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Page 1: Retail Sales and Customer Servicesjnujprdistance.com/assets/lms/LMS JNU/MBA/MBA... · V/JNU OLE 6.5 Customer Segmentation .....113

Retail Sales and Customer Services

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This book is a part of the course by Jaipur National University, Jaipur.This book contains the course content for Retail Sales and Customer Services.

JNU, JaipurFirst Edition 2013

The content in the book is copyright of JNU. All rights reserved.No part of the content may in any form or by any electronic, mechanical, photocopying, recording, or any other means be reproduced, stored in a retrieval system or be broadcast or transmitted without the prior permission of the publisher.

JNU makes reasonable endeavours to ensure content is current and accurate. JNU reserves the right to alter the content whenever the need arises, and to vary it at any time without prior notice.

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Index

ContentI. ...................................................................... II

List of FiguresII. ........................................................ VII

List of TablesIII. ........................................................VIII

AbbreviationsIV. .........................................................IX

Case StudyV. .............................................................. 153

BibliographyVI. ......................................................... 160

Self Assessment AnswersVII. ................................... 163

Book at a Glance

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Contents

Chapter I ....................................................................................................................................................... 1Introduction to Sales Management ............................................................................................................ 1Aim ................................................................................................................................................................ 1Objectives ...................................................................................................................................................... 1Learning outcome .......................................................................................................................................... 11.1 Introduction .............................................................................................................................................. 21.2 Objectives of Sales Management ............................................................................................................. 31.3 Sales Organisation an Overview .............................................................................................................. 3 1.3.1 Co-ordination of Sales with other Departments ...................................................................... 4 1.3.2 Purpose of Sales Organisation ................................................................................................. 4 1.3.3 Setting up a Sales Organisation ............................................................................................... 5 1.3.4 Types of Sales Organisation ..................................................................................................... 51.4 Sales Related Marketing Policies ............................................................................................................. 81.5 Importance of Salesmanship .................................................................................................................. 10 1.5.1 Types of Salesman ................................................................................................................. 10 1.5.2 Qualities of an Ideal Salesman ................................................................................................11Summary .................................................................................................................................................... 12References ................................................................................................................................................... 12Recommended Reading ............................................................................................................................. 12Self Assessment ........................................................................................................................................... 13

Chapter II ................................................................................................................................................... 15Sales Force Management ........................................................................................................................... 15Aim .............................................................................................................................................................. 15Objectives .................................................................................................................................................... 15Learning outcome ........................................................................................................................................ 152.1 Introduction ............................................................................................................................................ 162.2 Sales Force Management: Strategy Imperative ..................................................................................... 16 2.2.1 Determining the Size of Sales Force ...................................................................................... 16 2.2.2 Sales Policy ............................................................................................................................ 162.3 Sales Job Analysis .................................................................................................................................. 202.4 Recruitment ............................................................................................................................................ 222.5 Selection and Selection Tools ................................................................................................................ 23 2.5.1 Interviews ............................................................................................................................... 24 2.5.2 Selection Tests ....................................................................................................................... 252.6 Training .................................................................................................................................................. 25 2.6.1 Designing and Conducting the Training Program ................................................................. 29 2.6.2 Trainer’s Ability ..................................................................................................................... 30 2.6.3 Methods of Training ............................................................................................................... 312.7 Types of Compensation .......................................................................................................................... 32 2.7.1 Factors and Criteria for Designing a Compensation Package .............................................. 332.8 Motivation of Sales Force ...................................................................................................................... 35 2.8.1 Monitoring of Sales Force ..................................................................................................... 372.9 Sales Report and their Analysis ............................................................................................................ 382.10 Performance Appraisal and Evaluation ................................................................................................ 39Summary .................................................................................................................................................... 41References ................................................................................................................................................... 41Recommended Reading ............................................................................................................................. 41Self Assessment ........................................................................................................................................... 42

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Chapter III .................................................................................................................................................. 44Sales Planning and Organisation .............................................................................................................. 44Aim ............................................................................................................................................................. 44Objectives .................................................................................................................................................... 44Learning outcome ........................................................................................................................................ 443.1 Introduction ............................................................................................................................................ 453.2 Components of Sales Planning .............................................................................................................. 463.3 Product wise Sales Planning .................................................................................................................. 463.4 Sales Territory Management .................................................................................................................. 47 3.4.1 Need of Sales Territories ........................................................................................................ 47 3.4.2 Steps in Territory Planning .................................................................................................... 48 3.4.3 Approaches to Territory Design ............................................................................................. 51 3.4.4 Territory Coverage Planning .................................................................................................. 51 3.4.5 Sales Territory Expenses Planning ......................................................................................... 533.5 Types of Sales Planning ......................................................................................................................... 53 3.5.1 Sales Plan on the Basis of Market Area ................................................................................. 53 3.5.2 Sales Plan on the Basis of Selling Functions ......................................................................... 53 3.5.3 Sales Plan on the Basis of Types of Customers ..................................................................... 53 3.5.4 Sales Plan on the Basis of Types of Products ........................................................................ 53 3.5.5 Sales Plan on the Basis of Time Period ................................................................................. 543.6 Control Systems ..................................................................................................................................... 543.7 Sales Programme Planning and Productivity ......................................................................................... 54 3.7.1 Improving Territory Productivity ........................................................................................... 54 3.7.2 Sales Programme Planning .................................................................................................... 55 3.7.3 Planning Sales Manager’s Itinerary ....................................................................................... 553.8 Need for Sales Organisation .................................................................................................................. 563.9 Developing a Sales Organisation ........................................................................................................... 563.10 Basic Types of Organisational Structure .............................................................................................. 58 3.10.1 Line Sales Organisation ....................................................................................................... 58 3.10.2 Line and Staff Sales Organisation ........................................................................................ 60 3.10.3 Committee Sales Organisation ............................................................................................. 61 3.10.4 Functional Sales Organisation ............................................................................................. 613.11 Specialisation in a Field Sales Organisation ........................................................................................ 62 3.11.1 Geographic Specialisation ................................................................................................... 62 3.11.2 Product Specialisation .......................................................................................................... 63 3.11.3 Customer Specialisation ....................................................................................................... 643.12 Role of the Sales Executive ................................................................................................................. 65 3.12.1 Functions of the Sales Manager ........................................................................................... 65 3.12.2 Sales Manager as a Coordinator .......................................................................................... 66Summary ..................................................................................................................................................... 68References ................................................................................................................................................... 68Recommended Reading ............................................................................................................................. 68Self Assessment ........................................................................................................................................... 69

Chapter IV .................................................................................................................................................. 71Sales: Forecasting, Quota, Budget and Control ...................................................................................... 71Aim .............................................................................................................................................................. 71Objective ...................................................................................................................................................... 71Learning outcome ........................................................................................................................................ 714.1 Introduction ............................................................................................................................................ 724.2 Sales Forecasting : A Quick Recapitulation ........................................................................................... 73 4.2.1 Managing Sales Forecasts ...................................................................................................... 73 4.2.2 Forecast Differing .................................................................................................................. 73 4.2.3 Monitoring Sales Forecast ..................................................................................................... 744.3 Sales Quotas ........................................................................................................................................... 74

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4.3.1 Meaning and Importance ....................................................................................................... 74 4.3.2 Purpose of Sale Quota ............................................................................................................ 75 4.3.3 Types of Quota and Method for Setting the Quota ................................................................ 75 4.3.4 Attributes of a Good Sales Quota Plan .................................................................................. 774.4 Sales Budget ........................................................................................................................................... 77 4.4.1 Meaning of Sales Budget ....................................................................................................... 77 4.4.2 Purpose of Sales Budget ........................................................................................................ 77 4.4.3 Format of Budget ................................................................................................................... 78 4.4.4 Budgetary Process .................................................................................................................. 79 4.4.5 Flexibility Sales Budget ......................................................................................................... 79 4.4.6 Implementation and Feedback Mechanism .......................................................................... 804.5 Sales Control .......................................................................................................................................... 80 4.5.1 Purpose of Sales Control ........................................................................................................ 80 4.5.2 Sales Control System ............................................................................................................. 81 4.5.3 Methods of Sales Control ...................................................................................................... 81 4.5.4 Marketing Cost Analysis ........................................................................................................ 83Summary .................................................................................................................................................... 85References .................................................................................................................................................. 85Recommended Reading ............................................................................................................................. 85Self Assessment ........................................................................................................................................... 86

Chapter V .................................................................................................................................................... 88Sales Presentation and Selling Skills ........................................................................................................ 88Aim ............................................................................................................................................................. 88Objectives .................................................................................................................................................... 88Learning outcome ........................................................................................................................................ 885.1 Sales Presentation .................................................................................................................................. 895.2 Types of Sales Presentation .................................................................................................................... 895.3 Structure of Presentation ........................................................................................................................ 895.4 Planning the Presentation Strategy ........................................................................................................ 91 5.4.1 Define the Purpose ................................................................................................................. 91 5.4.2 Analysing the Audience ......................................................................................................... 91 5.4.3 Developing Message .............................................................................................................. 92 5.4.4 Determination of Presentation Method .................................................................................. 92 5.4.5 Deciding the Presentation Media ........................................................................................... 935.5 Selling Skills .......................................................................................................................................... 93 5.5.1 Essential Sales Skills ............................................................................................................. 935.6 Presentation Skills .................................................................................................................................. 945.7 Negotiation Skills................................................................................................................................. 102 5.7.1 Negotiation Strategies .......................................................................................................... 104 5.7.2 Principles of Negotiation ..................................................................................................... 105Summary ................................................................................................................................................... 106References ................................................................................................................................................ 106Recommended Reading ........................................................................................................................... 106Self Assessment ......................................................................................................................................... 107

Chapter VI ............................................................................................................................................... 109Introduction to Customer Service .......................................................................................................... 109Aim ............................................................................................................................................................ 109Objectives .................................................................................................................................................. 109Learning outcome ...................................................................................................................................... 1096.1 Introduction ...........................................................................................................................................1106.2 Understanding Retail Concepts .............................................................................................................1106.3 Retail Customer Behaviour and Role of Services in Retailing .............................................................1116.4 Types of Customers ...............................................................................................................................111

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6.5 Customer Segmentation ........................................................................................................................1136.6 Customer Service Principles .................................................................................................................1166.7 Stages of Consumer Decision Process ..................................................................................................118 6.7.1 Types of Consumer Decision Making Process .....................................................................1196.8 Factors Affecting Consumer Decision Making Process ..................................................................... 120Summary ................................................................................................................................................... 122References ................................................................................................................................................ 122Recommended Reading .......................................................................................................................... 122Self Assessment ......................................................................................................................................... 123

Chapter VII ............................................................................................................................................. 125Role of Customer Service Representative .............................................................................................. 125Aim ........................................................................................................................................................... 125Objectives .................................................................................................................................................. 125Learning outcome ...................................................................................................................................... 1257.1 Introduction ......................................................................................................................................... 1267.2 Role of CSR ......................................................................................................................................... 126 7.2.1 Role of CSR in Inbound Call centre .................................................................................... 127 7.2.2 Role of CSR in Outbound Call Centre ................................................................................. 1277.3 Essential Attributes of CSR ................................................................................................................. 1287.4 Customer Service over Phone .............................................................................................................. 129 7.4.1 Telephone Techniques .......................................................................................................... 130 7.4.2 Handling Dead Air on Calls ................................................................................................. 132 7.4.3 Structuring a Call ................................................................................................................. 132 7.4.4 Home Based Customer Service Representative ................................................................... 134Summary ................................................................................................................................................... 135References ................................................................................................................................................. 135Recommended Reading ........................................................................................................................... 135Self Assessment ......................................................................................................................................... 136

Chapter VIII ............................................................................................................................................ 138Customer Relationship Marketing (CRM) and Customer Retention ................................................. 138Aim ............................................................................................................................................................ 138Objectives .................................................................................................................................................. 138Learning outcome ...................................................................................................................................... 1388.1 Introduction to CRM ............................................................................................................................ 1398.2 Strategies of CRM in Retailing Industry ............................................................................................ 1408.3 CRM in Organised and Unorganised Retail Sector ............................................................................. 1428.4 Role of Employees in Maintaining Store Loyalty ............................................................................... 1448.5 Customer Retention ............................................................................................................................. 1458.6 Customer Switching ............................................................................................................................. 1458.7 Complaining and Service Recovery ..................................................................................................... 1468.8 Service Recovery Strategy ................................................................................................................... 1478.9 Service Guarantees ............................................................................................................................... 148Summary ................................................................................................................................................... 149References ................................................................................................................................................. 149Recommended Reading ........................................................................................................................... 149Self Assessment ......................................................................................................................................... 151

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List of Figures

Fig. 1.1 Hierarchy of objectives ..................................................................................................................... 3Fig. 1.2 Line sales organisations .................................................................................................................... 6Fig. 1.3 Functional sales organisation ............................................................................................................ 6Fig. 1.4 Geographic organisation ................................................................................................................... 7Fig. 1.5 Product organisation ......................................................................................................................... 7Fig. 1.6 Customer organisation ...................................................................................................................... 8Fig. 2.1 Activities involved in the managing the force ................................................................................ 21Fig. 2.2 A seven step selection system ......................................................................................................... 24Fig. 2.3 The training process ........................................................................................................................ 26Fig. 2.4 Compensation during stages of product life cycle .......................................................................... 34Fig. 3.1 The circle shape .............................................................................................................................. 48Fig. 3.2 The clover leaf shape ...................................................................................................................... 49Fig. 3.3 The wedge shape............................................................................................................................. 49Fig. 3.4 Suitable station of the sales person ................................................................................................. 50Fig. 3.5 Suitable station of the sales person ................................................................................................. 50Fig. 3.6 Process of developing a sales organisation ..................................................................................... 57Fig. 3.7 Line sales organisation ................................................................................................................... 59Fig. 3.8 Line and staff organisation ............................................................................................................. 60Fig. 3.9 Functional sales organisation .......................................................................................................... 62Fig. 3.10 Geographic specialisation of field sales organisation ................................................................... 62Fig. 3.11 Product specialisation of the field sales force ............................................................................... 63Fig. 3.12 Customer specialisation in sales organisation .............................................................................. 64Fig. 5.1 Audience Lack of Interest Reflected in Their Body Language ...................................................... 90Fig. 5.2 Communication process ................................................................................................................. 97Fig. 5.3 Levels of oral communication ...................................................................................................... 100Fig. 5.4 Negotiating continuum ................................................................................................................. 103Fig. 6.1 Classification of customers ............................................................................................................111Fig. 6.2 Steps in market segmentation ........................................................................................................113Fig. 6.3 Bases of segmentation ...................................................................................................................114Fig. 6.4 Psychographics segmentation ........................................................................................................115Fig. 6.5 Decision making process ...............................................................................................................118Fig. 6.6 Factors affecting consumer decision making process .................................................................. 120Fig. 6.7 Customer classification and preferences ...................................................................................... 121Fig. 7.1 Call structure ................................................................................................................................. 132Fig. 8.1 Four waves of marketing thoughts ............................................................................................... 139Fig. 8.2 CRM strategy Components .......................................................................................................... 141Fig. 8.3 Underlying logic of customer retention benefits to the organisation ........................................... 145

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List of Tables

Table 2.1 Basic responsibilities of a sales person ........................................................................................ 22Table 2.2 Job description: sales planning .................................................................................................... 27Table 2.3 Job description: make effective sales contract ............................................................................. 27Table 2.4 Job description: Motivate and train distributors .......................................................................... 28Table 2.5 Job description: provide after sales service .................................................................................. 28Table 2.6 Questions that need to be answered for running an effective refresher course ............................ 30Table 2.7 Compensation related to demographic characteristics ................................................................. 34Table 3.1 Company XYZ ............................................................................................................................. 46Table 3.2 Territory coverage plan ................................................................................................................ 52Table 3.3 Sales territory expenses planning ................................................................................................. 53Table 3.4 Functions of a sales manager ....................................................................................................... 66Table 4.1 Net profit quota ............................................................................................................................ 76Table 4.2 Budget variance ............................................................................................................................ 78Table 4.3 Format of budget .......................................................................................................................... 78Table 4.4 Sales analysis based on territory .................................................................................................. 81Table 4.5 north territory: sales by sales person ............................................................................................ 82Table 4.6 Salesperson: Gulani’s sales by product line ................................................................................. 82Table 4.7 Gulani’s customer break up .......................................................................................................... 83Table 5.1 Categories of questions ................................................................................................................ 91Table 5.2 Determination of presentation method ......................................................................................... 92Table 5.3 Some don'ts related to body language .......................................................................................... 95Table 5.4 Gestures ........................................................................................................................................ 95Table 5.5 Difference between selling and negotiations ............................................................................. 103Table 5.6 Steps of negotiations .................................................................................................................. 104Table 8.1 Difference between relationship and transactional marketing ................................................... 140

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Abbreviations

AMA - American Marketing AssociationAV - Audio VisualCRM - Customer Relationship Management / MarketingCSR - Customer Service RepresentativeHRD - Human Resource DevelopmentSR - Sales Representative

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Chapter I

Introduction to Sales Management

Aim

The aim of this chapter is to:

introduce the objectives of sales management•

describe the evolution of sales function•

explain the coordination of sales with other departments•

Objectives

The objectives of this chapter are to:

elucidate the purpose of sales organisation•

explicate setting of sales organisation•

enlist the types of sales organisation•

Learning outcome

At the end of this chapter, you will be able to:

understand the sales related marketing policies•

discuss the importance of salesmanship•

comprehen• d the qualities of an ideal salesman

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1.1 IntroductionSales function is one of the most crucial functions of an organisation. It is the principal, and often, the only revenue generating function in the organisation. In addition to helping an organisation achieve its business goals, the selling function performs various other roles such as enhancing knowledge pertaining to the internal and external environments, developing positive relationships with customers, suppliers and distributors, and negotiating with customerstosellthecompany’sproductsprofitably.

Sales Management refers to the variety of techniques used by retailers to increase store revenue through the front line sales team. It’s a proven fact that sales do increase when you implement proper sales management techniques. Sales management will help you make sense, not only of your direction, but also of your performance along the way and the things you can do to help ensure your success. Here are a few simple ideas to help you stay focused on the need to generate sales:

Set daily sales goals and track your progress. •Do hourly subtotal readings on your cash register. Share this sales performance with your staff and make sure •everyone knows what is still left to accomplish for the day.Start every day with a short meeting (5 minutes) focuses on sales and service. •Don’t send mixed messages to the staff that will confuse their priorities. •Constantly praise great service or a hard-earned sale. •Make stars of staff that excel at service and sales•

Evolution of sales functionPrior to the industrial revolution, organisations were small, and the production was limited, and meant for local market. Selling was thus not a complex activity. It was the owner who sold off what he produced. He was more concerned with manufacturing rather than selling. To achieve the organisational objectives, it was felt necessary to divorceownershipfrommanagement,givingbirthtocorporateformoforganisation.Thefirsttoemergeweretheseparatemanufacturingandfinancedepartments,followedbyselling.Thoughsellingasaseparatedepartmentdidhelp in mass selling in expanded markets, it still remained a problem as to how to communicate with these huge markets. Export and import also gave a boost to the emergence of wholesalers. The manufacturer’s sales department was thus far removed from the actual consumers. This made the scene complicated. In the meantime, manufacturer’s sales function added several other important activities such as promotion, marketing research, transportation, sales administration in the form of credit and collections. Sales function became an income-generating department for the organisation.

Definition of sales managementTheDefinitionCommitteeof theAmericanMarketingAssociation stated thatSalesManagementmeant: “Theplanning, 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.

Initially, sales management was equated with sales force management. As time rolled on, sales management became broader. Apart from the management of personal selling, it encompassed other marketing activities like advertising, sales promotion, marketing research, physical distribution, pricing, merchandising and so on. However, the comprehensive broad function later got labelled as marketing management. Sales management came to be definedbyAMA(AmericanMarketingAssociation)as:‘theplanning,directionandcontrolofpersonalequipping,assigning, routing, supervising, paying and personal sales force.’ Selling, including recruiting, selecting, motivating asthesetasks,applytotheSalesmanagement,accordingtotheabovedefinition,isthemanagementofthesalesforce. Sales management interfaces with other marketing functions while policies of these functions are being formulated. Different organisations have different type of needs for selling.

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1.2 Objectives of Sales ManagementSalesvolume,contributiontoprofitsandgrowtharethethreemajorobjectivesthesalesfunctionisexpectedtoachieve. Though these are broad corporate functions to be achieved by the top management, sales contribute a great deal in achieving them. Corporate objectives are communicated to the marketing department who in turn passes on the responsibility to the sales department.

Corporate Objectives

GrowthProfitabilitySales Volume

Marketing Management

Sales Management

Fig. 1.1 Hierarchy of objectives

Sales provide invaluable feedback to the higher management while achieving these objectives. Sales have to co-ordinate with the marketing department. Particularly promotional activities and sales do need harmonisation. Sales have to co-ordinate with market planning. Sales co-ordinate with distribution channels on introduction of products and later on. The buyers must be made aware where the products are available. Sales have to balance the interests of the trade and those of the manufacturer. Sales have to motivate the trade for joint promotional efforts. It is necessary to have the co-ordination of sales and overall marketing strategy. New product introduction rightly calls for a high degree of co-ordination between sales and marketing. It is necessary to be careful about inventory levels, sales plans, branch management, sales training and sales operation while a new product is being introduced. It is also necessary to co-ordinate with publicity, sales promotion and advertising of a new product.

1.3 Sales Organisation: An OverviewOwing to intense global competition, slow growth in markets and different customer expectations, sales •organisationshave to reengineer theirorganisationstructuresandstreamline theirprocesses.An inefficientorganisation structure can frustrate top managers as it may result in strategic plans going off track due to absence ofclearlydefinedresponsibilitiesandreportingrelationships.Developing customer-centric organisations, building strong relationships within and outside the organisation, •modifying the traditional top-down hierarchical structure and introducing cross-functional teams are some steps companiesaretakingtoimprovetheirefficiencyandprofitability.Theorganisational structure should fulfil the purpose forwhich it has beendesigned.The role of a sales•organisation is to achieve company objectives, streamline reporting relationships, facilitate effective coordination andcontrolanddevelopanefficientsalesforcestructuretoensureeffectivesellingstrategy.Designingthesalesorganisation plays a crucial role in a company’s overall success.

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Onemustconsidertheinfluenceofexternalandinternalfactorswhiledesigningasalesorganisation.External•factorsincludethemarketstargetedandthetechnologyprevailinginthetargetmarket.Internalfactorsinfluencingthe design of a sales organisation include the company objectives, the size of the sales force, core competence of the company, compensation system, reporting relationships, etc. Based on the span of control, authority, hierarchical levels and departmentalisation, four basic organisation structures are possible. These are formal and informal structure centralised and decentralised structure, vertical and horizontal structure and line and staff organisation structure. Toefficientlyservetheever-changingneedsofcustomersinthebestpossiblemanner,acompanycanhavea•product-based, geographic-based, customer-based or a combination-based sales force structure. The type of customers, the market size and its potential, the type of industry in which the company is operating, level of salesdesired,sizeofthesalesforceandthewidthanddepthoftheproductmixaresomefactorsthatinfluencethe decision on the type of sales force structure to be adopted. Sales culture plays an important role in the success of a sales organisation. Sales culture is a collective impression •of the values, attitudes and personality of top management in an organisation. It saturates down to the lower levelsofhierarchyovertime.Salesculturehasasignificantinfluenceonsalesforceactivitiesandattitudes.The various components that make up sales culture include symbols, language, ceremonies, rites and rituals, rolemodels,talesandstories,andvaluesandbeliefs.Thestrengthanddirectionorfitofthesalesculturealsoplay a crucial role in developing a sound sales organisation.Sales organisation is used to attain the qualitative and quantitative objectives of personal selling. These objectives •arerelatedtosalesvolume,profitabilityandmarketshare.Salesorganisationisusednotonlytoachievethepresent objectives, but also to attain a particular future position. Sales organisation is a second priority when a typicalcompanystartsitsoperations.Itfirstconcentratesontheproductionandfinancialaspects.Asitevolves,itkeepsonevolvingtheproductionandfinancedepartments,butsomehowtendstooverlookthesalesfunction.It is kept constant without much alteration as the company evolves. What changes are the selling style and the size of the sales force. Sales organisation must be adapted to the changing environment.

1.3.1 Co-ordination of Sales with other DepartmentsSales have to co-ordinate with the marketing department. Particularly promotional activities and sales do need harmonisation. Sales have to co-ordinate with market planning. Sales co-ordinate with distribution channels on introduction of products and later on. The buyers must be made aware where the products are available. Sales have to balance the interests of the trade and those of the manufacturer. Sales have to motivate the trade for joint promotional efforts. It is necessary to have the co-ordination of sales and overall marketing strategy. New product introduction rightly calls for a high degree of co-ordination between sales and marketing. It is necessary to be careful about inventory levels, sales plans, branch management, sales training and sales operation while a new product is being introduced. It is also necessary to co-ordinate with publicity, sales promotion and advertising of a new product.

1.3.2 Purpose of Sales Organisation

Good organisation avoids overlapping of workload and wastage of efforts. It also avoids the friction involved •and results in organisational co-operation. As in any organisation, there are informal groupings in a formal sales organisation.Theseshouldbeusedstrategicallyforthebenefitoftheformalorganisation.Salesorganisationallows delegation of authority and assignment of responsibility. Specialised tasks are performed by persons best suited to do so. As the organisation grows, there are necessary changes to accommodate the additional responsibilities. The •administrative distance between the top sales executive and the customers is far more in a large organisation. Sales organisation is used to achieve co-ordination and balance. There should be team work. Motivation to strive towards the common goal in the individuals also enables co-ordinated functioning. There should be harmonisation of the personal goals and the organisational goals. Such harmony can be brought about by training, seminars, group interactions, and two-way communications. There should be a dialogue between the specialists and others.

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Inasalesorganisation,theauthorityflowsfromthetopdowntothefieldlevelsalesmen.Thereportingisupwards.•This is essentially a line structure. In line structure, there is unity of command - one subordinate report to one boss only. In a growing organisation, however, there is a need to have functional specialists like distribution manager, logistics manager, marketing research manager, product manager and promotion manager. In a good organisation, the proper span of control is expected. A large span is possible when the co-ordinator is •having skills to co-ordinate such a large number. Lower level sales executives have a larger span. Higher level executives have to devote time to planning and conceptualisation. The spans are, therefore; kept narrow. The span also depends upon the abilities of the subordinates. Structured tasks enable a wider span. Concentration of subordinates at one location also enables us to have a wider span. Good communication system allows us to widen the span.

1.3.3 Setting up a Sales OrganisationMostly, there exists some kind of sales organisation, and what is done is the re-organisation. However, each reorganisation should be considered as an opportunity to examine the structure afresh. Organisations are set up by undertakingfiveactivities:

group the activities into jobs or positions•Advertising,SalesandPromotionManagementdefinetheirobjectives•list down the activities necessary to carry out these objectives•assign staff to man these positions•provide for co-ordination and control•

A sales organisation derives its qualitative and quantitative objectives from the overall organisational objectives. Qualitative objectives could be to be an industry leader, or to get reputation for quality products or to diversify inadifferentproductline.Quantitativesalesobjectivesareagivenlevelofsalesvolumeinspecifiedtime,andagivenlevelofprofitabilitybycontrollingcosts,andtoattainagivenlevelofgrowth.Whilequalitativeobjectivesare long-term, quantitative objectives are short-term. The modern sales management has some common activities. The emphasis can differ from organisation to organisation. These activities are grouped by classifying them. These activitiesaresoclassifiedthattheyattainoneparticularsellingobjective.Closelyrelatedtasksareunderonegroup,andarecalledaposition.Eachpositionhasasufficientnumberoftasks.Someorganisationshavespecialsignificancefor certain activities like credit evaluation in a credit card company. They are placed at the top of the organisation structure. Group of related positions form a departmental sub-division. The organisation has provision for control and co-ordination. Authority responsibility relations are established. Job-descriptions spell out these relationships.

1.3.4 Types of Sales OrganisationMostly sales is a line function. There is a chain of command running from the top sales executive down to the level of a sales representative. The executive here enjoys line authority over subordinates. The subordinates are accountable to their immediate superiors. There is a vertical line of command. All functionaries are therefore autonomous in respect of their work on the same level.

Line and staffHere,diversifiedproductrangeissold.Theorganisationhasgrowntoo.Thelineexecutiveneedsstaff/advisoryassistance.Theadvisorsarecompetentexpertsintheirownfield,forexample,salestraining,salesanalysis/planning,sales promotion, marketing research etc. These experts do not have line authority or command the subordinates. They just provide competent advice to the line executives. The line gets unburdened to some extent. The line executives leave complicated problems at the door of staff specialists for solution. Even planning activity can be shared. The following is an example of line/staff type structure:

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Marketing Manager

Training Manager

Promotion Manager

Sales Manager

Regional Sales Manager

Fig. 1.2 Line sales organisations

In the above diagram, the sales manager is given assistance by two staff functionaries, a training manager and a promotion manager. There is a problem of co-ordination in this type of structure. There are sometimes problems ofinter-personalconflictbetweenlineandstaff.Lineexecutivesareincommand,andhavepower.Staffsdonotenjoy the power to command. They may become backroom boys. However, the staffs do not have to share the responsibility for results. These problems can be minimised by properly allocating the work load between them, and by inculcating a sense of mutual respect and understanding.

Functional sales organisation Here,thebenefitsofexpertadvicearecompletelyutilised.Allsalesrepresentativesreceivedirectionsfromandare accountable to the different executives with respect to different parts of their work. It violates the principles of unity of command; while giving functional executives a direst authority to command and issue orders. A sales representative is thus under command at one and the same time from several executives. The top sales executive has co-ordinating responsibilities. This structure is found suitable for a small sales organisation. The operation becomesinefficientinlarger-firms.Smallandmediumfirmsfinditcostliertooperate.Theco-ordinatingfunctionis very complicated.

General Manager Sales

Manager Sales

Planning Co-ordination

Manager Training

Development

Manager Territory

Manager SP

Manager Distribution

Manager Institutional

Relations

SR SR SR SR SR SR

Fig. 1.3 Functional sales organisation

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Geographic organisationItisthemostextensivelyusedmethod.Heresalesrepresentativesareassignedtospecificgeographicareas.Thereactivities are kept limited to that area. Fig. 1.4 illustrates this. Local operations in limited geographic area make SRs better conversant with the territories. The market development work becomes easier. The organisation is in a better positiontorespondtolocalneeds.Thisorganisationisflat(ratherthantall),andthereisashort-lineofcommunication.Properroutingmakestravelplanseasier.However,administrativeburdenofofficesandco-ordinationareproblems.This type is suitable when the line is limited. SRs are also general in their approach, and not specialists. They may not be equally knowledgeable about the whole product-line. They are selective in their promotional approach.

Marketing Manger (All India)

Sales Manager (All India)

Area Sales Manager North:

Delhi based

Area Sales Manager South: Chennai based

Area Sales Manager West: Mumbai based

Area Sales Manager East: Kolkata based

AreaSalesOfficer

SRs

Fig. 1.4 Geographic organisation

Product organisationIn case of those companies which handle diverse product-lines making it necessary to employ specialists, this type of structure is adopted. Generally, product organisation and geographic organisation are combined at the top level. At lower levels, SRs/ salesmen who are specialised can work. The following is an illustration:

Sales Manager: All India

Regional Manager (South)

Area Manager

SRs for medical

instruments

SRs for diagnostic equipment

SRs for bulk drugs

SRs for home

remedies

SRs for insecticides

SRs for pharmaceuticals

Fig. 1.5 Product organisation

The diversity of product-line makes it necessary to do categorisation of SRs. The respective lines can then be well-handled. Customers can be better served. Each team of SR however serves the same market intensively leading to more time and costs. Dabur has been divided geographically but the SRs have been given charge of different groups. There are two major product groups- healthcare and family/home remedies. Each territory will be assigned two categories of SRs- one for each product group.

Customer organisationHere, the products are identical but the requirements of different categories of customers are so varied, that a separate salesman may have to be assigned to them. Xerox is the pioneer in this type of organisation. A pharma company may adopt this structure for general trade, hospital/institutional trade and export trade divisions.

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Sales Manager: All India

Regional Manager

Sales Manager: Medical Clinical

Sales Manager: Hospitals /

Institutional

Sales Manager: Hospitals /

Institutional

Sales Manager: Agro

Fig. 1.6 Customer organisation

The unique problems of each customer grouping are taken into account. It is a customer oriented approach. The major drawback is the over-lapping geographic territories. In one and the same territory, a company may have different people serving different customers.

Combining more than one basis of organisingMost companies use a combination of the above to divide the line authority. The selling task is sub-divided to permit greater specialisation. Mostly, all large companies have geographic sub-division. In addition, there can either be product-type or customer-type system. To signify greater emphasis of geographical differences, the primary sub-division at the top is geographic, with product or customer type system at the lower level.

In case we want to underplay the geographic difference, we can have product or customer type system at the top and geographic sub-division at the lower level. The most important factor in marketing is the primary basis for sub-division at the top, and the lesser factors account for further sub-division down below.

Centralisation vs. decentralisationIn a highly centralised organisation, the sales function and the task associated with it are managed from corporate headquarters. In adecentralisedorganisation,field salesmanagersmostlydo recruitment, training, evaluationand compensation of SRs. The degree of centralisation and decentralisation depends upon the size of operation, effectiveness and competitive necessary. In a growing organisation, there is a tendency to decentralise. Medium-sizedfirmshavebothcentralisedanddecentralisedportions.ComputerisationandIThaverecentlyledtosomeamount of centralisation.

1.4 Sales Related Marketing PoliciesA business moves on, adding certain products, and leaving behind certain old products. An organisation has to decide the product design and product quality of its product portfolio. Product decisions are made on the basis of product policies. A company takes its product decision on the basis of its product objectives. Some industrial marketers are interested in selling just the product, with no back-up services, whereas some sell the product with back-up services. Product policies in both these cases will be different.

Product line policy The full set of products offered by an organisation is called its product mix. It is an assortment of product lines •handledbyacompany.Adiversifiedcompanyhasaproductmixofrelatedorunrelatedproducts.Letusconsideronly one product line; say breakfast products. A company can have an entire range of breakfast products like porridges,instantmixes,formulamilk,milkadditives,nutrientchocolatemixes,cornflakesetc.Itiscalledfull-line.Thecompanycanconcentrateonlyonashort-line,saycornflakes.A company can choose full-line policies for certain product categories and short-line policies for other product •categories. It is a choice between an assortment and specialised products. The more short-line one is the higher istherisk.Asingleproductcompanycanbehighlyprofitable,becausetherearebenefitsofspecialisationandconsequent economies of scale in production. However, the company is vulnerable as it may be forced out of the market if its product offering shows a decline in sales because of replacement product of the competitors.

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The length of the line is a matter of sales force capabilities, the infrastructure for after-sales services, the •expectations of the trade and customers and costs associated with production and promotion. A wider line distributesrisk.However,eachitemhasitslimitationtocontributetotheprofits.Policiesareframedtoaddnewproduct lines, introduction of more product items to lengthen the line, introduction of different product variants or deepening the line, and maintain a level of consistency in the product line. ProductLineAnalysis:Aproductlineisputinchargeofanexecutive.Hehastomonitorthesalesandprofits•of each item in his product line, and see how it fares with the competitor’s product lines. Those product items whichcontributemostfewsalesandprofitsshouldbeguardedagainstcompetition.Ahighconcentrationofsalesinafewselectitemsmakestheproductlinevulnerable.Thoseitemswhichcontributeinsignificantlytosalesandprofitsareeithertoberejuvenatedordropped.Productofcompetitorsisputonamapintermsoftheir attributes. This enables a line manager to decide the competition of his own product. It also indicates the nichesinthemarketwhichcanbefilledup.Product Line Length: The product line manager tries to have an optimum product line length. The length is •consideredshortifanyadditionofnewproductincreasestheprofits.Thelengthisconsideredtoomuchifthereisapossibilityofincreasingprofitsbydroppingtheitemsfromtheproductline.Companyobjectivesdoaffectproduct line length. Those companies which are committed to high market share and growth have longer lines, eventhoughsomeitemsarenotyieldingprofits.Thosecompanieswhichareobsessedwithprofitstendtohaveshorter lines.Over a period of time, as the company grows, product lines start lengthening. The sales force and distributors •pressurise a company to have a full product line to satisfy all the needs of the target customers. The expanded production capacity also acts as an incentive to have product lines length increased. The product line manager keepsonaddingproductitemsforhavinglargersalesandprofits.Theeverlengtheningproductlinesintheirwake bring additional costs, which cannot be allowed to rise beyond a limit. A review of product line is then undertaken. Such a review may reveal many loss-making product items. To •improve the bottom line, such items are dropped. From an undisciplined product-line growth, we reach a massive product pruning stage. The length of the product-line is increased by two ways -line stretching and linefilling.Line Stretching: Line stretching consists in going beyond the ends. The stretch can occur upwards or downwards •or in both the directions. Current range of products. Downward stretch is resorted to by those companies whose productsareallupperend.Adownwardstretchmayfillupamarketvoidormayextendthehighendreputationof the company to the low end products. A competitor’s attack at the highest end may provoke a company to attack him at the lower end. Sometimes, there is low growth at the high end, and so a downward stretch may become necessary. Downward •stretch exposes the company to the risk of cannibalisation - the low-end items cannibalising the high-end ones. There is another risk - the competitor is compelled to enter the high end market as a response to the company) s low-end entry. There may be distribution problems. The trade might not like to patronise low end items for a variety of reasons. Upward stretch is the entry of the company in the market at the higher end when its current range is located •atthelowerend.Perhaps,ahighgrowthrateorhigherprofitsareanincentiveforupwardstretching.Italsogives an opportunity to the company to have a complete range. An upward stretch is a risky proposition. The competitor is likely to go down market. Besides, the competitors at the upper end are usually well established. Even customers may not take a lower end company entering the higher end seriously. The trade channel may not have the competence to handle a higher end product. Two-way stretch is in the middle of the market, and can opt for stretching both upwards and downwards. LineFilling:Withinthepresentrangemoreproductitemscanbeadded.Thisiscalledlinefilling.Thereshould•notbeamissinglinkintheline.Itmayresultinlostsales.Linefillingmayhelptofillupexcesscapacity,forexample, children’s tooth brushes can be manufactured if there is excess capacity in a toothbrush industry. Additionofproductitemsmayleadtoincrementalprofits.Thegapsarefilledup,socompetitorsdonotgetachancetoenterthemarket.Linefilling,however,shouldnotconfusethecustomers-eachitemmusthaveavisibledifference.Linefillingshouldnotleadtocannibalisation.Upwardstretchingisalsocalledtradingupand downward stretching is also called trading down.

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Line Modernisation: A company may have an adequate product line length. But the product line might be old •styled. What is necessary is the line modernisation. In rapidly changing environment, line modernisation should be continuous. Overall modernisation or piecemeal modernisation is an important decision. Modernisation in piecemeal allows the company to assess the reaction of the traders and customers. The disadvantage of such an approach, however, is that is allows competitors to copy the changes. Modernisation should not be too early to affect the sales of existing products adversely or should not too late so that competition goes ahead of us, and makes us obsolete. Line featuring: One or a few product items are selected by the product-line managers for featuring. Sometimes, •lowendproductsarefeaturedastrafficbuilders.Sometimes,ahigh-endproductisselectedforfeaturingtogiveprestige to the entire product line. Sometimes, weak items are selected for featuring.LinePruning:Aproductlineneedspruningtoeliminatelowprofitproducts.Thereisanattempttogetprofits•from fewer products. Sometimes, an entire product line is eliminated; for example, Xerox dropped its line of computers and Gillette its line of digital watches. Line pruning is also resorted to when there is shortage of raw materialsandenergy.Itisdifficulttomaintainproductioncapacitythen.

1.5 Importance of SalesmanshipThe importance of salesmanship is universally recognised today. It is considered as an effective process of understanding the needs and tastes of consumers, imparting full information to them about the utility of products and including them to buy. Its real importance lies in its attempts to bring a potential buyer into business contact with a seller. It is persuasive in its methods and educative in its approach to consumers and hence it develops as a constructive factor in increasing the volume of sales. Following points underline its importance:

Creation of demand for different goods by respective salesmen leads to increase in total production and allied •business activities. It aims at increasing the tempo of turnover. Hence, accumulation of unsold stocks is avoided. •Expansionofsalesbysalesmen’seffortsresultsinlargerprofits.•Increased business activity, induced by effective salesmanship, leads to increase in the level of employment and •higher income for the community.Sales talks of different salesmen will give the customers the opportunity of wide choice in their purchase of •different articles. Salesmen enlighten the consumers about the merits of different goods and hence help them to make a right •choice. Salesmen act as useful links between the sellers and the customers. Sellers’ products are brought to the notice •of customers and customers’ complaints, impressions and suggestions are brought to the notice of sellers. Adjustments in selling policy and improvements in products can, thus, be made by sellers in order to satisfy •the customers. Since salesmen try to create demand for articles of luxury and comfort the standard of living of the community •would be raised. Salesmanship is a lucrative career for promising young people. It is a profession that gives a lot of experience •in the working of human motivations.

1.5.1 Types of SalesmenThere are mainly four types of Salesmen: Manufacturer’s Salesman, Wholesaler’s Salesman, Retail Salesman and Specialty Salesman.

The manufacturer’s salesman sells either to dealers or middlemen or to the ultimate consumers. The manufacturer’s salesmen selling to dealers are of three types: Pioneer-type, Dealer-servicing type and Merchandising type.

The pioneer-type salesman has the tough job or creating market for new goods. His main task is to persuade •wholesalers and other dealers to take up a business in new line of products. They should convince them of the specialty of the new products and create reasonable hope in them that ultimate users would like those goods

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Then only the dealer may decide to stock those goods for re-sale. The pioneer type salesman, therefore, should be aggressive in his sales talk. He should be well-informed in the use of such goods and be lifted with high skill of persuasion. Dealer-servicing salesman is one who sells to the dealers those goods which have an established market. He •visits the dealers periodically and books new orders from them. His main job is to maintain and extend the demand for the goods which are already known to the dealers. He is expected to render all possible help to the dealers in marketing the product to subsequent buyers. This type of salesman need not be much aggressive but shouldcertainlypossessalotofenergyandperseverance.“Heneedspersistenceandenthusiasmandheshouldhave a warm friendly personality.” MerchandisingSalesmanisjustrequiredtotenderadviceandcollectinformation.“Merchandisingsalesmanare•mere promoters of sales for their companies than they are creators of direct orders.” Their main job consists not in booking actual orders but in collecting the information from the dealers and in giving advice to them about the various problems of selling the goods. They visit the dealers, inquire of their stock position, discuss their difficulties,andadvicethemonsalespromotionactivities.The guidance given by merchandising salesmen will be helpful to the dealers in giving push to the product. They •also obtain the views of the dealers about the product and accordingly advise the manufacturers to improve the productoralterthetermsofsalesoastoincreasethesales.Thus,theystrengthenthereputationofthefirm.The wholesaler who is an important link in the chain of distribution may appoint -his own salesmen to sell his stock of goods to retailers. The wholesaler’s salesman calls on retail dealers at regular intervals and books their orders. It is his essential •tasktoensureconstantflowofordersfromtheretailers.Heshouldbepunctualandpromptinrenderingservicesto retailers. He should be well informed about the goods. He should create goodwill and develop sales so that wholesaler’s stocks are quickly cleared. The salesman at the retail level is expected to push the sales direct to the ultimate consumers. Retail salesman •is of two types:

Counter salesman works in the retail store and attends to customers who call at the store. He has ample �opportunities to sell suitable items to various customers visiting the shop. He has to exercise imagination andingenuitytofindoutpreciselytheneedsofcustomersandtopersuadethemgoestoinfortheproperproduct which meets their needs. He should, therefore, possess adequate knowledge about stocks, prices and other selling points. He should be alert, accurate, patient, polite and considerate in his behaviour and talk with the customers. The outdoor salesman is one who is required to carry sample of goods and visit the prospective consumers �and book orders. Large retail stores can employ outdoor salesman. He must be able to create interest and desire for the goods in the customers he visits.

