer term territory marketing plans.

Using various sales force reports and other information, sales

management evaluates members of the sales force. It evaluates

salespeople on their ability to “Plan their work and work their

plan”. Formal evaluation forces management to develop and

communicate clear standards for judging performance. It also

provides salespeople with constructive feedback and motivates

them to perform well.

On a broader level, management should evaluate the

performance of the sales force as a whole. Is the sales force accomplishing its customer relationship,

sales, and profit objectives? Is it working well with other areas of marketing? Are sales force costs in

line with the outcomes? As with other marketing activities, the company wants to measure its return

on sales investment.



The Personal Selling Process

The selling process consists of several steps that the salesperson must master. These steps focus on

the goal of getting new customers and getting orders from them.

STEPS IN THE SELLING PROCESS

The selling process consists of 7 steps: Prospecting and qualifying, pre-approach, approach,

presentation and demonstration, handling objections, closing and follow-up.

Fig: 2.6

Prospecting and qualifying: The first step in the selling process is prospecting - Identifying

qualified potential customers. The salesperson often approach many prospects to get just a

few sales. The best source is referrals. Salespeople can ask the current customer for referrals

and cultivate other referral sources, such as noncompeting salespeople, bankers, dealers

etc. They can also search for prospects in directories or on the Web and track down these

leads using the telephone and direct mails. Salespeople also need to know how to qualify

leads – that is, how to identify the good ones and screen out the poor ones. This can be

done by looking at their financial ability, volume of business, special needs, location, and

possibility of growth.

Preapproach: Before calling on a prospect, the salesperson should learn as much as possible

about the prospective customer. Preapproach begins with good research. The salesperson

can consult standard industry and online sources, acquaintances, and others to learn about

the prospective customer. Then the salesperson must apply research to develop a customer

strategy. “You need to translate data into something useful for your clients”.

Approach: During the approach step the salesperson should know how to meet and greet

the buyer and get the relationship off to a good start. The steps involve the salesperson’s

appearance, the opening lines and the follow-up remarks.

Presentation and demonstration: During this stage the salesperson

tells the “value story” to the buyer, showing how the company’s offer

solves the customer’s problem. The customer-solution approach fits

best with today’s relationship marketing focus. The solution approach

calls for a good listening and problem solving skills. “God gave us two

Prospecting and

qualifying

Pre approach

Approach

Presentation and

demonstration

Handling objections

Closing Follow-up



ears and one mouth, to use in that proportion”.

The quality that the buyer dislike most in salespeople include being pushy, late, deceitful,

and unprepared and disorganized. The qualities that they value the most include good

listening, empathy, honesty, dependability, thoroughness, and follow-through.

The goal of a sales presentation is to deliver a clear, concise, and consistent message to your

prospects about your product and your brand, as well as why you are better than the

competitors.

Handling Objections: The step in the sales process in which the salesperson seeks out,

clarifies, and overcome customer objections to buying.

Closing: The step in the selling process in which the

salesperson asks the customer for an order. Some

salesperson may lack confidence, feel guilty about asking

for the order, or fail to recognize the right moment to

close the sale. Salesperson should know how to recognize

the closing signals from the buyer, including physical

actions, comments and questions. Ex: The customer might

sit forward and nod approvingly or ask about prices and credit terms.

Follow-up: The last step in sales process in which the salesperson follows up after the sale to

ensure customer satisfaction and repeat business.



Some Related Topics

Sales Force Automation

In today’s competitive world managing salespeople is as challenging as managing customers.

Companies face high attrition rate due to more opportunities for salespeople in the industry. Some

companies have 100% attrition within a year. What would happen with the customer if the sales

representative leaves the company and the customer is handled by other sales representatives?

Many problems arise when the customer faces a new sales team. Customers will have to state all the

requirements, budgets, features, and payment details to the new sales team, a process which can be

time consuming and creates dissatisfaction among customers.