1.5.2 Qualities of an Ideal SalesmanA good salesman is he who has a charming personality, has the aptitude and skill required for a selling job, has the thorough knowledge of the goods he is to represent and who can study the different motives of numerous customers to be approached in the course of his sales efforts. Following is the list of qualities of an ideal salesman:

He should have attractive, cheerful and smart appearance which creates a favourable impression on prospective •customers. Heshouldbeamanofexcellenthealthassoundhealthisakeytoefficiency.•He should be well-dressed. Appropriate dressing improves the grace of his appearance. •Heshouldhaveawell-pitchedvoice.Histoneshouldbepleasing,appealingandfreefromanyartificialaccents•so as to create receptivity in the listening customer. He should master the art of conversation so as to inspire response in the customer concerned. •Heshouldhavegoodmannersrevealinghissenseofrefinementanddelicacy.Repulsivemannerismsshould•be avoided as they weaken his sales talk with the customer. He should have keen imagination and foresight so thathecandevelop“newanglesofapproach”tothesalesproblem.

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Summary TheDefinitionCommitteeoftheAmericanMarketingAssociationstatedthatSalesManagementmeant:“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.”Salesvolume,contributiontoprofitsandgrowtharethethreemajorobjectivesthesalesfunctionisexpected•to achieve.Salesculturehasasignificantinfluenceonsalesforceactivitiesandattitudes.Thevariouscomponentsthat•make up sales culture include symbols, language, ceremonies, rites and rituals, role models, tales and stories, and values and beliefs.Sales co-ordinate with distribution channels on introduction of products and later on. The buyers must be •made aware where the products are available. Sales have to balance the interests of the trade and those of the manufacturer.In a good organisation, the proper span of control is expected. A large span is possible when the co-ordinator is •having skills to co-ordinate such a large number. Lower level sales executives have a larger span. Higher level executives have to devote time to planning and conceptualisation. The spans are, therefore; kept narrow.Local operations in limited geographic area make SRs better conversant with the territories. The market •development work becomes easier. The organisation is in a better position to respond to local needs.In case of those companies which handle diverse product-lines making it necessary to employ specialists, •product organisation is adopted.The full set of products offered by an organisation is called its product mix. It is an assortment of product lines •handledbyacompany.Adiversifiedcompanyhasaproductmixofrelatedorunrelatedproducts.The diversity of product-line makes it necessary to do categorisation of SRs. The respective lines can then be •well-handled. Customers can be better served. Each team of SR however serves the same market intensively leading to more time and costs.In a highly centralised organisation, the sales function and the task associated with it are managed from corporate •headquarters.Inadecentralisedorganisation,fieldsalesmanagersmostlydorecruitment,training,evaluationand compensation of SRs. The degree of centralisation and decentralisation depends upon the size of operation, effectiveness and competitive necessary.Withinthepresentrangemoreproductitemscanbeadded.Thisiscalledlinefilling.Thereshouldnotbea•missinglinkintheline.Itmayresultinlostsales.Linefillingmayhelptofillupexcesscapacity.

ReferencesSharma, S. P. & Joshi, D. B., • Marketing and Sales Management. Chunawalla, S. A., Advertising, • Sales and Promotion Management. Mehta, J., 2008. • Advertising, Marketing and Sales Management, Global media.ICMR., • Introduction to Sales Management [Online] Available at: <http://www.icmrindia.org/courseware/Sales%20and%20Distribution%20Management1/SDMC01.htm>. [Accessed 11 October 2011]. Sales Management• [Online] Available at: <http://farbigtech.com/wpcontent/uploads/2011/03/1.pdf>. [Accessed 11 October 2011]. REALtrendsinc, 2010. • The Changing Role of Sales Management [Video Online] Available at: <http://www.youtube.com/watch?v=THU6WtKcOeU>. [Accessed 11 October 2011].Bruce Fenton, 2009. • Sales Management in Business & College – How Important? [Video Online] Available at: <http://www.youtube.com/watch?v=e0c7h60vMXo>. [Accessed 11 October 2011].

Recommended ReadingMathur, U. C., 2008. • Sales Management, New Age International.Calvin, R. J., 2004. • Sales Management, 2nd ed., McGraw-Hill Professional.Tyagi, C. L. & Kumar, A., 2004. • Sales Management, Atlantic Publishers & Dist.

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Self AssessmentSales Management refers to the variety of techniques used by ____________ to increase store revenue through 1. the front line sales team.

Retailersa. Wholesalersb. Marketing peoplec. Manufacturersd.

__________definedsalesmanagementas‘theplanning,directionandcontrolofpersonalequipping,assigning,2. routing, supervising, paying and personal sales force.’

AFAa. AMAb. APAc. AIAd.

AMA stands for ________________.3. American Management Associationa. American Medical Associationb. American Marketing Associationc. All Marketing Associationd.

The role of a ___________ is to achieve company objectives, streamline reporting relationships, facilitate effective 4. coordinationandcontrolanddevelopanefficientsalesforcestructuretoensureeffectivesellingstrategy.

Sales managementa. Marketing headb. Sales marketingc. sales organisationd.

_____________ is a collective impression of the values, attitudes and personality of top management in an 5. organisation.

Sales culturea. Sales organisationb. Sales managementc. Sales persond.

Which of the following statements is true?6. Sales have to co-ordinate with the manufacturing department.a. Sales management is used to attain the qualitative and quantitative objectives of personal selling.b. Salesorganisationhasasignificantinfluenceonsalesforceactivitiesandattitudes.c. New product introduction rightly calls for a high degree of co-ordination between sales and marketing.d.

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______________salesobjectivesareagiven levelof salesvolume inspecified time,andagiven levelof7. profitabilitybycontrollingcosts,andtoattainagivenlevelofgrowth.

Quantitativea. Qualitativeb. On demandc. Out of stockd.

Here, all sales representatives receive directions from and are accountable to the different executives with 8. respect to different parts of their work.

Geographic organisationa. Product organisationb. Functional sales organisationc. Product organisationd.

Which of the following statements is false?9. The diversity of product-line makes it necessary to do categorisation of SRs.a. The full set of products offered by an organisation is called its product mix.b. A company can choose full-line policies for certain product categories and short-line policies for other c. product categories.A wider line increases risk.d.

Match the following.10. Term Definition

1. Customer organisationA. A. In case of those companies which handle diverse product-lines

making it necessary to employ specialists, this type of structure is adopted

2. Product organisation B. Here the products are identical but the requirements of different categories of customers are varied

3. Geographic organisationC. Here, all sales representatives receive directions from and are

accountable to the different executives with respect to different parts of their work.

4. Functional sales organisation D.Thisorganisationisflat(ratherthantall),andthereisashort-lineof communication.

1-B; 2- A; 3-D; 4-Ca. 1-A; 2-B; 3-C; 4-Db. 1-C; 2-D; 3-A; 4-Bc. 1-D; 2-C; 3-B; 4-Ad.

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Chapter II

Sales Force Management

Aim

The aim of this chapter is to:

definesalesforcemanagement•

explain determining size of sales force•

classify sales policy•

Objectives

The objectives of this chapter are to:

explain selection, motivation and training of salesman•

illustrate sales job analysis•

defineselectionandselectiontools•

Learning outcome

At the end of this chapter, you will be able to:

design and conduct the training program•

explain methods of training•

definesales• report and their analysis

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2.1 IntroductionThe Sales force of any company needs to be compensated adequately to keep its morale high and to enable it to contribute to its maximum. The general trend is towards increasing the indirect incentives of the sale force. A salesforceistherepresentativeofthecompany’sphilosophyandbusinessprinciples.Afirmneedsregularsalesinformation on effort by product line, customer type or by geographic segment for appraising the salespersons and analysingtheirprofitability.Mostorganisationstodayhaveformalperformanceappraisalsystemstoaidtheminevaluating their sales force.

2.2 Sales Force Management: Strategy ImperativeFollowing given are some important indications related to sales force management.

2.2.1 Determining the Size of Sales ForceManagement makes the second of its two key decisions on personal selling strategy when it decides the size of thesalesforcethatthecompanyshouldhave.Havingdeterminedthekindofsalespersonthatshouldbestfitthecompany’s needs, management must now determine how many such salespersons should be employed to meet the company’ssalesvolumeandprofitobjectives.Inpractice,itisextremelydifficulttodeterminetheexactnumberofsalespersons that a particular company should have; however, there are three basic approaches used in approximating this number:

the workload method, •the sales-potential method, and •the incremental method•

Eachapproachprovidesneededinsightsonthe“rightsize”ofsalesforce,althoughnoneproducesadefinitiveanswertothe“how-many-salespersons”question.

2.2.2 Sales PolicyTheSalesPolicyofafirmstartswithselectionofproduct/sforsale,pricingofproducts,geographiccoverage,distribution arrangements, distribution logistics, advertising, promotion and publicity plans. The policy is decided afterthefinalapprovalbythefirm’sCEO,whoconsidersthefinancialaspectsofthepolicybeforeapprovingit.

Training, Motivation and Selection of Salesmen:Gettingtherightpeopleisdifficulttask.Afirm’sHumanResourceManagers,thereforeuseallpossiblemethodstolocate the right people. Firms look for the following qualities in their salesmen:

An aptitude for hard work •Technical knowledge as required for selling the product •Positive outlook •Good communication skills, both oral and written •Extrovert personality •Helpful nature •Requisite experience, if it is not a management trainee position •

Human Resource Managers get the persons in one of the following ways: Promotionsfrominsidethefirm•Competitor’s personnel •Casual applications received by them •Business school’s campus interviews •Advertisements in the press •With the help of recruiting agencies •

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For technical products the inside promotions can be useful as they know about the product and can start becoming productive in less time. However, the inside person should have the basic selling attitude. For Sales Trainee positions, thebusinessschoolsareagoodsourceandmostgoodfirmsareregularlygoingthereforcampusinterviews.

Pressadvertisementsareabitexpensive,but theyget thebest rewardsas,peoplewhomeet theexact specificrequirements only apply and from them the right person/s can be selected.

Training of salesmenHerearethreemainmethodsofprovidingtrainingtothenewentrantsinthesalesorganisationofafirm:

Class room training: where the trainee is told about the plans, policies, methods of working, hierarchy levels, •reporting levels, forms used in report writing. Besides, they are given extensive product knowledge, they are toldaboutproductsbenefitsforthecustomers,itsUSP,anditscomparativevaluewithrespecttocompetitiveproducts. On-the-job training: when they work as understudy of one senior experienced salesman, watch him negotiate •the sales deals and generally plan his work on a day-to-day basis. Training on the job: is like learning how to swim once the person is thrown inside the pool. For people with •initiative and drive this is the best method. It allows the trainee to learn at his own speed unencumbered by some senior who may have become cynical because of his length of service and perhaps no promotion.

Besides the training given at the start, salesmen should keep receiving refresher courses to ensure that they are updatedontothefirms’plans,newproductsandchangesinthebusinessenvironment.Suchcoursescanbeplannedin-house or at a training institute, which offers such programs for the corporate executives in different disciplines in management.

Motivating the salesmen To ensure that the contests are effective and bring the desired result, they should be planned on the following lines:

Each salesman should be given a target to achieve clearly in writing. •The contest should be on a time bound basis. •Weightage should be given to the strength of the competitors in each salesman’s area. •If there are several products, targets should be set for each one of them and not just for the ones where the sale •is lagging from previous periods. The basis of targets should be historical sales of products in each area, plus any major change, which may have •taken place, like development of new industrial centres. Judgement of contest winners should be done without any bias to prove fair play by the management. •Winnersshouldbegivenawards,acclaimedinthefirm’snewsletterandiftheperformancekeepsimproving,•then they can be promoted.

Selection of salesmen/saleswomen The usual method of selection is through the candidates’ bio-data and interview. The Sales Manager is guided •by the following factors while selecting his sales team:

Product to be sold, its technology and usage �Sizeofthefirm �Distribution channels �Level of the customers to be met, for example, Purchase Assistants, Technical Managers, or Managing �Directors Selling aptitude �Knowledge of the trade �Knowledge of the market, channels �

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Knowledge of local language �Knowledge of a foreign language, if the salesman has to be posted out of the country �Product knowledge �Health, as travelling takes a big toll on the salesmen’s health. �Dutiesofsalesmen,showroomorfieldwork �Aptitude for selling is obviously important, which includes ability to make friends easily, hard work, plenty �of travelling, negotiating skills and a genuine desire to help others, especially the customers, within the ambit of work or even outside of it.

The salesmen can acquire most of the other characteristics but the aptitude must be within the person. To assist •theSalesManager,theHRDpeoplehavethefirstinterviewofthecandidates,whichattimesassumestheroleof interrogation which cover varied aspects of the candidate’s life from childhood onwards, social activities, leisuretimeactivitiesetc.Attimesawrittentestisgiven,whichisscreenedbypsychologists,tofindoutthecandidate’s reactions in times of stress.

Sales territory allocation It is the job of the sales manager to ensure that the salesmen in his department are usefully employed, given equitable workload and can produce the best results. For this purpose, sales managers have to distribute the entire geographic area of business in salesmen’s territories, which become the sole responsibility of individual salesman with regard to the sales activities in the areas. As the product range differs widely so do methods of territory allocation as can be seen from the following:

Consumer products: as the customer groups are spread wide geographically, the territories are divided as given •below,

Equitable sales potential (While dividing north India, Rajasthan may have lower potential and hence it �could be added to the Haryana state) Concentration of business (If Delhi state has large potential it could be considered as an independent �territory) Ease of territory coverage, which will help in reducing the back tracking for the salesman �

Sales targetsBasedontheavailabilityofproducttothesalesmanagerinoneyear,throughthefirm’sownproductionor•throughoutsideprocurements,thesalesmanagerplanstoselltheentirequantityofproducts.Hefixeshisowntarget for the year, which is then divided in to targets for each of the sales territories. The common method of targetfixationisgivenbelow:

Territory’s total business potential strength of the sales team �Competitive strength Environment’s effect on business in the territory. �Target should be reachable but with a stretch �Eachsalesexecutivefixesthetargetofhisdealersbasedonpastperformance,marketpotential,whichis �discussedwiththedealerbeforefinalisation.Onemethodofkeepingrecord,dealer-wiseasalsomonitoringdealer sales is given below, which shows product sales for each dealer on monthly basis and compares the sale with sales of the same month in the year/ s gone by. This lets the salesman to locate the weak areas (products)incaseofeachdealerandhelpsthesalesmaninfindingsolutionsforthedeclineinsales.Thiscan be worked on progressive basis, which would indicate to the salesman the dealer’s performance on a cumulative pattern for the year.The salesmen need to organise their work and time in a manner that desired results are ensured. For the �purpose they need to plan the work for which they need the following inputs. Territory map giving locations of the main distributors, dealers, retailers, direct customers. This helps in tour planning when the salesmen can avoid backtracking by planning going in loops to cover the entire territory without having to resort to going back and forth.

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Structuredtourshelpthecustomersandmanyfirmsbelievethatifthecustomers,includingthechannel �membersknowthatthefirm’ssalesmanwillvisitonthetenthofeachmonththentheypreparethemselvesfor the meeting at the agenda can be gone through in quick time and the desired result achieved. Italsogivestheimpressionofprofessionalismofthefirmtothecustomers.Incaseofindustrialproducts,the �targetfixationtakesintoaccountnewcustomers(industries)emerginginthearea,generalandcompetitiveenvironmentanddemandpatternofthefinalproductofthecustomers.BusinesstoBusinesssalesrequiresthe following extra ingredients for successfully meeting the targets:

Complete knowledge of the customer’s requirements, problems which need to be solved. -Level of technology involved in marketing the product. This would decide if a technical salesman should -be making the call. Productknowledgeandthebenefitsitofferstothecustomerintermsofsafetyofoperations,economy, -ease of usage and storage.

The full report of each visit should be on a format specimen given below: �Customer–firm’sname,address,phone,fax,e-mail. -Persons met, with designation and visited authority. -Files, documents, literature, testimonials taken and discussed with the customer. -Objectives of the visit: It is useful to have one major and a few minor objectives, which should be in line -with the major objective. In case the major objective is not achieved in a particular visit the salesman can try to achieve at least one of the minor objectives. Major objective of sales call is usually to get the purchase order. Minor objective could be to invite the -customer for a product demonstration. Abriefaccountofthediscussionheldandthecustomer’sviewpointonthebenefitstorygivenforthe -product. Result of the visit. Follow up action required, giving the names of the people who would take the action -along with the time schedule for the same.

Sales forecastsDifferentfirmshaveseparatedefinedperiodsforwhichtheywantasalesforecast.Theforecasthelpthefirm•in the following activities:

Building production quantities �Controlling inventory levels �Planning distribution network changes, if required �Pricing decisions �Recruitment, training of salesmen Increase in geographic coverage of sales �Providing technical support to the sales team �Providing after sales service, guaranty and warranty services �

Salesforecastsaremadeonthesalesterritorybasisandthentheyareconsolidatedtogettotheall-Indiafigure.•Inthefirsthalfofthetwentiethcentury,salesforecastwasmadeforperiodsrangingfromonetosevenyears.It was possible to give long-ranging forecast because the business and competitive environment were not changing much. In case of seven years forecast, it was assumed that the deviation level of each forward year couldincreasebyfivepercent.Sales forecast for the entire country is the sum total of the forecasts of all the territories plus the plans for exports •made by the sales manager. Forecasting export trade is done on the following basis:

Country-wise sales plans �Service facilities needed in each country �Competitive products �General and competitive business environments of the countries �

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Political stability of the country �Relationship with the foreign government heights. �

The Sales force of any company needs to be compensated adequately to keep its morale high and to enable it to •contribute to its maximum. The general trend is towards increasing the indirect incentives of the sale force.A sales force is the representative of the company’s philosophy and business principles. It is the medium which •builds the company’s perception among its clients. The building of the sales force is a phenomenal task but its maintenance, is also important. This is possible through proper compensation schemes including provision of indirectbenefitsinaplannedmanner.Even the best organised sales department will not function effectively unless the sales effort is planned and •controlledonaregularbasis.Salesreportsformthebasisforthemonitoringofsalespersonnel.Afirmneedsregular sales information on effort by product line, customer type or by geographic segment for appraising the salespersonsandanalysingtheirprofitability.

2.3 Sales Job AnalysisAll sales related jobs, irrespective of the type of industry, have very distinctive characteristics. Some of the characteristics are as follows:

Assalespersonnelworkinthefield,awayfromtheheadoffices,theyareresponsibleformanagingtheir �territories or accounts. Therefore, sales personnel are expected to take their own decisions for planning and executing their individual activities in relation to their targets.Most salespersons, while on their journey cycle, get fewer opportunities for interactions in person with �their supervisors. Most of the time they provide feedback or receive instructions, telephonically or through fax in their hotel.Thethirdcharacteristicsofthefieldsalesjobarethatthesalespersonnelremainawayfromtheirhomeand �family for days together. This is a regular feature. In some consumer product companies salespersons travel for as many as 21 days in a month.Another important aspect of the sales job is job monotony. Each salesperson is doing the same work, �repetitively, with different customers. For example, a hotel sales representative makes the same presentation to all the travel agencies, day-after-day, but the negotiations with different agents may differ.Lastly, success in a sales call doesn’t depend only on an individual’s effort. It may so happen that the �customer doesn’t need your product or the customer was not happy with his or her previous experience, ondeliveryoraftersalesserviceorspares.Allfieldsalesjobscreate,therefore,anormaltendencytogetdisheartened or discouraged.

Eachoftheabovecharacteristicshasspecificimplicationsforrecruitmentandselection,andtherefore,itis•recommended that while developing your recruitment and selection policies, you should not overlook the above points.Accordingly,jobspecificationsshouldbedecided.Sales force management is the personnel function in the marketing department of an organisation. The issues in •sales force management are, therefore, the same as that of the personnel management issues. The starting point of all sales force management activities is Job Analysis, as shown in Figure 2.1.

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Compe

nsati

on an

d moti

vatio

nal p

rogr

ammes

Performance evaluation

Job descriptionJo

b eva

luatio

nJobspecifications

Sales Job Analysis

Recruitment Selection Training

Fig. 2.1 Activities involved in the managing the force

Job analysis helps in three distinct ways. Most importantly, it helps in Job Description, i.e., in identifying various •activities–majorandtrivial,tobeperformedunderthejob.Italsohelpsinidentifyingthequalificationsandindividual’scharacteristicsinrelationtothejob,whichiscalledjobspecifications.A good approach for developing job description is to use a checklist of various activities relating to sales •personnel’s job. Some of these responsibilities are given in Table 2.1. A detailed account of basic responsibilities ofasalespersonhelpsintheidentificationofqualificationsandindividualcharacteristicsforthejob.Theprocess,bywhichqualificationsandpersonalitycharacteristicsareidentified,iscalledJobSpecification.Thepersonmay have them at the time of joining or they are imparted to the salesperson through training.

S. No. Sales Responsibilities Specific Activities

Direct Selling

Locating prospectsa. Determining prospects’ needsb. Planning selling strategyc. Interviewing d. Creating desiree. Handling objectivesf. Completing salesg.

2 Customer Relations

Helping customers by solving their problems and providing a. special servicesTraining customers to use their purchasesb. Arranging displays and promotionsc. Keeping customers up to date on new developmentsd. Settling complaintse. Establishing and maintaining good personal relations with f. customers

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3 Product / Service Knowledge

Knowing products / services and their applicationsa. Looking for new product / servicesb. Keeping up to date on merchandise style and price changesc. Keeping up to date on competing products / servicesd.

4 General Administration

Maintaining call recordsa. Carrying on routine correspondencesb. Checking customer’s creditc. Follow up on inquiriesd. Maintenance expense account recordse.

5 Management RelationsMaking required reportsa. Reporting competitor’s activitiesb. Working with other departmentsc.

Table 2.1 Basic responsibilities of a sales person

Oncethejobspecificationsarelaiddown,itbecomeseasierforacompanytoinitiatetheprocessofrecruitment•andselection.Alsotrainingcanhelpasalespersontofulfilljobresponsibilitiesmoreeffectively.Nonetheless, it is generally believed that recruitment and selection process should be such that, it should •helpyoutohandpickthosesalespersonswith‘justright’kindofpersonality,(sinceitisdifficulttodeveloppersonality through the training programmes). Job Analysis also helps in clearly identifying the job performance norms based on which the job evaluation can be done. Such an exercise provides a good base for compensation management.

2.4 RecruitmentOnce a company has determined the number and kind of salespersons it requires, the next step in the selection •istogettherightapplications,insufficientnumber,forthepositions.Alltheactivitiesinvolvedinsecuringtheapplications for the sales positions are referred to as Recruitment. It does not include, but is followed by, the selection process to evaluate and screen the applicants. Itshouldberememberedherethattheapplicationformshouldbedesignedasperthejobspecifications.Itmust•provide the applicant an opportunity to provide information about one’s capabilities in the area. Some of the factors that affect the type and amount of information requested on an application form, may be

The objective of the company in using the application form – if it serves as an initial screen, it is shorter �than one that will be used for complete personal history record.Theotherselectiontoolsandrecordsusedofteninfluencethedesignoftheapplicationform.Useofpatterned �interview,forinstance,mayenableaconcerntoshortenitsform.Ontheotherhand,afirmmaywanttoduplicate its questions in order to check on a recruit’s honesty, by seeing, if his or her answers on the form coincide with those obtained from other sources.Thenatureofthejobisanotherfactorthatinfluencesthequestionsaskedontheapplicationform,because �differentsalesjobcallfordifferentqualifications.Afirmtryingtohirepersonnel’swith5-10yearsofsales experience, for example, is not so concerned about a recruit’s activities in school and college. The information required on the application form, for hiring a salesperson for sales executive’s job in an Airline will be different from the information for hiring a door-to-door salesperson selling low priced consumer product.Another factor is the degree to which the selection function is decentralised. If home executives take part in �the hiring of salesperson, the application form, probably, is detailed. But if territorial managers do the hiring, the form may be short because the other tools, especially the interviews, can be used more extensively.

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Ideally each company should prepare its own formal application form, since no two companies have precisely •the same information requirements. The information that is typically requested on standard application form includes personal background, education and employment record. Companies using standard application form can obtain the additional information required, during the interview. Following are the methods adopted in the case of sales persons:•

Salespersons of non-competing companies: � Individuals, currently employed as salesperson for non-competing companies, are often attractive recruiting prospects. Such people already have selling experience, some of which may be readily transferable. For those, who have worked for companies in related industries – there is additional attraction of knowing something about the product and the market. A firmthathiressalespersonfromothercompaniesshouldbeespeciallycarefultodetermine,whythepersonis interested in changing jobs and why he or she wants to work for the hiring company. People hired from other companies may not have the same degree of loyalty that the recruits promoted from within posses.Salespersons of competing companies � : The question of whether to hire competitors’ salespersons is argued on ethical ground and from an economic standpoint. It is considered unethical to recruit the competitor’s salespersons actively, after he or she has spent the money on hiring and training them. From an economic point of view, there are mixed feelings regarding this source. On one hand, they know the product, customers and competitors and they are also experienced sellers and, therefore, no money is required to be spent for their training. On the other hand, it is a costly source as generally, higher pay must be offered to them to leave their organisations. Some sales managers, as a matter of policy refrain from hiring competitors’ salespersons, as their loyalty towards company is questionable. They feel that an individual hired away from one organisation for higher pay or other enticements can be similarly tempted in future.Internal transfers � : The persons working in other departments of the company may be transferred as salespersons to the sales department. This is generally used along with the other recruitment sources. Transfers are good prospects for sales positions, as product knowledge makes up a substantial portion of sales training. They are also familiar with company’s objectives, policies and programmes. It is possible thatthefactoryandofficeemployeesmayconsiderthetransfertosalesdepartmentaspromotion,whichhelps in increasing their morale and loyalty.Recommendations of Present Salespersons: � A company’s sales force is good source of leads to new recruits. Salespersons typically have wide circles of acquaintances, both on and off the job, since they continually meet new people and generally have many friends with similar interests. Their contacts may yield good sales people because of their understanding of the job and the kind of salespersons required by thecompany.Salespeoplearevaluablesourcesofrecommendations,whenjobmustbefilledinremoteterritories, as the sales personnel in the same or adjacent areas may know considerably more about unique territorialrequirementsandlocalsourcesofpersonnelthanhome-officeexecutives.Manycompaniesrecruitsalespersons for short durations or what many students refer to as summer vacation jobs. In such cases, applications should be asked for at local levels i.e. city wise or even locality wise.

2.5 Selection and Selection ToolsAfter a company has determined the type and number of salespersons it needs and the applications for the job have beenreceived,themanagementisreadyforthethirdandthefinalstageoftheselectionsystem,i.e.selectionprocess.Itinvolvesprocessingtheapplicantstoselecttheindividualswhobestfittheneedsofthatparticularcompany.Thesales force selection process refers to the steps, the sales management goes through to staff the sales organisation. Specifically,theprocessinvolves:

Critical analysis and evaluation of each tool and procedure.•Development of a system for measuring the applicants against the predetermined requirements.•

The basic objective of the selection process is to gather information about the applicants for sales job, which is used for predicting their success/failure probabilities. A selection system can be visualised as a set of successive screens at any of which an applicant may be dropped from further consideration. It can range from a simple one step system consisting perhaps of nothing more than an informal personal interview to a complex multiple step system. Figure-2.2 shows an example of a selection system consisting of seven steps.

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Preliminary interview

Time Reject

Formal application

Interview (s)References

Psychological tests

Physical examination

Employment offer

Expe

nses

Fig. 2.2 A seven step selection system

The type of selection tools and their order of arrangement vary from company to company. Each company must design its own selection system tofit its informationneeds andbudgetary limitations.Factors like the sizeofcompany,typeofindustry,thetypeofsellingjobandthefinancialconditionofthecompanyaffecttheselectionpolicydecisionsofthefirm.

2.5.1 InterviewsThe interview is the most widely used selection tool and in some companies, it comprises the entire selection system. This tool may be used as preliminary interview for initial screening of applicants which also plays an importantpartinthesubsequentstagesofthehiringprocessi.e.asfinalinterview.Personalitytraitslikeinitiative,imagination, aggressiveness, tactfulness, enthusiasm, etc. can come out, when an applicant is talking. Another purpose of interviewing is to verify and supplement the information obtained through other tools. Unusual or omitted references on the application form can be discussed or more details about personality, attitudes and previous work experience can be explored.

Interviewing decisions: The following important decisions are arrived at, by the management regarding interviews:

Who and where: Persons to do the interviewing and place for interviewing depends upon the size and degree •of decentralisation of sales organisation.How many: Number of formal interviews varies with the selling style of the company. •When: The interview may be used at the initial stage of screening process as preliminary interview and it also •usuallyplaysanimportantpartinthesubsequentstageofthehiringprocess,asfinalinterview.

Techniques of interviewingSome of the commonly used techniques of interviews used for selecting salespersons are given below:Patterned/Structured interview: It is totally guided and highly standardised technique of interviewing. The interviewers aregivena specific list ofquestionsor anoutlineofquestions, designed to elicit abasic coreofinformation. Each person interviewed is asked these questions and answers are recorded on a standardised form. Since all the applicants are queried on the same points, different persons can do the interviewing at different places and the results will still be comparable.

Non- directed/non-structured interview: This method does not follow a set format; instead it involves a relaxed discussion. The candidate is urged to talk freely about his or her business experiences, home life, school activities, future plans and on certain outwardly irrelevant topics. The interviewer asks few questions and says only enough to keep the conversation rolling along the desired line. The theory for this type of interview is that it produces truthful answers and thus draws out the real person.

Semi-structured interviews:Mostfirms todayuse interviews that fall somewherebetween the two extremesdiscussed above. Usually, the interviewer has in mind a prepared outline of topics to be covered during the interview and also has the freedom to deviate from the plan and to determine the depth to which a topic will be pursued for each candidate, at the time of interview itself.

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Stress interview: It is a more complex and sophisticated technique of interviewing. The interviewers create stressful environment for the candidate through interruption, criticism, by asking him or her solutions for tricky situations, by rapidlyfiringquestions,etc.Whileinterviewing,theinterviewermayhandtheapplicantanobjectandsay,“Here,sell this to me”, and may then raise unreasonable objections during his or her sales presentation. This technique is used for selecting the sales personnel who are supposed to work under stressful conditions in actual selling situations. The stress interview needs to be planned, administered and interpreted by well trained interviewers.

Rating scales: One shortcoming of the interview is the tendency to lack objectivity, a defect that can be reduced through rating scales. These are so constructed that interviewer’s rating are channelled into limited choice of responses. For instance, in evaluating an applicant’s general appearance, an interviewer is forced to choose one of these answers: nicely dressed, presentable, untidy. It results in more comparable ratings of the same individual by different interviewers. One drawback of the rating scale is the lack of precise description of many personal qualities. It is good practice, therefore, to encourage interviewers to explain rating in writing whenever they feel that the comments are needed.

2.5.2 Selection TestsPsychological testing refers to having the recruit answer a series of written questions, the proper answers to which have been previously determined. The major purpose of testing is to identify and measure more accurately, the various aspects of a person’s behaviour such as intelligence, achievements, interests, aptitude, personality traits, etc. It requires trained specialists for designing, administering and interpreting the psychological tests.

Factors conducive to successful testing: Thefirmhiresarelativelylargenumberofpersonnelanditscostoftrainingperpersonisquitehigh,•Thefirmishiringyounginexperiencedpersonsaboutwhomlittleisknown,•The persons being selected are not likely to be test wise, i.e. danger of faking is minimised, •The executive responsible for interviewing the recruits are not adept at discovering personality traits and selling •aptitude, andIn companies, where the cost of person’s future development is high, the expense of testing may be a small •insurance premium, just to be more accurate in judging a candidate.

Sales executives need to recognise the fact that psychological testing, although capable of making valuable contribution, is but one step in the selection system. The sales manager should not believe that the best score on a test means that the person is the best prospective employee. All that can be said is that the person does or does not fallwithinarangeandallthosewhodofallwithinthatrangeshouldbejudgedasbeingequallyqualifiedforthejob. Test results should be used to probe deeper into any questionable areas.

2.6 TrainingBeforeanyparticipantattendsatrainingprogramme,thetrainermust identifyspecificareasofknowledge,•skills, or attitude in the participant that need to be improved. After the training programme, it is expected that the participants have gained the required knowledge, skills or attitudinal change. To consider the total value of any training, it is important to consider the sequence of training activity in its totality, i.e., before the training, the training event and after the training.Diagrammatically, the training process can be represented in the following manner:•

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Identifying performance opportunity or problem

Identifying training needs

What knowledge and skills are required

Developing training resources

Assembling training materials

Conducting the programme

Reviewing and feedback

Fig. 2.3 The training process

The purpose of a Sales Training Programme is to impart training in the following broad areas mentioned below:Company’s knowledge: nature of industry to which the organisation is related. The organisational place in �its industry and industrial practicesProduct/service knowledge and applications �Sales techniques: the selling process, negotiation skills, sales presentation, handling complaints, post sales �follow-ups, etc.Reporting systems �

Atrainingneedcanbedefinedasagapbetweenthedesiredlevelandtheactuallevelofknowledge,skillsor•performance that can be bridged by training. The starting point for organising and conducting an effective training programmeforthesalespersonisthecarefulandpreciseidentificationoftrainingneeds.Wellintentioned,butgeneral sales training may not yield good results. To the salesperson it may not appear to be tailored to their needs, or it failed to take account of the special selling situations they generally face.Theidentificationthesalestrainingneedsisarationalundertakingandithastobedoneinpropersequence,•which are as follows:

Firstly,todefinethejobstobedone,thespecifictasksinvolvedandtheperformancestandardsrequired. �This involves writing of the job description.

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Secondly, specifying what knowledge, skills and attitudes are needed to achieve the standards set for the �job. Based on the job description, training need analysis can be done setting out the knowledge, skills and attitudes. Some examples of such exercises are given below:

Task Knowledge Skills Attitudes

(a) Identify target

Number of unit sizes Location Present Situation/usage Future needs Finance

Ability to select priorities, good administration

Time, effort and thought given to planning make the whole job easier, more enjoyable and more effective

(b) Draw up action plans

Company activities Competitor activities Distributor involvement Timing Management assistance available own time available

Good communication with managers and distributors. Ability to set realistic objectives in a reasonable time scale.

An agreed plan of action makes success more likely

(c) Plan with distributors

Distributor coverage Distributors representatives Credit problems Distributor needs

Motivation of distributor representatives

Liaison is essential for success

Table 2.2 Job description: sales planning

(a) Plan Journeys

Geography Market Days/events Whether appointments are needed

Ability to assess timing of individual calls Ability to plan journeys economically

Time and effort saved, makes work easier, enjoyable and effective

(b) Plan calls

Customer needs products available Distributor involvement Customer attitude

Ability to identify customer needs Communication with distributors

(c) Make effective sales presentations

Products and system knowledge Economics Customer needs Selling techniques/negotiation SalesbenefitNature of objectives Alternative methods of closing

How to open an interview How to create interest HowtopresentbenefitsHow to overcome objections Negotiation How to close positively

Professional selling is essential in a competitive market

(d) Involve management when necessary

Own limitations of authority Customer needs Price limitations

Communication with management and distributors

A team works better than a collection of individual

Table 2.3 Job description: make effective sales contract

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Task Knowledge Skills Attitudes

(a) Identify needs for each distributor and each representative

Priority‘gaps’tobefilledbetween company needs individual needs, and customer’s needs

Distinguish between knowledge, skills and attitudes and establish priorities Distinguishbetween‘lackof’and‘needfor’

Efficientprofitabledistribution is essential to Co’s own prosperity

(b) Agree what should be done and by whom

Methods of training other facilities available Other personnel Own limitations Own skills

Liase with management ‘Sell’trainingtodistributors and representatives Setting of objectives Planning and preparation

It is our responsibility to equip our distributors with the knowledge and skills to sell products and services

(c) Carry out training

Methods : On-the-job Off the job Product knowledge Sales knowledge Use of training techniques Preparation of aids Appropriate location

Applying the right Method Translating knowledge to suit audience techniques and aids

Training is not only a class room operation. Use of the right method and careful preparation is essential

(d) Evaluation on a Continuous basis

Gap in the objectives set Objectives achieved

Interpret reasons for gap Take appropriate steps i.e. change objectives, change training methods and change training contents

All good training is continuous and accumulative

Table 2.4 Job description: Motivate and train distributors

Task Knowledge Skills Attitude (a) Identify what is needed:

(i) For personal action (ii) For Distributor action (iii) For individual

customers

Priorities Customer needs Customer attitude Distributor coverage Representative’s abilities

Ability to select and prioritise Ability to delegate

(b) Keep personal involvement to a minimum As Above

Tactful delegation to distributor representatives Training of representatives

(c)Providefirstclasspersonalservices where necessary

Technical Knowledge Product knowledge Managementoffinanceandeconomics

Ability to provide service effectively Use service as a sales aid

Service is a tool to be used in gaining and maintaining business not an end in itself

Table 2.5 Job description: provide after sales service

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Thirdly, definewhat knowledge, skills and attitudes each salesperson has: how andwhat performance•standards each one is achieving. The collection of this information requires the setting up and constant use of an effective salesperson performance appraisal system. It also involves agreement on measurement standards and techniques.Fourthly, identify the training gaps in each area of knowledge, skills and attitudes.•Fifthly, definewhat additional trainingneeds arise as a result of changes external to the salespersonspast•achievements and standards. This necessitates checking on a systematic and continuous basis the directions and future plans for the company’s marketing planning, sales planning and recruitment functions. Lastly,definethetrainingprioritiesforthecurrentperiod,i.e.,toidentifywhatarethetrainingneedsinthe•immediate future, in the mid-term and in the long term, and accordingly prioritise the training activity.

2.6.1 Designing and Conducting the Training ProgramWhen you are designing a training programme, you must keep in mind that different people, learn easily from different learning styles. Therefore, any person has one of the following as dominant learning style:

Activist: An activist involves himself or herself fully and without bias in new experiences. He or she is •open minded, not sceptical and is enthusiastic about anything new. He or she is happy to solve problems by brainstorming. Thus, if you are designing a programme for an activist, be sure to include situations of his or her participation like, games, simulation exercises, etc.Reflector:Heorshelikestostandbacktoponderexperiencesandobservethemfromvariedperspective.Heor•she will collect data, himself or herself and from others, and prefer to think it thoroughly before coming to any conclusion. He or she prefers to take a back seat in meetings and discussions and enjoys observing other people inactionandtendstoadoptalowprofile.Whiledesigningaprogrammeforareflector,besuretoincludeactualcase studies and experience and guide him or her to make his or her own decisions.Theorist: He or she integrates observations into complex but logically sound theories. He or she thinks out •problems step by step and likes to analyse and synthesise. He or she tends to be detached, analytical and dedicated to rational objectives, rather than being subjective or ambiguous. His or her approach to problems is consistently logical.Pragmatist: He or she is keen on trying out ideas, theories and techniques to see if they work in practice. He •or she is the sort of person who will return from training brimming with new ideas that he or she wants to try out in practice.

For training of sales force, you can use one of the three major types of programmes. However, for all the programmes, the planning must be done comprehensively to ensure effectiveness of the training. The programmes are:

Self learning modulesIn this programme, the participants are given the course material which they are required to study themselves. Written notes can be sent, and if needed audio and video cassettes can be used. This kind of training is useful when you want the participants to revise some material or you want to send some pre-conference study material. The major disadvantage of this method is that you cannot be sure whether the participants have actually studied the material. Also, in this method, there is no feedback.

Class room trainingEach training programme needs to be individually planned based on the pre-decided objectives decided for the programme. However, the following are the important areas that can be covered in a typical sales related programme:

Company knowledge – history and future plans•Product information•Marketing strategies for various products or services•Learningthefeatures,advantagesandbenefitsofproductsorservices•How to obtain interview with the prospective customers•

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The sales presentation•Differentwaysoffindingcustomer’sneeds•Answering objections•Closing the sales presentation•Planning geographical territory and planning each day•Time management•Administrative responsibilities•Communication abilities•Writing report•

The objective of a class room based refresher course is to reinforce some aspects in the salespersons which they are likely to forget and also to add new knowledge and skills to the salespersons. Thus, as the name suggests, a refresher and development course must refresh the memory and develop the true potential of the salespersons. To truly meet its objective, a refresher course must be based on factual information. Some of the questions that need to be answered for running an effective refresher course are:

Planning Does a salesperson prepare and work on his or her plan? Does he or she keep up to date records? Does he or she call regularly on his or her customer?

Appearance Is his or her appearance professional? Does he or she keep his or her presentation material neat and clean?

Attitude Does he or she have a positive or a negative attitude? Howishisorherresponsetoofficialcommunication?Howmuchisheorsheinfluencedbyoutsideinfluences?

Selling Skills How good is his or her product knowledge? How updated are his or her selling skills? Does he or she have knowledge of any special techniques?

Table 2.6 Questions that need to be answered for running an effective refresher course

Once all the information is gathered, the trainer can plan different session of refresher course which can include case studies, role plays, syndicate presentations, simulations etc.

On the job trainingOneoftheveryimportantwaysofteachingnewskills tosalespeopleis throughonthejobfieldtraining.Theimportant advantage this method offers is that the skills are demonstrated to the salesperson in the real life situation and thus the impact on the salesperson is expected to be much stronger. Also the individual salesperson’s needs can beidentifiedandattendedto.Inon-the-joborfieldtraining,thetrainercaneithermakeasalescallhimselforherselfwhich the salesperson observes and learns. In the other method of on-the-job training the trainer gives feedback to the salesperson after observing him or her during his or her sales call. The salesperson thereafter, practices the recommendations in the future calls.

2.6.2 Trainer’s AbilityA successful trainer needs to posses various skills to do a good job of training. Some of the basic things without which a trainer cannot be successful are thorough job knowledge and an ability to relate to the actual situations the salesperson experiences. The other main abilities which a trainer must posses are:

Analytical abilityA good trainer is able to analyse the situations and identify the exact training needs for salespersons. The analytical abilitywillhelpthetrainertofocusonissuesofprimeimportanceratherthantouchingsuperficialissues.

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Basic educational abilitiesA trainer needs to have the knowledge about the jobs the salespersons perform. He or she should also know the principles of communication. It would be still better if the trainer has some knowledge about the adult learning.

Training techniquesA successful trainer needs to understand what makes people learn and accept new things. He or she should have clear knowledge about different techniques of training. He or she should be able to employ such techniques, for maximum results.

Ensuring participants’ participationTo ensure effective learning, the training session must be interactive where participants freely participate. Some of the methods employed for ensuring trainee participation are:

Discussion groupsTrainees are divided into groups and given various topics, issues etc. which they have to discuss amongst themselves and come up with probable solutions/questions and answers period, after each session.

Decisionmakingexercises,forexample,findingproductbenefitsandconvertingthemintosalespresentations•for various types of customers.Demonstrations: These can be either trainees acting out certain role plays or video demonstrations or •demonstrations by the trainer.CaseStudies:Participativeattempttofindthebestpossiblesolutionforareallifeproblem.•

Course organisationOnce the total written material for a course is ready, the session can be put into practice. A good trainer will always keep in mind some basic rules of organising training session, like:

Punctuality is essential.•All material related to training like, slides, demonstration pieces, samples, etc., must be carefully checked before •the programme.The room where the training is to be held must be checked for adequate lighting and seating arrangements.•

Training follow up refers to the time immediately following the training. This may vary from the time when learners are still a captive audience, to possibly months or years after training. What happens after training is vital to any training session.

2.6.3 Methods of TrainingThere are manifold methods of imparting training to salesmen. Any of them can be adopted to suit the nature of the product and the temper of the market and con also be varied according to the calibre of the candidates put on training. The main methods of training are:

Lectures: Lectures are given at appointed hours on the various aspects of selling and the salesmen are expected to take notes of the lectures and learn skills of salesmanship. The quality of the lectures and the attention and receptivity of the trainees determine the effectiveness of this method. Lectures should be interesting, intelligible and appealing to the salesmen. Otherwise they go waste. Lectures are to be followed-up by other methods like group discussions, seminars and written tests.

Sales Conferences: Salesmen may be called to attend the sales conference at periodical intervals, say, once a weekorfortnightlyormonthly.Officers-in-chargeofthesalesofthefirmmayaddresssuchconferencesonsellingtechniques.Subjectlikesellingpoliciesofthefirm,complaintsreceivedfromcustomers,improvementsintheproduct,competitionfacedbythefirm’sproduct,proposedadvertisingprogrammeetc.arediscussedinsuchconferences.Merits of this method of training are as follows:

It develops logical thought. �It trains salesmen in taking balanced decisions. �

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Participants get broader views of the subject discussed at such conferences by exchanging ideas and �experience. Combinedthinkingofthegroupofparticipantshelpsinfindingsolutionsofproblemsdefyingsolutionby �individual salesman. Its limitations are that it is slow and costly and there is shortage of such persons who can preside over such conferences to guide the discussions on right lines.

Sales manuals: Salesmen are provided with bulletins, catalogues, brochures etc. for their reference. Sales Manual isahand-bookcontainingabriefhistoryofthefirm,theparticularspertainingtotheproductdealtwiththefirm,itsselling policies, and advertising and sales promotion activities. It also contains detailed instructions to be followed by salesmen under different circumstances. It is a sort of ready guide or a tool of self-study for the salesmen so as toplantheirsaleseffortsappropriately.Salesbulletinsarepublishedbysomefirmsatperiodicintervals(weeklyormonthly) to give latest information to the salesmen.

Field training: After the salesmen have completed their basic training they may be given practical experience of the sales job by taking them to the prospects. The salesmen and the trainer approach the prospects. The trainer begins his sales talk. The trainer is expected to observe the whole process and bear the different crucial points in his mind. The trainer afterwards explains the different steps and points of his sales talk. Then, the trainee is asked to handle the sales job. This is an expensive method of training.

Correspondence training: Salesmen working in different territories are supplied, from time to time, with lessons bearing upon the techniques of selling and giving other useful information. Instructions are also despatched to the salesmen through post. The salesmen are expected to go through the lessons and other literature and make use of the hints and information contained therein to reinforce the effectiveness of their sales efforts. The salesmen also may correspondwiththetrainingofficeseekingguidanceonmattersrelatingtotheirduties.Thismethodoftrainingissuitable only to the experienced salesmen and is meant mainly to provide extra information to them.

Visual training:Sellingprocessisactuallydemonstratedthroughvisualaids.Bymeansofmotionpicturesoffilms,televisionetc.thestepsinvolvedinsellingprocessarepicturisedandexhibitedatspecifiedhoursdaily,weeklyorbi-weekly. These pictures create permanent impression on the salesmen. Sometimes short plays, skits and dialogues are staged to educate the salesmen. This method of training is very costly. Besides, its effectiveness depends on the quality of the pictures, the theme and its presentation.

2.7 Types of CompensationThe Direct compensation package of salesperson consists of the basic pay plus allowances covering all travel •and entertainment expenses etc. In case, the salesperson has to stay overnight, his or her boarding and lodging allowances are also provide for. All the above expenses needless to say, are budgeted and controlled as per the salesperson’s route and cycle of travelling. The salesperson is normally required to present necessary vouchers to get his or her expenses reimbursed.The basic salary and other allowances are revised from time to time. They also increase with promotion of the •salesperson.Moreimportantthanthebasicsalaryaretheotherbenefitsmadeavailabletothesalesperson.TheIndirectcompensationconsistsoffinancialaswellasnon-financial incentives.Thefinancial incentivesareagain in more than one form:

Salary plus commission on sales above a certain amountHerein, the salesperson receives direct salary and in addition to it a commission. Every salesperson is assigned a fixedquota,territorywise/customerwisetobeachievedinafixedperiodoftime.Thecommissionisawardedonachievementofthetargetedquota.Again,afixedpercentageofsalesachievedoverandabovethetargetarealsoset. This type of compensation scheme ensures a direct salary as well as an in-built motivation system through incentives.

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Salary plus share in profitsThis is not a very prevalent method. It is generally suggested for a company selling high value items with high profitmargins.Theincentivehereisbasedonprofitsearned.Herein,thesellingexpensestosellaproductmayalsobelargeandthisisincorporatedintheprofitsharingschemeasitactsasacontrolmechanism.Alsosalespersonsworkingtoobtaincontractsaregenerallygivenashareinprofitsratherthanawardedondirectsales.

Non financial incentivesThetrendthesedaysistoprovideothernonfinancialincentiveslike:

Training programme �Awards, recognitions and prizes. �

Most companies offer training programmes for their salespersons. On an average a salesperson has to undergo •atrainingcourseeveryoneortwoyears.Thesetrainingprogrammesareviewedasanindirectbenefitbythesalespersons. They may be held in the company premises or preferably at an outdoor locale. They break the monotony of the salesperson’s job as well as make him or her feel a part of the company team. A sense of belonging is cultivated which also motivates him or her.In addition to the training programmes the award ceremonies for outstanding achievements in sales are held •inexoticlocaleslikehillstationsorfive-starhotels.Theawardsarepresentedthroughforeigndignitariesorimportantpeopleinthefield,thusprovidingthesalespersonwiththemuchneededrecognition.Alsointhecorporate sector travelling opportunities are given as incentives.

2.7.1 Factors and Criteria for Designing a Compensation Package Although the basic structure of a compensation plan may be similar across the companies, some factors do predominantly shape the structure of the company’s compensation plan. They are:

The relation with product life cycleThe amount of selling effort is directly related with the stage at which a product is in its life cycle. So, in effect, •the compensation structure is an indirect function of the selling effort. When the product is in the introductory stage the company needs a dynamic sales force which can establish the product in the desired market. The sales force must be enterprising, willing to travel, take criticism easily, have a good knowledge of the product, have good communication skills and last but not the least, have tremendous stamina to work. To keep such a sales force motivated, adequate compensation is the basic need. So, in the introductory stage of •aproduct,thedirectsalarymaybeonahighersidebutindirectbenefitsmaynotbeonthehigherside.Inthegrowth stage, the motivation of the sales force has to be sustained to exploit all the opportunities available in the market. They have to approach the market with renewed vigour. At this point indirect compensation schemes, which are incentive linked, play an important role. Incentives •linked with achieving targeted quotas; giving adequate feedback on market and competitor activities will keep the sales force happy and at the same time help the product in its growth.Whentheproducthasfirmlyestablisheditself,thesalesforcealsoneedsabreakfromthemonotony.Otherindirect•benefitsliketrainingprogrammesingoodenvironmentallocals;foreigntripsfortrainingandunderstandingthemarket; promotions to much responsible positions, etc., are the requirements at this stage. These programmes not only enhance their knowledge but lend a new direction of looking at things.When the product is in the decline stage some fresh incentive schemes may be introduced in the compensation •scheme to generate fresh interest in the product. The number of people involved with the product also has to increase marginally. The existing product managers who may be concentrating on a more successful product at this stage would require added incentives to revive the declining sales of the product concerned.Incorporating the discussions we have had above a Product Life Cycle Curve in relation to changes in •compensation over time would look like Figure 2.4.

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Sales

Training

Direct salary+

Basic incentives

Direct salary

Added incentives

Product life cycle

Introduction Growth Maturity Decline

Compensation during stages of product life cycle

Fig. 2.4 Compensation during stages of product life cycle

Compensation related with demographic characteristicsIn practical situation the compensation package preferred by the salespeople depends upon their demographic characteristics also. Their age and size of family or the number of dependents play an important part in the preference for a basic salary and /or incentives. However, this cannot be generalised and depends largely on the individual. Table-2.6classifiesthepreferenceaccordingtodemographicdata.

Salesperson Preferred Job Preferred Compensation Style

Age Family Size

20-28

28-35

35 & above

Bachelor

Married with one-two young children

Married with growing up children

High risk High reward Aggressive Company Established

Company stability

Stability and steady job

Straight Commission or Incentive Intensive plan

Basic + Incentive preferably with higher basic component

Preferably straight salary basis

Table 2.7 Compensation related to demographic characteristics

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Competitor’s practicesFew important criteria which must be kept in mind while designing a sales force compensation package. These are primarily:

The budget set for the compensation of sales force.•A proper study of job requirements is the second step followed by a concise job description.•Definingtheorganisationalhierarchyofthesalesforce,theroleandfunctionsofeachresponsiblepersonin•the structure.The current trend in the competitors selling similar products in the similar markets.•The company’s policy of motivating salespeople whether through an in-built incentive system or through •provisionofindirectbenefitslikeentertainmentallowance/liberaltravellingallowancesandotheroutofpocketexpense reimbursements.Formal and compulsory training programmes for all sales personnel to make them feel a part of the company •as well as to develop their skills and provide them with the necessary break from the monotony of daily routine sales reports.Human resource development programmes to create a feeling of attachment towards the task at hand and imbibe •the culture of the organisation.

The present day trends lay greater emphasis on the last two mentioned considerations along with a direct compensation programmeinclusiveofdirectsalary.Withsellinghavingbecomemoreandmoredifficult,asatisfactorycompensationpackage is must to avoid high turnover with the sales force.

2.8 Motivation of Sales ForceMotivation is generally regarded as the process of getting people to work towards the achievement of an •objective. Ideally it should go beyond the achievement of company objectives, plans, forecasts or targets and help the company win commitment of sales force to the company.Salesforce is primarily responsible for achieving the sales targets and as already mentioned the sales force can •notbecontrolled,administeredinthewayfactoryworkersorofficestaffcanbemonitored.Thesalespersonsare required to be self starters, highly ambitious, result oriented and go-getters. All the sales situations cannot be predicted in view of the dynamics of the market place.Effective selling, therefore, requires creative skills. Thus, the sales force has to be kept highly motivated and •committed, both externally as well as internally. Attracting and maintaining a well motivated sales force is a challengingtask.Theconfidenceandmotivationofasalespersongetswornoutbytheinevitablerejectionsheor she suffers from customers as part of his or her everyday activities. The challenge ofmotivation ismagnified by the fact that the salespersons and supervisor are formally•geographically separated; as a result the salesperson may feel isolated and even neglected. He or she is prone to frustration of success and failure coupled with extra working hours. He or she requires extensive travelling, many days of separation from family and with sense of risk involved in travelling.Above all he or she has to live in the environment of competitiveness with his or her own colleagues to meet •the targets. In a market situation characterised by keen competition the salesperson is constantly exposed to the offerings of the competing manufacturers – in terms of their sales compensation packages, working conditions etc. All these peculiar conditions, therefore, require an understanding of the motivational needs of salespersons by the management.Thesimplemotivationaltoolsofearlyyearssuchasonlyfinancialbenefitsprovetobeapoormethodofmotivation•beyond physiological and safety needs satisfaction, on account of the unique aspects of a salesperson’s job. The non-financialincentives,thus,becomeanimportantcomponentofthemotivationmixofacompany.Surveysbased on the sales force of the different industries have resulted in identifying some unconventional factors effecting the motivation of the sales force. The unconventional factors that make a special mark on sales force motivation are discussed below:

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Meetings between Manager and Salesforce �These are highly regarded by sales managers in the motivation of their sales teams. This provides an -opportunitytomanagerstomeettheirsalesforceinthefield,atheadofficeandatthesalesmeetings/conventions. This further provides a number of opportunities for improving motivation. These meetings allow the sales manager to understand the personality, needs and problems of each salesperson. The manager can then better understand the causes of demotivation/frustration in individual salesperson and respond in a manner which takes into account the needs, problems and personality of the salesperson. Salestechniquescanbeimprovedandconfidenceboosted.

Clarity of Job �Clarity of job and what is expected from the salesperson is a great motivator. The objectives when duly -quantifiedandwelldefined,properlyconnectedandlinkedwiththerewardandrecognition,serveassource of motivation to the salesperson.

Sales Targets or Quotas �If a sales target or quota is to be effective in motivating a salesperson, it must be regarded as fair and -attainable and yet offer a challenge to him or her. Because the salesperson should regard the quota as fair, it is usually sensible to allow him or her to participate in the setting of the quota. However, the establishment of the quotas is ultimately the sales manager’s responsibility and he or she will inevitably be constrained by overall company objectives. Quotas can be set on Rupees sales, unit volume margin, selling effort or activity and product type. The attainment of a sales target or quota usually results in someformoffinancialbenefittothesalesperson.

Sales Contests �The sales contest is an important tool to motivate salesperson. The purpose of the sales contest varies -widely. It may encourage a higher level of sales in general, to increase the sales of a slow-moving product or to reward the generation of new customers. It provides an incentive to show better performance and secure more satisfactory results. However, sales contests have a few disadvantages too. One such disadvantage is that it can encourage cheating.

Sales Conventions and Conferences �These are the devices of group motivation. They provide opportunities for salespersons to participate, -gain social satisfaction and express their views on matters, directly affecting their work. They promote team work, dissolve social barriers, inspire and raise salesperson’s morale. Most of the companies in India are now-a-days adopting this method to motivate their sales force.

Positive Affect �The positive affect method is also an important technique for motivating the sales force to their best. -The proper application of praise, positive feedback, and human warmth and understanding can impel others to perform up to their capabilities. This must be done in a genuine way and not be perceived as overtly self serving. Another form of motivation through positive affect occurs via small group and peer relations. Friendship, support and comradeship frequently serve as vehicles for creating a positive feeling towards the company and job.

Leadership Style of the Manager �Leadership style of the manager plays an important role in motivating the salespersons. Inspirational -leadership,whichreferstoinfluencethroughreferentpower,identificationorcharismaticcharmisanimportant tool in the motivational strategy of the management. It also tries to create and perpetuate certain corporate myths and success stories, which indirectly motivates salespersons to perform at their best.

Freedom to Work �In order to perform the onerous duties and responsibilities, the salespersons must be given a reasonable -amount of freedom and discretion in performing their job. Discretion and freedom may be accomplished by allowing salespersons to develop their own call patterns, more control over the types of promotional packages that are offered to their customers, etc.

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Reward and Recognition �Although sales quotas, sales contents, conventions and conferences have positive carry over effects, -these are short lived techniques of motivating salespersons. On the other hand reward and recognition of salesperson’s accomplishments are more enduring and relatively more sound methods of motivation. Some of the ways to extend recognition and honour to salespersons include conferment upon the title of“salespersonofthemonth/year.”

Persuasion �One of the more common and recommended forms for including high levels of motivation is through -persuasion. In this situation, managers use rational arguments to convince salespersons that it is in their own best interests to act in a preferred way. Persuasion has the advantage of getting people to conclude that their actions were performed out of their own free will. This leads to higher levels of self direction thanrewardorcoercivemodesofinfluencewhereoneperceivesheorsheactsmoreasafunctionorexternal compulsion than internal volition.

Financialincentivesaredefinitelyamotivatingfactor,buttheyvaryatthehierarchicallevelsofthesalespersons.•The need is great at lower end of the salesperson. They not only keep the salespersons on the company rolls but also motivate them to contribute to the growth of the company and thereby get grown individually. It is also important as a managerial tool to control and direct the sales force to attain the sales objectives. In the managementandmotivationofsalesforce,afairlyreasonablefinancialincentiveplanplaysaveryimportantroleand“asalesforcecannotbeconsideredsoundlymanagedunlessthereisawelldevelopedandwelladministeredcompensation plan.”

2.8.1 Monitoring of Sales ForceThe monitoring system becomes an input in the formal appraisal of the salesperson’s performance, Sales reports are the basic tool used for monitoring sales personnel. The sales manager uses the information from these reports to judge whether sales personnel are calling on and selling to the right people and whether they are making too many or too few calls. A good monitoring system also helps the sales management in determining what can be done to secure more and larger orders.

The basic purposes for which a good monitoring system is designed could be:to keep the sales manager informed about all the sales activities of the sales personnel•to enable the sales manager to get data for evaluating performance; for example, details of prospects called •upon, number of calls made, number of orders obtained, days worked, kilometres travelled, selling expenses incurred, displays arranged, etc.to enable the sales manager to detect deviations from standard performance and take timely remedial action•tohelpthesalespersonplanhisorherwork,forexample,inplanningspecificapproachesforspecificaccounts;•planning a travel schedule, etc.to record consumer reactions and complaints in respect of new products, price changes and service policies•to record information on competitors activities for example, new products, changes in promotion and pricing, •changes in service and credit policy, etc.to record information on local changes•to build a rich database of territorial information which can be put to a variety of uses•to furnish information requested by marketing research – i.e. data on dealers sales, product wise•

The monitoring of sales force is closely related with the monitoring of sales. One depends on the other. The sales performance of a company and its sales force is measured using a number of parameters on a continuous basis. Some of the commonly used parameters are:

sales per salesperson, per dealer, per product•expense to salesperson, ratio for each dealer and salesperson•calls per day•

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order – call ratio•average cost per call•direct selling expenses•profitcontributionanalysis•number of accounts•number of customer complaints•

The emphasis in monitoring is on gathering information on day to day activities with respect to the chosen parameters and taking a timely stock of deviation from expected performance. Monitoring therefore is a way of achieving day-to-day control over the sales effort. There are two of the most common methods of monitoring sales performance arethroughsalesreportsorthroughfieldvisitsbythefieldsalesmanagers.

2.9 Sales Report and their Analysis Though the format of the sales report will vary across companies, some basic components are common to the sales report in all organisations. Some of these components are:

Progress report: This part of the report is meant to give information on the progress or day to day work done by •thesalesperson.Itmaybepreparedaftereachcall,orcommutativelyforcallsmadeduringaspecifiedperiod.The component furnishes valuable data on company’s position in different territories and in respect of each account.Usually,theprogressreportalsorecordsinformationonspecificclassorcustomers,extentofcompetitiveactivity, best time to call upon the competitor items which become valuable input in future sales planning.Expense component: Since all salespersons are reimbursed for expenses incurred or are given expense accounts •for which they have to account for, most sales report have an expense component. The objective of incorporating this component is to keep a check on the nature and extent of salespersons expenses.Work plan component: Usually for a week or a month in advance, salespersons are expected to submit a work •planorcallschedule.‘Theworkplan’mayincludedetailsofprospectiveandpresentcustomerstobecalledupon,routes to be taken, the non-selling activities to be performed, etc. The main aim is to help the salesperson in his or her planning and scheduling activities and keep a track of his or her whereabouts. This component also helps the management in process of control by allowing comparisons of salesperson’s plan and accomplishments.New business or potential business component: The report may require the salesperson to inform on accounts •recently obtained or those who may become sources of potential business. This component furnishes information on the prospecting capabilities of salesperson.Lost business component: As salespersons are required to sell under competitive conditions, they may at times •lose prospects to competitors. This component of the report provides information on the salesperson’s ability to retain customers. It can also be utilised to develop pointers for gaps in sales training, changes in service and credit policy and product improvements.Complaintandadjustmentcomponent:Thiscomponentisrelatedtothespecificcomplaintsthatacustomer•or class of customers may have in relation to the work of the salesperson, the product or the company policy and the adjustment if any made by the salesperson. The information generated is useful in detection of needed product improvements, service improvements and change in merchandising practices.Basic types of sales report and how they can be analysed to monitor sales performance:

Daily/weekly sales reportThe basic sales report to be prepared by the salesperson is a daily report or a weekly report depending upon the •type of product and its movement. This report forms a basis for estimating the future trend of sales of individual products/brands. It also assists in production planning, cost planning and product portfolio planning.A summary of the daily/weekly reports for all the branches is made on a monthly basis to arrive at total sales •for the month and to study its variance from estimated sales. The budgets for the next month may be revised accordingly. At times sales in a particular territory/area may be affected on account of stock-outs; as a result, more stock is needed to be sent. A study of weekly sales estimates reveals the seasonality of sales, if any. This

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enablesproperproductionplanningandmonitoringofsalesperformance.Condensingofmonthlyfiguresintoquarterlyfiguresisusedtoestablishsalesestimatesforthenextquarter.Apartfromthebasicvolumeanalysis,information on other parameters is also sought.

The value of goods sold gives the contribution from each product. This contribution needs to be �maximised,Sales are broken down geographical area wise to assess the potential demand and monitor salespersons �performance in the light of this information, andA customer wise break-up of sales indicates whether the right kind of customer is being serviced or whether �the salesperson is concentrating on a segment which is not a prospective buyer in the long run.

Regional sales analysis The strength of sales region wise is indicated through this analysis. Variation in regional sales reveals the •effectiveness of particular localised sales development and the importance of competitors in different regions. Theregionalsalesfiguresareadjustedfortheareaoftheregionasalsothesizeofthepopulationofthatregion.The boundaries of the regions should be permanent so that trends over a long period of time can be watched.The reports in addition to supplying the regular information on the different aspects of marketing, reveals certain •additional information :

What are the main competitive brands? �On what system of distribution do they work – direct sales to retailers, through wholesalers only or both �or otherwise?How do services given by competitors compare with those given by the company? �Doesanymanufacturersupplygoodsona“salesorreturnbasis”? �What are the credit terms offered? �What are the discounts offered? �Do the competitors give any specialised treatment to some traders? �Are the in-shop displays regularly supplied by the competitors? �What is the frequency with which competitors call upon their distributors as also the promptness in �delivery?

The above analysis seeks to point out the factors which contribute to the competitors’ success and the policies •that the company must employ to counteract it. The perception of retailers with respect to the company’s product and the competitor’s product is very essential. The reasons to which retailers attribute the success or failure of the leading brands is very essential to determine. •The retailers serve as a vital link between the company and the consumer and it is his or her opinion which generally forges the link. Also, technical faults in the product, if pointed out as detrimental to sales by the retailersneedstoberectified.

2.10 Performance Appraisal and EvaluationEvery sales manager is engaged in the task of appraising and evaluating his or her sales force continuously in •an informal way. Informal evaluation however is not enough to arrive at realistic and astute assessment of the worth of a salesperson in absolute or relative terms. The ultimate goal of any evaluation programme is to make a salesperson more valuable to the company. In order to achieve this evaluation programme must involve:

A study of the salesperson himself or herself – his or her skills, habits, aptitudes and attitudes. �A study of his or her selling record, efforts and accomplishments. �An analysis of the direction that the development function is to take. �

Evaluating salesperson’s performance is a complex task not only because salespersons are required to perform a •variety of activities, but also because different types of selling situations require different kind of selling skills, which may not lend themselves to equitable comparisons.

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In addition salespersons differ in terms of selling acumen and personal qualities, then territories differ and •they are required to spend a large part of their time away from their immediate supervisor. A good monitoring system, as you have learnt in the preceding sections, becomes a basis for developing an appraisal system and for evaluating sales performance.Appraisal and performance evaluation systems, besides enabling the sales manager in judging the contribution •ofhisorhersalesteamandimprovingitsefficiency,havealsobeenfoundtobeusefulin:

Developingsalesmanshipasaninterpersonalinfluenceprocess, �Motivation of salespersons and supervisory leadership, �Identifying the need for continuous training and development of sales force, �Improving selling aids like demonstration materials, working documents etc. �Determining and restructuring salesperson’s territories and work assignments., �Improving sales planning like planning call cycles routes and visits, job preparation etc., and �Introducing sound compensation and incentive systems supported by a national evaluation system. �

There are some basic issues involved in all performance evaluations systems for sales force which require •consideration while the system is being designed. You will note that unless adequate attention is given to these issues they might result in discontentment of those being evaluated. Some of these issues are:

Thefirstissuerelatestoevaluationbasedonqualitativevis-a-visquantitativedata.Itisobviousthatinany �qualitative assessment, personal bias and subjective value judgement may vitiate evaluation. On the other hand evaluation based entirely on statistical data may not give entirely valid results as certain important determinants of a salesperson’s effectiveness (for example personal effectives of a salesperson in handling consumerrelatedproblems)donotlendthemselvestoquantitativedefinition.Another issue relates to the comparisons between salespersons on the basis of the results of evaluation. Such �comparisonscanneverbeona“persontoperson”basissinceagreatdealofhumanelementisinvolvedand different salesperson have to work under different geographical and environmental conditions; and may handle different set of products or customers.

The third issue is related to the problem of determining standards of performance. The whole evaluation exercise •rests on the comparison of actual sales performances against predetermined standards or norms. If these norms or standards are not realistic, the whole exercise would become self-defeating.Another issue worthy of consideration is the periodicity of evaluation. Evaluation based on very short-term •results may not be very correct as it ignores the value of some criteria which are of long-term value to the company. Periodicity of evaluation has been found to vary with the type of product sold, industry practices and management’s outlook towards control. Yearly evaluations are a very common practice though longer periods are also prevalent, especially in case of capital goods and industrial goods companies.The last issue here refers to the accounting system or the database of the company as a basis of developing the •evaluation system. Actual data taken from typical sales records are not adequate to provide precise comparison of salespersons or sales group performance. For example, if the product mix sold by different sales group differs,itwillbedifficulttocomparetheperformanceofthesalespersonsinthetwodifferentgroupsmerelyon accounting data.

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Summary TheSalesPolicyofafirmstartswithselectionofproduct/sforsale,pricingofproducts,geographiccoverage,•distribution arrangements, distribution logistics, advertising, promotion and publicity plans.The usual method of selection of candidate is through the candidates’ bio-data and interview.•Basedontheavailabilityofproducttothesalesmanagerinoneyear,throughthefirm’sownproductionor•through outside procurements, the sales manager plans to sell the entire quantity of products.Sales forecasts are made on the sales territory basis and then they are consolidated to get to the all-India •figure.Oncethejobspecificationsarelaiddown,itbecomeseasierforacompanytoinitiatetheprocessofrecruitment•andselection.Alsotrainingcanhelpasalespersontofulfilljobresponsibilitiesmoreeffectively.The information that is typically requested on standard application form includes personal background, education •and employment record. Companies using standard application form can obtain the additional information required, during the interview. Salespeoplearevaluablesourcesofrecommendations,whenjobmustbefilledinremoteterritories,asthesales•personnel in the same or adjacent areas may know considerably more about unique territorial requirements and localsourcesofpersonnelthanhome-officeexecutives.A selection system can be visualised as a set of successive screens at any of which an applicant may be dropped •from further consideration.The major purpose of testing is to identify and measure more accurately, the various aspects of a person’s •behaviour such as intelligence, achievements, interests, aptitude, personality traits, etc.Lectures are given at appointed hours on the various aspects of selling and the salesmen are expected to take •notes of the lectures and learn skills of salesmanship.

ReferencesSharma, S. P. & Joshi, D. B., 2008. • Marketing and Sales Management , Global Media.Sharma, N. K., • Sales Management. Global Media.Influenceofsalesforcemanagement• [Online] Available at: <http://salescognition.com/articles/Influence%20of%20Sales%20Force%20Management%20by%20Slater.pdf>. [Accessed 10 October 2011].Sale Force Management • [pdf] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/36207/1/unit-6.pdf>. [Accessed 10 October 2011].Singh, I., 2010. • Mod-4 Lec-4 Sales Forecasting-I [Video Online] Available at:<http://www.youtube.com/watch?v=HCUvalZnQ-Q>.[Accessed 10 October 2011].Zarrabian, M., • Sales Training Effectiveness [Video Online] Available at: <http://www.bnet.com/videos/sales-training-effectiveness/253433>. [Accessed 10 October 2011].

Recommended ReadingChurchill, A. G., 2000. • Sales force management, 6th ed., Irwin/McGraw-Hill.Carter, T., • Contemporary sales force management. Routledge.Spiro, 2003. • Management of a Sales Force. Tata McGraw-Hill Education.

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Self AssessmentThe______________of afirm startswith selectionof product/s for sale, pricingof products, geographic1. coverage, distribution arrangements, distribution logistics, advertising, promotion and publicity plans.

Sales Policya. Force managementb. Sales strategyc. Sales forced.

Human Resource Managers get the persons in one of the following ways:2. Posting advertisements on the wallsa. Sending personal mails for interviewb. Business school’s campus interviews c. Flashing advertisement on televisiond.

In ________________________ the trainee is told about the plans, policies, methods of working, hierarchy 3. levels, reporting levels, forms used in report writing.

On the job traininga. Training on the jobb. Class room trainingc. Onthefloortrainingd.

Theprocess,bywhichqualificationsandpersonalitycharacteristicsareidentified,iscalled______________.4. Job satisfactiona. Job requirementb. Job opportunityc. JobSpecificationd.

The _______________ is the most widely used selection tool and in some companies, it comprises the entire 5. selection system.

Interviewa. Questionnaireb. Group discussionc. Personality testd.

_______________________ produces truthful answers and thus draws out the real person.6. Interviewa. Patterned interviewb. Semi structured interviewc. Non structured interviewd.

____________________ is useful when you want the participants to revise some material or you want to send 7. some pre-conference study material.

Self learning modulea. Class room trainingb. On the job trainingc. Training on the jobd.

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The advantage of __________________ offers the skills that are demonstrated to the salesperson in the real life 8. situation and thus the impact on the salesperson is expected to be much stronger.

Self learning modulea. Class room trainingb. On the job trainingc. Training on the jobd.

Which of the following statements is false?9. The amount of selling effort is directly related with the stage at which a product is in its life cycle.a. When the product is in the decline stage some fresh incentive schemes may be introduced in the compensation b. scheme to generate fresh interest in the product.Reward is generally regarded as the process of getting people to work towards the achievement of an c. objective.The establishment of the quotas is ultimately the sales manager’s responsibility and he or she will inevitably d. be constrained by overall company objectives.

Match the following.10.

Involves himself or herself fully and without bias in new 1. experiences. A.Reflector

He or she will collect data, himself or herself and from others, and 2. prefer to think it thoroughly before coming to any conclusion B. Activist

He or she tends to be detached, analytical and dedicated to rational 3. objectives, rather than being subjective or ambiguous. C. Pragmatist

He or she is the sort of person who will return from training 4. brimming with new ideas that he or she wants to try out in practice. D. Theorist

1-A; 2-B; 3-C; 4-Da. 1-B; 2-A; 3-D; 4-Cb. 1-C; 2-A; 3-B; 4-Ac. 1-D; 2-B; 3-C; 4-Ad.

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Chapter III

Sales Planning and Organisation

Aim

The aim of this chapter is to:

definemeaningofsalesplanning•

enumerate characteristics of sales planning•

discuss components of sales planning•

Objectives

The objectives of this chapter are to:

elaborate sales territory management•

explain approaches to sales territory management•

discuss steps in territory planning•

Learning outcome

At the end of this chapter, you will be able to:

definetypesofsalesplanning•

discuss basic types of organisational structure•

explain ro• le of the sales executive

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3.1 IntroductionInitially sales management meant the market expansion and the management of sales force. Later on all the marketing activities like advertising, sales promotion, marketing research, pricing etc. were also assigned to it. But still later the termMarketingManagementwasusedtodefinethebroaderconceptandthetermSalesManagementwasdefinedas“Planning,Direction,andcontrolofpersonalselling,includingrecruiting,selecting,equipping,assigning,routing,supervising, paying and motivating the sales force.” Some of the functions of sales management are important in making some key marketing decisions such as budgeting, deciding the objective, sales force size, territories etc.

Meaning of sales planningSales’ planning is a part overall planning of the whole organisation. In sales planning answers to following •questions are decided:

What type of selling functions is to be formed? �How various selling functions are to be formed? �When these functions are to be formed? �Who will perform these selling functions? �

In sales planning, sales related policies, procedures, programmes, budget, schedule etc. are decided in advance, •soastoachievesalesobjectives.Salesplanningaredonebytopofficialsofsalesdepartmentinconsultationwithmarketing,productionandfinancedepartments.Salesplanisawrittendocumentforsettingsalesobjectives,policies, procedures, programmes to achieve these objectives. AccordingtoAmericanMarketingAssociation,“Salesplanningistheworkofsettingupobjectivesforselling•activities, determining and scheduling the steps necessary to achieve these objectives.” AccordingtoJohnsonandSchewing,“Salesplanningmaybedefinedasmanagerialtaskofdeterminingthe•future course of sales action preceded by an analysis of the past and projection of future events, culminating in a written document referred to as sales plan which spells out in terms of time and resources, a systematic and integrated operational programme, so as to facilitate achievement of sales objectives.Thus sales planning is the managerial task of determining the sales objectives and future course of selling •functions to achieve these objectives.

Characteristics of sales planningSales planning have following main characteristics:

Sales’ planning is an intellectual activity. In sales planning questions like what, where, how, by whom sales are •to be done etc. are answered.Sales’ planning is the primary function of sales management.•It is concerned with selecting best alternative among the various available alternatives.•It includes deciding selling objectives, sales policies, procedures, programmes, forecast, budget, schedules •etc.Sales plans are prepared keeping in view the present and expected changes in marketing plans and marketing •environment.Sales’ planning is an important managerial function and it gives direction to various selling activities.•It is a continuous process.•Sales’ planning is flexible as it requires necessary adjustments in consequence to changes inmarketing•environment.Itaffectstheplansofproductiondepartment,purchasedepartment,financedepartment,personneldepartment•etc.Sales’planningleadstoefficiencyandeconomyinvarioussellingactivitiesandthushelpstheorganisationin•utilising its resources in the most effective manner.

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3.2 Components of Sales PlanningThe main components of sales planning are as follows:

Selling objectives: Determining sales objectives of the organisation is an important component of sales planning. •Objectives are the end results in the process of planning; for their attainment planning is done. Selling objectives should be communicated to sales staff. The sales staff should be inspired to achieve these selling objectives in aspecifiedperiodoftime.Sales policies: The purpose of sales policies is to put broad limitations on various sales personnel by prescribing •the broad guidelines to perform selling activities. Policies decide a framework within which various sales managers are free to plan their selling activities. Policies help to achieve coordination in various selling activities and guide the various selling activities towards achieving selling objectives. Sales programme: Sales programmes are formulated by sales department within the limits of sales policies and •are designed to achieve selling objectives. These programmes may be regarding introducing a new product, entering a new market, sales promotion, sales force training, meeting customer’s grievances etc. Separate programmes are also prepared for separate marketing activities. If different regions are different in terms of marketing environment then separate sales programmes are prepared for various market areas.Sales procedures: Sales procedures are those plans which determine order / sequence of different selling •activitiesforaparticularsalesrelatedjob.Welldefinedprocedureshelptocarryouttheprogrammesinaneffective manner. Sales Rules: Sales-rules are applicable to all sales personnel without distinction. There is a difference between •rule and procedure. Rules tell us what should be done and what should not be done. On the other hand, procedures lay down the manner to complete a particular work.Sales forecasts: Sales forecasts are the essential part of sales planning, sales forecast is an estimate of sales in •rupeesorinphysicalunitsorinbothforaspecifiedfutureperiodunderaproposedmarketingplanandassumedenvironmental conditions. Sales forecasts guide the sales manager in deciding various selling activities.Sales budget: Sales budget is also an important part of sales planning. Sales budget is an estimate of future sales, •sellingexpensesandtotalprofitsfromsaleoperations.Performanceofthesalesforceisevaluatedbycomparingtheir actual performance with these standards.Sales strategy: In sales planning, strategies are also included. These are prepared in the form of counter plans •to offset the moves of competing units. It is important to consider the plans and policies of competing business units and plan our strategy accordingly.

3.3 Product wise Sales PlanningProductive Sales Planning entails planning the unit-wise sales for various products of a company. This is done, •usually in organisations, on annual, quarterly and monthly bases. Once, the product-wise planning is completed for the organisation, it can be divided into regional, area and territory-wise planning. An example of the Product-wise Sales Planning for a company having 6 products can be as follows:

S. No. Product Unit wise Sales Plan Value per Unit (Rs.) Total Sales Value (Rs.)

1 A 10,000 1000 1,00,00,0002 B 1,10,000 100 1,10,00,0003 C 20,000 50 10,00,0004 D 75,000 25 18,75,0005 E 1,00,000 35 35,00,0006 F 50,000 80 40,00,000

Rs. 3,13,75,000

Table 3.1 Company XYZProductwisesalesplanningforthefinancialyear1998-99

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Once this product-wise Sales Planning is acceptable to the Top Management, the same can be divided into •regional, area-wise and territory-wise sales planning.

While determining the sales plan for each product, the Sales Management has to derive the Market Potential, Sales Potential and the Sales Forecast for their products. Market Potential is the total number of units of a product which can be sold by all the companies in a given market.

For example, the market potential of 10 million cars in India would indicate that combined sales of all the car •manufacturers will not be more than 10 million cars in a year in our country. Sales potential, on the other hand, would indicate maximum units of product which a single manufacturer can sell in a given market in a year. For example, the sales potential of 5 million cars for Maruti Udyog Limited would indicate that the company can sell a maximum of 5 million cars in India in a year.

Sales Forecast, indicates the number of units of a product which that single manufacturer actually plans to sell. For example, Sales Forecast of 2.5 million cars of Maruti Udyog Limited would indicate that this company •plans to sell 2.5 million cars out of total sales potential of 5 million cars that it can sell. A company goes for a lower sales forecast than its sales potential, because of various reasons like lower production capacity, limited working capital, scarce availability of raw material etc.WhiledecidingonSalesForecast, theSalesManagementshould tryandfindout theanswers tofollowing•questions.

What is the number of its customers: this should include the present customers as well as the potential or �planned or future customers (planned or future customers would be the ones that Sales Management wants to include in the year for which the sales forecast is being made).What is the size of the customers (The ABC Analysis of the customers in terms of their sales turnover, �profitetc.).What products will they purchase? �Why do they buy such products or what are their needs to buy such products. �How many quantities do they buy for a particular product? �How many times, in a year do they buy such products? �Under what conditions do they buy? Whether they buy on cash or credit. �What is the competition doing in these product markets or even what the competition is expected to do? �

Realistic and fact - based answers to all these questions plus the information on what marketing activities our •own company is going to perform, will help determine the product-wise sales.

3.4 Sales Territory ManagementAsalesterritoryrepresentsagroupofcustomeraccounts,anindustry,amarketoraspecificgeographicalarea.Oneoftheimportantfunctionsofsalesmanagementistosetupsalesterritorieswithoptionalprofitpotential.Themajorfactors that govern the territory size are, number of customers and prospects, call frequency on existing customers, and the number of calls that sales person makes in a day.

3.4.1 Need of Sales TerritoriesSales territories are established for achieving some of the following goals:

Proper market coverage: Systemic mapping of sales territories facilitates sales persons in effectively combing •the territory, covering present as well as potential customers. Effective deployment of sales force: Proper knowledge of the demands of the sales territory results in assignment •of the right person for the territory. Therefore when territories are distributed equitably to the sales persons fewer conflictsarisefromcallingsomeoneelse’scustomerandonworkloadcarriedout.Efficient customer service:Well designed sales territories improvebuyer seller contacts and enable better•customer orientation on the part of the sales person. This results in regularity of customers call as provision of more satisfying customer service.

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Objective evaluation of sale force: Comparison of the sales person’s performance to the potential of the assigned •territory results in their adjective evaluation. Territory by territory evaluation of the sales performance in turn, helps spot market condition as well as to make needed adjustments in the strategy.Improving selling and marketing productivity: A well designed sales territories coordinates territory selling •activities with other marketing function of the company. It has been found that launching advertising campaigns, selling dealers on co-operative advertising, distribution point of purchase display or launching sales promotion schemes, are generally more satisfactory if the work is assigned and managed on a territory by territory basis rather than for the market as a whole.

3.4.2 Steps in Territory PlanningTerritoryPlanningisanotherveryimportantaspectofthetotalSalesPlanningexercise.VariousstepstoScientificTerritory Planning are:

Salesperson’s capacityA proper analysis should be made as to how many customers / prospects can a salesperson meet in a day. The number of customers thus obtained should be multiplied with the number of working days in a month. The resultant number should determine the territory.

Frequency of calls per monthThe Sales Management would also decide the frequency of calls per month to each customer. The customers can be classifiedasclassA,BandCdependinguponthebusinessgivenbythem.SayClassAcustomergivesthemaximumbusiness, the Class B moderate and least business is given by Class C. The salesperson should devote time with individual customers on the basis of the sales potential of each customer. More the potential, more should be the time devoted.

Parity in sales potentialVarious territories should have some parity in sales potential. This enables more realistic appraisal of various salesperson, though there would be some difference in the capacity of various salesperson to perform.

Minimise travel time and expensesThe territory should be planned in such a manner where maximum amount of salesperson’s time is spent in interacting with the customers rather than in travelling. This would automatically reduce the expenses also. There are three general shapes in use:

The circle shape is appropriate for a territory where the concentration of customers is more or less the same •throughout the territory. The salesperson is based in a town which is near the centre of his or her complete territory. This shape ensures almost equal concentration of the salesperson to all his or her customers because the time involved in travelling to any area of his or her territory will be the same. This type of a sales territory is more common in fast moving consumer goods companies and pharmaceutical companies.

H

B

C

D

EF

GA

Fig. 3.1 The circle shape

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The clover leaf shape is desirable for the companies marketing industrial goods. This shape is suitable when •the customers are located randomly. In other words, their concentration is not equal in all areas of a territory. In this shape the salesperson is based at the centre of the territory and plans his or her tour to cover all customers along one leaf. This ensures that the salesperson comes to his or her base town at the weekend, spends sometime to meet his or her customers here and moves for towns on other leaf, the next week.