This scenario demands a computer application which will not just maintain the customer

information in the sales representative computer, but can also report the latest information to the

sales manager in the company. This is where the implementation of sales force automation (SFA)

software is required.

Fig: 2.7

Various advantages of SFA include:

Centralized database for retrieval and updating customer information

Information sharing

Company has access to all latest information about customers

Sales team can be more responsible in entering right data, as company can track when the

data was updated and by whom.

Data can be accessed anywhere irrespective of the location either using wired networks like

LAN, WAN or wireless networks like WiFi.

Sales team can work from home as the data can be accessed anywhere



Since all customers’ data is stored in one place, it would be easy to know the efficiency of

the sales teams, status of the targets etc.

Due to centralized data, many departments can access the customer data so multiple sales

to the same customer by different teams can be avoided thereby using the time more

efficiently.

Some disadvantages

Complex scree may not be user friendly for all sales representative

Require continuous management and back-up facilities if data crashes.

SFA applications may be costly for the company where investments need to be justified

implementing one.

Customer Relationship Management (CRM)

CRM deals with automating all customer related data related to the sales, marketing, customer care,

technical, finance, and human resource departments. CRM is defined in the book “Sales Force

Management” by Johnston and Marshall (2009) as “any application or initiative designed to help

your company optimize interactions with customers, suppliers, or prospects via one or more touch

points such as call centre, sales person, distributor, store, branch office, web or e-mail for the

purpose of acquiring, retaining, or cross selling”.

CRM aims at putting the customer at the centre of the business process. In a client meeting you see

not only the sales representative but also may see members from marketing, finance, technical

departments participating. A system is required to be in place where all these business operations

need to be aligned. This is where the CRM applications come into picture.

CRM application for the sales department provides the following benefits:

Improved sales planning and management

Automating the lead system

Managing sales opportunities effectively

Streamlining account management

Boosting sales productivity

Enhancing sales pipeline management

Simplifying workflow management

Analytics for improved decision making



Value Merchants versus Value Spendthrifts

It’s the company’s job to create a compelling value proposition for customers. Then, it’s the

salesperson’s job to build profitable customer relationships based on that value proposition.

Unfortunately in the heat of closing sales, salespeople too often take the easy way out by cutting

prices rather than selling value. It’s usually much easier to win a sale by matching competitor’s lower

prices than by working to convince a customer that your product’s greater value justifies its higher

price.

Value Spendthrifts Value Merchants Prefer to give quick price concessions to

close deals and move on to other business

Give price concessions without changes in the market offerings

Routinely trade more business for lower prices.

Give services away for free to close a deal

Sell primarily on price comparisons with competitors

Complain to the company that its prices are too high

Believe management pursues a volume driven strategy.

Tell the company that customers are only interested in price.

Make token unsupported claims about superior value to the customers

Focus on revenue and volume components of their compensation plan.

“Hang Tough” in the negotiations to gain better profitability out of each deal based on customer value

Only give price concessions in exchange for cost-saving reductions in the market offering

Routinely gain more business at the same price.

Strategically employ services to generate additional business

Sell primarily on cost of ownership comparisons versus competitors

Explain to the company that they need more proof of superior value

Believe management pursues a value driven strategy

Provide customer’s insights to improve the value of company’s offerings

Demonstrate and document claims about superior value in monetary terms to customers

Concentrate on gross margins and profitability component of their compensation plan.



WORKBOOK

1. Briefly describe the activities involved in the sales force management

2. List the 10 most important qualities of a professional sales person

3. Discuss the personal selling process

4. Describe with example how can Sales Force Automation and Customer Relationship

Management help companies?

5. Difference between Value Spendthrifts and Value Merchants

GROUP ACTIVITY

Work in a group of 5 to describe the stages in the selling process for a wealth management firm

selling Financial Plans to the IT professionals of a MNC. Role play the actual selling process, from

approach to close, with 3 team members acting as a sales team (Relationship Manager, Investment

Advisor and Service Manager). The other 2 member of the team should act as a customer and raise

at least 3 objections.