O

P

NM

LK

J

I

H

G

FE

B

C

D

A

Fig. 3.2 The clover leaf shape

The wedge shape of a territory is suitable when the salesperson is based in a town with dense population of •customers and has to visit the satellite towns also for small customers or sparsely populated customers. Such a shape is an alternative to circle shape for companies marketing fast moving consumer goods or pharmaceutical products.

A B C DE

FGHI

J

Fig. 3.3 The wedge shape

Suitably Station the Salesperson: The salesperson should be based at a place in his or her total territory, with •the highest concentration of customers. Suppose a territory consists of towns A, B, C, D, E, F, G, H, I and J and most of the customer are located in town F, then the headquarter of the salesperson should be town F only. Moreover, other towns should be well connected with town F and distances should be minimum between the towns. This can be graphically represented as given below:

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AB

C

D

E

F

H

G

I

J

Fig. 3.4 Suitable station of the sales person(The dimensions of circle represent the concentration of customers in each town.)

F

E

I

C

J

D

H

G

B

A

Fig. 3.5 Suitable station of the sales person

In the graphics illustrated above, where the salesperson is based in town A with low customer concentration, the salesperson will have to remain mostly on tour to meet more customers in town F, which will not only put more pressure on the time available to the salesperson but will also increase his or her expenses on tour and travel.

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3.4.3 Approaches to Territory DesignThe two basic approaches commonly used for designing sales territories are discussed below:

The market builds up approach: This approach estimates the present and potential product/service demand by looking as how the market is build up, that is, who are the present/potential users, and how much do they consume and at what frequency. Its major use is in industrial goods companies where complete listing of users is feasible along with approximate consumption norms. By aggregating the estimates for all the areas we arrive at the total market potential for the product. This salespotentialwhendividedonterritorybasisconstitutestheterritorysalespotentialandspecifiesthecorrespondinglevel of sales and marketing support requirements for the territory.

The workload approach: W.J. Talley’s Workload approach of territory design is based on creation of territories that are equivalent in terms of workload performed by salespersons. The steps involved in the creation of sales territories under this approach are:

Customers are grouped into class sizes according to the annual Sales Volume that the Company has.•Optimum call frequencies for each class of customers are estimated. For example, in one case present and potential •customers are grouped into volume classes and then theoretical call frequencies are assigned to them.Present and potential customers are then located geographically and arranged volume and value-wise.•The number of present and potential customer in each volume/value group is then multiplied by the desired call •frequency to get a total number of planned calls required for each geographical control unit.This is followed by determination of geographical control units. The carved out territory is combed to the •maximum, giving adequate workload to the salesperson as well minimising, if not eliminating the unproductive time spend in covering distance between two calls and post call activities.AccordingtoGeoffreyLancasterandDavidJobber,workloadcanbedefinedas:•W = ni ti + ntk

Where,w = workloadni = number of calls to be made to the customers in category iti = average time required at call for each categoryn = total number of calls to be madetk = average time required to travel to each call.

This equation is useful since it highlights the important factors which a sales manager must take into account when assessing workload.

The basic weakness of workload approach is that, since the call frequency is already established it may not •provide for development of mediocre or neutral customer accounts into super accounts due to lesser number of calls assigned to them. The other shortcoming lies in establishing parity in workload and potential territories, in different markets. In practice no two territories are equal in terms of travel time, current sales or potential.

3.4.4 Territory Coverage Planning

Oncethecustomershavebeenidentified,thefrequencyofvisitshasbeendetermined,andthepotentialofeach•customer (and thus each town) has been determined, the Territory Coverage Plan is now drawn.Each town or city is listed on a sheet of paper and it is noted that on which date of the month, the salesperson will •visit a particular town. The mode of transport is also indicated on the same sheet and the address of salesperson and his or her contact point in each town is also mentioned. This enables the Sales Manager to contact the salesperson in a particular town. A typical Territory Coverage Plan may look as given in Table-3.1.

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It is appropriate to keep looking at Territory Coverage Plan at frequent intervals and the sales performance from •each town in this plan. This analysis helps the Sales Manager to take necessary steps to improve sales in a poor-performing town. It also helps him or her to take a decision to drop a town from the Territory Coverage Plan, if there are no chances of sale improvement. On the other hand, another town which was not being visited earlier but promises good sales potential can be added to the Territory Coverage Plan. Now a day it has become easier to be in touch with the travelling salesperson via faxes, pagers and internet using email facilities.

Company XYZTerritory Coverage Plan

Name of Salesperson : Arvind SharmaHeadquartered : FTerritory Coverage Plan for the Month of : January, 99Date of Preparation : 25/12/ 98

No. Date Mode Town of Travel

Distance from HQ

Address, Telephone No., Contact Point

1 1.1.99 - F - -2 2.1.99 - F - -3 3.1.99 - F - -4 4.1.99 - F - -5 5.1.99 - F - -6 6.1.99 Sunday - - - -7 7.1.99 - F - -8 8.1.99 - F - -9 9.1.99 - F - -10 10.1.99 - F - -11 11.1.99 - F - -12 12.1.99 - F - -13 13.1.99 Sunday - - - -14 14.1.99 Bus A 25 km XYZ15 15.1.99 - A - -16 16.1.99 Bus B 35 km UVW17 17.1.99 - B - -18 18.1.99 Train C 85 km MNO19 19.1.99 - C - -20 20.1.99 Sunday - - - -21 21.1.99 Train D 40 km QRS22 22.1.99 Bus E 30 km JKL23 23.1.99 Bus G 25 km ZAB24 24.1.99 Bus H 28 km OPQ25 25.1.99 Bus I 12 km WXY26 26.1.99 Bus F - -27 27.1.99 Sunday - - - -28 28.1.99 - F - -29 29.1.99 - F - -30 30.1.99 - F - -31 31.1.99 - F - -

Table 3.2 Territory coverage plan

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3.4.5 Sales Territory Expenses PlanningOnce the Sales Manager has completed the Territory Planning and the Territory Coverage Planning, he or she can takeadecisionastohowmanysalespersonswillbeneededtocoverallthecustomersefficientlyandeffectively.Once the number of salesperson has been decided, the Sales Manager can work out the expenses which will include salesperson’s salaries, travelling expenses, bonus, incentives, fares and other administrative expenses. These should also include estimates about expenditure on cell phones, fax, pager, etc., as they are now being widely used while covering the territory. The total of all these expenses would provide the Sales Manager with Sales Territory Expense Planning.

Following illustration can be of use to understand the same in a better way.

No. Particulars Rate (Rs.) Number of Salesmen Total Amount (Rs.)1 Salary (including P.F., L.T.A., E.S.I.) 4,000 10 40,000

2 Travelling Expenses (@ Rs. 100/- per day for 25 working days / month) 2,500 10 25,000

3 Fare (Approximate) 3,000 10 30,0004 Bonus @ 10% of salary per year 400 10 4,0005 Administrative Expenses 500 10 5,000

Total 10,400 10 1,04,000

Table 3.3 Sales territory expenses planning

3.5 Types of Sales PlanningVarious types of sales plans are as follows:

3.5.1 Sales Plan on the Basis of Market AreaIf total market area of a business unit is large then it is divided into different regions / territories. Separate sales plans are prepared for different regions depending upon the demographic, socio-cultural and economic characteristics of that region. Keeping in view the level of competition in different regions decisions regarding promotional activities, distribution channels and prices etc, are taken.

3.5.2 Sales Plan on the Basis of Selling FunctionsDifferent types of selling functions are performed by sales organisation, like advertising, sales promotion, sales research, distribution, sales force management, etc. Large organisations prepare separate sales plans for different selling functions. All these sales plans are then coordinated to achieve broad selling objectives of the organisation.

3.5.3 Sales Plan on the Basis of Types of CustomersIf customers of business unit are of different types, like: wholesale customers, retail customers, foreign customers, institutional customers, etc. then separate sales plans are prepared for each type of customers. For dealing with different types of customers, separate types of sales programmes and sales procedures are required. So by making separate sales plans for different types of customers, business unit can better satisfy different types of customers.

3.5.4 Sales Plan on the Basis of Types of ProductsWhen business unit is producing different types of products then sales plans can be prepared on the basis of types of product. Depending upon the nature of product, different types of selling activities are to be performed. Moreover ifseparatesalesplansarepreparedforeachtypeofproduct,thenbusinessunitcanfixsalesquotafordifferentsalesman on the basis of products.

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3.5.5 Sales Plan on the Basis of Time PeriodAccordingtotimeperiod,salesplancanbeclassifiedasshorttermsalesplansandlongtermsalesplans.Iftimeperiod of sales plan is up to one year, then it is treated as short term sales plan and if time period is more than one year, then it is termed as long term sales plan. Framing short term sales plan and long term sales plans involves different types of activities, programmes, procedures, procedures, etc. Both these plans are coordinated with each other so that when short term selling objectives are achieved, then it works towards achievement of long term selling objectives.

3.6 Control SystemsControl is checking and evaluating the difference between what was planned and what was actually done and •achieved. A sales manager has to analyse the qualitative as well as the quantitative data about his salesmen to exercise effective controls. All these qualitative data about his salesmen can be analysed while working in the fieldwiththesalesmen.Asalesmanagershouldcall-onthecustomerswiththesalesmen,shouldtravelwiththem using the same mode of travel and should interact with his salesmen as much as possible.The quantitative data is available from the salesman’s daily reports and his territory coverage plan. The sales •manager can analyse the number of customers being called by the salesmen on day - to - day basis, the value of the business received by the salesmen, the expenses made and the ratio of sales to expanses.The sales manager can have the qualitative and quantitative data about all his salesmen. Thus a sales manager •can analyse the difference between what was planned to be achieved and what has actually been achieved in terms of customers calls, business produced, expenses made and proper communication of messages about the product to the customers.Once the sales manager has analysed all these data, he can take corrective actions. He can ask the salesman •to improve his daily average of customers contacted, or to improve value of orders generated or to improve his communication etc. He can also ask his training manager to conduct the salesman’s training in a particular aspect where he found the salesman weak.

3.7 Sales Programme Planning and ProductivityThe productivity of each salesperson and the sales management depends upon the number of total sales. The sales actuallytakingplacereflectontheplanningandexecutionofthevariousplansbytheSalesManager.Theprimaryjob of the Sales Manager is to observe that the set sales targets are being achieved. And secondly, to check that the productivity is constantly improving.

3.7.1 Improving Territory ProductivityFor obtaining maximum productivity out of the sales territories, it is essential that the sales force lay emphasis on its effective management than on mere coverage. In practice its means that sales territories be mapped and managed onaprofitorientedbasistakingintoconsideration,thefollowingpoints:

profitcontributionmadebydifferentcustomers,clarityofapproachtoaccountdevelopment,aswellastosmall/•marginal customer,profitgeneratorsanddetractorsintheterritory,•allocation of sales, marketing and other resources based on territory’s contribution potential, and•effective utilisation of sales force time•

The process of improving territory production, therefore, requires establishment of a system of monitoring and review of the sales territory. The system should focus on:

Sales territory performance in terms of itsmarket potential, resources deployed and required, and profit•contribution potential,Sales force itinerary planning, covering call planning, journey planning, appointment scheduling, preparation •and usage of sales aids and equipment during sales calls, and post call planning,

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Documentation of customer call records, daily activity reports, cost and time on various activities, market •intelligence, etc., andIndividual sales person’s productivity and incentives for increased sales.•

Inbrief,attentiontoeverysingleprofitsdetractorandtimelyactiononallprofitgeneratorshelpsacompanytooptimisethe sales territory productivity. Superior quality of the sales force facilitates in the attainment of this goal.

3.7.2 Sales Programme PlanningWhile undertaking this planning, the Sales Manager plans as to what and when each of his or her salesperson should do. All this is planned with the objective of meeting sales targets. Primarily, this planning includes activities like:

Putting up point of sales material like danglers, posters, stickers, billboards etc. at retail counters,•Improvingshopwindowdisplaylikearrangingproductpacks,brochures,leaflets,etc.attractivelyintheglass•windows at retail shops,Conducting outside the shop promotions like distributing gifts to the customers who purchase their product or •distributing coupons for some discounts or free goods to customers,Conducting demonstrations on the actual performance of a product at a shopping complex,•Sampling programmes like distributing free samples of the product (a new detergent) to some housewives in •a colony, andPresentationontheperformanceandbenefitsverballytoanindividualoragroupofpotentialcustomers.•

Each of the above mentioned activities have to be planned. In case of services visual aids are to be used.

3.7.3 Planning Sales Manager’s Itinerary

For achieving the product-wise and thus value-wise sales planning, the Sales Manager should plan his tour •orworkplanquiteobjectively.Beforehegoesontourortoworkwithasalesman,heshouldfindanswerstoquestions like

Why is he going there? �What is he going to do there? �What he will achieve? �What has been the performance of the salesman he is going to work with? �What are his developmental objectives for the salesman? �

Generally, in any given area, 60 percent of the members of a team are average producers of sales, 20 percent •are above average and 20 percent are below average performers. Usually the Sales Managers work more with either the above average or below average performers. In the process, they neglect the average performers who bring about the major chunk of the business. Therefore, the sales managers should concentrate more of their time on this group of salesmen who will mostly do an adequate job.A Sales Manager should circulate his tour plan to other departments within the organisation. This will enable other •departments to voice their concerns to be discussed with a particular salesman. This way a lot of unnecessary correspondence can be avoided and full advantage of Sales Manger’s tour can be taken by the organisation.In a nutshell, while planning his own tour plan, the Sales Manager should know WHERE there is a problem •and he should go there, WHY there is the problem, he should investigate when he is there, and HOW & WHEN to solve it.Therefore,whatisneededforahighlevelofSalesPlanningisCustomerdefinitionandclassificationProduct-•wise emphasis - which products should receive high priority.

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3.8 Need for Sales OrganisationItisthesalesorganisationwhichbridgesthegapbetweenthemarketandtheproductivecapacityofthefirm.•Market changes have to be accommodated through adjustments in the sales organisation and its operations. Shifts in size of market operations, market trends, competitive position and other environmental factors may necessitate changes in existing sales organisations. An effective sales organisation usually provides for growth and adaptability to such changes.Salesorganisationsvarywidelyoverfirms.Thisisbecauseeveryenterprisehasitsownobjectivesandresources,•andcorporateplanstoachievethoseobjectives.Thestructureofthesalesorganisationreflectsthisdiversity.Apartfrom providing a basic structure to facilitate working, sales organisations have the following basic purposes:

Define linesofauthority:Anysoundsalesorganisationdefines therelationshipsbetweenpeople in the �organisationintermsofauthority,responsibilityandaccountability.Itisimportanttodefineandidentifytheflowofauthority,indicatewhereresponsibilitylies,specifywhoistobeheldaccountableandtowhom.Ensure that all necessary activities are assigned and performed: The process of organising presupposes �identification of necessary activitieswhich have to be performed to achieve the sales objectives.Ascompanies grow, the tasks performed within the organisation also multiply. One of the basic purposes of thesalesorganisationistoensurethatallnecessaryactivitiesarespecificallyassignedtopersonnel,andthat procedures are devised to supervise the performance of all these activities.Establish lines of communication: Today, with growing complexity in business, access to much greater �volume of information and increasing emphasis on staff assistance, the lines of communication may be moreflexibleandvaried.Theflowofinformationmaybebothhorizontalandvertical.Theorganisationalstructure becomes a good aid in identifying the sources of information and recipients of data, and may also tell us who is responsible for generation of information.Provide for co-ordination and balance: By clearly delineating formal relations between different positions in �the sales department, the sales organisation reduces confusion about the individuals role and responsibility. Since you will have to identify the types of activities to be performed, group them together and make specificpersonsresponsibleforthevariousjobs.Whileorganisingyoursalesdepartment,youwillbeableto generate information that is basic to the function of co-ordination. The answers to the questions, which are responsible for what and when, provide vital inputs in developing the co-ordination programmes for sales effort.Provide insight into avenues of advancement: The personnel in the sales department look at the organisational �structures as one of the indications of the direction in which their future careers may grow. A good use of the organisation chart may be made by the management, in communicating to the subordinates, the possible avenues of career advancement. Economise on executive time: As operations and activities in the sales department increase in number and �complexity, delegation of authority becomes imperative. Sound organisation design allows effective use of specialisation so that executives may spend less time in operations and more on planning. In growing organisations, the need for effective coordination often results in limiting the number of subordinates who report directly to a certain executive. One of the main purposes of delegation is achieving economies in the use of executive time.

3.9 Developing a Sales OrganisationIn order to covert your sales plans into operations you ought to have a sales organisation. Figure 3.6 gives a step •bystepprocessofdevelopingasalesorganisation.Theobjectivesofthesalesorganisationneedtobedefinedinthe light of the corporate objectives and both quantitatively and qualitatively. Though the general sales activities tobeperformedmaybesimilarinmostcompanies,therelativevolumeandtheemphasisthatafirmmayputon a group of activities will differ. A good key therefore would be to move backwards from the objectives and identify necessary activities.

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Next,youmustdefinethepositionallevelsatwhichtheseactivitieswillbeperformed.Similaractivitiesand•tasks will have to be grouped together and assigned to the positions. Each position should have adequate tasks to perform which are also varied enough to provide challenge and motivation. The number of the different types of activities assigned to a single position would depend upon the degree of specialisation associated with each position. The place of an activity in the hierarchy would depend upon the relative importance of that activity for the sales department. For example, in an organisation trying to sell a new product/service like a new tour package or a new hotel through middlemen, dealer relations becomes a crucial activity and has to be assigned to positions higher up in the sales organisation.An interesting dimension in sales organisation exercises has been whether to build positions around individuals, •totakeadvantageofthespecialcapabilitiesofaparticularindividualortorecruitindividualsspecificallytofillintheidentifiedpositions.

Step 1DefineSales•Organisation objectives by asking what does the company want to achieve in terms ofGrowth / •SurvivalMarket share•Cost and •ExpensesMarket •LeadershipCustomer •relations

Step 2Definethe•various activities that need to be performed to achieve these objectivesDefinethe•volume and costs of each of these activities

Step 3Identify •positions to whom these activities may be assignedClassify and •group closley related activities and assign them to the same position.Decide on •hierarchy of activities by definingthelevel at which each activity will be performed.

Step 4Definethe•relationship betwen positions Definethe•nature of authority in respect of each positionAssign •personnel to positions

Step 5Check the organisation structure to ensure:

Provision for •coordination and controlprovision for •growthProvision for •flexibilityandcontrol

Fig. 3.6 Process of developing a sales organisation

Adecisionthathastobetakenalongwiththeidentificationofpositionsisthatoftherelationshipbetweenthese•positions in the organisation. The span of control has direct bearing on the coordination responsibility of the higher level executives. Care should be taken that it is not too wide to tax the capabilities of top management and lead to weaker coordination of subordinate activities.Sales organisations have to be responsive to changing market trends, growth in both products/service and markets •as well as to competitive requirements. While designing a sales organisation, therefore, a key consideration is theprovisionofflexibility,effectivecoordinationproceduresanddefinedlinesofcommunication.

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3.10 Basic Types of Organisational StructureOne of the key decisions in sales management is related to the degree of centralisation or decentralisation of •the various sales functions. In centralised systems, recruitment, training, compensation and evaluation are all managedfromthecentralheadquarters,whileinadecentralisedsystemthefieldSalesManagerstakeupmostor all of these functions. Inorganisationsinvolvingtheuseofafieldsalesforcesomedecentralisationwouldobviouslyresult,though•theextentofittendstovaryacrossfirms.Thedegreeofcentralisationordecentralisationinsalesorganisationmay depend on the size of operations, costs, effectiveness and competitive necessity. A recent development, which has affected the centralisation / decentralisation choice, is the increased use of •computers to process and handle sales data. As computers can process vast amount of sales information at lower costs and much more speedily, the trend towards computerisation has encouraged centralised decision making. Notwofirmswouldhaveidenticalsalesorganisationastheirneedsandexpectations,marketsandproducts,company size and marketing channels differ from each other.

3.10.1 Line Sales Organisation

The line sales organisation is the most basic form of sales organisation, characterised by a chain of command •running from the top sales executive down to the level of the salesperson. Figure 3.7 gives the sales organisation of a hotel chain designed as a line sales organisation.The hotel chain is headed by the Vice President Marketing, who has two marketing Managers looking after the •South West region and North East region, reporting to him. The marketing manager has a line authority over a numberofRegionalandAreaManagerswhointurncontrolafieldstaffofsalesexecutive,fieldsalesofficerand sales representatives, each level connected to the subordinate level by scalar lines of command.

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Vice President

Marketing Manager (South West)

Marketing Manager (North East)

Regional (or Area) Sales Manager

Sales Executive Marketing Executive

Field Sales Officer

Sales Representative

Fig. 3.7 Line sales organisation

Lineorganisationisextensivelyusedinsmallerfirmsorthosedealinginanarrowproductline,orsellingina•limited geographical area. As the line organisation have no subordinate specials, the top sales executive needs to be a person with outstanding ability and all round knowledge of every facet of the sales function. Since operational details of managing the sales department take up a large part of the line executive’s time, he or she is,attimes,forcedtotakedecisionswithoutthebenefitofadequateplanning.Line organisation becomes inappropriate in case of rapidly growing organisations or those with large sales staffs, •as growing departments necessitate additional layers of executives to be added. Increase in vertical levels is often accompaniedbydistorteddirectionsandreducedefficiencyofcommunication,resultinginimproperresults.

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3.10.2 Line and Staff Sales Organisation

Line and Staff organisation usually results as the size of the operations grow. It is characteristically found in •mediumandlargefirmswithsizeablesalesstaffsellingdiversifiedproductlines.Thelineandstaffdepartmentis differentiated by the presence of staff specialists or staff assistants to advise and assist the top sales executives. Thesespecialistsareexpertsintheirownfieldswhichcouldbesalestraining,service,salesanalysisandplanning,dealer relations, sales promotion, sales personnel development and so on. While staff executives and assistants do not have the line authority to command, they advise the line executives •throughrecommendationsandprovidethebenefitofspecialisationintheorganisation.Theinclusionofthestaffcomponent frees the line executives from the burden of detail. By delegating problems involving in depth study or detailed analysis to staff specialists, the top executive gets more time for policy making and planning. Apoolofexpertsbecomesavailableforprovidingadviceandassistanceinspecialisedfields.Theactivityof•planning can also be subdivided and assigned to staff specialists. More information is also made available forbetterdecisionmarketing.Figure3.8givesthesalesorganisationofafirmwhichhasbothlineandstaffcomponents.

Managing Director

Sales PromotionManager

Customer Service Manager

Regional Manager Regional Manager

Regional Sales Manager (NE)

Regional Sales Manager (South)

Sales Executive

Fig. 3.8 Line and staff organisation

The organisation is headed by the Managing Director who has, reporting to him or her line managers called •Regional Managers and Staff Managers who look after the staff functions of customer service and sales promotion.The problem that arises with line and staff organisation is basically one of coordination. The work of the staff •specialists needs to be actively coordinated with the operations of the line department and generally a lag develops as reports and recommendations take time to compile. Line and staff organisation also sometimes generate problems of interpersonal relations. The staff executives tend to overstep their advisory authority and try to assume and sometimes succeed in assuming the authority to issue orders and directions.

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Thispresentsdifficultiesofdualsubordinationandmaycreateconfusion.Thefactthatstaffspecialistsdonot•share direct responsibility for results is also resented by some line executives. Experience has shown that to a large extent these problems can be minimised if all areas in which line and staff executives have to share authorityandresponsibilityarespecificallywrittendownascomponentsofthejobdescription.

3.10.3 Committee Sales Organisation

In committee sales organisation the committee is never the sole basis for organising a sales department. It is a •method organising the executive group for planning and policy formulation while leaving actual operations, includingimplementationofplansandpolicies,toindividualexecutives.Thus,manyfirmshaveasalestrainingcommittee (comprised of the general sales manger, his or her assistants, the sale training manager, and perhaps representative divisional or regional sales mangers) that meets periodically to draft training plans and formulate sales training policies. Implementation of these plans and polices, however is the responsibility of the sales training manger, if the •company has one, or of the line and or staff executives responsible for sales training in their own jurisdictions. Other committees found in sales organisation include customer relations, operation, personnel, merchandising, and new products. The use of committees in the sales department has advantages. Before policies are made and action is taken, important problems are deliberated by committee members and are measured against varied viewpoints. Committee meetings, where idea is interchanged and diverse opinions are present, promote coordination among members of the executive team. When problems are aired in the give and take of committee meetings, cooperation is likely to be better than under any other organisation plan. Co – ordination is of utmost importance in Committee sales organisation.However,unlessdecision-makingandpolicyformulationarelefttospecificindividuals,itisimpossibletofix•responsibility. Committees render their most important service in providing focal points for discussion and for the making of suggestions; so many companies prohibit committees from making decision or formulating policies. No committee should development in to a vehicle for the evasion of responsibility.For committees to operate effectively, other precautions are necessary. The agents must be planned and controlled •to avoid wasting time of executives not directly interested in the topics considered. The tendency for committees to consume large amount of the counteracted if the chairperson keeps the discussion focused upon the subject at hand.Butthechairpersonshouldnotdominate.Chairpersonsshouldguidediscussionwithinspecifiedbounds,but they should not force their opinions on others.

3.10.4 Functional Sales Organisation

The functional salesorganisation is aimedat utilising thebenefitsof specialisation to its fullest extent. In•the functional sales organisation, all sales personnel receive direction from and are accountable to different executives, on different aspects of their work. Somewhat in contravention to the principle of unity of command, thefunctionalorganisationalstructuregivesallexecutives,eachspecialistinhisorherownfield,andadirectauthority to command and issue orders. It simply means that at any given time, a salesperson could be under instructions from a number (depending upon the functional specialisations set up) of executives. The top sales executive has coordinating responsibilities in respect of the action of functional heads (as shown •in the Figure 3.9 each sales person is under direction of several executives). Functional organisations have not beenfoundtobeaveryappropriatestructureforsalesorganisation.Inlargerfirmswherethesizeofthesalesforce is substantial, the degree of centralisation necessitated by the functional organisational structure renders theoperationinefficient.Smallerandmediumsizedfirmsontheotherhandfindthesystemexpensivebecauseof the high degree of specialisation. Another weakness of the structure is that burden of coordinating the activities of highly diverse specialists is •placed on a single individual. In case that individual is not capable enough in this regard, the whole structure is likely to become cumbersome and ineffective.

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General Manager Sales

Manager Planning

Co-ordination

Manager Sales

Training

Manager Territory

Development

Manager Sales

Promotion

Manager Distribution

Manager After Sales

Service

Salesperson Salesperson Salesperson Salesperson Salesperson Salesperson

Fig. 3.9 Functional sales organisation

3.11 Specialisation in a Field Sales OrganisationInmostcompaniesfordirectsellingtoretailersorconsumers,thedevelopmentofafieldsalesorganisationsoonerorlaterbecomesanecessity.Afieldsalesorganisationconsistsofallsalespersonnelworkingawayfromtheheadoffice.ItincludesthetravellingSalesperson,SalesSupervisors,BranchandAreaManagersaswellasthesupportstaffinthesebranchandareaoffices.Themajorpurposeofsettingupafieldsalesorganisationistohavemoreadequate market coverage and control of sales expenses, better coordination with regional requirements, and in case of new products, more vigorous market cultivation.

3.11.1 Geographic SpecialisationThefieldsalesforceistypicallyorganisedonthebasisofgeographic,customerorproductwisespecialisation,withmany sales organisations combining customer and product specialisations with geographic territories.

Marketing Manager (India)

SalesManager (India)

Area SalesManager, Delhi

Area SalesManager, Madras

Area SalesManager, Bombay

Area SalesManager, Calcutta

AreaSalesOfficer

Area Sales Representative

Fig. 3.10 Geographic specialisation of field sales organisation

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The most common pattern of organising a sales force is by geographic territories where sales personnel are •assignedtoaspecifiedgeographicarea,andwillsellonlytocustomersinthatarea.Forexample,figure3.10showsthefieldsalesorganisationofAirlineswherethewholecountryhasbeendividedintofourareasunderthe charge of Area Sales Managers. These areas representing North, South, and West and East regions are Delhi, Madras, Bombay and Calcutta. These major divisions are further divided into smaller geographical territories whicharecoveredbyAreaSalesOfficers.TheAreaSalesOfficersinturn,haveAreaSalesRepresentatives,reportingtothemwholookaftercustomersinthespecificareaassignedtothem.A major advantage which characterises the geographic organisation is that the sales personnel usually have a •smaller area of operation than in the other organisational schemes and over a period of time get to know their customers and markets intimately. This leads to intensive market cultivation and the organisation becomes more responsivetolocalneeds.Thegeographicorganisationisgenerallyaflatorganisationandtheshorterlinesofcommunication make for greater effectiveness of supervision and control. Another advantage that follows is that travel time and expenses can be reduced if call patterns are properly devised. Ontheotherhand,becauseofmultipleofficesbeingsetup,administrativeexpensesandtheburdenofcoordinating•the sales activities of a widespread organisation become heavy. Geographic organisation is generally more effective when the product line is not too wide or consists of relatively simple and non-technical products.

3.11.2 Product Specialisation

Product specialisation is usually called for when the product / service line is large and diverse or when the products/•services warrant specialised applications, knowledge, and information or when adequate technical knowledge is an important determinant of successful selling. Product specialisation is generally combined with geographic territorisationatthehigherlevels,whileatthelevelofthefieldoperators,differentsalespersonsmaybeassignedtospecificproductlines.Insteadofsellingtheentireproductlineinaspecificterritory,asalespersonassignedto a particular product/product group, will sell only that product/product group to the customers in that area. Given below (Figure 3.11) is the example of a company selling travel services ranging from ticketing to conference •facilities.Theinitialgeographicdivisionisfollowedbyproductspecialisationatthefieldpersonnellevel.

Sales Manager (India)

Regional Manager(North)

Area Manager(Statewise)

Salesperson Ticketing Salesperson HotelAccomodation

Salesperson ConferenceFacilitiesSalesperson Tours

Fig. 3.11 Product specialisation of the field sales force

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In the above example (Figure 3.11) since the product/service line is both technical and diverse, it is not possible for •one salesperson to acquire enough knowledge to sell the entire product line successfully. Product specialisation, as shown above would allow the sales personnel to specialise in their respective product line which in turn would result in more effective sales performance. Customer queries and sales resistance can be handled more effectively on account of intensive product knowledge.Evenwhentheproduct/servicelineisnottechnicalbuttheproductrangeiswideenough,organisationsfind•splitting the sales responsibility product wise a more effective arrangement. Organising the sales force by productspecialisationgeneratesadditionalexpenseswhichshouldbecarefullyweighedagainstthebenefitsofsuch a structure. There is an obvious increase in travel and administrative expenses. There is some duplication of effort also, as two salespersons from the same company selling different products in the same territory may call on the same customer to which many customers may object.

3.11.3 Customer Specialisation

Customer specialisation is practiced in situations when almost identical products/services are marketed to •consumers, each of which may present a different set of selling problems. In this kind of organisational scheme each salesperson sells the entire product line to the selected buyers. The sales organisation is organised by customer specialisation. As Figure 3.12 shows, each Branch Sales Manager controls 3 Sales Managers (Major Accounts), who in turn have reporting to them Major Account Managers. Each Major Account Manager is given the charge of a certain number of customers (accounts) and is supposed to service all their requirements with respect to the company’s products.

Sales Manager (India)

Regional Manager

Branch Sales Manager

Sales ManagerMajor Accounts

Major AccountsManager

Major AccountsManager

Major AccountsManager

Sales ManagerMajor Accounts

Sales ManagerMajor Accounts

Fig. 3.12 Customer specialisation in sales organisation

Customer specialisation enables the salespersons to become more knowledgeable about the unique problems •and needs of each group of customers. A customer oriented sales force is consistent with the marketing concept of increased emphasis on consumer satisfaction. The greater market specialisation developed as a result of constantly working with the same set of consumers imparts a degree of professionalism to the sales task and has been found to result in lower turnover of sales personnel.The main disadvantage of this form of specialisation is that geographical territories may typically overlap. •There may be a number of company’s representatives covering the same geographical areas serving different customers which often results in higher costs. Geographic, product and customer specialisation present the basic approaches to organisation structure. As is evident from some of the examples given above, quite a high proportion of organisations use a combination of these basic types in order to achieve a sales organisation that mostefficientlyservestheneedsoftheirtargetcustomers.

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3.12 Role of the Sales ExecutiveAfter going through the Section on sales organisation, you are now aware that within the marketing organisation, •the sales operations are usually put under the charge of a sales executive. Depending upon the organisational practice the position may be given different nomenclatures, viz., Vice President Sales, Sales Manager, Corporate Sales Manager, National Sales Manager or Sales Executive, etc. This Section on role of Sales Executive is designed to give you an understanding on the type of responsibilities the Sales Executive is expected to undertake in an organisation.Sales management function in an organisation is mainly concerned with the attainment of goals related to sales •volume,contributiontoprofitsandsustainedgrowthofthecompany.TheSalesExecutivescarrythemajorburdenofthisresponsibilityandareexpectedtomakeasignificantcontributioninthisregard.Withinandoutsidetheorganisation, they are responsible for managing the entire sales effort and coordinating it with related marketing activities as well as the overall marketing strategy. Internally, the sales executives are expected to structure formal and informal relationships to ensure effective communication within the sales department as well as with other organisational units. Outside the company they are expected to develop and coordinate effectively with the distribution network, and serve as a contact for external public and customers.As a line executive in charge of vital operations, the sales executive is responsible for timely preparation of •information critical to marketing decisions related to budgeting and cost planning. Depending upon the corporate policies which may vary over organisations the Sales Executive is also expected to participate in decisions on promotion planning, deciding about the distribution channels and pricing. A Sales Executive therefore acts both as an operating manager and a member of the strategic planning group in the organisation.With the changing orientation to marketing, the top management’s conception of the sales job has undergone •a change and accordingly the role of the sales executive has also been shifting. Some of the factors, apart from the changing marketing orientation, affecting this trend are greater concern over personal development of Salesperson, a higher degree of professionalism in personal selling and the greater use of computers in sales management.

3.12.1 Functions of the Sales Manager

The changing emphasis in the role of the Sales Manager has implications for nearly all the aspects of his or her •personnel related as well as other responsibilities. The sales executive basically performs two distinct kinds of functions – the operating functions and the planning functions. Table 3.3 gives the list of these functions.The relative emphasis given to the operating and planning functions by a sales executive varies across •organisations. Some determinants of the allocation of his or her time between the two types of responsibilities are the size of the company, the type of product/service and the top management’s expectations from the sales executives. Generally, the smaller the size of the company, the greater the tendency on part of the sales executive to devote more time to the operating function. In case of industrial products, operating functions take up a greater part of the sales executives’ time while the trend is reversed for consumer goods. Again, the extent to which the top management expects the participation of the sales executive in the strategic •marketing planning also affects the time spent on the planning functions.

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Sales ExecutiveOperating Functions Planning Functions

Management of the sales force:•Recruitment �Selection �Training �Development �Compensation �Motivation �Direction �Control �Territory Management �

Setting the sales objectives•Designing the sales program•Formulating sales policies•Designing and developing the sales •organisationParticipating in the marketing•

Establishing working relationship with other •departmental headsEstablishing communication systems both upward •and downwardEstablishing relationships and distributive network•

Table 3.4 Functions of a sales manager

3.12.2 Sales Manager as a CoordinatorIn order to be effectively discharged, the sales function needs to be closely coordinated with related functions like pricing, promotion and distribution. An important responsibility that the Sales Manager has is to coordinate personal sellingwiththesefunctionssothattheoverallmarketingprogrammemaybemademoreeffective.Letusbrieflydiscuss the coordination functions of the sales executive:

Coordination with promotion managementThough sales executives are not directly responsible for designing the promotional policies, they provide •valuable inputs in their formulation. Coordinating the promotional functions with the activities of the sales organisation is imperative because not only are the two functions interdependent but the sales executive is also responsible to quite an extent for, the implementation of the promotional programmes. Sales personnel have to be responsible for coordinating dealer effects with advertising programmes and for getting their cooperation for point of purchase displays.The sales executive must also ensure that sales personnel are fully informed about the latest advertising and •other promotional campaigns so that they can maximise the total promotional effort. Further, the role of personal selling, an important ingredient of the promotional mix, needs to be coordinated with the rest of the promotional mix elements in terms of total promotion cost and the expectation from personal selling. In particular, advertising efforts need to be synchronised with personal selling, to enable the latter to capitalise on it.

Coordination with distribution channelsThe important areas of dealer activities which need to be coordinated with the sales effort are:•

gaining distribution support and overcoming obstacles to product distribution, �ensuringdealeridentification, �reconciling sales and distribution goals, and �sharing promotional tasks with the dealer �

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Even if advertising of the product has been successful in creating a pull for the company’s products, no sales will •resultiffinalbuyersdonothaveinformationonthelocaloutletsthatstocktheproductorprovidetheservice.Dealeridentificationbecomesevenmorecrucialincaseofnewproductsorservices.The difference in perceptions of business goals between the channel members and the manufacturing organisation •mayleadtoconflictbetweenthetwo.Throughcoordinationbetweentheactivitiesofthedealersandthoseoftheorganisation,SalesExecutivescanpreventthisconflicttoacertainextent.Regularsharingofinformationwith the middlemen regarding the company programmes and policies goes a long way in reducing disharmony. Similarly, by making the information about dealer activities and needs available to the organisation, the sales executive can ensure that the organisation will be in position to render promotional and other assistance to the dealers.

Coordination with the pricing functionThough the Sales Executive’s role in formulating pricing policies is only advisory, he or she is responsible for •the implementation of the pricing policy. As price is an important variable affecting sales, all price changes need to be coordinated with sales policies as well as with related areas like distribution. The sales executive, because of his or her intimate knowledge of the market and market behaviour, becomes an important source of information when changes in pricing policies are being planned. On the operational side, compensating changes in the marketing mix need to be made to offset the negative impact of the price change.

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SummarySales’ planning is the work of setting up objectives for selling activities, determining and scheduling the steps •necessary to achieve these objectives. Sales plans are prepared keeping in view the present and expected changes in marketing plans and marketing •environment.The purpose of sales policies is to put broad limitations on various sales personnel by prescribing the broad •guidelines to perform selling activities.Sales programmes are formulated by sales department within the limits of sales policies and are designed to •achieve selling objectives.Sales-rules are applicable to all sales personnel without distinction. There is a difference between rule and •procedure. Rules tell us what should be done and what should not be done. On the other hand, procedures lay down the manner to complete a particular work.Productive Sales Planning entails planning the unit-wise sales for various products of a company. This is done, •usually in organisations, on annual, quarterly and monthly bases.Oneoftheimportantfunctionsofsalesmanagementistosetupsalesterritorieswithoptionalprofitpotential.•The major factors that govern the territory size are, number of customers and prospects, call frequency on existing customers, and the number of calls that sales person makes in a day.Various territories should have some parity in sales potential. This enables more realistic appraisal of various •salesperson, though there would be some difference in the capacity of various salesperson to perform. If total market area of a business unit is large then it is divided into different regions / territories. Separate •sales plans are prepared for different regions depending upon the demographic, socio-cultural and economic characteristics of that region.For obtaining maximum productivity out of the sales territories, it is essential that the sales force lay emphasis •on its effective management than on mere coverage.

ReferencesSales planning and organisation• . [pdf] Available at <http://www.egyankosh.ac.in/bitstream/123456789/36208/1/unit-7.pdf>. [Accessed on 11 October 2011] Noospherebusiness ., 2010. • Innovation sales organization [Video Online] Available at: <http://www.youtube.com/watch?v=JeURhaftu5Q> . [Accessed 10 October 2011].BlackdotInsights• , 2011. Are You a High Performing Sales Organisation?[Video Online] Available at: <• http://www.youtube.com/watch?v=XDNzteztKuM>. [Accessed 10 October 2011]. boostyoursales• ., 2009. Sales Planning [Video Online] Available at: <http://www.youtube.com/watch?v=bhmkKOOg838>. [Accessed 10 October 2011].

Recommended ReadingWelz, G., 2007. • Methods to Identify Success in a Sales Organisation: Sales Controlling ., Verlag,Trehan• , M & Trehan, R., Advertising and Sales Management, FK PublicationsTyagi, C.L. & Kumar, A., 2004. • Sales Management, Atlantic Publishers and Dist.

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Self Assessment_____________ is a written document for setting sales objectives, policies, procedures, programmes to achieve 1. these objectives.

Sales plana. Budgetb. Sales quotac. Sales budgetd.

The purpose of _____________ is to put broad limitations on various sales personnel by prescribing the broad 2. guidelines to perform selling activities.

Sales plana. sales policiesb. sales programmec. selling objectived.

___________ are those plans which determine order / sequence of different selling activities for a particular 3. sales related job.

Sales plana. sales policiesb. sales procedurec. selling objectived.

_____________ ensures almost equal concentration of the salesperson to all his or her customers because the 4. time involved in travelling to any area of his or her territory will be the same.

Clover leaf shapea. Wedge shapeb. Suitable station of the sales personc. Circle shaped.

______________ ensures that the salesperson comes to his or her base town at the weekend, spends sometime 5. to meet his or her customers here and moves for towns on other leaf, the next week.

Clover leaf shapea. Wedge shapeb. Suitable station of the sales personc. Circle shaped.

__________________ ensures when the salesperson is based in a town with dense population of customers and 6. has to visit the satellite towns also for small customers or sparsely populated customers.

Clover leaf shapea. Wedge shapeb. Suitable station of the sales personc. Circle shaped.

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____________________ estimates the present and potential product/service demand by looking as how the 7. market is build up, that is, who are the present/potential users, and how much do they consume and at what frequency.

Market build up approacha. Workload approachb. Territory coverage planningc. Sales territory approachd.

__________ is checking and evaluating the difference between what was planned and what was actually done 8. and achieved.

Quotaa. Sales planb. Controlc. Sales control\d.

_____________ have to be responsive to changing market trends, growth in both products/service and markets 9. as well as to competitive requirements.

Sales organisationsa. Salesmanb. Sales managerc. Manufacturerd.

The __________________ is the most basic form of sales organisation, characterised by a chain of command 10. running from the top sales executive down to the level of the salesperson.

Sales organisationsa. line sales organisationb. line and staff sales organisationc. committee sales organisationd.

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Chapter IV

Sales: Forecasting, Quota, Budget and Control

Aim

The aim of this chapter is to:

definesalesforecasting•

identify different ways to manage the forecast•

explain sales quotas•

Objective

The objectives of this chapter are to:

definetypesofquotaandmethodforsettingthequota•

explain sales budget•

illustrate budgetary process•

Learning outcome

At the end of this chapter, you will be able to:

discuss sales control•

definemanagingsalesforecast•

explain attri• butes of a good sales quota plan

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4.1 IntroductionAsalesbudgetisafinancialplandepictinghowresourcesshouldbeallocatedtoachievetheforecastedsales.Thepurpose of sales budgeting is to plan for and control the expenditure of resources (money, material, people and facilities) necessary to achieve the desired sales objectives that have been set on the basis of sales forecasts. Sales forecast and sales budget are closely related. If the sales budget is inadequate the sales forecast will not be achieved or, if the sales forecast are increased the sales budget must be increased accordingly.

The process of sales forecasting involves reviewing performance and history of the product or service and •relatingittothemarketingandsaleseffortsofthefirm,withintheanticipatedmarketenvironment(economic,competitive, technological, public policy, etc.) and buyer behaviour.Sales forecasts are time span related and therefore termed as, short term forecasts – covering time period of up •toayearormediumtermforecasts–foratimeperiodofaroundfiveyears.Theexacttimeperiodforwhicha forecast is developed is depend on the product/market characteristics as well as the purpose for which it is developed and hence may vary from company to company. The longer the time span covered, the more qualitative will be the forecast and the shorter the time span covered, the more quantitative will be the forecast.Timeseries(trendfixing,movingaverage),customer/dealersurveysandexecutive judgementare themost•commonly used methods for preparing sales forecasts. The selection of the appropriate forecasting method(s) depends upon

its purpose, �availability of reliable and relevant data, and �market conditions �

For increased usefulness, the overall sales forecasts should be broken down by product, month, territory, •geographical area and segment as per the needs of the company. The pay-off of sales forecasting lies in the accuracy of the forecasts made. Since the attainment of sales •forecasts require the deployment of resources in its anticipation, the manager must do his or her best to make the forecasts come true. In certain cases the entire design of the service along with its operational preparedness and capacity depends totally on forecasts. Evaluation of the approach and methods used for sales forecasting as well as monitoring of the actual sale and its comparison with the estimated performance form part of the regular activities of the Sales Manager.As the sales realise for the operating period, they should be monitored at a regular time period. The unfolding •of market reality often creates the need to adjust the sales forecasts. Business prudence desires that in the case of annual sales forecasts, the forecasts should be thoroughly reviewed at least on a quarterly basis and if need be, corrected too. A similar review on an annual basis in the case of long-term forecasts is also felt necessary. In the process of carrying out corrections in the sales forecast emphasis should be laid on diagnosing the causes •warranting such corrections so that the accuracy level of sales forecasts can be improved. In any case, a strong justificationmustbemadeformodifyingthesalesforecastssothatsuitableadjustmentsinthemarketingandsales strategy are also carried out.Manyafirmsinordertominimisetheerrorfactorinsalesforecasting,usemultipleexpertsandapproaches.•At times this results in varying levels of sales forecasts. Under these circumstances, the manager may examine the differing forecasts by:

Probing into the methodology of sales forecasting adopted by different experts, �Lookingintodefinitionandscopeofthetermsusedintheconstructionoftheforecast, �Pooling of wisdom of the experts and arriving at the most agreeable level of forecast, and �Conductingretrospective–prospectiveanalysisofthesuggestedlevelsofsalesforecastsusingfinetuned �historical data and executive judgement.

Experience brings out that the Sales Managers who have detailed market knowledge, and their companies have •the comprehensive marketing information system providing data on product/service, customer and segment wise basis of their competitor’s sales, succeed in making more accurate sales forecasts.

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Unliketheestablishedproducts,forecastingofthesalesfornewproducts/servicesismoredifficult.Depending•upon the degree of similarity/dissimilarity with the existing products, sales forecasts for new products are based on :

Past records and experience, �Study of competing product’s demand, �Marketresearchfindings, �Test market results, and �Demand behaviour of substitute products and rate of substitution. �

In addition, sales curve of a similar new product in foreign markets and its analysis on a product life cycle •provides meaningful insights.

In the case of a totally new product, a close watch on the actual sales along with the experts’ opinions lessens to some extent the otherwise impossible task of developing reliable forecasts for such products.

4.2 Sales Forecasting : A Quick RecapitulationSales forecasting is an estimation of projected sales for a time period. Simply speaking, the process of sales •forecasting involves reviewing performance, history of the product or service, and relates it to the marketing andsaleseffortofthefirmwithintheanticipatedmarketenvironment(economic,competitive,technological,public policy etc.) and buyer behaviour.Sales forecasts are time span related and therefore are termed as, short term forecast - covering time period of •uptoayear,mediumteamforecasts-foratimeperiodofaroundfiveyears.Theexacttimeperiodforwhicha forecast is developed is dependent on the product/ market characteristics as well as the purpose for which it is developed and hence may very from company to company. Notwithstanding thus the longer the time span covered, the more qualitative will be the forecast, and the shorter the time span covered, the more quantitative the forecast. Timeseries(trendfitting,movingaverage),coronationsandregression,customer/dealersurveysandexecutive•judgement are the most commonly used methods for preparing sales forecasts. The selection of the appropriate forecasting method(s) depends upon

its purpose �availability of reliable and relevant data and �market conditions �

For increased usefulness, the overall sales forecasts should be broken down by product, month, territory, geographical area, and segment wise as per the needs of the company.

4.2.1 Managing Sales ForecastsThe pay off of sales forecasting lies in the accuracy of the forecasts made. Since the attainment of sales forecasts require the deployment of resources in its anticipation, the manager must do his best to make the forecast come true. Evaluation of the approach and methods used for sales forecasting as well as monitoring of the actual and its comparison with the estimated performance form part of the regular activities of the manager.

4.2.2 Forecast DifferingManyafirmsinordertominimisetheerrorfactorinsalesforecasting,usemultipleexpertsandapproaches.Attimes this result in varying levels of sales forecasts under the circumstance, the manager may examine the differing forecasts by:

Probing into the methodology of sales forecasting adopted by different experts.•Lookingintodefinitionandscopeofthetermsusedintheconstructionoftheforecast.•Pooling of wisdom of the experts and arriving at the most agreeable level of forecast.•Conductingretrospective-prospectiveanalysisofthesuggestedlevelsofsalesforecastsusingfinetunedhistorical•data and executive judgement.

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Experience brings out that the sales managers who have detailed market knowledge and their companies the comprehensive marketing information system providing data on product, customer and segment wise basis of their competitors sales, succeed in making more accurate sales forecasts.

4.2.3 Monitoring Sales ForecastAs the sales realise for the operating period these should be monitored at a regular periodicity. The unfolding of market reality often creates the need to adjust the sales forecast. Business prudence desires that in the case of annual sales forecast, these be thoroughly reviewed at least on a quarterly basis and if need be corrected too. A similar review on an annual basis in the case of long-term forecast is felt necessary. In the process of carrying out corrections in the sales forecast emphasis should be laid on diagnosing the causes warranting such corrections so that the accuracy levelofsalesforecastsisimproved.Inanycaseastrongjustificationmustbemadeformodifyingthesalesforecastso that suitable adjustment in the marketing and sales strategy is also carried out.

Sales forecasting for new productsUnliketheestablishedproducts,forecastingofthesalesfornewproductsismoredifficult.Dependinguponthedegree of similarity/dissimilarity with the existing products, sales forecast for new products are based on:

Past records and experience•Study of competing product’s demand•MarketresearchfindingsTestmarketresults•Demand behaviour of substitute products arid rate of substitution.•

In addition, sales curve of such a new product in foreign markets and its analysis on a product life cycle basis provides meaningful insights. In the case of a totally new product, a close watch on the actual sales along with the experts’ opinion lessen to some extent the otherwise impossible task of developing reliable forecasts for such products.

4.3 Sales QuotasSales quota is a goal in terms of quantity given to a sales representative, or a group of sales representatives over •aperiodoftime.Salesquotamaybeassignedtoaregion,territoryorbranchoffice.It may be assigned to a distributor too. Sales quotas are the tools of planning and control. They have motivational •potential and serve as basis for awarding incentives. Sales quotas are based on sales forecasts and sales potentials of different markets. The more accurate the data •used in formulating the sales quotas, the more effective quotas become. Sales effort is controlled by using quotas. It helps in appraisal. It helps in controlling expenses. Quotas provide •quantitative performance standards. Quotas are used as performance criteria in sales contests. Salesforecastisthefirststepinsettingupquotas.Itleadstothesalesbudget.Inthebudget,thereisaprovision•for setting quotas as performance standards.

4.3.1 Meaning and ImportanceA sales quota is a quantitative goal assigned to a sales unit relating to a particular time period. A sales unit may be a salesperson,territory,branchoffice,regionordistributor.Salesquotasareusedtoplan,controlandevaluatesellingactivities of a company. They provide a source of motivation, a basis for incentive compensation, and standards for performance evaluation of sales person and uncover the strengths and weaknesses in the selling structure of the firm.

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4.3.2 Purpose of Sale QuotaSales quotas serve several purposes. The principal purposes include:

Providing goal and incentives: Quotas provide sales persons, distributive outlets and others engaged in the selling •activities, goals and incentives to achieve certain performance level. Many companies use quotas to provide their salesforce the incentives of increasing their compensation through commissions or a bonus if the quota is surpassed and/or recognised for superior performance. Needless to mention, to be true motivators sales quotas, set should be perceived as being realistic and attainable.Controlling sales person’s activities: Quotas provide an opportunity to direct and control the selling activities •of sales persons. Sales persons are held responsible for certain activities of customer per day, calling on new accounts, giving a minimum number of demonstrations and realisation of company’s account. If the sales person fails to attain these quotas, the company can take corrective action to rectify the mistake.Evaluating performance: Quotas enable the company to evaluate performance of its sales person, territory or •distributive network. Performance against quotas also helps identify the strong and weak points of the sales persons.Controlling the selling expenses: Quotas are also designed to keep selling expenses within limits. Some companies •reimburse sales expenses only up to a certain percentage of sales quotas. Other tie expenses to the sales person’s compensationinordertocurbwastefulspending.Expensequotahelpscompaniestosetprofitquotas.Making effective compensation plan: Quotas play an important, role in the company’s sales compensation •plan. Some Indian companies follow the practice that their sales person will get commission only when they exceed their assigned quotas. Companies may also use attainment of the quotas in full or in part as the basis for calculating the bonus. If the sales person does not reach the minimum desired quota, he/she will not be entitled for any bonus.

4.3.3 Types of Quota and Method for Setting the QuotaThere are four types of quotas:

Sales volume quotas: The most commonly used quotas are those based on sales volume. This type of quotas is set for an individual sales person geographical areas, product lines or distributive outlets or for any one or more of these in combination. Sales volume quotas are also set to balance the sales of slow moving products and fast moving products or between various categories of customers per sales unit. The sales volume quotas may be set in terms of units of product sales, or rupee sales or both on overall as well as product wise basis. Some companies combine thesetwoandsetquotaon“Point”basis.Pointsareawardedontheattainmentofacertainspecificlevelofsalesinunits and rupee terms for each product/customer.

Methods for Setting Sales Volume quotas:Past sales: The method in this case would be to determine the percentage by which the company’s market share •is expected to increase and then add this into last year’s quota. For example, .if a company expects an increase of 8 per cent this year then the new quota for each marketing unit would be last year’s quota plus 8 per cent or 108 per cent of last year’s quota. This method assumes that the preceding year was a typical year, and if not, it suffersfromthelimitationsofbeingbasedonunrealisticfigures.Animprovedmethodistotaketheaverageofsay past three years and then add to it to the planned rate of growth.Total market estimates: The other method is to derive sales quotas from the total market size estimates made •by the company for the year. Two approaches are used to arrive at such market estimates. One approach is to estimate the market size in an aggregate manner as per the data available as well as the judgement of the executiveattheheadoffice.Theotheristobuildestimatesbasedonprojectionsmadebythefieldstaffateachterritoryofficeofthecompanies.Ineithercasethemarketestimatesneedmoderationtoberealisticaswellasto match with the company’s sales objectives.

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Financial quotas:Financialquotasaredeterminedtoattaindesirednetprofitaswellastocontrolthesalesexpensesincurred.

Netprofitquota:Netprofitquotasareparticularlyusefulinmultiproductcompanieswheredifferentproducts•contributevaryinglevelofprofits.Itemphasisesonthesalesforcetomakerightuseoftheirtime.Thefollowingfigureclearlydepictsasellingsituationinwhichasalespersonoptimallybalancestheirtimebetweenhighandlowprofityieldingproducts.

RatioofSalesVolumetoNetProfit

Volume per month Net Profit per month

Product Sales Price per unit

Profit Margin per unit (%) Mr. A Mr. B Mr. A Mr. B

Product X Rs. 200 Rs. 140 (70%) 20,000 60,000 14,000 42,000Product Y Rs. 100 Rs. 40 (40%) 35,000 25,000 14,000 10,000Product Z Rs. 50 Rs. 10 (20%) 75,000 10,000 14,000 2,000

125,000 95,000 42,000 54,000

Table 4.1 Net profit quota

Thisfigureillustrateshowimportantitisforthemanagementtoensurethatitssalespersonsdonotspendmoretimeonlessprofitableproducts,becausethesalespersonsarecostingthecompanytheopportunityofearninghigherprofitsfromtheirhighmarginproducts.Inotherwords,itshouldensurethatitssalespersonsspendtheirmaximumtimeonmoreprofitablecustomer.Theobjectivecanbeachievedbysettingaquotaonnetprofitforitssalesforce,and thus encouraging them to sell more of high margin products and less the low margin products.

Expense quota: In order to make the salesforce conscious of the need to keep selling costs within reasonable •limits, some companies set quota for expenses linked to different levels of sales attained by their salesforce. And to ensure its conformity they even link compensation incentives to keeping expenses within prescribed limits. Since sales are the result of the selling tasks performed which vary across sales territories, it is not easy to determine expense quotas as percentage of sales in a uniform manner. Also very strict conformity to expense quota norms result in demotivation of salesforce. As such expense quota is generally used as a supplement to other types of quotas.

Activity Quotas: Good performance in competitive markets requires the salesforce to perform the sales as well as market development related activities. The latter activities have long term implications on the goodwill of the firm.Toensurethatsuchimportantactivitiesgetperformed,somecompaniessetquotaforthesalesforceintermsof the various selling activities to be performed by them within a given periodicity. Finally the company must set a target level of performance for the sales persons. Some of the common type of activity quotas prevalent in Indian companies is as under:

Number of prospects called on•Number of new accounts opened•Number of calls made for realising company’s account•Number of dealers called on•Number of service calls made•Number of demonstration made•

Thechiefmeritofactivityquotaliesinitsabilitytodirectthesalesforcetoperformthe“urgent”sellingactivitiesand“important”non-sellingbutmarketdevelopmentrelatedactivitiesinabalancedandregularmanner.

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Combination quotas: Depending upon the nature of product market selling tasks required to be performed as well assellingchallengesfacingthecompany,somecompaniesfinditusefultosetquotasincombinationofthetwoorthreetypesdiscussedabove.Rupeesalesvolumeandnetprofitquotasorunitsalesvolumeandactivityquotainacombined manner are found in common use in a large number of consumer and industrial products companies in India.

4.3.4 Attributes of a Good Sales Quota PlanUsually, the sales department is responsible for establishing the sales quota, and no review or approval of a higher executive is needed. Within the sales organisation, the task may rest with any of several executives, depending on the size of the company, the degree of centralisation in the sales force management, and the method used to determine the quotas. There are several characteristics of a well-designed quota structure.

Realistic attainability: If a quota is to do its intended job of spurring a man to the efforts management wants, •the goal must be realistically attainable. If it is too high or out of reach, the salesmen may loose initiative.Objectiveaccuracy:Regardlessofwhetherafirmisusingvolume,profit,expense,oractivityquotas,theyshould•be related to potentials. Obviously, executive judgement is also required, but it should not be the sole factor considered. If the men are to have faith in the performance goal, they must be convinced it was set impartially and based on factual, qualitative market assessment.Ease of understanding and administering: A quota must be simple and easy for both management and the sales •force to understand. A complex plan probably will cause friction and make the men resentful and even suspicious. Also, from management’s point of view, the system should be economical and cost effective, to administer.Flexibility:Noquotaordinarilyisagoodoneunlessthereisadequateflexibilityinitsoperation.Particularly•if the quota period is as long as one year, management may have to make adjustment because of changes in marketconditions.Atthesametime,cautionmustbeexercisedtoavoidunlimitedflexibility,whichmayresultin confusion and destroy the ease with which the system is understood.Fairness: A good quota plan is fair to the men involved. As much as possible, the work load imposed by quotas •should be comparable, but this does not mean that quotas must necessarily be equal for all men. Differences in potential, competition, and salesmen’s abilities exist and, therefore, the performance goals may not be comparable by absolute measures. They can be compared but only in relative terms.

4.4 Sales BudgetSales forecasts are closely related to sales budget. A sales budget helps in attaining the sales forecasts and controls the expenditure of resources. Inadequate sales budget will hamper the attainment of sales forecasting. Let us now discuss the purpose and the methods of Sales Budgeting.

4.4.1 Meaning of Sales BudgetAbudgetisafinancialplan.Insalesbudget,resourcesareallocatedtoachievethesalesforecast.Itspellsoutwhateach one will sell, and how much. It also spells out what and how much will be sold to the different classes of customers. A budget is an estimate of sales either in units or value and the selling expenses likely to be incurred whileselling.Itthusenablesanetprofitforecastonthebasisofthesellingoperations.

4.4.2 Purpose of Sales BudgetA sales budget generally serves three basic purposes.

A planning tool: In order to achieve goals and objectives of the sales department, a Sales Manager must •outline essential tasks to be performed and compute the estimated costs required for their performance. Sales budgeting,therefore,helpoverallcostingandprofitplanningandprovideaguideforactiontowardsachievingthe organisational objectives.An instrument of coordination: Selling is only one of the important functions of marketing. To be effective it •needs support from other elements of the marketing mix. The process of developing realistic sales budget draws upon backward and forward linkages of selling with marketing and in turn brings about necessary integration withinthevarioussellingandmarketingfunctions.Italsoestablishesco-ordinationbetweensales,finance,production and purchase function.

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A tool of control: The sales budget on adoption becomes the mark against which actual results are compared. •

Budget Variance

(in '000 Rs.) Budget Actual Variance

Favourable UnfavourableSales Rs. 7000 Rs. 8900 Rs. 1900Expenses Direct Selling

2500 2375 125

Sales promotion 1500 1650 Rs. 150 Advertising 997 1075 78 Administrative 8 75 775 100Total expenses Rs. 5872 Rs. 5875 03Profit ( before tax) Rs. 1128 Rs. 3025 1897

Table 4.2 Budget variance

Table 4.2 is self explanatory and points out to both the favourable and unfavourable variance. The analysis of •the factors causing variance enables the Sales Manager to quickly spot potential problem areas and plan for unexpected outcomes such as higher than budget sales.The budget variance analysis approach thus helps in improving insights of sales manager and enables him or •hertorefineanddeveloprealisticsalesbudgetsinfuturewithminimalvariance.

4.4.3 Format of Budget

ItemJanuary February March

Budgeted Actual Variance Budgeted Actual Variance Budgeted Actual Variance

SalesExpenses SalariesCommissionsBonusMedicalRetirement

Travel LodgingFood (Boarding)Entertainment

OfficeExpensesMailTelephoneMisc.

PromotionsSamplesCataloguesPrice – listsVisualsAdvertising

Table 4.3 Format of budget

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Budgetisashort-termexercisethattriestooptimisebusinessprofits.Inthelong-run,businessmayhaveprofitmaximisationgoals.Abudgettriestooptimiseprofitsbyaccommodatingcustomerserviceactivitiesandincurringexpenses to acquire new business. If the sales volume is to be increased by, says Rs. 10 crores, sales management has to decide how this could be achieved. We may have to rope in new customers. Those expenses are also included in the budget. All activities are converted into rupee estimates, for example,. travel activities. Here we have to multiply the estimated volume of performance of each activity by its cost. Standard costing methods can be used here. Historical costs can help us in estimating the cost of an activity.

4.4.4 Budgetary Process

In many organisations, the sales are the key variable for formulating budgets of the other departments. Thus •raw materials are purchased in accordance with the sales estimate leading to the purchasing budget. Production is planned in accordance with the sales and purchase budget. Finance is arranged in accordance with the requirements of production and other departments.Human Resources are deployed to realise the overall planning requirements. Thus, the starting point becomes •the sales budget. It generates other budgets like the inventory budget, purchase budget production budget and soon.Salesbudgetbecomesamajorinputforthefinancialplanintermsofworkingcapitalrequirement,capitalexpenditureplanning,cashflowsandfundflowsandadministrativeexpenses.Productionisplannedinunitswhereasfinancesareplannedinmonetaryvalue.Planningcanbetop-downor•bottomup.Intop-downplantheplanflowsfromthetopandISbrokendownforsmallerunits.‘Inbottom-up plan, the departments and units set their own goals, which are aggregated at the top. In sales budgeting some organisation adopts top-down approach in which the goals are set by the immediate higher level. Some organisations follow bottom-up approach where each level in sales right from the salesman put forward sales andprofitobjectives.Bottom-up style is more participatory. Budgetary procedure thus works upwards in the sales organisation. The •lowestlevelinthebudgetaryprocessisaprofitcentre-sayabusinessdistrict.Herethedistrictlevelbudgetsare made. They are aggregated to make the regional budget or divisional budget. Divisional budgets for different product groups make up the corporate sales budget. This is integrated to the •overall marketing budget. At each level budget gets approval before it is submitted for aggregation upwards. Thefinalbudgetofthecompanycontainsseveralotherdepartmentalbudgets.Theapprovedbudgetislaterpassed down for implementation. A sales manager has to argue before the marketing manager for his due share of funds. The marketing manager is turn tries to argue his case before the top management.Budget is used after approval for controlling. Each budget has quotas or standards. Against these, management •has to measure performance. Budget progress reports are prepared periodically. Proper and timely corrective action is taken. Sales performance is broken down by products, package sizes, territories or customers. Variancescanbeonaccountpoorperformanceofthesalesgrouporpoorterritorialservicing.Budgetedfigures•can be revised to keep pace with the changing environment. Sales budgets can go wrong due to changed environmentalconditions.Duetosignificantdifferencesinthenumberofunitssold,significantdifferencescanoccur in the estimated expenses especially the variable expenses. Thus, the sanctity of the budget is lost. Still the budget serves as a useful guideline.

4.4.5 Flexibility Sales Budget

Flexible sales budget is an alternative to overcome the rigidity of the traditional sales budget which makes the •SalesManagermerelyananalystofthefinancialperformanceofthecompany.Aflexiblebudgetmakesuseofstandard costs (based on past records or managerial judgement) for different revenue forecasts. It allows the SalesManagertocontinuouslymonitorfinancialperformanceintermsofstandardcostratios.Inthepastuseflexiblebudgetingwaslimitedtolargesizecompanies,butnowsmallcompaniesarealsoadoptingflexiblebudgeting technique.

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Thereisonemoredimensionofflexibilityinsalesbudgetandthisarisesoutoftheverynatureofsalesbudget.•A sales budget is an estimation relating to the future period under assumed market conditions. In the event of changeinmarketconditionsnecessitatingachangeinthefirm’sexpenditureofefforts,thesalesbudgetshouldcarryflexibilityofinter-itemreallocationofexpensesandotherresources.

4.4.6 Implementation and Feedback Mechanism

Actual budgetary control features go into operation as soon as the approved budgets have been distributed to all •unitsofthefirm.Eachiteminthebudgetservesasquotasorstandardsagainstwhichmanagementmeasurestheunits’ performance. In case of actual performance showing a variance from budgeted performance, two courses of actions are available to the organisation:

To ascertain whether the variance is a result of poor performance by the sales group. In this case necessary �steps should be taken to ensure that salespersons organise their selling efforts more carefully, so that budgeted performance can be brought back into line.To revise the sales budget by incorporating the changed allocation of the item. For example, if it is discovered �that travel expenses have increased because of the necessity of calling on new customers not previously covered,actionshouldbetakentorevisethebudgettoreflectchangedconditions.

It is the responsibility of the sales manager to ensure that the sales revenue and cost ratios remain within •reasonable budget limit. Experience brings out the following main items on which variance between budgeted and actual costs often arise :

salariesandfringebenefits, �direct selling expenses, �maintenance of company vehicles, �sales and other product/business promotional costs, and �Promotional allowances including discounts, rebates, etc. �

The sales manager must give attention, though in varying degree, to each of the above and other items. It is wise •to tighten control over expenses especially under circumstances when sales forecasts are not being met or sales budgets are being exceeded. A general attitude of caution before incurring an expense is considered prudent. Allshortfallsinbudgetedsalesthataffectgrossprofitcontributionmustatleastmakeacaseforathorough•reviewof the sales andmarketing programmesof thefirm.Researches reveal the causes of shortfalls as:distribution problems, shift in market mood, competitive activity, wrong pricing, under-manning of sales staff or inexperienced sales staff, delays in new product launch, etc.

4.5 Sales ControlOne of the most important responsibilities of a Sales Manager is to exercise control over the sales results and the performance of the selling activities. In order to ensure that the sales targets are achieved, sales need to be controlled bothonanon-goingbasis(andcontinuously)aswellasoverallatafixedperiodicity.Thesalescontrolfunctionassists the Sales Manager to ascertain what levels of sales results have been attained; why there has been a variance, if any, between actual and budgeted results; and what remedial action is taken to achieve the targeted results.

4.5.1 Purpose of Sales ControlBy comparing the actual sales results with the objectives set and diagnosing the causes for the variance between the two, sales control assists the Sales Manager to:

initiate remedial steps,•revise the sales policy and the strategies followed,•implement steps for improving the productivity of the salesforce,•improve the quality of target setting, sales planning and budgeting functions, and•increasesalesprofitability•

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4.5.2 Sales Control SystemAsalescontrolsystemcanbeset-upbyafirmbyinstitutingactiononthefollowingfivesteps:

setting detailed objectives (at least around key result areas),•establishing standards for appraising performance,•gathering information on actual sales activities and results,•comparison of actual results with established standards, and•taking remedial action (need based)•

The existence of a comprehensive sales information system in thefirm is a prerequisite for an effective salescontrol system. Such an information system can be built by regularly recording sales by – unit, value, customer, sales person, territory, distribution outlet, cash or credit. In addition to invoice, other important information sources include dispatch notes, credit notes, customer call reports, daily activity (and time spent) reports, journey plans, sales quotation slips, sales expense forms, discount and allowances records, customer complaints, warranty claims settled, market intelligence including sales promotions and special reports sent by sales persons.

4.5.3 Methods of Sales ControlMost commonly used methods of sales control are discussed below:

Sales analysisSales analysis is a detailed examination of sales volume by territory, salesperson, customer, product line, etc. It •works on a basic principle that the trends of the total sales volume conceal rather than reveal the market reality. Researches point out that in most sales organisations a large percentage of the customers, orders, products or territoriesbringinonlyasmallpercentageofthetotalsalesvolumeaswellasnetprofits.This situation is popularly referred as 80-20 principle i.e. 80% of the orders, customers, territories or products •contributeonly20%ofthesalesorprofit.Conversely,20%ofthesesellingunitsaccountfor80%ofthevolumeorprofit.Likewise,thereareexamplesofIcebergPrinciplewhichshowthatthetotalsalesvolumemayrevealonly about 10% of the real market situation which is above the surface and the mighty 90% may remain unknown. It is, therefore, strongly recommended that for unearthing the reality and gaining meaningful insights regarding company’s selling strengths and weaknesses, the sales must be analysed on the bases discussed below:

Sales analysis by territoryIn this method Sales Managers scan the total sales on territory basis. It assumes that each quota assigned to a salesperson was based on fair and sound measurement of potential. In addition, any unusual conditions in the individual territories such as intense competition, closure of market or problems in transportation, etc. which made an adverse effect on the sales of the company’s product were considered in order to guide further sales analysis. The following example (Table-4) will further throw light on the aforesaid discussion.

Sales Analysis based on Territory Territory Q uota A ctual value in'000 Rupees

Performance East 825 850 103% West 750 750 100%North 890 870 98%South 850 920 108%

Table 4.4 Sales analysis based on territory

This example shows that almost all the territories achieved or exceeded their quota except northern region which achieved 98% of the assigned quota. It will thus help the sales manager to investigate the reasons – for shortfall in northern territory and, of best performance in southern territory.

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Sales analysis by salespersonsConcentrating on the northern territory, the Sales Manager should see the sales performance of all the salespersons working in the territory. From Table 4.5 below it is clear that out of eight salespersons working in the territory, four havemadeorexceededtheirquota,threeothersbarelymissed,andonlyonei.e.(Gulani)fellsignificantlybelowhis sales quota with a performance of only 82%:

North Territory: Sales by Sales persons

Sales person Quotas Actua Performance as % of

Mukherjee 95 93 98% Singh 115 117 102% Singa 110 109 99% - 106 110 104% - 108 107 99% - 110 112 102% Gulani 130 106 82% Reddy 116 116 100% Totals : 890 870 98%

Table 4.5 north territory: sales by sales person

Sales analysis by product lineBefore asking for any explanation from Gulani for his poor sales performance, the Sales Manager should see his sales performance based on product line (Table 4.6).

Salesperson : Gulani's Sales by Product Line

Product Line Quotas Actual Performanc as % of QuotaTrekking tours 22 23 104%Wildlife tours 28 28 100%River rafting tours 30 06 20%Cultural tours 24 24 100%Health tours 26 25 96%Totals 130 106 82%

Table 4.6 Salesperson: Gulani’s sales by product line

It is clear from Table 4.6 that Gulani did an excellent job of reaching product quotas with the exception of river rafting tours, where he achieved only 20% of quota. With total sales of river rafting tours running slight ahead of the last year in all other territories and no unusual situation in Gulani’s territory, the sales manager should look into Gulani’s customer-wise details for detecting the causes of the shortfall.

Sales analysis by customerCustomer-wise break-up of river rafting sales attained by Gulani showed (Table 4.7) that one important account i.e. College X’s alumni was responsible for Gulani’s poor performance on that product line. They were Gulani’s biggest customers and had been targeted for 80% of his entire sales quota for river rafting tours. With the entry of another tour operator, the customer had switched over to the same. Gulani did not feel the gravity of situation, as being old customers the alumni was taken for granted by him. If he had foreseen the alarming situation in time, he could have asked for assistance from the sales manager; offered more discounts or in other words changed his sale offers. Analysis of Gulani’s sales by customer also validates the existence of 80-20 principle referred above.

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Gulani's Customer Break-up

Customers for River Rafting Quotas Actual Performance As % of QuotaCollege A Students 6 6 100%College X Alumni 24 0 0% 30 06 20%

Table 4.7 Gulani’s customer break up

The above case clearly brings out the importance of conducting detailed sales analysis. It also leads the Sales Manager to diagnose the factors responsible for variance between targeted and actual performance. Sales analysis, thus, makes a good beginning in the sales control function of the Sales Manager.

4.5.4 Marketing Cost Analysis

Attainmentoftargetedsalesvolumeisonlyonepartoffulfilmentofthesalesobjectiveofthefirm.Theother•important part being the level of selling costs incurred to attain the given sales volume. It is not mere sales rather saleswithbudgetedprofitsorexpensesthatreallymatter.Marketing cost analysis is a detailed examination of the costs incurred in the organisation and administration •ofthesalesandmarketingfunction,anditsimpactonsalesvolume.Itisafactfindinganalysiswhichrelatescoststosalesvolumeandresultantprofitability.Itpre-supposestheexistenceofagoodcostingandfinancialaccountingsysteminthefirm.Byrelatingsales,•costandfinancialdimensionofeachsellingtransactionandactivityitcangenerate:

Cost of goods per rupee of sales, �Profitperrupeeofsales, �Profitpersegment,channel,territory,productpack,salesperson,etc., �Sales volume and turnover of receivables, �Turnoverofstockandprofitability, �Average value of orders, �Average cost per orders, �Total value of orders, �Inquiry - order conversion ratio and cost, �Number of inquiries generated say in response to advertisement, salesperson call, Direct mail, etc., �Total operating and functional cost - product-wise, region-wise, etc., �Sales to call ratio, �Expense to sales ratio, and �Profitcontributiononvariousbases,etc. �

It would be worth repeating that the above listed valuable information can only be generated by systematising •thecostaccountingsysteminthefirm.Thiscostingsystemamongotherdimensionsshouldbesetupsalesfunction-wise, cost centre-wise and as criteria for allocation and absorption of selling, marketing and other general managementcosts.Successfulconductofmarketingcostanalysisbenefitsthesalesmanagerinascertaining:

relativecostandprofitabilityofsalesoperations, �profitable, not so profitable andnot profitable – territories, products, pack size,market segments and �distribution channels,minimum order level quantities, �productivity of salespersons, �

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profitabilityofdifferentsalespromotiontechniques,and �profitabilityofdifferentmarketingmixprogrammes �

Trendsinmarketingcostanalysiscoveraperiodoftimewithinthesamefirm.Crosscomparisonswithleadingcompetitors and the average norm of the industry provides a valuable advantage of knowing the relative strength ofthefirmintheindustry.

Sales management auditThough important, the previous two techniques focus only on routine and operational aspects of sales control. •This third technique of sales control relates to the strategic dimensions of sales control.Sales management audit is a comprehensive, systematic, independent and periodic audit of the sales policy, •objectives,strategies,organisationandproceduresfollowedbythefirm.Thepurposeofsalesmanagementauditistoevaluatethesoundnessofthesalesmanagementofthefirm.It•examines the validity of the very basis and assumptions on which the sales function is planned and managed. It appraises the suitability of the prevailing sales management system in the emerging market environment of tomorrow. By critically evaluating the strength of the sales management against the changing market environment it points out to the merging areas of opportunity as well as the areas which need intervention. Some of the aspects covered in the sales management audit include:

Appropriateness of selling function objective. �Role of the selling function in the promotion-mix and sales-marketing integration, �Organisation and work-norms of the salesforce and its size, �Recruitment, selection, promotion policy, compensation and motivation of salesforce, �Basis of sales quota, sales budget, territory allocation and their market need suitability, �Quality of salesforce, appraisal criteria and training and development of sales personnel, �Productivity of the sales function, �Sales planning and control system, and �Commercial procedures and sales promotion method used, etc. �

Sales management audit is relatively a new technique of sales management control. Its conduct and format is •yet to be standardised and so is its coverage. From the limited experience it is felt that if conducted by outside professionalsitbenefitsthecompanyimmensely.Inthecaseofaleadingconsumerdurablescompanythisauditinter alia resulted in the re-organisation of its sales department from the functional system to product manager system, as also a change in its selling system from selling through distributor to retailers. Thischangecarriedouttwoyearsagohasimprovedthemarketshareaswellasprofitabilityofthecompany.•In the case of another company dealing in vanaspati and edible oils, the sales audit brought out the redundancy ofthepositionofassistantsalesofficerbetweenthesalessupervisorandregionalsalesmanager.

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Summary The purpose of sales budgeting is to plan for and control the expenditure of resources (money, material, people and •facilities) necessary to achieve the desired sales objectives that have been set on the basis of sales forecasts.The process of sales forecasting involves reviewing performance and history of the product or service and •relatingittothemarketingandsaleseffortsofthefirm,withintheanticipatedmarketenvironment(economic,competitive, technological, public policy, etc.) and buyer behaviour.Sales quota is a goal in terms of quantity given to a sales representative, or a group of sales representatives over •a period of time. These are based on sales forecasts and sales potentials of different markets. The more accurate the data used in formulating the sales quotas, the more effective quotas become. A quota must be simple and easy for both management and the sales force to understand. A complex plan •probably will cause friction and make the men resentful and even suspicious. Also, from management’s point of view, the system should be economical and cost effective, to administer.Abudgetisafinancialplan.Insalesbudget,resourcesareallocatedtoachievethesalesforecast.Itspellsoutwhat•each one will sell, and how much. It also spells out what and how much will be sold to the different classes of customers. A budget is an estimate of sales either in units or value and the selling expenses likely to be incurred whileselling.Itthusenablesanetprofitforecastonthebasisofthesellingoperations.Human Resources are deployed to realise the overall planning requirements. Thus, the starting point becomes •the sales budget. It generates other budgets like the inventory budget, purchase budget production budget and so on.Flexible sales budget is an alternative to overcome the rigidity of the traditional sales budget which makes the •SalesManagermerelyananalystofthefinancialperformanceofthecompany.Aflexiblebudgetmakesuseofstandard costs (based on past records or managerial judgement) for different revenue forecasts.

References Sales forecasting• [pdf] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/4523/1/unit-8.pdf> [Accessed 11 October 2011].Sales forecasting and sales quotas• [pdf] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/7478/1/Unit-15.pdf> [Accessed 11 October 2011].SusanCrosson, 2007. • Budgeting Process - 2 Sales P6 [Video Online] Available at: <http://www.youtube.com/watch?v=pPLkO5z2IHg>. [Accessed 10 October 2011]. Routhwsuedu, 2011 • Responsibility Accounting - Sales Budget [Video Online] Available at: <http://www.youtube.com/watch?v=hKz0xxO7-VM>. [Accessed 10 October 2011].SeanPAS., 2009. • Ask Tim Berry - How Do I Start a Sales Forecast? [Video Online] Available at: <http://www.youtube.com/watch?v=E78j9AsE7lk>. [Accessed 10 October 2011].How to Use Sales Forecast• . [Video Online] Available at: <http://www.5min.com/Video/How-to-Use-Sales-Forecast-262592216>. [Accessed 10 October 2011].Chunawalla, S.A., 2009. • Sales Management with Personal Selling - Salesmanship.Global Media.Chunawalla, S.A., 2008. • Advertising, Sales and Promotion Management. Global Media

Recommended ReadingWallace, F. Thomas., 2002. • Sales forecasting: a new approach: why and how to emphasise teamwork.Mentzer, J. T & Moom, A. M., 2005. • Sales forecasting management: a demand. 2nd ed., SageVashisht, K., 2006. • A Practical Approach to Sales Management, Atlantic Publishers & Dist.Still, R. R., 2007. • Sales Management, Richard R Pearson Education India.

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Self AssessmentThe process of __________________ involves reviewing performance and history of the product or service and 1. relatingittothemarketingandsaleseffortsofthefirm,withintheanticipatedmarketenvironment(economic,competitive, technological, public policy, etc.) and buyer behaviour.

sales forecastinga. sales budgetingb. forecastingc. sales quotad.

The longer the time span covered, the more ______________ will be the forecast and the shorter the time span 2. covered, the more _______________ will be the forecast.

Quantitative, qualitativea. Qualitative, quantitativeb. Quantitative, supportivec. Supportive, qualitatived.

_____________ is a goal in terms of quantity given to a sales representative, or a group of sales representatives 3. over a period of time.

sales budgetinga. forecastingb. sales quotac. budget quotad.

Which of the following is true?4. A sales quota is a qualitative goal assigned to a sales unit relating to a particular time period.a. Sales budget is controlled by using quotas.b. Forecasts are used as performance criteria in sales contests.c. Sales quotas are based on sales forecasts and sales potentials of different markets.d.

_________________ is set for an individual sales person geographical areas, product lines or distributive outlets 5. or for any one or more of these in combination.

Sales volume quotasa. Financial quotasb. Activity quotasc. Combination quotasd.

________________ is a detailed examination of sales volume by territory, salesperson, customer, product line, 6. etc.

Financial quotasa. Activity quotasb. Combination quotasc. Sales analysisd.

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In ________________________, it is assumed that each quota assigned to a salesperson was based on fair and 7. sound measurement of potential.

Sales analysis by territorya. Sales analysis by sales personb. Sales analysis by product linec. Sales analysis by customerd.

_________________ is a detailed examination of the costs incurred in the organisation and administration of 8. the sales and marketing function, and its impact on sales volume.

Marketing cost a. Marketing cost analysisb. Cost analysisc. Marketing analysisd.

___________________ examines the validity of the very basis and assumptions on which the sales function is 9. planned and managed.

Marketing cost analysisa. Cost analysisb. Sales management auditc. Sales auditd.

The purpose of _____________ is to plan for and control the expenditure of resources (money, material, 10. people and facilities) necessary to achieve the desired sales objectives that have been set on the basis of sales forecasts.

sales forecastinga. sales budgetingb. forecastingc. sales quotad.

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Chapter V

Sales Presentation and Selling Skills

Aim

The aim of this chapter is to:

definesalespresentation•

differentiate types of sales presentation•

illustrate structure of presentation•

Objectives

The objectives of this chapter are to:

explain the planning of presentation strategy•

enumerate selling skills•

definepresentationskills•

Learning outcome

At the end of this chapter, you will be able to:

discuss negotiation skills•

definestepsofnegotiation•

understand • principals of negotiation

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5.1 Sales PresentationA presentation is a commitment by the presenter to help the audience to do something for solving a problem. An interesting thing to note is that in a presentation commitments are made by the presenter and the audiences are making judgement, simultaneously. In terms of content and structure, presentations and speeches have a good deal in common with formal reports - many of them are oral version of a written document.

Poor presentations are consistently losers irrespective of purpose or the business for which a presentation is made. Stage fear can be a reason for oral presentation, which is an important part of the business routine and each one has to deal with such challenges successfully. There are industries in which sales presentations are the most important marketing tools. Pharmaceutical industry, information technology industry, advertising agencies, insurance sector is some examples of the same where success in business depends on the success in presentation.

5.2 Types of Sales PresentationTypically, all sales people use one of the following types of sales presentations.

Canned Presentation Planned Presentation Audio-Visual Presentation

Problem Solving Presentation

text of the presentation is carefully worded, tested

carefully planned and organised

Need charts, slides, videofilms,prototypes,computer based presentations to the use of actual product

study the individual prospect’s needs and suggests a proposition

most commonly used in non-technical product selling, like, Pharmaceuticals, telephone selling, door to door selling, etc.

department provides just a format and the individual sales person then writes explanations, descriptions and illustrations

advertising industry, computer software industry

Mostly used in insurance sector, management consultancy assignments

Advantage:onecanfinishthe presentation in a short-time and still have a successful close. But The prospect has limited participation

it appears more conversational and less formal, as the sales person is using his own wordings

in the absence of these itmightbedifficulttoexplain or demonstrate

5.3 Structure of PresentationA presentation has following parts:

Opening or introduction of a presentationTheopeningofapresentationisveryimportant.Itisinthefirstfewminutesyougainorlosetheaudience.Themajor purpose of the introduction is:

To catch the audience attention and arouse their interest •To relate the speakers’ purpose with the audience interest•To build the focus for the contents•

Body of presentationThe structure of presentation has to be clear and audience’s attention should not get distracted. From their body-•language you are able to make out that they are not with you. Some of body positions suggesting their lack of attentionareshowninfigure5.1.

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Secretive glance at neighbour’s watch – assumes that it will not be noticed –

shy, sneaky attitude

Pretended yawn – attempt to disguise a look at watch

Fiddling with watch or moving hand over watch. Reveals preoccupation with time or another appointment but

reluctance to offend by looking bluntly at watch

Openly looks at watch unconcerned about impact of action on others

Fig. 5.1 Audience Lack of Interest Reflected in Their Body Language

These situations are, in fact, difficult to handle.Because, in such situations, there is nopoint to keep the•presentation continued. You have to adopt a strategy to gain their attention. Some of the suggestions far gaining audience attention are as follows:

Summarise the remarks and emphasise transition from one point to another. �Use variety in speech and presentation �Give chance to audience to participate by taking a pause for questions or comments. �Usevisualaidsforclarificationandstimulation �Use variety in tone and gestures �Add humour while giving the presentation �

Ending a presentationBeginyourconclusionsbytellinglistenersthatyouareabouttofinish.Theywillmakeonefinalefforttolisten•to you, intently. During the concluding stage restate the next step. Some presentations require the audience to reach a decision •ortotakespecificaction.Inthesecasesthesummingmustcoverthespecificactiontooccurandwhowouldbe responsible for doing what. Yourfinalwordsshouldbeagistofyourpresentation.Alwaysendonapositivenote.Yourfinalremarksshould•be enthusiastic and memorable.

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Irrespective of whether you accept questions, as you go along or you defer them till the end, this phase of a •presentation is most important. It only helps in providing better clarity but also in removing some misconceptions, if any, among your audience, about your product or company.

Question and answer periodProviding opportunity for questions and answers facilitates interactions. Some tips for landing questions:

Given below are some categories of questions. You may decide in which category the question falls and then take action accordingly.

Sr.No. Type of Question How to Handle

1 Confused Question Reformulate/Paraphrase the question. Ask the questioner to restate the question. It also gives you time to think and it can be followed by all. Be clear, a confused question can never be answered.

2 Hostile Question Don’t be defensive or hostile. Rephrase it and unload emotions from it to understand the message.

3 Two-part Question Separate the parts and prioritise them before answering.

4 Off Topic Question Suggest the audience that you would not handle an off topic question.

5 Can’t Answer Question Admit it and say that you would answer it later. You may not be authorised to take a decision about the question. Take time from the audience, check with your superior, and get-back

Table 5.1 Categories of questions

5.4 Planning the Presentation StrategyDevelop the presentation in an easily understandable form. Following points are important while planning the presentation:

definethepurpose,•analyse the audience, •construct or develop the message with due estimate of time and appropriate length, •decide on the most appropriate style and media for presentation•

5.4.1 Define the PurposeThefirstreasonoffailureinapresentationisnotthinkingthroughthepurposeofthepresentationandfocussingitsharply.Thespecificpurposesforapresentationare:

To motivate: motivate the audience to participate in the discussion•To inform or analyse: A group of people meet to hear the oral equivalent of a written report, then members of •the audience offer comments or ask questions.To persuade or collaborate: The most interaction occurs when you aim to persuade people to take a particular •actionortocollaboratewiththemtosolveaproblemorreachadecision.Beflexibletoadjusttoanunexpectedreaction.

5.4.2 Analysing the AudienceThe nature of the audience affects your strategy for achieving your purpose. You should know your audience and size them up in advance. Consider the followings in as much detail as possible:

First consider the size and composition of the audience: A small group may be drawn into a decision making •process.Ahomogeneousgroupbenefitsfromafocussedpresentation;adiversegrouprequiresamoregeneralisedapproach. So be sure of the size of the group to which you are going to address.

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Consider likely reactions to your speech or presentation: The reactions to your speech could be hostile, receptive, •and indifferent. It is easy to talk to a receptive group. It is also possible to convert indifference into interest. It is quite challenging to convert hostility into support. But be clear that whether the audience care about the issues you will discuss and how much they already know about your subject.Finally, you need to take a cold hard look at their relationship with you. Do they already know you? Do they respect •your judgement? The answer to these points would help deciding the best way to organise your material.

5.4.3 Developing Message

Itisimportantthatwhiledevelopingmessagesoneshoulddefinethemainidea,constructanoutlineandestimate•the appropriate length. In such situations if you loose control on what you speak, your message will not be understood in the right way. Itis,therefore,importantthatwedefinethemainideaandconstructaconcreteoutlinearoundtheidentified•idea.Thencollectsufficientinformationwhichshouldbeadequatefortheavailabletimeyouhavetomakethepresentation.At times, you collect a whole lot of information but you fail to put it together in an appropriate order. There are •specificguidelinesavailabletoarrangethematerialinsuitableorder.The suggestion is that you should start with the most important point and then go down to the least. Another •way is that you can start with conclusion and go down to back-up information or start with a general statement andgodowntospecifics.Anyoneoftheseoptionswouldguideyouinsequencingtheinformation.Although it appears simple but actually it is not. One has to decide and compartmentalise information in various •groups, sequence them and then present. Having decided the sequencing of information for developing an appropriate message, the next step is how to deliver it. Knowing your abilities, time available for preparation, audiencesize,etc.,wouldinfluenceyourpresentationmethod.

5.4.4 Determination of Presentation MethodFollowing given is the determination of presentation methods:

1 Extemporaneous

Extemporaneous presentation is that which is prepared in advance and delivered afresh.Theexactwordingsarefiguredout,asthespeakergoesalong.Itcombines prior organisation and spontaneity. The audience prepare an outline, may write down, at best, full opening and closing sentences, and prepare visual aids to promote a set sequence of thoughts and contents.

2 Impromptu Impromptu is that when you are given no time to think and organise. You never knowwhenyoursuperiorwillaskyouforatwominuteupdateonyourfieldexperiences of the previous day.

3 Memorising Memorised is a presentation which is learnt by heart. If a link is broken while speaking the whole presentation gets affected. Typically in Pharma-selling canned presentation are used.

4 Reading Reading is yet another method. In paper reading it is said that even the speaker looks at his. notes for 35% of time and for the remaining 65% to the audience, it is still a paper-reading. In business this method is followed least.

5Speaking from Notes

Speakingfromnotesissimilartothefirstmethodwithadifferencethatthespeaker has his points, with explanations written down and he speaks from the notes. To prepare these notes normally reference cards are used which the speaker can hold in one hand.

Table 5.2 Determination of presentation method

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5.4.5 Deciding the Presentation MediaAlways keep in mind while selecting any AV material that to what extent the selected media would help supplementing or reinforcing your message. You can select audio-visual material out of a large variety, ranging from brochures, leaflets,slides,prototypes,actualproduct,audiotapes,videomaterial,computerbasedaids,etc.Preparingoritissuggested to follow the following guidelines for selecting the best suited media:

Do not stuff information if you have too much to say, may be you should write it out, separately. •Keep only relevant material as irrelevancies create distractions, and confusions.•Organise and break up your material into small modules. Disorganised compels the audience to concentrate on •findingthestructureofyourpresenting,ratherthanlisteningtoyou.Visualise your ideas as much as possible. Understanding, remembrance and clarity are the highest in the picture •form.Use as few words as possible. Use only those points which the audience can understand, and don’t write complete •sentences.Make the pictures and letters bright enough to be visible from a distance. Make the letters bright enough and •think enough to be read by all. Use light colour for background. Use dark or bright colours for pictures or letters to improve visibility.Make the sound material audible, pleasing in tone, varied and synchronised with visuals.•Finally, before the presentation, check particularly the audibility, visibility and readability of your AV material, •if possible, in the actual place of presentation.

5.5 Selling SkillsTherearespecificsellingtechniquesthathavebeenprovenovertimetobeeffective.Asyoubecomemoreskilledand advanced in selling, you will learn how to:

Determine customers’ needs, wants, and buying motives �Open and close sales �Question customers �Handle customer objections �Suggest additional or substitute items �Demonstrate products �Follow up on sales �

Your job is to satisfy customers’ needs by providing accurate product information that will enable customers to make intelligent buying decisions. By meeting the needs of your customers, you will be helping your company grow and prosper.

Communication skills: Express yourself clearly and simply so that customers understand how your products •willbenefitthemandmeettheirneeds.Explainthetechnicaltermsfromalayman’sapproach.Creativity: Be imaginative and inventive in your efforts to sell. Look for new or improved uses of your products. •Listen carefully to your customers, and build your sales dialogue and presentation around what they tell you. Personalappearance.Firstimpressions,positiveornegative,aredevelopedwithinthefirst60secondsafter•meeting someone. Make sure that you are always dressed and groomed appropriately for your type of sales job.

5.5.1 Essential Sales SkillsThere are a lot of different ways to approach sales, but they all tend to rely on the same skill set. Note that these are skills, not talents. Talents are inborn, but skills are learned. Anyone can learn to be an effective salesperson, and good salespeople can become great ones by acquiring the following sales skills:

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Maintaining Self-Confidence:All the other skills are based on persistence. If you have every other sales skill listed below but you give up at thefirsthintofa“no,”thenyou’llneverhaveachancetousethoseskills.Thefirsttimeyouspeaktoaprospect,theymightnotwanttotalktoyoubutifyoucallbackaweeklatertheymightfeellikebuyingit.Self-confidencedoesn’t end with persistence; if you believe in yourself and your product, your prospects will be inclined to believe aswell.Self-confidencewillalsoinclineyoutowardsamoreassertiveclosingapproach,whichisvitaltoyourselling success.

Good Listening:Taking the time to ask your prospect questions and really listen to the answers shows respect for them, and gives you a clearer idea of what they want. By forcing yourself to be quiet, you will notice right away how strong your urge is to jump in and say something before the prospect has stopped talking.

Persuasiveness:Persuasiveness is the skill that allows you to convey your emotions to the customer. If you can make your prospect feel how great it will be to own your product and how much their life will be improved when they have it, you can sell it to them.

Building Strong Relationships:Building and maintaining healthy relationships is the key to developing a strong network.

Self-Motivating:Youcanalwaysfindawaytodevelopyourskills,workonyourpitch,andlearnmoreabouttheproductsandservicesyou sell. But the drive to constantly improve you has to come from within. Your manager might direct you to make some changes if your sales start to plummet, but if you are constantly working to become a better salesperson you can start working on the issue

5.6 Presentation SkillsAllpreparationsonthe‘structure’and‘strategy’ofyourpresentationwillhavelimitedimpactonyourcustomersor audience if you don’t have the right presentation skills.

Personal AspectsA logical step in preparing a presentation is to analyse yourself. You are an integral part of the message. You should seek following characteristics:

Sincerity is vital. Project an image of sincerity by being sincere to yourself, to your subject and to your •audiences.Thoroughness - giving the listeners all they need.•Confidenceinyourselfisimportantsoastogainyouraudience’sconfidence.Youmustearntheconfidenceof•your audiences. Project the right image, and talk in a strong, clear voice.Friendliness - help your communication effort by creating the right environment.•

Non-Verbal behaviourAlthough,itisnotallthateasytosuggestadefinitesetof`Do’s’aboutyourbodylanguageduringpresentations,however,onecaneasilyidentifysome`Don’ts’.

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Reader Does not make eye contact with the audience and only concerned about his material. Such speakers fail to establish any wave-length with the audience.

Weakling Does not know the utility of Lactorn, which in fact, is the support for the speaker’s materials and not the speaker himself.

Gripper Does not make any attempt to supplement the message; rather he/she is only bothered about the verbal part of the message.

Musician Does not adapt the gestures to the contents of the presentation but continuously relaying these, which does not relate. The suggestion is that one should-bring some variation is the gestures.

Bon-Voyager Overdoing the gestures; as a result the presentation becomes more theatrical. The suggestion is that in a typical business presentation the hands should not go above the shoulder level.

Pacer Although relaxed but still not too sure about movements, postures and gestures.

Table 5.3 Some don'ts related to body language

Following are some elements of the non verbal communication in the context of presentation:Posture

Sagging shoulders, dropped head forward and sloppy casualness are indicative of depression, while standing •uprightwithsquareshouldersandheadheldhighareindicativeoftheconfidence.Choice of a comfortable pair of shoes helps avoiding conveying a negative, allot-ease impressions because •your shoes are bothering you. Giving thought to such minor details can help you in making a winning presentation.

MovementsWhile presenting a topic, your physical movements can help you in the following ways:

To hold attention: Lectern restricts movement. Rather than moving back and forth it is suggested to move left •to right to gain attention of the audience, sitting on both sides. However, don’t move continuously.To get rid of nervousness: Movement helps decreasing stage fright in the beginning of your talk and the way •you walk up to lectern or podium, tells something about you non-verbally to the audiences. Do you move with assurance, determination and enthusiasm? However, over-enthusiasm is also not productive.To suggest transitions: In writing, the cues for transition are headings, words, numerical hints. In speaking, the cues •are physical moving yourself, a directional shift in the posture helps, the audience to follow the transition.To increase emphasis: In writing we underline, we use italics, capitals, exclamation etc. While in speaking a •movement towards the audience, accompanied by a gesture, can imply you’re stressing a point.

GesturesGesturesrelatetomovementsoffingers,palm,wrist,arm,elbowandshoulder.Herearesomeexamplesofsituationswhere gestures can help you.

1 To emphasise Clenchedfistofonehandhittingthepalmoftheotherhandemphasisesthepointyou want to make.

2 To point Theindexfingercallsattentionoftheaudience3 To reject Hand may go on a side in an act of rejection.

4 To describe You may communicate and describe everything through hands. Even an approximation of the verbal message through gestures is worthwhile than none.

Table 5.4 Gestures

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Eye contract Though it is not possible to have eye contact with each and every person sitting amongst the audience but it is suggested that you may identify, select persons sitting spread across amongst the audience and establish eye contact withthem.Don’tlookatonepersonallthetime.Eyecontacthelpsyouingainingconfidenceinyourselfanditalsoconveys to the audience that whatever you are saying, you are very sure of it.

Facial expressionsKeep your facial expressions natural. Smile which comes on your face actually originates in your brain on recollecting something pleasant. You can easily build rapport with your audience using good, natural pleasant facial expressions.

Ifyouarenervous, thegesturesdon’tflowoutofyouandyoutry tobringcontrol toyourself.Here thefacialexpressionalsoreflectsseriousness.

Oral deliveryHowconfident,youappear throughyourvoice,howeffectiveyoubecomethroughtheuseofyourvoice,howsuccessful you emerge, by speaking clearly and holding the attention of your audience are the issues related to the oral delivery

Pitch: Voice too high or low can add to word value. A monotonous voice may drift the audience away from the •speaker.Rate: It relates to the number of words released per minutes. The purpose is to synchronising speaking with •listening pattern of the audience. The rate should also relate to the subject matterVolume: It relates to the loudness or softness of the voice and by contrast in volume one can give emphasis on •the spoken words.VocalQuality:Itisdifficulttodefineitbutwecomeacrosssomanywordstodescribevoicequality.•Pronunciation:Itshouldbeyourconstantendeavourtofindouttherightpronunciationsofeachword.There•are some suggestions to help you in enhancing your non-verbal while you speak to a group. These suggestions are:

Sincerely like your audience �Knowyoursubjectthoroughlyinordertoappearconfident �Be well dressed (not overdressed) �Look your listeners in the eye (Not too long at any one) and talk with them �Avoid excessive, meaningless, gestures and nervous movements �Keep calm �Remain objective, no matter what the provocation �Speak clearly and pleasantly, make sure that you can be easily heard �

Communication skillsTheword ‘communication’ isbasedon theLatinwordmeaning`common’.Thus the termcommunicationhascometomean-sharingsomethingofcommonuse.Sincemarketingcommunicationaimatinfluencingtheconsumerbehaviourinfavourofthefirm’sofferings,thesearecredibleinnature.Communicationwillbecompleteonlywhenthe receiver understands in the same sense what the sender wished to convey.

Communication processThe process of communication begins when one party (called source, sender or communicator) wishes to communicate with another party (the receiver). Communication is complete when the receiver understands in the same sense what the sender wished to communicate. The various elements of a typical communication process are given in Figure 5.2.

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Who Says What How To whom

Senders

Examples

Manufac-turers

MarketersRetailers

Examples

WordsPhrasesPicturesSymbolsFiguresActionsSignals

Examples

Newspapers

MagazinesTV

RadioHoardings

Direct mails

TelephonePersonal

visit

Examples

Depending upon Past

experience to

Perceptions Attitudes

Examples

IndividualGroup

CompaniesRetailersResellers

OtherPublish

Encoding (of message)

Media Decoding (of message)

Receiver

With what effect

Feedback

Sales, complaints, inquiries

Fig. 5.2 Communication process

Communication objectivesThe various elements are as given follow:

Source: The source of communication contributes to its effectiveness. A lot of research has been done on source •credibility. One source may be more credible than others, and communication from such a source may produce more effective results. The Target: If the target of communication is receptive, the communication is likely to be effective. It may, •therefore, be useful to assess a target’s readiness and receptivity, and take necessary action to ensure a minimum level before sending the message. The Message and its Goal: The message may be one of three types:•

Information, a feeling, or a request for action. �Communication of ideas and knowledge are communication of information. �Communication of concerns, reactions, pleasant or unpleasant feelings, attitudes, likes and dislikes relate �to the second category of massage (feeling).

The MediaThemediausedincommunicationcanbeclassifiedinseveralways.Mediamaybeverbalornon-verbal.Non-verbalcommunication includes such a variety of behaviour that these cannot be enumerated. A verbal medium can either be in written or oral form and either in a face-to-face or distance situation. Letters and telephones are the distance media.

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Communication media and their characteristicsFor marketing communication or in the sales function we use a variety of communication media, both written and oral.

Purpose: Any document is written with a purpose to analyse the situation and to give reasoning for the •recommendations which were being made. Whereas an oral presentation is assimilative and emotive. Speaker has to make his/her presentation impactful by involving himself/herself with the topic’ or subject. Speaker is an integral part of the message, and therefore the challenge is in selecting the right combinations of facial expressions, tone of voice, gestures, postures etc.Audience: The other difference is that in an oral presentation the audience are interactive, i.e., you can read the •audience’s reaction in their body language and you may accordingly adjust your message if desired. While in a written communication the audience, are non-interactive as you write down a message to send across and you may not have any interaction with the receiver.Medium: In a written communication, whatever you write or illustrate is frozen in words and visuals. While in •thecaseoforalpresentationthemediumisfluid.Theaudio-visualaids,theirsynchronisationwithverbal,bodylanguage, atmosphere, etc., can make a sales presentation successful.Message: In a written communication the message is invariably long and complex, whereas an oral presentation •has to be short and simple. You have to tailor your message which should appeal to your audience and for this reason it should be small and simple.Feedback: The chief advantage of oral communication is the opportunity for an instant feedback. This channel •or medium can be effectively used when you don’t require a permanent record of feedback. In a written communication invariably the feedback is delayed or it doesn’t exist at all.Time, Place, Cost: These are the other three points of differentiation between oral and written communication. A •presentation has to be made at an allotted place, on a pre decided date and time, while in written communication theplaceisnon-restrictiveandtimeisflexible.Asfarasthecostaspectsareconcerned,ingeneral,costofanoral presentation is low as compared to written communication, unless one is using sophisticated high-tech. equipment.

Selecting media optionsThere are no hard and fast rules about which channel of communication to choose. Whether you should speak or whether you should write depends on the context. Decisions about communicating, either individually to a group, may depend on the personalities of the people involved.

You write when:•you or the reader wants a record of the communication; �you don’t need an answer but are simply supplying information; �the receiver is preoccupied with other pressing matters; �the information is complicated or detailed; �costs of telephoning are excessive �

You talk when:•you want to encourage discussion; �you need a quick response; �you want to foster a personal relationship; �you want to build group rapport; �You are dealing with a personal or sensitive matter. �

Aside from whether you write or speak the particular medium you choose can affect the reception of your message. Onewayofattackingtheproblemofchoiceistothinkaboutthe“richness”ofthemedium;thatis,thenumberofdifferent ways a message can be inferred or reinforced..

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Non- Verbal communicationNon-verbal means of communication do not include all communication forms that involve neither written nor spoken words. Some of the types are as follows:

Body Movements : Kinesics•Space : Proxemics•Voice Patterns : Paralanguage•Time : Chronemics•Touch•Colour•Layout/Design/Graphics•Objects•

KinesicsWhen communicating with others in a face-to-face situation our entire body participates in communication, which is called body language, like

Facial Expression•Eye Contact•Gestures•Posture, movements etc.•

Like all other forms of communication, non-verbal message should be sincerely planned otherwise gesture & body movements usually appear to be just that faked. Use gestures naturally to reinforce the meaning you are expressing throughwords.Toomuchshufflingofgestures,posturesaredistracting&annoying.

Space Special change gives tone to a communication. It accents it and at times even overrides the spoken words. Proxemics involves how we arrange personal space and what we arrange in it. It is said that each one of us have four space circles around us, which are as follows:

Consider the one & half feet circle around you. Only special but a few people are permitted here - Intimate •SpaceInspectthefourfeet,beyondthefirstcircle,friendlyconversationsandspontaneouscommunicationsnormally•occur here - Personal SpaceExamine the personal space 4-12 feet around you. It is used more formally - i.e., for business or social •situationsObservethespacebeyond12-16feetthingsofleastsignificanceoccurhere-PublicSpace•

Voice & non-verbal vocalisation - paralanguageWhen we speak apart from the spoken words, the manner in which a word was spoken, relates to paralanguage. In paralanguage we consider two aspects. First is the voice set which includes various measurements of voice in terms of intensity are pitch.

Rhythm and resonanceThese can be measured through some physical instruments used for measuring sound.The second is the -un-Verbal Vocalisation which includes laughing, crying, verbal pause & interludes of silence like:“AH’s,”“OH’s”………etc…

Oral communicationOral Communication doesn’t mean speaking only i.e., public speaking, making business presentations, participating or conducting meetings, interviews, etc, but it also includes listening.

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It is said that communication begins with listening and the fact is that you can’t be an effective speaker unless you are a good listener - one can’t speak unless one listens.

Significance of oral communicationNot only does it provide the opportunity for feedback but when people communicate orally they are able to interact, they can ask questions and even test their understanding of the message in addition people can also relate and comprehend the non-verbal, that serves far more than words. By observing facial expressions, eye contact, tone of voice, gestures, postures etc., one can understand the message better. Oral communication also makes people feel goodasitsatisfiesoneofourdeepestneedsofbeingpartofacommunity,groupidentityandhighmorale.The only shortcoming of oral communication is that more often than not it is spontaneous and if you communicate incorrectly your message will not go understood. It is primarily due to this reason one needs to develop effective oral communication skills as a message, if not understood at appropriate time, can lead to disaster.

Levels of oral communicationThehierarchicalnatureofthefivebasiclevelsandcorrespondingtypesoforalcommunicationareshowninthegivenfigure5.3.

Public communications

Multi group communication

Small group communication

Interpersonal communication

Intrapersonal communication

Fig. 5.3 Levels of oral communication

Interpersonal communication processThis is most basic form of communication relating to listening, observing and interpreting. We all process the information which we receive. Each one of us observes things and draw meaning out of it. When we talk to someone we listen. The degree of attention we are able to give to the speaker, would determine our understanding. We also observe body language, the manner in which a word is spoken, facial expressions, etc., and we reassure ourselves that the meaning we have drawn out of this information which we received is correct.

Interpersonal communicationInterpersonal Communication builds on the intrapersonal level, by adding another person to the communication situationandintroducingadyadicrelationship.Adyadisdefinedastwopersonswhoseektoexchangeinformation,which could be a situation like interviewing, telephoning or dictating. In each of these situations also one has to decide what to say, when to say, how to say etc.

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Group CommunicationThe group communication is further divided into two levels - small group and multi-group. Small group communications in turn builds on dimensions of group dynamics and multiple interpersonal relationships to the communication situation. Multi-group communication exists through the combination of three other levels (Intrapersonal, Interpersonal and Small group) involving coordination with a large number of people involved in the shared accomplishment of complex goods. It is therefore important to recognise group communication at the small group and multi-group levels. Various types of meetings, training situations, committees, etc. fall in this category. Arid in such cases the group communication has to be effective; otherwise it may not help to meet the objectives for which the group is meeting.

Public or mass communicationIn addition to the above levels of communication, there are other forms of communication also. These additional forms of communication are public communication or mass communication. Public communication takes place when one person or a small number of people address a larger group of people. Although the speaker assumes the major responsibility for public communication and sends the preponderance of verbal messages, the speaker is not the only person engaging in communication. The audience sends messages to the speaker, primarily through nonverbal channels. Speeches, lectures, oral reports and dramatic performances are Be different form of public communication.

Inasituationofpublicormasscommunicationoneshouldbeveryselectiveandspecific.Anumberoftimesanunclear statement made orally to a large group might be interpreted differently by different people who can further complicate a situation, rather than solving it.

Non-verbal behaviour in inter-personal interactionsHaving discussed the various forms of non-verbal communication and also the interpersonal communication, let us now relate the two. This will help to understand the relevance of observing the non-verbal during sales interactions, which is the most common interpersonal communication situation, a sales person face.

Most human feelings, an emotional and thoughts can be communicated through a mix of non verbal forms of communication. For example, crinkled eyes convey warmth; staring eyes convey hostility and downcast eves suggest submissiveness.

Facial expressions:Similarly,asmileonthefaceconveysalikingfartheother;asagainsta‘serious’facialexpressions.Gesturescanalso convey various emotional responses.

Selling skills:Further, hand movements i.e., gestures, can also help in supplementing you message or describe things clearly, •during a sales presentations. Postures, i.e., body position can also convey messages or responses.•Assume that in a sales presentation your prospect holds his face between his hands and bends forward to place •elbows on the legs, near the knees. You would obviously draw a meaning that the person got bored with your prepositions.Similarly postures can convey to you whether your prospect is defensive, resentful, enthusiastic or open-minded •about your proposals.To win a customer, in all sales interactions, it is important to take the feedback, continuously. The feedback •can help you to re-adjust your message, clarify the doubts, or supplement the sales talk with more information. This feedback invariably, can be taken by observing the body language of your prospective customer. You may observe the facial expressions, gestures or postures.

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Each of these forms of non-verbal communication can give you a feedback about the response of your customer which can help you in effectively adopting your message to win a sales or a customer.

Written communicationA good salesperson has strong written communication skills very often as a salesperson you are required to write to your customers. Also a salesperson has to communicate with different people within the organisation.

The purpose of writing is to communicate a thought, an idea, feeling or fact. The more concrete and concise these elements in a communication, the more easy it is for a reader to respond to your communication. Also make sure that when you are writing you don’t miss out on some essential detail, for example, you are informing your key customers about the launch of a new product, but forget to write to them where and whom to contact for the product. How irritated your customer will feel.

Writing sales letter and other materialsThe seller should present their product in terms of what it will do for the buyer. If, as a seller, you think your brand hasnothingworthwhiletooffer,youwouldfindthatyoursalesmessagedoesn’tbecameconvincing.Tomakeyoursales message convincing, it is therefore important to identify such distinctive features, which in communication wecallas`centralsellingpoints’.

In addition, there are other special characteristics of sales letters and sales materials. Some are of these points are as follows, which have been discussed in relation to a sales.

Firstly, the general approach centered around four approaches. This approach is typically followed to suggest •howthereceiverwillbenefitfromthepurchase.Secondly,saleslettersemphasiseontheoverallmessage,byusingspecificforcefulwordsandphrases.Wordand•expressionlike,unmatched,uniqueblanksemesteradvantage,stateoftheact’,mostqualified,`etcareused.Thirdly all sales letters use mechanical means of emphasising on the contents. These mechanical means range •fromtheusecapitalletters,underliningspecificlinesorpartsofline,useofcolourinthetextifitisaprintedletter,specificarrangement/placement,boxitem,etc.

5.7 Negotiation SkillsNegotiation is the basic means of getting what you want from others. It is a two-way communication process designed to reach an agreement when the two sides have some interests’ that are shared and others that are opposed. When welookaroundourselveswefindthatalmosteverythingneedstobenegotiated-whetherinbusiness,industryorfamily. Negotiation is a demanding activity and the best way to learn it is to practice it with seasoned negotiators and get a personal feedback. It is essentially a practitioner’s art. The primary objective of every negotiation is goal achievement.Boththesidesinvolvedinnegotiationwillhavetheirowngoals.Butthedesirablegoalisa“win-win”situation - with a win-win situation both the parties get a feeling of satisfaction with the outcome.

Meaning of negotiationNegotiationcanbedefinedasaprocessforresolvingconflictbetweentwoormorepartieswherebothorallmodifytheir demands to achieve a mutually acceptable solution.

Negotiationisaprocessofresolvingconflictsandiftherearenoconflicts,thereisnoneedtonegotiate.•Thereisaneedtoresolveconflicts,moresowithourcustomers.Ifwedon’tresolveconflictswemayeven•loose them.Negotiation does not mean persuading the others to accept our offer. Rather we should listen to others, and their •propositions. If possible modify one stand or suggest/guide the others to modify there demand.Through negotiations we try to reach at a mutually acceptable compromise to solve a problem.•

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Difference between selling and negotiating

Selling Negotiating

A process of identifying customers, then getting through to them and persuading them to act, or accept our propositions

A process of getting the best terms, once the other side starts to act on their interest

whenever the buyer and the seller differ on terms on sale, be it price, discounts, terms or place of delivery, a negotiation opportunity arises

what we really want is to suggest, or encourage a proposal which will put things right, and take the parties concerned to an acceptable solution

Table 5.5 Difference between selling and negotiations

Negotiating continuumNegotiation involves movement of both the parties. Thus in a negotiation we must have somewhere to move from and somewhere to move to. We move from our ideal position to a settlement point that is acceptable to both parties. Our opponent also does exactly the same. It is the relative bargaining strength and skill of the negotiators that decides the position of this settlement point.

Ideal

Ideal

Limit

Bargaining Arena

Limit

A

B

Fig. 5.4 Negotiating continuum

This sample diagram is static. Negotiation in reality however is a dynamic process. Both the sides often, as the negotiation proceeds have to review and modify their limits. As the sales process moves both of you are likely to move from ideal positions and reach a mutually agreeable state if the transaction has to take place.

Steps of negotiationThe negotiating process, for understanding purposes is broken down into following steps through which negotiations will go, if agreement is to be reached. However, please keep in mind that this is not a rigid order, and the time and attention devoted to different steps varies.

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No. Steps What you should do

1 Preparing

Have you decided your objectives? -Have you prioritised them? -Are they realistic? -What are your opponent’s objectives? -Do you have any information regarding buyer attitudes, personalities, assumptions etc? -Isyourstrategysimpleandflexible? -Inagroupnegotiation,haveeachmemberstasksbeenclearlydefined? -

2 DiscussionAlways try to avoid interrupting, talking too much, using sarcasm and threats -Practice listening, and summarising -

3 Signalling

Is your signal generating some movement? -What signals save you made? -If your signals have been ignored, have you tried rewording them? -Are you listening attentively for your opponents’ signals? -

4 ProposingWhat is the language you are using to convey your proposal? -Have you itemised your proposal? -While receiving a proposal ensure that you do not interrupt it -

5 OfferBefore making an offer review your opponents and your own objectives -How can your offer meet all/some of your opponents’ inhibitions/objectives? -Have you considered all the possible variables in your offer? -

6 BargainingEverything must be conditional -Decide what you require in exchange for your concessions -Keep all unsettled issues linked -

7Closing and agreeing

Decide where you intend to stop trading -What type of close are you going to use -Always list the agreement in detail -If the agreement is oral, always send a written note to your opponent, as soon as possible -after the meeting

Table 5.6 Steps of negotiations

We have seen all the steps of negotiation process. During any of the steps negotiations could enter deadlock. A deadlock stops the negotiation process. Deadlocks occur in many negotiations despite the best efforts of the negotiators. Some deadlocks are temporary, others can be permanent. The way to handle deadlock is to keep your emotions,prejudicesoutoftheissueandworktowardsfindingsomecommonobjectives.Yourbasicintentionshouldbe to get negotiation process moving again, so as to enable a solution, acceptable to both parties.

5.7.1 Negotiation StrategiesDuring the negotiation process, as the discussion happen you would be reacting to the other party’s continents in various ways. However three natural reactions that are commonly observed in most people are:

Strike Back: In this strategy you respond to your customer in the same tone and language as he is doing to you. •Occasionally striking back will show your prospective that you can also play the same game and will make him stop. But more often this strategy will land you in a futile and costly confrontation.

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Give In: Many times your customer may succeed in making you feel so uncomfortable with the negotiations that •you give in just to be done with it. Giving in results in an unsatisfactory outcome especially for you. Giving in also gives you a reputation for weakness that your opponent and others may try to exploit in the future.Break Off: At rimes, the negotiation process can come to such a stage, that avoidance is a perfectly appropriate •strategy. Sometimes it is better to end a business relationship if continuing wear being taken advantage of or gettingintofightsagainandagain.Butthecostsofabreakoffarehigh.Breakingoffisfrequentlyahastyreaction that you come to regret later.

There are four kinds of communications:Type 1• High pressure communicator: He is the kind of person who is over aggressive and insensitive to other person’s feelings. He feels, due to sheer pressure, he can win over the argument. In fact, mostly what happens is that as he has very low empathy, it becomes self-defeating and switches off the other people who are taking part in negotiation.Type 2• Little interest communicator: He is the kind of person, who has little interest in either person, or surprisingly his own ideas. His general attitude in the process is taking it or leaves it kind. It often appears that mentally he has no interest in the process of negotiation. Thus a lack of commitment to the whole process tends to just run the process.Type 3• Weak communicator: He is the kind of person, who is over sensitive to the other person’s needs and comes over as essentially nice. He can take the side of the other person so much on occasion that there is no persuasion and thus no commitment is achieved.Type 4• Ideal/ Assertive communicator: He is the kind of person who has understanding of the other person’s ideas butisalsofirmabouthisideas.Heproducesagreementandcommitmenttothesatisfactionofboththesides.

5.7.2 Principles of Negotiation

Negotiation is about bargaining to reach a mutually agreeable outcome. Thus your endeavour should be a win-•win outcome for both the parties.Never neglect your preparation and you must have a clear plan. It is also advisable that you select the right •starting point.All the participants of the negotiation must regard each other as equals as mutual respect is essential to both the •conduct and the outcome of negotiation.Alwayskeepinmindthatnegotiationisnotadebatebutadiscussion.Thereforeeachpersonmust‘fighthis•comer’ without trying to over dominate or show one-upmanship. Patience is a key characteristic of a good negotiator, thus take your time and do not rush into decision making. •Delay is much better than a poor outcome.Empathy is another vital characteristic; therefore see things from other’s point of view objectively.•State clearly your objectives and take a feedback as to whether the other person has clearly understood your •objectives or not.Avoid confrontation and avoid getting into a corner you cannot get out of. When you have to disagree, do it •carefully. When you have to make concessions, make them one at a time, unwillingly.Aim high, and settle as high as possible. Know when to drop the whole thing rather than agree to a totally •inappropriate deal.Maintain your stamina.•Never underestimate people.•End positively. Neither party will get exactly what they want, but the deal should be agreeable. •

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SummaryA • presentation is a commitment by the presenter to help the audience to do something for solving a problem. An interesting thing to note is that in a presentation commitments are made by the presenter and the audiences are making judgement, simultaneously.The structure of presentation has to be clear and audience’s attention should not get distracted. From their body-•language you are able to make out that they are not with you.The most interaction occurs when you aim to persuade people to take a particular action or to collaborate with •themtosolveaproblemorreachadecision.Beflexibletoadjusttoanunexpectedreaction.Asmallgroupmaybedrawnintoadecisionmakingprocess.Ahomogeneousgroupbenefitsfromafocussed•presentation; a diverse group requires a more generalised approach. So be sure of the size of the group to which you are going to address.Itisimportantthatwhiledevelopingmessagesoneshoulddefinethemainidea,constructanoutlineandestimate•the appropriate length. In such situations if you loose control on what you speak, your message will not be understood in the right way. Extemporaneous presentation is that which is prepared in advance and delivered afresh. The exact wordings •arefiguredout,asthespeakergoesalong.Expressyourselfclearlyandsimplysothatcustomersunderstandhowyourproductswillbenefitthemandmeet•their needs. Explain the technical terms from a layman’s approach. Taking the time to ask your prospect questions and really listen to the answers shows respect for them, and gives •you a clearer idea of what they want. By forcing yourself to be quiet, you will notice right away how strong your urge is to jump in and say something before the prospect has stopped talking.

References Negotiating skills • [ pdf ] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/7469/1/Unit-7.pdf> [Accessed 11 October 2011].Communication skills • [ pdf ] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/7467/1/Unit-5.pdf> [Accessed 11 October 2011].Sales presentation• [ pdf ] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/7468/1/Unit-6.pdf> [Accessed 11 October 2011].What is Selling • [ Online ] Available at: <http://www.mbaresearch.org/newlaps/SE_117/SE_117_st_PDF.pdf> [Accessed 10 October 2011]. Essential Sales Skills [Online ] Available at: <http://sales.about.com/od/wheretostart/a/Essential-Sales-Skills.•htm>. [Accessed 10 October 2011].Sales Management Communication• [Video Online] Available at: <http://www.5min.com/Video/Sales-Management-Communication-228887867> . [Accessed 10 October 2011].How to Communicate When Selling • [Video Online] Available at : <http://www.5min.com/Video/How-to-Communicate-When-Selling 295721428>. [Accessed 10 October 2011].

Recommended ReadingSchiffman, S., 2007. • Sales Presentation Techniques: That Really Work 17th ed., Adams Media.Shook,• R. L., 2001The Perfect Sales Presentation Random House Publishing Group.Denny, R., 2009.• Successful Selling Skills, Kogan Page Publishers.

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Self AssessmentIn _______________, text of the presentation is carefully worded, tested.1.

Canned presentationa. Planned presentationb. Audio-visual presentationc. Problem solving presentationd.

__________________ is carefully planned and well organised.2. Canned presentationa. Planned presentationb. Audio-visual presentationc. Problem solving presentationd.

_________________needcharts,slides,videofilms,prototypes,computerbasedpresentationstotheuseof3. actual product.

Canned presentationa. Planned presentationb. Audio-visual presentationc. Problem solving presentationd.

______________ study the individual prospect’s needs and suggests a proposition.4. Canned presentationa. Planned presentationb. Audio-visual presentationc. Problem solving presentationd.

Which of the following is false?5. The major purpose of the introduction is:

To catch the audience attention and arouse their interest a. To relate the speakers’ purpose with the audience interestb. To build the focus for the contentsc. To introduce oneselfd.

__________________ presentation is that which is prepared in advance and delivered afresh.6. Extemporaneousa. Impromptu b. Memorising c. Readingd.

________________ is that when you are given no time to think and organise.7. Extemporaneousa. Impromptu b. Memorising c. Readingd.

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__________________ is the skill that allows you to convey your emotions to the customer. If you can make 8. your prospect feel how great it will be to own your product and how much their life will be improved when they have it, you can sell it to them.

Persuasivenessa. Listening skillb. Maintainingselfconfidencec. Self motivatingd.

Thegestureusedto______________isclenchedfistofonehandhittingthepalmoftheotherhandemphasises9. the point you want to make.

Emphasisa. To pointb. To rejectc. To described.

When communicating with others in a face-to-face situation our entire body participates in communication is 10. known as _______________.

Spacea. Kinesicsb. Touch c. Colourd.

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Chapter VI

Introduction to Customer Service

Aim

The aim of this chapter is to:

definecustomerservice•

understand retail concepts•

differentiate types of customers•

Objectives

The objectives of this chapter are to:

explain customer segmentation•

definecustomerserviceprinciples•

illustrate Strategic Advantage through Customer Service•

Learning outcome

At the end of this chapter, you will be able to:

definefactorsaffectingconsumerdecisionmakingprocess•

explain customers’ decision-making process•

discuss se• rvices in retailing

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6.1 IntroductionCustomer service is an integral part of the present day competitive business environment. The customer today is a well informed individual who wants value for his money. He also wants good service and is willing to pay for it. There is no business without customers, so it is essential to focus on understanding and providing everything a customer needs. Good customer service practices lead to higher gains and a distinctive advantage in today’s competitive markets. When the customer’s interaction is made into a memorable and effective one, it leads to loyalty that cannot be replaced even by short-term, price- based promotional offers by competitors.

Definition of customer serviceHerearesomedefinitionsofcustomerserviceinusetoday:

“Customerserviceistheabilitytoprovideaserviceorproductinthewaythatithasbeenpromised”•“Customerserviceisabouttreatingothersasyouwouldliketobetreatedyourself”•“Customerserviceisanorganisation’sabilitytosupplytheircustomers’wantsandneeds”•“CustomerServiceisaphrasethatisusedtodescribetheprocessoftakingcareofourcustomersinapositive•manner”“CustomerServiceisanycontactbetweenacustomerandacompany,thatcausesanegativeorpositiveperception•by a customer”“Customerserviceisaprocessforprovidingcompetitiveadvantageandaddingbenefitsinordertomaximise•the total value to the customer”“CustomerServiceisthecommitmenttoprovidingvalueaddedservicestoexternalandinternalcustomers,•including attitude knowledge, technical support and quality of service in a timely manner”“Customerserviceisaproactiveattitudethatcanbesummedupas:IcareandIcando.”•

6.2 Understanding Retail ConceptsThe retailing concept covers four broad areas which rules out the strategy:

Customer orientation:Where the retailer studies consumer behaviour and buying trends and fulfils those•needs.Goal orientation: The retailer has clear goals and targets to achieve as per a given formulated strategy.•Value driven approach: The retailer makes a careful study of the value of the goods to be sold and its perception •in the consumer mind. Price and quality plays an important role here.Coordinatedeffort:Everyactivitywithintheretailspaceisalignedtoagoaltomaximiseefficiencyinservicing•the customer and deliver value.

Definition of retail customerItisimportanttocomprehendthedifferencebetweentheterms‘customer’and‘consumer’.Manyuseboththe•terms interchangeably, and may cause confusion in the minds of the students of retail management. Theterm‘Customer’isusedforapersonwhobuystheproductfromamanufacturerortraderorretailer,but•may or may not be the actual user of the product. The customer in turn may sell or gift or use the product bought by him/her.When a customer uses the product purchased by him/her then he or she becomes a consumer. •RetailCustomeristhepersonwhopurchasestheproductdirectlyfromaretailstore.Since‘customer’isanall•inclusive term, in the below discussion and in other Managing Customers following sections, the term customer will be used in place of retail customers.

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6.3 Retail Customer Behaviour and Role of Services in RetailingIn spite of the Internet making inroads in the shift of shopping behaviour, majority of the customers still prefer to purchase through stores.

Stores remain popular because of the following basic reasons:Need to touch and feel the product prior to buying.•It allows social interaction and the opportunity to compare brands at one place.•It instigates impulse buying by the look and physical feel of the product such as chocolates, snack foods and •magazines.Customers also look for ambience and convenience in shopping.•Consumer money drives the economy, and retail is where consumers spend their money-such as in boutiques, •restaurants, discount stores, and e-tailors.Consumer shopping behaviour can be understood analysing factors such as demographic, psychological, or the •lifestyle of the consumer.Retailersarerequiredtohavebetterunderstandingofconsumerbenefitstheirperceptionsandattitudesandhow•theyinfluencethedevelopmentofsuccessfulretailmarketingstrategies.

Some of the major criteria for the right approach to a customer need are:Creating the right environment•Listening to customers•Providing rewards to frequent buyers•Realising the lifetime value of a customer and ensuring loyalty•

The concept of life time value customers is employed in relationship building and marketing. The ongoing process of identifying and creating new value with individual customers over a lifetime of a relationship is termed as relationship marketing. This is important as it is much harder to attract new customers than it is to retain old ones. It is a blend of product, quality and services.

6.4 Types of CustomersIn the present day, retail customers demand lower prices, better quality, a broader selection, instant service, and round-the-clock access. In the retail industry, it seems as though we are constantly faced with the issue of trying tofindnewcustomers.Inretail,thisideaoffocusingonthebestcurrentcustomersshouldbeseenasanongoingopportunity. To better understand the rationale behind this theory and to face the challenge, we need to break down shoppersintofivemaintypes:

Discount customers

Need based customers

Impulse customers

Wandering customers

Loyal customers

Fig. 6.1 Classification of customers

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Fromtheabovefigure,youcanunderstandthattheretailcustomerscanbeclassifiedintofivecategories,as

Loyal customersThese are customers who visit the store often. They normally represent no more than 20% of our customer base, but can make up for more than 50% of the sales. Naturally, we need to be communicating with these customers on aregularbasisbytelephone,mail,emailandsoon.Thesepeoplearetheoneswhocanandshouldinfluenceourbuying and merchandising decisions. Nothing will make loyal customers feel better than soliciting their inputs and showing them how much as a retailer you value it. Many a times, the more you do for them, the more they will recommend you to others. Hence, loyal customers should form an important basis of a retail selling strategy.

PhilipKotler,again,definesfourpatternsofbehaviorofloyalcustomers:Hardcore Loyal: who buy the brand all the time•Soft core Loyal: loyal to two or three brands•Shifting Loyalty: moving from one brand to another•Switchers:withnoloyalty(possibly‘deal-prone’,constantlylookingforbargainsor‘vanityprone’,looking•for something different)

Nothing will make a loyal customer feel better than soliciting their patronage and showing them how much you value it. Many times, the more you do for them, the more they will recommend you to others.

Discount customersThesecustomersarealsocalled“BargainHunters’.Theyshopin thestoresespeciallywhenthere isasaleon.Their buying decisions are based on the size of the markdowns (discount). This category of customers ensure better inventoryoverturnand,asaresult,itisakeycontributortocashflow.Thisgroupofcustomers,however,canoftenwind up costing you money because they are more inclined to return product.

Impulse customersThese customers do not plan their purchases. They are mainly window shoppers.

Theydonothaveplanstobuyaparticularitematthetopoftheir“ToDo”list,butcomeintothestoreinimpulse.They will purchase what seems good at the time.

Visual merchandising in store and the window acts as a silent salesman for these customers. Clearly, this is the segment of our clientele that we all like to serve. There is nothing more exciting than assisting an Impulse shopper and having them respond favourably to our recommendations. We want to target our displays towards this group becausetheywillprovideuswithasignificantamountofcustomerinsightandknowledge.

Need-based customersThesearecustomerwhoplanswhattheyhavetopurchase.Theyhaveaspecificintentiontobuyaparticulartypeof item. They do not spend too much time in the store. They do not normally do impulse purchases. People in this categoryaredrivenbyaspecificneed.Whentheyenterthestore,theywilllooktoseeiftheycanhavethatneedfilledquickly.Ifnot,theywillleaverightaway.

Theybuyforavarietyofreasonssuchasaspecificoccasion,aspecificneed,oranabsolutepricepoint.Asdifficultas it can be to satisfy these people, they can also become loyal customers if they are well taken care of. Salespeople maynotfindthemtobealotoffuntoserve,but,intheend,theycanoftenrepresentyourgreatestsourceoflong-term growth. It is important to remember that Need-Based customers can easily be lost to Internet sales or a different retailer. To overcome this threat, positive personal interaction is required, usually from one of your top salespeople. If they are treated to a level of service not available from the web of another retail location, there is a very strong chance of making them loyal customers. For this reason, Need-Based customers offer the greatest long-term potential, surpassing even the Impulse segment.

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Wandering customersTheyhavenospecificneedordesireinmindwhentheycomeintothestore.Theyliketospendtimeinthestorebuttheyseldombuy.Formanystores,thisisthelargestsegmentintermsoftraffic,while,atthesametime,theymake up the smallest percentage of sales. There is not a whole lot you can do about this group because the number of wanderers you have is driven more by your store location than anything else. Although they may not represent a large percentage of your immediate sales, they are a real voice for you in the community.

Since a retailer is serious about growing his business, he needs to focus his effort on the loyal customers, and merchandise the store to leverage the Impulse shoppers. The other three types of customers do represent a segment of the business, but emphasising too much on them means misdirecting the resources.

6.5 Customer SegmentationA market segment is a detachment of a market made up of people or organisations sharing one or more •characteristics that source them to insist related product and/or services based on qualities of those products such as price or task.

Preliminary Considerations

Always make 1. key accounts a segment on their own

Apply 2. segmentation to smaller customers

Consider a 3. firmgraphicsegmentation

Using research to find segments

Grouping segments and Implementation

Look where 4. possible for a needs based segmentationUse market 5. research to determine needsCustomer needs 6. are simpler than you thinkConsider 7. behaviour segmentation if needs is hard to recognise

Use cluster 8. analysis to group together companies with different needsIn a spread-9. sheet code all customers and potential customersImplement the 10. segmentation

10 Steps in Market Segmentation

Fig. 6.2 Steps in market segmentation

Aretailmarketsegmentisagroupofcustomerswhoseneedsaresatisfiedbythesameretailmixbecausethey•have similar needs and go through similar buying process. Retail market can be segmented in different ways, customers can be grouped on the basis of the fact that they live in the same locality, have similar incomes, similar Age and education. Retailer use various data depending which is best suited for their business.Market segmenting is dividing the market into groups of individual markets with comparable wants or needs. •A retailer segments the market into dissimilar groups who have diverse needs, wants, behavior or who might want diverse products & services. The most frequently used bases of segmentation are mentioned below:

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N

S

EW

Psychographics

Geographic

Demographics

Fig. 6.3 Bases of segmentation

Demographic segmentationDemographic characteristics are measurable statistics about any given population. These variables are used by •the retailer to segment the market and select a target segment for business. Demographic characteristics include data on the following:

Population size �Number of households in give area �Income levels �Levels of education �Gender �Age distribution �Occupation �Marital Status �Height/Weight/Sizes �Colour/Region /Caste �

Many supermarkets segment market using demographics such as age, gender, marital status to develop their retail mix. Retailers can also use demographic data in selecting the appropriate location in which to operate.

Income Groups: People in different income brackets demand different types of products or services. The •populationcanbeclassifiedbasedontheincomelikeUpperClass,UpperMiddleClass,MiddleClass,LowerMiddleClassandLowerClass.LowerclasscanfurtherbeclassifiedasBelowPovertyLine(BPL)andAbovePoverty Line (APL), and so on.Manyretailersuseincomeclassificationtounderstandtheconsumerspendinghabits.Lower-incomeconsumers,•for instance, are more likely to eat at home, than less likely to buy luxury items and tends to be more practical in their purchase than other income groups. Middle income consumers are generally educated and spend more on vacation and meals outside the home than lower income people do. Like lower income people, middle class consumers tend to search for higher- quality merchandise at lower price. People in the upper-income category are more likely to buy luxury items, spend on travel, eat outside the home, and be highly educated and own big houses.

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Using the data on income, a retailer can identify where the customers are located and can select the locality for •his store. Alternatively, an existing retailer can change the product mix in his store to serve the majority of the moreprofitablecustomersinhislocality.Age Groups: Age distribution of the consumers is also another important data which a retailer requires. Normally •thebuyingpatternofagroupofpersonsinsameageprofilewillbesimilar.Thestudyofagegroupsandhowthey behave in the consumer market is called generational marketing. The data on age can be categorised in the following seven life stages:

Age group (years) Life stage4-14 School students15-23 College students23-28 Working singles29-33 Working married – no children34-50 Working married – with dependent children50-60 Working married – with independent children60 above Retired

Psychographics segmentationPsychographicssimplyrefertolifestyleanalysis.Psychographicdataprovidesinsightinto“whatconsumersdo”over a period of days, weeks, or even years. These data may include information on activities, interest, opinion and lifestyle information. A consumer’s lifestyle often gives the retailer more accurate and detailed information on the purchasing pattern of that consumer. Psychographics will study the following areas:

Activities:

Work, hobbies, social events, vacation, entertainment, club mem-bership etc.

Interest:

Family, home, job, community, fashion, food etc.

Opinion:

about themselves, social issues, politics, products, culture etc.

Fig. 6.4 Psychographics segmentation

In a multicultural country like India, careful study of the psychographics is a must for the retailer before a product launch or to decide the products mix at a store. Having same standard product lines across the country may result in poor selling at many outlets. Sometimes even within the same city, sales of a product may vary from one outlet to the other outlet. A retailer has to be in constant touch with the customers’ base to understand them better.

Geographic segmentationGeographic information deals with the physical location of the customer. Various retailers divide the retail market into separate geographic areas. The areas may consist of a state, a region, or a few small blocks in a neighbourhood. The principle seeing that buyers in same geographic area behave similarly, geographic segmentation is use to decide the marketmix.Customerstypicallyshopinoutletslocatedclosetotheirhomesoroffices,atthesametimeindividualretailer usually focus on the customer segment reasonably close to the outlet.

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6.6 Customer Service PrinciplesCustomer service is a set of activities and programmes undertaken by the retailer to make the shopping experience more rewarding for their customers. These activities increase the value customers receive from the merchandise andservicetheypurchase.Allemployeeoftheretailfirmandallelementsoftheretailingmixprovideservicethatincreases the value of the merchandise. For example, an employee in the warehouse contributes to customer service by making sure the merchandise is in stock. The employee responsible for store location and design contribute by increasingthecustomer’sconvenienceingettingtothestoreandfindingmerchandiseinthestore.

Services offered by retailersSome of the services offered by retailers are as under:

Acceptance of credit cards •Extended store hours•Alteration of merchandise •Locate and identify merchandise•Free home delivery •Gift wrapping•Salespersons in assisting the customers •Shopping carts•Play area for kids •Warranties•Rest room •Parking•Demonstration of merchandise•

The above list is not exhaustive. There are many more innovative services a retailer can offer. But the most important indicator of quality service is not the number of services offered, but how they are delivered by the employee of the store.

Strategic advantage through customer serviceTop retailers in the world differentiate their retail offering. Build customer loyalty and develop s sustainable competitive advantage by providing excellent customer service. Good service keeps customers returning to a retailer and generates positive word-of mouth publicity, which attracts new customers. Customisation and standardisation are the two approaches that retailers use to develop as sustainable customer service advantage.

Customisation approach Customisation approach relies on the quality of interaction between a sales associate and the customer. This •approach encourages service providers to tailor the service to meet each customer’s personal need. This approach is generally seen in high end apparels and accessories retailers. Here you will see sales associates assisting the customer individually.The customised approach typically results in most customers receiving superior service. But the service might •be inconsistent because service delivery depends on the judgment and capabilities of the service provider. Some service providers are better than others, and even the best service provider can have a bad day. In addition, providing customised service is costly since it requires better trained service providers.

Standardisation approachThis approach is based on standardising key touch points of service delivery and ensuring that these guidelines •are followed strictly. Rules and procedures are set for customer. Through standardisation, customers receive the same service in the store time after time.

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Store design and layout also play an important role in the standardisation approach. In most of the situations the •customer do not need the assistant of a sales person. They know what they want to buy and their objective is to finditinthestorequickly.Inthissituation,theretaileroffersgoodservicebyprovidingalayoutandsignagethat enables customers to locate the merchandise easily, by having the relevant in formations in display, and by minimising the time required to make a purchase including the billing.

Cost of good customer serviceProviding high-quality service, particularly customised service, can be very costly. Many organisations have •learneditthehardwayafterincurringheavylosses.Itisnecessarytounderstandthecostbenefitanalysisofproviding exceptionally good service. If managed well, good customer service can also help reduce cost and increaseprofits.Astudyestimatesthatitcosts5to15timesmoretoacquireanewcustomerthantogeneraterepeat business from a present customer. Thus,itcoststheretailermuchlesstokeepitsexistingcustomerssatisfiedandsellmoremerchandisetothem•compared with the cost of selling to people who are not buying from the business now. Retailers need to consider thecostsandbenefitofcustomerservicespolicies.Manyretailersinwesterncountriesarereconsideringtheir“noquestionsasked”returnpolicy.Manyretailerswhowerereturningcashforreturningarenowgivingstorecredits.

Customers’ evaluation of service qualityWhen customers evaluate the quality of retail service, they compare their perceptions of the service they received withtheirexpectations.Customersaresatisfiedwhentheperceivedservicemeetsorexceedstheirexpectations.Theyaredissatisfiedwhentheyfeeltheserviceisbelowtheirexpectations.

Customer expectationsCustomer’s expectations are based on a customer’s knowledge and experiences. Expectations vary depending •on the type of store. Customers expect a super market to provide convenient parking, to be opened from early morning to late evening, to have a wide variety of fresh and packaged foods that can be located easily and to offer fast checkout at cash counter. At the supermarket, customers normally do not expect to have a store employee standing in the aisle to offer •information about groceries or how to prepare meals. On the other hand, when the same customer goes to a specialty store, they expect the store to have knowledgeable salespeople who can provide information and assistance. Similarly, the service expectation of a customer from a road side tea stall is different to when he is visiting a star hotel.Sinceexpectationsaren’tthesameforallretailers,acustomermaybesatisfiedwithlowlevelsofactualservice•inonestoreanddissatisfiedwithhighservicelevelsinanotherstore.Customershavelowserviceexpectationforself service retailers like discount stores and supermarkets. Departmental stores have many more salespersons available to answer questions and provide information than Wal-Mart does. But customer service expectations are also higher for departmental stores. If a department store customer can’t locate a salesperson quickly for assistance,theyaredissatisfied.

Perceived serviceCustomers base their evaluations of store service on their perceptions. While these perceptions are affected by the actual service provided, service due to its intangibility is often hard to evaluate. Customers evaluate service quality basedonfiveservicecharacteristics,viz.,reliability,assurance,tangibility,empathyandresponsiveness.

Service recoveryCustomer service delivery is inherently inconsistent, so service failures are bound to happen. Therefore, consumer •complaint is bound to happen in retail. Retailers should focus on the positive opportunities such customer complaints generate. Service problems and complaints are excellent source of information about the retailer’s merchandise and service.

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Service problems enable a retailer to demonstrate his commitment to provide high quality customer service. By •encouraging complaints and handling problems, a retailer has an opportunity to strengthen its relationship with its customers. Most retailers have standard policies for handling customer complaints. If a correctable problem isidentified,suchasdefectivemerchandise,retailersmayeitheroffertoreplacethemerchandiseorgiveacredittowards future purchases or give cash refund. In many cases the problem can be heard to identify whether it is non correctable or a result of customer’s unusual expectations. In such cases, service recovery might be more difficulty.Retailersfollowthisstepforeffectiveservicerecovery:

Listen to the Customer: Customers can become very emotional over their real or imaginary problems with �the retailer. Store employees should allow the customer to convey their complaints without interruptions. Interruptions can further irritate customer. Store managers should be empathetic towards a complaining customer and should be happy to receive the complaint. Employees should receive carefully to determine what the customer perceives to be a fair solution to his complaint.Providing a Fair Solution: When handling a complaint, the store employee must focus on how they can win �the customer back, not simply how they can solve the problem. Favorable impression arises when customers feel they have been treated fairly. Customers typically prefer tangible rather than intangible resolution to their complaints. If tangible solution is not possible, the best alternative is to let the customer feel that their complaint will have an effect in future. This can be done by taking notes in front of the customer or writing to the customer about actions taken to prevent reoccurrence of similar problems in the future. It is important that solution to the complaint is perceived as fair by the customer. As solution is be win-win for the customers and the retailer discontent with the procedure used to handle a complaint can overshadow thebenefitofapositiveoutcome.Resolve the Problems Quickly: Customer satisfaction is affected by the time it takes to get an issue resolved. �The faster the issue is resolved, the better. Retailers can minimise the time to resolve complaints by reducing the number of people the customer must come in contact with. As a general rule, store employee who deal withcustomershouldbemadeasself-sufficientaspossibletohandletheproblem.Customerismoresatisfiedwhenthefirstpersontheycontactcanresolveaproblem.Whencustomersarereferredtoseveraldifferentemployees,theywastealotoftimerepeatingtheirstoryandalsothechanceofconflictingresponsesbystoreemployees increases.Effective service recovery significantly increasescustomer satisfaction,andproduces positive word of mouth publicity to the retailer.

6.7 Stages of Consumer Decision ProcessThedecision-makingprocesscanbedescribedinfivedifferentstages:

Need recognition

Information search

Evaluation of alternatives

Purchase decision

Purchase evaluation

Fig. 6.5 Decision making process

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Depending on the consequences of making a wrong decision, the complexity of this process can range from •careful analysis to pure impulse. While an impulse buy can take place instantaneously, complex purchases mostly stretch over a long period of time.This buying process is an iterative process, where people collect information from different sources and repeatedly •return to re-evaluate and compare the information they have found.By understanding customer needs and concerns as they progress through the decision making process, marketers •can build better and more successful retail marketing mix.In the retail context, a marketer is concerned about shopping decisions such as when, what, how and from •whom the consumers purchases and the frequency of purchase. Post purchase behaviour may take the form of cognitive dissonance.

6.7.1 Types of Consumer Decision Making ProcessFollowing given are the types of consumer decision making process:

Customer service and online retailingThe Web as you will agree has turned out to be a great tool for information research, and studies show that •the Internet is becoming the primary means by which people get key information. This counts for commerce inparticular.Peopleexpecttobeabletofindinformationaboutproductstheyareconsideringbuying,evenifa company doesn’t sell its products online. Considering peoples’ high expectations about the information and services available online, it’s disturbing to see just how bad commerce web sites are at selling.Researchers have discovered that the online buying process acts as a sieve, where customers are inadvertently •filteredoutateachstageoftheirdecision-makingprocess.Studiesshowthatoutof100purchase-readycustomerscompletely intended on buying a product, only 34 will accomplish their goals.

Knowing the customers’ decision-making processThe most interesting thing about consumer decision process is that while critical usability problems do exist in •thedesignofthecommercesite,suchasusersnotbeingabletofindproductsandbaddesignofcheckouts,themajority of dropouts happened because of inadequate product information:

Customers couldn’t identify purchase options from the products list. �Customers couldn’t decide if the products would satisfy their needs. �The product presentations and descriptions raised wrong expectations, -which made customers return their �purchases.Commerce sites simply fail in supporting the consumer decision-making process, by not taking their �customers’ information needs into, account.Designers of commerce web sites, have little chance of knowing exactly which information needs customers �havewhenevaluatingspecificproducts.Tosupportthecustomers’decision-makingprocess,theyhavetoresearch in order to learn which needs and concerns they have when making a purchase decision.

Research of customer needs can be done in several ways. An effective and economical method is to collect •information during a workshop with salespeople who are in contact with customers on a daily basis. Generating userprofilesandscenariosisagreatwayofcollectingthisinformation.Withamoreextensivebudget,interviewswith customers and observations of their shopping behaviours can be conducted, in order to validate the generated profilesandscenarios.No matter how we choose to conduct our research, there are some basic things we need to know about the •customers in order to be able to support their decision-making process.

Information search onlineThe basic prerequisites for customers to make their way through the information search stage are that they are able tofindproductsandthattheycaneasilyidentifypurchaseoptionsfromtheproductlistpages.Thus,inordertosupport the customer decision-making process at this stage, we need to know:

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Which words will customers use when browsing and searching for purchase options?•What basic information do customers need in order to identify purchase options?•What educational information do novices need in order to decide which product criteria are important to •them?

Evaluation of alternativesThe problem at times with consumer decision making process is that there’s no one to ask if you have a question. Some of the critical questions that we need answers to are:

What detailed product information does the customers need when evaluating product alternatives?•Which product evaluation criteria will customers use and which are most important to the customers?•Which concerns will the customers have about the products and how can we address them proactively?•How can we encourage customers to contact the sales and support department if they have further questions?•

6.8 Factors Affecting Consumer Decision Making Process

Consumer Decision Making

Demographic Physiological Environmental Life style

Fig. 6.6 Factors affecting consumer decision making process

A consumer’s purchase decision tends to be affected by these four factors:Demographic factors:Demographicfactorsareuniquetoaperson.Itinvolvesidentificationofwhoisresponsiblefor the decision making or buying and who is the ultimate consumer. All stores have focused themselves on respective segments based on factors such as age, income family size, gender, occupation, and so on.

Psychological factors: Psychological factors refer to the inner aspects of an individual. An understanding of consumer’s psychology guides the retailer’s segmentation strategy. Consumers respond differently towards the same retail marketing due to their respective motives, personality, level of involvement and attitude.

Motives: Motivation is prerequisite for any action this includes buying. It stimulates the need. If you have a •headache buying a medicine is a motivation. The need to have the latest fashion in clothes, mobile phones and so on. is also a motivation.Perception: Perception is the process by which consumers attach meaning to incoming stimuli by forming •mentalpicturesofpersons,placesandobjects.Stimulusreceptionisaccomplishedthroughthefivesensesthatis sight, sound, taste, touch and smell. The consumer feels that what he/she sees (hear, feel, taste and smell) is what they get.Learning: Learning is the process of acquiring knowledge through past experiences. If you visit a store and the •treatment you receive will be the criteria for repeat visits to the store. If the experience with the sales team was good then you may visit the store even if it is slightly more expensive than the store where the service was bad. Free sampling/trials etc. are also ways of making the consumer learn about a product and its attributes. If the customer sees, hears, feels, tastes or smells a product he/she learns more about the product and its attributes. A retailer must encourage a consumer to touch and feel the product so that his visit could turn into a buying experience. By offering customer satisfaction the retailer can be rest assured of having a loyal customer which is easy to retail than to generate a new customer.

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Attitude: People use their attitude to pass judgment whether is it good or bad, right or wrong. If a customer feels •that a store is expensive he/she will avoid going to the store. Reliability, stability, responsibility, dependability and credibility are the all strong messages that a retailer is required to project. Emotions are extremely important as this drives buying. Behavioural traits are listed below.

Workaholic �Impulsive �Selfconfident �Friendliness �Adaptability �Ambitious �Introversion �Extroversion �

Environmental factors: Environmental factors are both physical and social factors. This includes physical objects (goods and outlets), spatial relationship (location of shopping center and merchandising stores) and social factors (referencegroupsandopinionleaders).Theenvironmentalfactorsinfluenceconsumerwants,learning,motivesetc.whichinturninfluenceaffectiveandcognitiveresponsesandthereforeshoppingbehaviouroftheindividual.

Social class Socialclassisreferredtoastheclassificationofmembersofsocietyintoahierarchyofdistinctstatusandclass.•Social class is measured by variables such as education, occupation, wealth, and ownership of assets. Market research has established a link between social class and consumer attitudes concerning shopping behaviour.Middle class and higher sections of society prefer to shop for grocery items once a month from a particular shop. •They usually prefer stores offering variety and range of choice. Lower sections of society usually purchase on a daily basis. They are also not particular about the shop they purchase from.Social status of an individual plays an important role even in determining the frequency of purchase. Majority of •the middle class consumers prefer to buy vegetables in the morning for their freshness despite the prices being onthehigherside,onthecontrarythelowerendsectionsofthesocietyprefertobuyatdarktogetbenefitoflow prices.

Customer classification and preferences

Upper middle class Middle class

Working class

Lower class

Lower upper class

Upper middle class

Fig. 6.7 Customer classification and preferences

Lifestyle: Lifestyle refers to an individual’s way/style of living as determined by his/her activities, interests and •opinions. Lifestyle is considered to be highly correlated with consumer’s values and personality traits. Individuals lifestylesisinfluencedbythesocialgrouphebelongstoandhisoccupationorforexample,doubleincomeno-kids (DINKS) families in metros regularly shop at super malls because of limited time at their disposal and they also look for entertainment while shopping on weekends. Besides they are heavy spenders when compared to families with single income.

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SummaryCustomer Service is the commitment to providing value added services to external and internal customers, •including attitude knowledge, technical support and quality of service in a timely manner.Theterm‘Customer’isusedforapersonwhobuystheproductfromamanufacturerortraderorretailer,but•may or may not be the actual user of the product. The customer in turn may sell or gift or use the product bought by him/her.Consumer money drives the economy, and retail is where consumers spend their money-such as in boutiques, •restaurants, discount stores, and e-tailors.The concept of life time value customers is employed in relationship building and marketing. The ongoing •process of identifying and creating new value with individual customers over a lifetime of a relationship is termed as relationship marketing.A market segment is a detachment of a market made up of people or organisations sharing one or more •characteristics that source them to insist related product and/or services based on qualities of those products such as price or task.Market segmenting is dividing the market into groups of individual markets with comparable wants or needs. •A retailer segments the market into dissimilar groups who have diverse needs, wants, behavior or who might want diverse products & services.Demographic characteristics are measurable statistics about any given population. These variables are used by •the retailer to segment the market and select a target segment for business.Psychographicdataprovidesinsightinto“whatconsumersdo”overaperiodofdays,weeks,orevenyears.These•data may include information on activities, interest, opinion and lifestyle information. A consumer’s lifestyle often gives the retailer more accurate and detailed information on the purchasing pattern of that consumer.Geographic information deals with the physical location of the customer. Various retailers divide the retail •market into separate geographic areas. The areas may consist of a state, a region, or a few small blocks in a neighbourhood.

References DefinitionofCustomerService• [Online]Availableat:<http://www.customerservicemanager.com/definition-of-customer-service.htm> [Accessed 11 October 2011].What is customer service?• [pdf] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/34431/1/Unit%201.pdf> [Accessed 11 October 2011].FilmTeller• , 2007.SHORT MOVIE - CUSTOMER SERVICE. [Video Online] Available at: <http://www.youtube.com/watch?v=FE2NatsC5g4&feature=related>. [Accessed 10 October 2011].dailyidea• , 2007. How to Provide Good Customer Service. [Video Online] Available at: <http://www.youtube.com/watch?v=Tg_Fpyp5KNE&feature=related>. [Accessed 10 October 2011].understanding retail customer • [pdf] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/7790/1/Unit-4.pdf> [Accessed 11 October 2011].managing customer • [pdf] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/39073/1/Unit-2.pdf> [Accessed 11 October 2011].customer service on phone• [pdf] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/34433/1/Unit%203.pdf> [Accessed 11 October 2011].

Recommended Reading Hayes, J. & Dredge, F., • Managing customer service, Gower Publishing, Ltd. Leland, K & Bailey, K., 2006. • Customer service for dummies By Karen Leland, 3rd ed John Wiley & Sons.Bonomo, T.P., 2002.• Customer Service: Aiming for Excellence. Trafford Publishing.

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Self Assessment_______________ is the ability to provide a service or product in the way that it has been promised.1.

Customer servicea. Retail serviceb. Product servicec. Consumer serviced.

Where the retailer studies consumer behaviour and buying trends and fulfils those needs is known as2. _____________________.

Goal orientationa. Customer orientationb. Value driven approachc. Coordinated effortd.

When the retailer has clear goals and targets to achieve as per a given formulated strategy, it is known as 3. __________________.

Goal orientationa. Customer orientationb. Value driven approachc. Coordinated effortd.

In _____________________, retailer makes a careful study of the value of the goods to be sold and its perception 4. in the consumer mind.

Goal orientationa. Customer orientationb. Value driven approachc. Coordinated effortd.

In________________,everyactivitywithin theretailspace isaligned toagoal tomaximiseefficiency in5. servicing the customer and deliver value.

Goal orientationa. Customer orientationb. Value driven approachc. Coordinated effortd.

Theterm‘______________’isusedforapersonwhobuystheproductfromamanufacturerortraderorretailer,6. but may or may not be the actual user of the product.

Customera. Retailerb. Consumer c. Manufacturerd.

Many a times, the more you do for ___________, the more they will recommend you to others.7. Discount customersa. Loyal customersb. Impulse customersc. Wandering customersd.

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______________ensuresbetterinventoryoverturnand,asaresult,itisakeycontributortocashflow.8. Discount customersa. Loyal customersb. Impulse customersc. Wandering customersd.

Visual merchandising in store and the window acts as a silent salesman for ____________ customers.9. Discount customersa. Loyal customersb. Impulse customersc. Wandering customersd.

A__________________isagroupofcustomerswhoseneedsaresatisfiedbythesameretailmixbecausethey10. have similar needs and go through similar buying process.

retail market segmenta. market segmentb. discount customersc. wandering customersd.

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Chapter VII

Role of Customer Service Representative

Aim

The aim of this chapter is to:

definetheroleofcustomerservicerepresentative•

illustrate essential attributes of CSR•

explain customer service over phone•

Objectives

The objectives of this chapter are to:

elucidate telephone techniques•

explain the method of handling dead air on calls•

definehowtostructureacall•

Learning outcome

At the end of this chapter, you will be able to:

understand home based customer service representative•

definehowtoclosethecalls•

differentiate the ro• le of CSR in inbound and outbound call centre

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7.1 Introduction Customersaredelightedwhentheyarehandledwith‘CARE’,i.e.,theirexpectationsaremetandexceededeverysingle time they call an organisation for the support or service they need. It is in the interest of any organisation to ensure its customers are happy with the service they receive, irrespective of the solutions being provided at that very moment the customers call. Though every CEO of a company might want to personally take care of his/her customersbyprovidingsolutions,itis,byfar,difficulttoimaginetheCEOhandling500calls(average)inaday.The bridge that connects the customer and the management of most organisations today is called Customer

Relationship Management (CRM) also called the Call Center Unit of an organisation. A team of members with good communication skills, designated as Customer Service Representatives (CSR), form a part of the CRM team. Sometimes the customer service representative is essentially a sales person. Companies that offer large scale mail order (Internet or telephone order) businesses frequently call people representatives, or customer service specialists todifferentiatethemfrombeingspecificallysalespeople.Intruth,theirfunction,thoughitdoesn’tusuallyinvolveface-to-face contact with others, is similar to that of sales people in retail stores. They essentially take orders for purchases, answer questions about products, prices or shipping, and listen to any complaints or concerns the buyer might have.

7.2 Role of CSRA CSR, at a call centre, is someone who has been trained to handle customer concerns and queries. It is expected •of the CSRs to provide service to their customers, and give immediate action to their issues. CSRs are employed by different types of companies to serve as a direct point of contact for customers. They are responsible for ensuring that their company’s customers receive an adequate level of service or help with their queries and concerns. These customers may be individual consumers or other companies, and their service needs can vary considerably.All CSRs interact with customers to provide information in response to inquiries about products or services and •to handle and resolve complaints. They communicate with customers through a variety of means—by telephone or e-mail. Some CSRs handle general queries and complaints, whereas others specialise in a particular area. Some of the forms through which CSR reach out to customers are:

E-mail �Telephone �

In some call centres, CSRs spend their entire day on the telephone. In others, they may spend part of their day •answering e-mails and the remainder of the day taking calls. CSRs need to remain aware of the amount of time spent with each customer so that they can fairly distribute their time among the people who require their assistance. This is particularly important for those whose primary activities are answering telephone calls and whose conversations are required to be kept within a set time limit (Average Handling Time called as AHT). For those working in call centres, there is usually very little time between telephone calls. When working in call centres, CSRs are likely to be under close supervision. Telephone calls may be taped •and reviewed by supervisors to ensure that company policies and procedures are being followed. Most CSRs use computers and telephones extensively in their work. CSRs frequently enter information into a computer as they speak to customers. Often, organisations have large amounts of data, such as account information. This ispulled-uponacomputerscreenwhiletherepresentativeistalkingtoacustomersoonecananswerspecificquestions. CSRs also usually have answers to the most common customer questions, or guidelines for dealing with complaints.In the event that they encounter a question or situation to which they do not know how to respond, CSRs consult •with a supervisor to determine the best course of action. They generally use multiline telephone systems, which may route calls directly to the most appropriate representative. However, at times, they must transfer calls to someone who may be better equipped to respond to the customer’s needs.

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Job responsibilities also can differ, depending on the industry in which a CSR is employed. For example, •thoseworkinginthebranchofficeofabankmayassumetheresponsibilitiesofotherworkers,suchastelleror new account clerk, as needed. In insurance agencies, a CSR interacts with agents, insurance companies, and policyholders. These workers handle much of the paperwork related to insurance policies, such as policy applications and changes and renewals of existing policies. They answer questions regarding policy coverage, help with reporting claims, and do anything else that may need to be done. Although they must have similar credentials and knowledge of insurance products as insurance agents, the •duties of a CSR differ from those of an agent as they are not responsible for seeking potential customers. CSRs employed by utilities and communications companies assist individuals interested in opening accounts for various utilities such as electricity and gas, or for communication services such as cable television and telephone. They explain various options and receive orders for services to be installed, turned on, turned off, or changed. They also may look into and resolve complaints about billing and other service.The outsourcing industry has evolved in the last decade and is expected to grow steadily in the future as well. •There are essentially two types of call centres - inbound and outbound. A CSR’s role varies in an inbound and an outbound call centre.

7.2.1 Role of CSR in Inbound Call centre

When a customer calls the Call Centre, it is an inbound call. Many customer inquiries involve routine questions •and requests. For example, CSRs may be asked to provide a customer with their credit card balance, or to check on the status of an order. However, other questions are more involved, and may require additional research or further explanation on the part of the CSR.In handling customers’ complaints, they must attempt to resolve the problem according to guidelines established •by the company. These procedures may involve asking questions to determine the validity of a complaint; offering possible solutions; or providing customers with refunds, exchanges, or other offers, like discounts or coupons. In some cases, representatives in a call centre are required to follow-up with an individual customer until a question is answered or an issue is resolved.Some CSRs help people decide what types of products or services would best suit their needs. They may even •aid customers in completing purchases or transactions. Although the primary function of CSRs in such cases may not be sales, some may spend time encouraging customers to purchase additional products or services. For example, when a customer calls the contact centre of an insurance company for details, the CSR may not haveto“hard”sellapolicy;however,thecustomermay,bytheendofthecall,decidetobuyapolicybasedonthe service/information provided.A simple call for information can be converted into a sale. CSRs may also make changes or updates to a •customer’sprofileoraccountinformation.Theymaykeeprecordsof transactionsandupdateandmaintaindatabases of information. A CSR’s function in any Inbound Call Centre is to communicate with the customers and gather information as to their concerns. This information will enable a CSR to provide answers or facilitate theprocessingoftheirrequest.TheCSRsareinchargeofmanagingandfindingsolutionstothecustomers’complaints.Common transactions that are brought to the CSR in an Inbound Call Centre are the availing of services, •complaints, procedural inquiries, technical problems, order status or check of balances. To provide answers to these transactions, a CSR solves them by looking-up the information over the computer. A CSR follows established guidelines as to the line of questions that would have to be asked from customers. The guidelines should include validating complaints through questions. They should also check from customers if it is a recurring incident.

7.2.2 Role of CSR in Outbound Call Centre

When the call goes out to a customer from a CSR, it is an outbound call. Typically, this type of Call Center is •involved in Tele-Marketing, Tele-Selling or Collections. It could be, for example, a call center for a credit card companyorafinancialinstitution,oranycompanythatwishestosurveythemarketorsellitsproductsoverthe phone. For example, those working in the call centre unit of an insurance company handle calls related to insurance policies, such as policy applications and changes and renewals to existing policies. They answer questions regarding policy coverage, help with reporting claims, and offer services relevant to Insurance Company requirements that may need to be done.

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Although they must have similar credentials and knowledge of insurance products as insurance agents, the •duties of a CSR differ from those of an agent as they are not responsible for seeking potential customers. CSRs employed by utilities and communications companies assist individuals interested in opening accounts for various utilities such as electricity and gas, or for communication services such as cable television (Example- Direct to Home) and telephone. They explain various options and receive orders for services to be installed, turned on, turned off, or changed. •They may also look into and resolve complaints about billing (Example- Mobile phone companies) and other services. A CSR’s other functions in an Outbound Call Centre include assisting customers in their purchasing decisions (Example- CSRs in the call centre unit of an insurance company, a credit card company, a cable television, etc.). They may advise consumers on the products suitable for them.

7.3 Essential Attributes of CSRInternational call centres have clients based across the globe, in the USA, the UK, Canada, and Australia; so •the CSRs are physically sitting in India while they attend to calls that are routed to India from another country. This is the reason for an emphasis on CSRs possessing good spoken English skills. A CSR is required to have good communication skills as his / her work involves communicating and handling global customers. Computer knowledge is likewise required as most information is drawn over the computer. But to top it all, one should have good interpersonal skills as one is dealing with customers’ problems and concerns. As a CSR, one will have to converse with callers who could have various accents and it is one’s responsibility •to not only listen to and understand what their concern is, but also to communicate effectively and provide a comprehensive and suitable solution. The qualities essential in high performing CSRs include:

Positive attitude:Positive attitudes allow those in problem-solving situations to see the issues as opportunities, not problems. A positive attitude helps the CSR to explore and create workable solutions for customers.

Desire to help:ThesecondcharacteristicofhighlyqualifiedCSRs,atacallcentre,istheirdesiretohelpthatgivesthemthegreatestsense of satisfaction; and makes them better at this profession than those who are motivated by other factors.Organisational skills:

In trying to rate the characteristics of the CSR, organisational skills is the third quality and an absolute necessity for the role. This skill helps one to organise his/her routine and workload so all the important things get done in priority. Organisational skills are the keystone to having a more balanced life.

Ability to multi-task:Most customer service roles require its representatives to be able to deal with a wide range of information and tasks that basically require general knowledge about all aspects of the business. Many different types of issues, tasks, and priorities need to be dealt with in a given amount of time. (Example- The members of the helpdesk (call centres) of a credit card company should be skilled at the use of computers as they might be dealing with multiple screens at the same time.)

High attention to detail:This crucial skill can mean the difference between getting the products and services the customer has requested or not. Even the smallest missed detail can have a terrible impact on the bottom line if you have not met the client’s request. Either the customer leaves, or the company is forced to save the situation by giving away products and services due to errors.

Ability to prioritise effectively:Due to the nature of the job, CSRs typically deal with a multitude of tasks and responsibilities, most of which are timesensitive.StrongCSRsprioritise,basedonthepossiblenegativeorpositiveimpacttothecustomer.Theyfinda way to balance that with the impact on the revenues or costs associated with their own organisation.

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Follow-up skills:CSRs with follow-up skills are vital to the long-term existence of any business today. The business world evaluates the strength and quality of its people on their ability to follow up. For instance, a follow up call by a CSR to check if the customer’s mobile connection has been activated or if he has received his PIN or if the laptops have been delivered in good condition, etc., boosts the reputation of the organisation the CSR works for and also helps one build good rapport with the same customer. Following up with the customer on his requests, suggestions, queries or complaints is a sure shot way of delighting the customer.

Relationship-building skills:Building relationships that transpire into friendships is the gift of the highly skilled CSR. People naturally want todealwiththeirfriends,andthesewarmrelationshipsthatdevelopcansignificantlyimpacttheproblem-solvingprocess. Friends working together to solve problems can more easily lead to a win-win situation for both parties than astrictlybusinessrelationshipwherebybothpartieslookfora“meonly”solution.Thesewarm,yetprofessionalrelationships lead to repeat business and long-term solid partnerships. Many people are not very technically sound and when these people call in an internet service provider with their problems, a CSR who makes them feel comfortable and provides a solution in a friendly manner will help not only boost one’s own career prospects but also the organisation’s success.

Effective communication:Customer Service Representatives play a critical role in providing an interface between customers and companies. As a result, employers seek out people who are friendly and possess a professional manner. The ability to deal patientlywithproblemsandcomplaintsandtoremaincourteouswhenfacedwithdifficultorangrypeopleisveryimportant.WorkersshouldhaveaclearandpleasantspeakingvoiceandbefluentinEnglish.

Teamwork:The key to success for many businesses today is the existence of a team culture. The CSR is typically the liaison betweenallinternaldepartmentsandthecustomer.Informationneedstoflowsmoothlythroughoutthesedepartmentsto ensure that the customer’s needs are being met. If customer satisfaction is the goal, CSRs are ultimately responsible for ensuring that a high level of communication is maintained throughout the process.

7.4 Customer Service over PhoneEffective communication is a vital part of the success or failure of any business, and while email is a popular way •of keeping in touch, the good old telephone still has an important role to play. It is our link to the outside world. Infactthetelephoneisthefirstpointofcontactacustomerhaswithanycompany,soitisveryimportantthatyou make a good impression when you’re answering the phone. Telephone calls are live, and there is no going back once you have picked up the receiver and said your lines. Unfortunately, you cannot edit your comments or erase something inappropriate in favour of something better. Just like a face to face meeting, a telephone conversation should follow certain rules of etiquette. It is easy to •forget your manners when you speak on the phone. There are plenty of distractions around you. Remember every telephone conversation is also a measure of how your business is understood by others, so it’s important to make sure you give the right impression every time you pick up the receiver. As a customer service representative you must work hard to make every encounter on the telephone, a pleasant and productive one so that the customer chooses your company.Telephone techniques are built from a few basic rules and principles. Proper phone technique can make or break •deals or relationships. Let us see how we can use the telephone as a power tool:

Always speak directly into the mouthpiece and if you are using other equipment like a computer while on �the phone, use a headset so that your hands are free.Speak a little slower on the phone than you would if you were having a general face-to-face conversation. �Important details can get overlooked if you speak too quickly and it also saves you from having to repeat yourself.Remember always to sound friendly and helpful. Let us look at this step by step. �

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7.4.1 Telephone TechniquesThere are some important techniques which one should follow while communicating on telephone. They are as follows:Answering the telephone/ greeting:

When answering the phone for business, be sure to identify yourself and your company whenever possible and •try to answer the phone within two to three rings. Business telephone calls usually lead to some action, so make sure your vocal impression is pleasant and professional. There are a number of ways to identify yourself and the company you work for.

“ThankyouforcallingETS.HowmayIhelpyou?” �“ETS,PrakashSeth”,or“ETS,PrakashSeth,howmayIhelpyoutoday?” �“ThisisPrakashSeth,accountsreceivabledepartment.HowmayIhelpyou?” �

If answering someone else’s line, be sure to include their name in your greeting, so that the other party does not •think they have reached a wrong number. While communicating over the phone, your message is communicated 18% by what you say and 82 % by how •you say it. Your voice quality plays a very important role here. The voice quality is affected by factors such as the tone, pitch, speed and volume. Keepyourtoneenthusiasticandinteresting,yourpitchlowsothatyousoundconfidentandresponsible,your•speed medium ranging between 100 and 140 words a minute, and your volume audible, neither too soft nor too loud.Although we tell our callers a lot through our voice tone, the words and phrases we use convey a message. •Unfortunately, sometimes we send a negative message to our caller through our choice of words. Be aware of the language you are using. Insteadofsaying,“Youhaveto…”,“Youneedto…”,“Whydidn’tyou?”trytouse“Willyouplease…Would•youplease?”Negativephraseslike“Yourproblem”or“Yourcomplaint,”wouldsoundbetterphrasedas“Yourquestion,”“Yourconcern,”or“thissituation.”Manypeopleusephraseslike“Ican’tdothat”or“It’snotmyjob.”Instead,tellthecallerwhatyoucando,“WhileI’mnotabletoestablishpolicyonthismatter,Iwillspeakto my manager about your concern.”

Placing customer on hold:Sometimes when you are on a call with a customer, you may be required to provide additional information which •is not immediately available on your computer screen or you may need to look for it in a register or ledger. At such times you would need to put your customer on hold. Being placed on hold is perhaps the biggest frustration of any caller. Calls abruptly put on hold for minutes on •end leave a customer wondering if the person on the other side is really concerned about him. A short period of a minute on hold can seem extremely long and tiresome to the caller. When you do have to put a customer on hold remember to ask your caller:

“MayIputyouonhold?”or �“MayIplaceyouonhold?” �

If you take the time to ask your caller to hold, be sure to listen to the response. After placing your customer on •hold, check back periodically (between 30-45 seconds) and reassure the customer that you are still on the line and explain what you are currently doing. If someone expresses reservation about being put on hold, calmly explain why it is necessary. Perhaps the person they want to address their question to have stepped out of the officeandneedstobetrackeddown,orisonanothercall.Alternately,givethemtheoptiontocontinuetoholdifitwilltakelongertofindinformationoroffertocallthem•back.Tellyourcaller,“MrRao,Iamworkingonpullingupyourrecords.Thismaytakealittlelonger.Pleasecontinue to stay on the line”. It is also advisable to offer a reason for the delay. Callers like an explanation for their inconveniences.

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When returning to your caller, remember to thank them for waiting.•“Mr.Rao,thankyouforyourpatience.” �“Mr.Rao,thankyouforbeingonhold” �

If your caller cannot hold, offer to take a message, transfer to another party, or arrange for them to return the •callataspecifictime.

Call transfer:A call can be transferred from one agent to another or from one department to another department. This is done •whenthecallerrequiresspecificinformationandacolleaguefromanotherdepartmentisbetterequippedtoprovide that information. Tell the customer the reason you are transferring the call before you do so. Then ask ifitisallrighttotransferthecall.“Mr.Rao,Iwouldneedtotransferthiscalltothemarketingdepartment.Would you please stay on the line while I transfer the call?”Call the department or person to whom you are transferring a call and make sure that they can take the call. If •they are able to take the call, give them the person’s name, their request, and any other relevant information.

“Hello,thisisRajeshcallingfromCustomerService.Ajith,Ihaveacustomer,MrRaowhoneedsadditional �information about the availability of our products in the North Eastern States of India. May I transfer the call to you?” Then, return to your caller and give them the name of the person they are being transferred to, the department and the telephone number if possible.“Thankyouforbeingonhold.IappreciateyourpatienceMr.Rao.Ihavearepresentativefrommarketingwho �will answer your questions. His name is Ajith. I am now transferring your call, please stay on the line.”

Having learnt how to transfer a call between departments you can also use a similar process to transfer a call •to your supervisor when a customer requests it or when you are not in a position to provide suitable answers. Remembertofirstexplaintothecustomerwhyyouareescalatingtheircalltosomeonemoresenior.

Taking phone messagesKeepapencilandpadnearyouandjotnotesduringphoneconversations.Thiswillhelpyou“activelylisten”•andhavea reference for later.Useactive listeningphrases suchas“yes”or“I see”or“Great”during theconversation so that the other person knows that you care about what they have to say. Using your notes, repeat any resolutions or commitments on either side to be sure that both of you have understood.Sometimesyoumayberequiredtocallbackyourcustomer.Whencallingsomeone,establishspecificcall-back•times.Ask“Whenisthebesttimeformetocallagain?”or“CouldyousuggestasuitabletimewhenIcouldcall you back?”

Answering voice mailIf you reach an answering device, for example, an answering machine or voice mail, wait to hear the beep and then leave the following information:

Your name, including the correct spelling, if necessary•Your department and telephone number•Date and time•Message, including a good time to reach the customer•

Make the voice message short and to the point. Remember to say your name and number at the beginning and the end of the message.

Closing the conversationIn this global marketplace, some of the most powerful business relationships have been between people who have never seen each other. Always end the call on a positive note by thanking the other person for their time and express an interest in speaking with them again. A gracious good bye leaves the door open for further communication. There aresomespecificthingsthatyoucansaytocloseyourconversationprofessionally:

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Use closing phrases such as:“Iamgladwewereabletoresolveyourissue.”

State the action you will take:“Mr.Varma,Iwillbesendingmyrepresentativetoyourhomewithintheweek,whowilldemonstratehowthesecurity device is to be installed.”

Spell out follow-up action, including time frames/deadlines“Mr.Varma,youwouldneedtofilltheformandmailitbacktousordropitoffatourofficeby6p.m.Fridaythe24th June.”

Thank them for calling and say good-bye.“Mr.Ram,thankyouforusingGeetel.Haveagoodday”.

7.4.2 Handling Dead Air on Calls

While conversing with a customer sometimes there is a silence in the conversation. Sometimes for want of an •appropriateansweryoumayremainquietformorethanthreetofourseconds.Thisiscalled“deadair.”Normallyit’s not possible to talk to the customer continuously during the call, because while checking the information in the system your mind is diverted towards the information the customer is asking about. However there are various ways that you can reduce, if not overcome this. When there is dead air a customer normally feels lost and might think that you do not have adequate information. Remember dead air seems longer at the customer’s end.One of the ways to handle dead air is to keep the customer informed step by step of what you are doing. Tell •the customer what you are doing while you are doing it. As an example, if you were speaking to Mr. David Thomas who called up to check about his order, and you had to check for the information on your computer screen while on the call, here is what you would say:

“Justamoment,Mr.DavidThomas,letmepullupyouraccountandI’lltakealooktoseewhathappened �to that order...Alright ...I’m looking at your order...I see the order you’re asking about...it says here that the order was shipped ...let me switch to the order detail screen and that will tell me when it was shipped and how we shipped it...one moment...Yes, here it is...we shipped on the 10th of November via DHL and I have a tracking number...”

At other times you can involve the customer in general small talk. This is a good opportunity to build rapport •with your customer. You could enquire about the weather or talk about non controversial general topics like sports. This would also be an appropriate opportunity to update the customer on additional products or services that your company may be launching.

7.4.3 Structuring a CallJust like any other form of communication, a telephone call should also follow a structure to be most effective. Here is a model of the call structure.

Opening the call

Developing the call

Proposing the solution

Gaining agreement

Closing the call

Fig. 7.1 Call structure

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Opening a callThefirststepinthecallprocessistogreetyourcustomer.Researchshowsthatthefirst30secondsarethemostimportant as they form the ground for the customer’s perception. It includes greeting, introduction and an offer to help. It should not take more than 5 seconds. Remember the initial contact with your customer is a moment of truth. Startonapositivenoteasthesefirstfewsecondswillsetthetonefortheentireconversation.

Developing a callPerhaps this is the most important and longest part of the call. After opening, this is the customer’s chance to explain his reason for calling. This is also the time for Customer Service Representative to establish the customer’s identity and determine the customer’s needs. It is also an excellent opportunity to build rapport with the customer. Ask probing questions to gather as much information as required. Let these be open-ended questions as this will give the customer an opportunity to explain and may lead you to vital clues that will help you serve them better; then paraphrase what they have communicated to you. What would be a better question to ask the customers so that you gain more information?

What is the condition of your computer system? Or•Is your computer on?•

While developing the call, often you would have to empathise and sometimes even apologise to the customer. You couldempathiseusingstatementslike“Iamsorrythatyourmonitordoesnotseemtobeworkingproperly.”Afteryou apologise you would need to let the customer know that the disappointment or frustration that he or she is feeling isjustified.Youcoulddothisthroughstatementslike“Icancertainlyunderstandwhyyouaredisappointedatthistime.”Acknowledgingfeelingshelpsthecustomersfeelthattheyarejustifiedintheirsituation.

Proposing a solutionHaving understood the customer’s problem, you now need to evaluate the options available and propose a solution/s to the customer’s problem. You can also advise the customer on the pros and cons of options available. Before proposingasolutionofferanempathystatementsuchas“Icanunderstandyou’reangrythatyouhavereceivedthewrong product.” By using an empathy statement you are simply telling your customer that you understand how they feel about their situation. Now propose a plan of action. Inform customers of the steps you plan to take, any steps thattheywouldneedtotake,indicateatimeframefortheresultsandtellthemthebenefitsofyouractions.Don’tforget to check with the customer if he has understood the proposed solution.

Gaining agreementGaining agreement with a customer on why they are calling is an important part of the call process. You can gain agreementthroughparaphrasingorreflectingbackonwhatthecustomer’srealissueis.Youcanalsogainagreementbyaskingthecustomerquestionslike“Whatdoyouthinkaboutthissolution?”Gettingagreementisveryimportantbecausecustomersaretheonlyoneswhocantellusiftheyaresatisfied.

The customer needs to make a decision and agree to one of the solutions proposed by the agent. If the customer hasanyobjections/clarifications,theCustomerServiceRepresentativemustclarifythemnow.Thecustomermustbe made to feel that he and you are working jointly. They will not like it if a plan is imposed on them. Once an agreement is reached, it’s time to close the call.

Closing a callEnding a telephone call can seem to be a simple matter but when you are looking at customer satisfaction, you need to place as much emphasis on closing as the opening of a call. A customer must be made to feel that you are willingtogivehimcontinuingservice.Andremembertoalwaysletthecustomerhangupfirst.Keepyourpositiveattitude; use the customer’s name for the personal touch for this meets their psychological needs. Review their plans of action. Be sure to include time elements and the action that you will take. Thank your customer and be sure they have no more questions to ask. Let the customer hang up the call.

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7.4.4 Home Based Customer Service Representative

One of the greatest works at home jobs is a customer service representative. Once you have already decided to •work from home and you have the right skills for it, being a customer service representative can be rewarding as well as satisfying. Find out all you need to know to become one.Many companies outsource their call centres in order to save costs. Call centres also save on operational costs •byemployinghomebasedworkerssolessofficespaceisneededandlowerelectricbillsandmunicipalitytaxesare paid.Almost anybody has a fairly good computer at home. Most of home computers today are many times stronger •than before and can sustain commercial customer service software successfully. You will probably also need a landline dedicated to this service which will be used to reroute the incoming calls from the call center to you using the new easy call forwarding technologies available today.Althoughtheworkisathome,youmayfindyourselfdoingmanyofthesametasksasinanoffice.Things•like telemarketing, taking orders and selling for online retailers, providing technical support for software and hardwaremanufacturersaswellas“Post-Sale”customerserviceforretailersandmakingreservationsfortravelservices as well.Working as a customer service representative entails:•

self-motivation �strong work ethic �the ability to work without physical interaction with people or direct boss �to have internet and computer skills �to have the right attitude �Patience and professional phone presence needed to interact with people with problems who might be angry �orimpatient,rudeorsometimesobnoxiousandmakethemsatisfiedwiththeservicegiven,gaintheirtrustand solve their problems.

Thebenefitsofworkingasacustomerservicerepresentativefromhomeinclude:•saving on child care (although call centres usually do not allow interferences or crying noise to be heard �on these call)saving on travelling costs to work and back �saving the time it takes commuting back and forth �saving on special work wardrobe �food and beverage costs �being able to see your children grow up and not missing anything �

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SummaryA CSR, at a call centre, is someone who has been trained to handle customer concerns and queries. It is expected •of the CSRs to provide service to their customers, and give immediate action to their issues.All CSRs interact with customers to provide information in response to inquiries about products or services •and to handle and resolve complaints. They communicate with customers through a variety of means—by telephone or e-mail.Telephone calls may be taped and reviewed by supervisors to ensure that company policies and procedures are •being followed.When a customer calls the Call Centre, it is an inbound call. Many customer inquiries involve routine questions •and requests.Some CSRs help people decide what types of products or services would best suit their needs. They may even •aid customers in completing purchases or transactions.When the call goes out to a customer from a CSR, it is an outbound call. Typically, this type of Call Center is •involved in Tele-Marketing, Tele-Selling or Collections.A CSR is required to have good communication skills as his / her work involves communicating and handling •global customers. Computer knowledge is likewise required as most information is drawn over the computer. But to top it all, one should have good interpersonal skills as one is dealing with customers’ problems and concerns. When answering the phone for business, be sure to identify yourself and your company whenever possible and •try to answer the phone within two to three rings.While communicating over the phone, your message is communicated 18% by what you say and 82 % by how •you say it. Your voice quality plays a very important role here. The voice quality is affected by factors such as the tone, pitch, speed and volume.

ReferencesRole of Customer service representative. • [pdf] Available at: <http://www.egyankosh.ac.in/bitstream /123456789/34432/1/Unit%202.pdf>. [Accessed 11 October 2011] Customer service over the phone.• [pdf] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/34433/1/Unit%203.pdf >. [Accessed 11 October 2011] Home Based Customer Service Representative• . [Online] Available at: <http://www.ommhub.com/customer-service-representative/ >. [Accessed 11 October 2011] What Is a Customer Service Representative?• [Online] Available at: <http://www.wisegeek.com/what-is-a-customer-service-representative.htm>. [Accessed 11 October 2011] Lastingimage, 2008. • Customer Service Training Video[Video Online] Available at: <http://www.youtube.com/watch?v=w7d9cpWp_Ds> . [Accessed 10 October 2011]. expertvillage, 2008. • The Different Types of Customer Service: Stop Watch Customer [Video Online] Available at: <http://www.youtube.com/watch?v=s4SVJGG37LQ>. [Accessed 10 October 2011].

Recommended ReadingQuinlan, K. A., • Customer Service Representative Capstone Pr Inc.Ferguso• ,2009. Career Discovery Encyclopedia, 7thed., Infobase Publishing, Manning, • Selling Today: Creating Customer Value, 9/e. Pearson Education India.

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Self Assessment_________’s employed by utilities and communications companies assist individuals interested in opening 1. accounts for various utilities such as electricity and gas, or for communication services such as cable television and telephone.

CSRa. Agentb. Employeec. AHTd.

Common transactions that are brought to the CSR in an _____________are the availing of services, complaints, 2. procedural inquiries, technical problems, order status or check of balances.

Outbound Call Centrea. Inbound Call Centreb. Call centrec. In – out call centred.

A CSR’s other functions in an ____________ include assisting customers in their purchasing decisions.3. Outbound Call Centrea. Inbound Call Centreb. Call centrec. In- out call centred.

__________________ helps one to organise his/her routine and workload so all the important things get done 4. in priority.

Positive attitudea. Desire to helpb. Organisational skillsc. Ability to multi taskd.

Which of the following statements is true?5. Never speak directly into the mouthpiece.a. Speak a little faster on the phone than you would if you were having a general face-to-face conversation.b. When answering the phone for business, never identify yourself.c. If answering someone else’s line, be sure to include their name in your greeting.d.

Which of the following statements is false?6. Following up with the customer on his requests, suggestions, queries or complaints is a sure shot way of a. delighting the customer.If answering someone else’s line, do not include their name in your greeting.b. If you take the time to ask your caller to hold, be sure to listen to the response.c. If your caller cannot hold, offer to take a message, transfer to another party, or arrange for them to return d. thecallataspecifictime.

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Which of the following is the correct way of closing phrase?7. “Iamgladwewereabletoresolveyourissue.”a. “Iamsureyourdoubtisresolvednow.”b. “Iknowwehaveclarifyyourconcerncompletely,.”c. “Contactagainifyoufacethesameissueagaininfuture.”d.

Which one of the following is the correct way of thanking the customer?8. “Mr.Ram,thankyouforusingGeetel.Haveagoodday”.a. “ThanksforusingGeetel.”b. “Thankyou”c. “Mr.Ram,thankyouforusingGeetel.Haveagoodday,takecare,pleasecontactagain,willwaitforyourd. call”.

Which of the following statements is false?9. One of the ways to handle dead air is to keep the customer on hold.a. Thefirststepinthecallprocessistogreetyourcustomer.b. While developing the call, often you would have to empathise and sometimes even apologise to the c. customer.Having understood the customer’s problem, you now need to evaluate the options available and propose a d. solution/s to the customer’s problem.

Which of the following statements is true?10. Never use the customer’s name while communicating with them.a. Afterunderstandingthecustomer’sproblem,customerhastoevaluatethebeneficialoptionsforhim.b. While developing the call, never apologise to the customer.c. Let the customer hang up the call.d.

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Chapter VIII

Customer Relationship Marketing (CRM) and Customer Retention

Aim

The aim of this chapter is to:

elaborate four waves of marketing thoughts•

definestrategiesofCRMinretailingindustry•

differentiate between relationship and transactional marketing•

Objectives

The objectives of this chapter are to:

elaborate the role of CRM in organised and unorganised retail sector•

understand gaps between expectation and performance•

defineloyaltyprogrammes•

Learning outcome

At the end of this chapter, you will be able to:

definetheroleofemployeesinmaintainingstoreloyalty•

understand the categorisation of CRM in organised and unorganised retail sector•

explain sw• itching customers

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8.1 Introduction to CRMMarketers started the new millennium in one of two groups: those who practice Customer Relationship Marketing, and those who do not. Those who do are reorganising their marketing programs to create and strengthen brand loyalty. They put as much emphasis on retaining customers as they do on attracting customers. These same marketers are alsodiscardingtheconceptthatadvertising’sjobendswiththesale,thatitsgoalistoeffectsome“hands-off”atsome cash register.

Theyrecognisethatthesaleisthebeginningofanopportunitytocreateanenduring,profitablebrandrelationshipwith the customer. Those who do not practice Customer Relationship Marketing (CRM) may not have to—yet. But theywill.Theywilliftheyaretosurviveinthismillennium,iftheyaretosustainprofitablegrowthinthefaceofdiminishing returns from the marketing waves that preceded CRM. There are three such waves:

Massmarketingfosteredgrowththrougheconomiesofscaleandefficienciesofreach,constructsasoldasthe•Industrial Revolution kept relevant by the post-war boom in population and uninterrupted gains in discretionary income. Mass products and services were mass marketed and mass distributed to mass markets through mass advertising in mass media.Targeted marketing took over when mass marketers realised that not all customers are created equal. Focused •marketing led not only to specialised products and specialised distribution but also to specialised media, audiences and messages.Global marketing, which many marketers use these days, is essentially a hybrid that takes the targeted approach •across geography instead of within geography. To achieve the economies of scale promised by mass marketing, marketers searched for common target markets worldwide.

Customer relationship marketing

Global marketing

Target marketing

Mass marketing

Fig. 8.1 Four waves of marketing thoughts

Thefirstthreemarketingwavessharedonethingincommon.Theyfocusedonmaximisingsales.Thegoalswereto maximise sales in mass markets, targeted markets or global markets. Marketers are now discovering that it is unfortunatelypossibletoincreasesaleswithoutincreasingprofits.So,nowmarketerslookatqualityofshare,notjustquantityofshare.Theirobjectiveisenduringprofitablegrowthisthecreationandreinforcementofbuildingcustomer relationships.

Evolution of relationship marketingCustomer relationship management (CRM) had its origins in two unrelated places. One was in the US where it •was driven by technology. Under the direction of marketers, information technology and statistical algorithms weredevelopedtoincreasetheefficiencyandeffectivenessofsellingwhatacompanymakes.Thispopularlycame to be referred to as database marketing. CRM systems such as call centres, websites, customer service and support teams, and loyalty programmes were used to manage the relationship with customers.The second place where the CRM concept developed was in business to business (B2B) marketing in Scandinavia •and northern Europe. The IMP (Industrial Marketing and Purchasing) Group has been instrumental in developing our understanding about the nature and effects of building long-term, trust-based relationships with customers, which are managed by the marketing and sales departments.

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They may be based as much on the structural ties between companies as they are on personal relationships among •managers. Here, the emphasis is on understanding customer needs and then solving problems or delivering benefitsthatcreatedemonstrablecustomervalue.WhileinformationtechnologyisimportantinthisstyleofCRM, it is designed to support rather than drive the customer relationship. The types of relationship that develop here are often deep and meaningful-for both the retailers and the customers involved. In the latter half of the 1990s, the focus of database marketing began to shift to relationship marketing. Marketers and retailers started usingimprovedinformationtechnologytoregularlycommunicatewithafirm’scustomersandtobaseproductofferings as per the consumer’s buying behaviour.Speedy-computer connections help in the communication among channel members and also have the added •effect of creating a relationship between a buyer and a seller. There is an economic and non-economic incentive for both entities to remain committed to the relationship.Customer relationship marketing in retailing has emerged out of two major considerations:•

At amacro level, the recognition thatmarketing influences awide rangeof areas including customer, �employee,supply,internal,referral,and̀ influencer’marketssuchasthegovernmentalandfinancialmarkets;andAt the micro level, the recognition that the nature of interrelations with customers is changing. The emphasis �is on moving from a transaction focus to a relationship focus.

An essential factor to be understood from this is the difference between customer relationship marketing and •transactional marketing. Few of these differing points are given in the table below:

Relationship Marketing Transactional MarketingFocus on customer orientation• Focus on single sale•Effortsonaddingmoreofproductbenefits• Efforts on adding more product features•High customer service emphasis• Little emphasis on customer service•Quality is a concerned only on production• Quality is the concern for all•

Moderate contact with the customers, hence •limited commitment with them

High customer contact hence higher •commitment with them

Table 8.1 Difference between relationship and transactional marketing

Thus, customer relationship marketing is different from the old concept of marketing, which used to be based •more on increasing the customer base. Relationship marketing focuses on using relational strategies to acquire customers, retain them, and enhance relationship with them. In fact, as per Pareto’s Law, 80% of the total sales come from 20% of the customers, and, thus, relationship marketing attempts to optimise the resources for the retailerbyretainingthemostprofitableofthecustomers.The retailing industry plays an important role in the success of relationship marketing as it serves as the major •link between the supplier and customers. Therefore, it engages, maintains, and enhances the relationship with the ultimate entity of the value chain, which in turn determines the success of all the members of the value chain. The retailers have always acknowledged the importance of long-term relationship with customers in their business.

8.2 Strategies of CRM in Retailing Industry Customer Relationship Marketing (CRM) strategies refer to any effort that is actively made by a seller towards a buyer, and is intended to contribute to the buyer’s customer value above and beyond the core product and/or the service provided. This can only be perceived by the buyer after continued exchange with the seller. For instance, if the traditional Indian retailers treat their regular customers in a warm and friendly manner and also provide them withspecialbenefitsintermsofhomedelivery,discounts,etc,thentheseeffortsareanattempttoprovidebenefitsabove and beyond the core service performance.

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FromthiswecanfigureoutthatstrategieslayforCRMisacombinationofseveralbenefits.Majorfourcomponentsthat help in formulating a Customer Relationship marketing strategy are given below:

Personalisation

Communication

Reward

Special treatment benefits

CRM Strategy

Components

Fig. 8.2 CRM strategy Components

Let’s discuss on each of the components in detail:Personalisation

Personalisation describes the social interaction between service employees and their customers. It consequently, •personalisation can be regarded as a means of showing recognition and respect for the other party. Some of the commonexamplesofsocialrelationshipbenefitsincludefeelingsoffamiliarity,personalrecognition,friendship,and social support. Such an interaction afforded by shopping sometimes works as a prime motivator for some consumers to visit •retail establishments. One of the suggested ways of valuing a buyer’s uniqueness as an individual is to address him by his name, as people feel good when someone remembers their names at a later point in time. Sales practitioners often stress the importance of remembering and using customers’ names. Other indicators of personalisation efforts are employees’ attempts to get to know a customer as a person, •their efforts to engage in friendly conversations, and their exhibition of personal warmth. This corresponds to thefeelingof`beingincludedinthecommunicationprocessesandof‘beinglikedandtreatedwithrespect’.Therefore, personalisation leads to a positive impact in terms of increasing trust in the seller/ store, customer satisfaction with the relationship, and repeat purchase.

CommunicationCommunication is without a doubt, an essential condition in the existence of any relationship. A retailer’s communication with a buyer conveys his interest in them and serves to strengthen their relationship. So, efforts to`stayintouch’withthecustomershavebeenidentifiedasthekeydeterminantsofrelationshipenhancementinretailer - customer relationship. It is generally observed that buyer - seller relationships become stronger when the ease and volume of exchange between buyers and sellers increase.

The intense levels of buyer - seller communication will help in increases the probability of discovering behaviours that generate rewards,

Enhancesthepredictionofbehaviouroftheotherpartyandclarifieseachother’sroles,•Leads to easier discovering of similarities between parties, and•Encourages feelings of trust, special status, and closeness.•

Generally, communication strategies as part of relationship marketing efforts refer to directed communication to the customers as against mass-media communication, which does not afford selectivity. However, it does not include face-to-face interaction, which forms part of personalisation efforts by the retailer. Many retailers now also adopt direct mail, e-mail, telephone, and SMS as means to interact with their loyal customers or members of loyalty programmes.

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RewardsProvidingcustomerswithtangiblerewardsisoftenreferredtoas̀ levelonerelationshipmarketing’.ThislevelofCRMreliesprimarilyonpricingincentivesandmoneysavingstosecurecustomers’loyalty.Frequentflyerprogrammes,customerloyaltybonuses,freegifts,personaliseddiscountcoupons,andotherpoint-for-benefit‘clubs’areexamplesof these efforts. Trying to earn points on such things as hotel stays, movie tickets, and car maintenance would help customers to remain loyal, regardless of service enhancement or price promotions of competitors. Rewards should be designed to promote long-term behaviour and discourage short-term deal-seeking behaviour. Rewarding efforts refer to structured and planned marketing efforts that should encourage loyal behaviour, distinguishing it from short-term oriented sales promotions.

Special treatment benefitsA key aspect of relationship marketing is that all consumers do not need to be served in the same way. If a consumer receives personalised, customised service from retailer A, but not from Retailer B, and if this service is valued, then the consumer will be less likely to leave Retailer A for B. The retailers can distinguish between at least two identifiable customers segments: loyal customers and non-loyal customers.Differentiating between loyal andnon-loyal buyers enables a seller to address a person’s basic human need to feel important. Most retailers use core serviceupgradationandserviceaugmentationaswaystoprovidespecialtreatmentbenefitstocustomersinreturnfor their loyalty.

8.3 CRM in Organised and Unorganised Retail SectorBroadly the organised retail sector can be divided into two segments:

In-storeretailers,whooperateinfixedpoint-of-salelocations,locatedanddesignedtoattractahighvolume �of walk-in customers, andNon-storeretailers,whoreachouttothecustomersattheirhomesoroffices. �

The organised retailers provide various standardised services to their customers. Large retail formats with high •quality ambience and courteous and well-trained sales staff is the distinguishing features of these retailers. In most of the cases, they have a wide range of merchandise stocked with them so that the customers can enjoy a wider choice. People visit these stores not only for shopping but also for having a nice time outside their homes.The unorganised retailers in India, on the other hand, comprise of the small independent stores located in •neighbourhood centres and central business districts of a city. These stores have a limited reach in the sense that people living in a particular locality visit stores in their own colony. The USP of these stores is the locational convenience they provide to their customers. They provide customised services to their customers and also go to the extent of procuring merchandise and delivering them to their customers on order.InthecontextofIndiantraditionalretailformats,one-cancomfortablyestablishthesignificanceofrelationship•marketing in the success of a retail store, particularly the relationship between retailers and customers. The existence of a sound relationship between these two entities (retailers and customers) comprehensively suggests the importance of the present unorganised retail network in India in the entire value chain.The strength of the relationship enjoyed by retailers with customers has provided them with the bargaining •power in the value chain, particularly in developing economies where organised retailing is at a growing stage. Soundrelationshipbetweenthetwoismutuallybeneficialbotheconomicallyandnon-economically.

Customer service in retailingToday’s competitive environment requires a retailer to understand and properly apply the concept of relationship from the perspective of the customer and other channel members. This will ensure that:

Customers strongly believe that the retailer offers good value for money; and•All the channel members (including the customers) would like to do business with that retailer.•

The challenge for a retail unit is to bring three critical areas, namely marketing, customer service, and quality, into closer alignment and the attempt of CRM is to bring these three areas together. The provision of quality customer service involves an understanding of what a customer wants and eventually buys, and determining how additional value can be added to the products or services being offered. Yet the implementation of customer service varies from one retail unit to another.

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Managing gaps between expectation and performanceWhen customers’ expectations are greater than their perceptions of the delivered product or service, customers are dissatisfiedandfeelthatthequalityoftheretailer’sserviceispoor.Thusretailerneedstoreducethisgap,whichisknown as the service gap. There are four important dimensions that customers employ to judge the effectiveness of customer services provided by retailers, these are:

The Knowledge Gap: The difference between consumer expectations and the retailer’s perception of customer •expectations. For example, a grocery store may put everything on display so that a customer chooses what he wants, but it may fail to realise that customers in the locality prefer being served personally. Therefore, what the store should have done is to keep staff to take orders from the customers and serve there over the counter.The Service Standards: The difference between the retailer’s perceptions of customers’ expectations and the •customer service standards it sets. For example, a mail order house may require its employees to answer a phone call after not more than two rings. However, the customer may not be concerned with the time he has to spend over phone. Instead, he may be concerned with the time it takes to deliver the merchandise ordered.The Delivery Gap: The difference between the retailer’s service standards and the actual service provided to •customers. The retailer must try to deliver in excess of what is expected by the customers to earn their loyaltyCommunication: The difference between the actual service provided to customers and the service communicated •in the retailer’s promotion programme. For example, ICICI Bank has attracted customers through an extensive advertisingcampaign regarding the innovativeproductprofile, luxuriousambience,helpful sales staff,andabove all convenient and effective services. But with the unexpected increase in the number of customers the established infrastructure could not provide the services as communicated to the customers.

Establishing loyalty programmesCustomer loyalty is all about attracting the right customer, getting them to buy, buy often, buy in higher quantities and bring you even more customers. However, that focus is not how you build customer loyalty. You build loyalty by:

keeping touch with customers using email marketing, thank you cards and more �treating your team well so they treat your customers well �showing that you care and remembering what they like and don’t like �You build it by rewarding them for choosing you over your competitors �Youbuilditbytrulygivingadamnaboutthemandfiguringouthowtomakethemmoresuccess,happy �and joyful.

Loyal customers are cheaper to serve: In most of the cases, retailers are not be required to invest to attract, •maintain, and communicate with loyal customers as they are already inclined to search for information on new arrivals, services, and developments of the store in comparison to customers who are not loyal.Loyal customers are willing to pay more for package offerings: Loyal customers generally are more familiar •about product offerings and can better assess their quality, that means they can develop solid reference prices and make better judgments about value than periodic customers can. Because of this, it is almost impossible these days to work on price differentiation for any length of time. A good example to quote would be of Amazon, which almost destroyed its brand when it attempted to charge different prices to different customers for the same DVDs.Loyal customers are strong advocates for the store’s offerings: The word-of-mouth marketing is very effective, •andmanystoresjustifytheirinvestmentsinloyaltyprogrammesbyseekingprofitsnotsomuchfromtheloyalcustomers as from the new customers the loyal ones bring in.Anumberoffactorsplayapartininfluencingtheloyaltyandcommitmentofcustomers,suchasthequalityand•valueoftheretailer’scoreoffering,levelsofcustomersatisfaction,`elasticity’inherentinthesectororproductcategory,othercompetitorsinthemarket,andevensocial,demographic,andgeographicalinfluences.Sector-SpecificLoyaltyProgrammes:Differentsectorsareviewingandapproachingloyaltydifferently,and•are at different stages of development, both in business terms and in the minds of consumers. Moreover, there are regional, national, and international variations and forces at work, which drive and determine the direction ofloyaltyprogrammeinspecificgeographicalareasofoperation.

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Supermarkets and General Retail Stores: Today, leading supermarkets are among the most sophisticated retailers •in the world. They lead most other sectors in customer data collection and analysis, in stock management, in level of customer service and in retail innovation. The questions of innovative techniques faced by the supermarket retailers are:

Whichsectorhasthe`smart’shoppingcarts?Or �Which one has the latest self-scanning of purchases? Or �Which sector has the in-store kiosk-based information and sales points? �

Telecom: The overall telecom market around the world has been volatile over the past two years, with non-•telecomfirmsjoiningthebattleforconsumercommunicationsspend-includinginternetserviceprovision-andgovernments deregulating the market, and of course the innovation of number portability. In the meantime, firms in themobile telecom sector have beendeveloping their offerings beyond communications into thefinancialservicessector,through‘m-payments’and‘en-cash’(mobilepaymentsystems).Someofthepopularloyalty programmes in the telecom sector are the Airtel’s Recharge Rewards Programme and MTNL’s loyalty programmes.Travel and Entertainment: A great deal has happened in the travel and entertainment sector in the pest few years, •with particular emphasis on increasing both the visit frequency and providing compelling offers and gifts to encourageloyalty.Airlines,hotels,restaurants,andevencarrentalfirmshavefocusedonimprovingcustomerservice and offering more relevant options to encourage consumers to buy more of what they want.Financial Services: Here, it is important to discuss the role of credit and debit cards as loyalty building tools •forthefinancialservicesaswellastheotherretailsectorsoftheeconomy.Creditcardsmakeuseseveralco-brandedandaffinityprogrammesforestablishingcustomerloyalty

A co-branded card is the result of a partnership between an issuing bank and a co-branding partner, which �could be any commercial organisation such as an airline, insurance company motor manufacturer etc. One example of a co- branded card is the UK’s GM Platinum Card issued by HDFC Bank.Anaffinitycardisgenerallyanon-profitmakingorganisationlikeaclub,association,charity,orprofessional �body (without a commercial partner). One example is the Amnesty International Visa Card issued by the CooperativeBank.Theaffinitycardsallowtheissuertominethepotentialofthedatabaseofmembersofan already formed non-commercial group.

Hospitality Industry: Business travellers for most of the loyalty programmes. They have their company booking •them into hotels all across the world. In case they make a decision to be loyal to a particular chain, the hotel’s loyalty programme subsequently rewards them and various other rewards which listed under a respective programme that are directly proportionate to the number of points earned. Any of these programmes should be accessible and well administered and one good example to support this discussion would be the internationally acclaimed̀ goldpassport’oftheMarionprogramme.InIndia,theTajalsoprovidesaloyaltyprogrammenamesas the Taj Hotels Inner circle Programme.Franchise Retail Outlets: The franchise retail format faces a distinct set of challenges in the successful •launch and operation of a loyalty programme. While the coordinated planning and execution of marketing campaignisrequiredfromtheentities,partiestotheloyaltyprogramme,fundingissuesrelatingspecificallyto loyalty programmes in the franchise retail format become a challenge and a constraint for their successful implementation.

8.4 Role of Employees in Maintaining Store LoyaltyThe dynamic business environment provides ample alternatives to customers to shop at every stage from the •shopping centre retail format to the retail store format (independent, specialty, etc.), so much so that they may buy from one store today and shift to another tomorrow. Not that they think that the earlier store was bad, but it is the luxury of variety, which the customers enjoy.The concept of an engaged employee becomes important especially for the retail businesses. In this industry, •the level of services by the employee determines store patronage by the customers.

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Employee retention has become important for the retail players in the organised sector. With the competition •heating up in this sector, the retailers now face a peculiar problem of limited supply of experienced and trained manpower. Most of the retailers facing major constraints in their expansion plan are in need of trained manpower.Even as the company trains employees, there is no guarantee whether me company will be able to retain them •given the competition hot only from the retail sector but also from other sectors like BPOs (business process outsourcing). Therefore, the time spent in training means that others take the share of responsibility and may not be able to service the customers adequately given the pressure.

8.5 Customer RetentionServices marketers understand that having customers, not merely acquiring customers is crucial for service companies.Thereisadirectlinkbetweencustomerretentionoveraperiodoftimeandprofitabilityandgrowth.Further, customer retention to a great extent depends on service quality and customer satisfaction. It also depends ontheabilityofthefirmstoencouragecustomerstocomplainandthenrecoverwhenthingsgowrong.Complaintsare a natural part of any service activity as mistakes are an unavoidable feature of all human endeavour and thus also of service delivery. Service recovery is the process of putting things right after something goes wrong in service delivery. Service marketing literature also suggests that offering well designed service guarantees help in attracting and retaining customers.

Importance of customer retentionThe importance of retaining customers should be properly understood by the services marketers. Generally, the longer acustomerstayswithacompanythemorethatcustomerisworth.Itinfluencesemployeeandsupplierloyaltyaswell,aspeopleliketoworkforcompanieswherecustomersareloyal.Italsoproducesprofitsthatinfluenceshareholderloyalty. In fact this all results in a positive spiral. Employee retention and loyalty results in high quality of services which leads to customer satisfaction and delight which makes the customer stay with the organisation and increases itsprofitabilitywhichinturnbringsemployeeloyalty.ThissequenceisshowndiagrammaticallyinFigure8.3.

Customer satisfaction

Quality services

Employee loyalty

Customer retention and increasedprofits

Fig. 8.3 Underlying logic of customer retention benefits to the organisation

8.6 Customer SwitchingCustomersleaveaproviderforawidevarietyofreasons.Considerwhenyouwerelastdissatisfiedwithaservice•providerorchangedaserviceprovider.Whatwerethespecificreasonsforyourreaction?Wasitbecauseofperceptionofpoorqualityorfailureofaserviceencounter?SusanKeavenlyidentifiedfollowingreasonsforcustomer switching in service industries:

Pricing (high price, price increase, unfair pricing , deceptive pricing) �Inconvenience (location /hours, wait for appointment, wait for service) �Core service failure (service mistakes, billing errors) �Service encounter failures (uncaring, impolite, unresponsive, unknowledgeable) �Response to service failures (negative response, no response, reluctant response) �

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Competition (found better service) �Ethical problem (cheating, unsafe) �Involuntary switching (customer moved, provider closed) �

An important aspect of the above to be understood by you is that six of the eight service switching factors are •controllable from a service organisation’s point of view. Some of the aspects to be examined and action be taken to stop customer switching would include philosophy to deliver a technically correct service every time. However, in case some thing goes wrong there should be strategies in place for effective service recovery. In order to reduce inconvenience the organisation should have effective queue management, waiting line strategies and strategies for management of demand and capacity.Customer defection caused by unsatisfactory service encounters – employee customer interactions can be reduced •by proper training of employees, listening to customers and keeping the customers informed. For maintaining customer relationship you have to deliver quality services including service recovery and continuously monitor therelationshiptofindoutcustomersatisfactionandloyalty.Anotherimportantaspectofkeepingcustomersisthe market segmentation. Unless you properly segment your customers and understand their buying behaviour, expectations and perceptions, you will not be able to meet their needs and can’t retain them. Now-a-days the segments are becoming smaller and smaller to the extent that even for mass services we talk •of segments of one i.e. individualised service. The important thing to understand is that it is not required to individualise services right from design to delivery in order to be differentiated, rather it can be done in number of ways. Another way is to create customisable services which can be customised by the customers themselves. This can •be done when customers can combine different components or modules of a service product in unique ways suited to their individual requirements. Please note that service offerings themselves are standardised.

Loyalty programmesLoyalty programmes are often used in service industries like cellular companies, airlines, hotels, credit card •companies, retail outlets etc. in order to build customer loyalty. They aim at locking on the consumer by rewarding him for patronising a particular service for a period of time. In fact number of similar terms like relationship marketing programme, frequency programme, continuity programme, points programme and loyalty programme are often used interchangeably. Oneofthemostvisibleformsofloyaltyprogrammesisthefrequentflyerschemesofferedbyairlineswhich•rewardcustomerswithafreeflightonaccumulatingacertainnumberofpoints.Similarly,hotelsawardregularcustomers with points, which can be redeemed for free meals or stay. While loyalty programmes are primarily aimed at ensuring that a customer stays loyal and buys more, they can also be used as a marketing tool to attract new customers and maximise their use of the particular service. The First Citizen club (of retailer Shopper’s Stop), Jet Privilege programme (of Jet Airways), Taj’s Inner Circle are all examples of programmes which offer incentives for customer loyalty.

8.7 Complaining and Service RecoveryComplaints are a natural consequence of any service activity. Mistakes are critical part of every service. Since •services are generally performed in the presence of customers, errors are bound to happen. While it may not be possibletopreventalltheerrors,companiescanlearntorecoverfromthem.‘ServiceRecovery’referstotheaction taken by the service provider in response to a service failure. Tad andBrowndefines service recovery “as a process that identifies service failures, effectively resolves•customer problems, classify their root cause(s), and yields data that can be integrated with other measures of performance to assess and improve the service system.” A good recovery can turn angry, frustrated customers into loyal ones. Further more, customers who have been successfully recovered not only remain loyal but can become advocates for the organisation spreading a positive word-of-mouth.

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When an error or service failure occurs the customer may or may not complain. A customer who doesn’t complain •islesslikelytocomebacktotheserviceprovider.Therefore,serviceproviderhastomakespecificeffortstoencourage customers to voice their concerns. Complaints provide feedback on how the service provider is performing in the market place. When customers complain, two potentially positive things happen for a service provider.

Theprovidergetsthechancetofixtheproblemandretainthecustomer(servicerecovery) �Complaints can point to areas of the business that need improvement. �

Agoodcomplaintcultureandgoodcomplaintprocessmaywellleadaserviceprovidertoimprovedfinancial•performance.Researcheshaveshownthatexcellentcomplaintmanagementservicerecoverycansignificantlyinfluencecustomersatisfactionandloyalty.Theserviceproviderinordertoimprovesolicitationofcomplaintsshould make it easy for the customers to get in touch.This can be done by providing multiple means of contact like toll free numbers, website, and customer contact •point with service personnel. Further, these should be published on a continuous basis and the customers should be made to feel that their feedback is invaluable and their opinions are wanted. The company should treat a complaint as a gift and the one who complains as a friend.

Complaint managementBill Dee (Convener of the ISO Technical Committee ISO/TC 176 subcommittee) opines that any worthwhile complaints management system has to have certain basis features:

Visibility : Customers should know where to complain•Accessibility: Customer should know how to complain. As a rule of thumb, the more formal the system for •lodging complaints, the less accessible it is to customers.Responsiveness: Complains need to be dealt with quickly. Quicker the complaints are dealt with, higher will •the customer satisfaction be.Customer-focusedserviceprovider‘A’whoadoptscustomerapproach:focusedapproachinvitescomplaints•and indicates commitment to resolving complaints by its words and actions in all fairness.Accountability: Someone in the organisation has to take responsibility for complaint handling.•

8.8 Service Recovery StrategyCompanies which want to build the capability of recovering from service problems should do the following things:

Measurethecosts:Asservicesmarketersyoushouldnotunderestimatetheprofitslostwhenacustomerdeparts•unhappily. This has been highlighted in the earlier part of this unit as well. Once this is appreciated, it will get due attention as it is said that what gets measured is truly what gets managed. The company should also keep in mind the costs the customer has to incur when service failure occurs. Excellent service companies will go that extra mile to cover the costs a failure incurs, or if the inconvenience is so great that the company cannot completely compensate the customer, the tone of the response must signal the company regret.Break the silence: This refers to soliciting and encouraging complaints from the customers. •Anticipate needs for recovery: Service providers can look for the weak links or the areas which tend to be •problem prone and address them in their service recovery strategies.Act fast: Customers who complain want quick responses. The urgent resumption of service and an apology are •oftensufficienttomakeamends.(Butnotalways).Empathisewithcustomers.Statementslike“Icanappreciatehowyoufeel,”You’reright”,“It,shouldn’thavehappenedthatway,”allconveyempathyforthecustomer.Also,symbolicatonementsshouldbemade.Itcanbemoney,flowers,a‘sorry’note,freedessertbyarestaurant,freeupgrade in airlines etc. The speedy response to complaints /service failures requires appropriate system and procedures as well as trained and empowered employees.Train and empower employees: The organisation must train the front line people and empower them. Simulated •real life situations can be an effective way to develop recovery skills among employees. The company should empower the front line employees to act and should give them the authority, responsibility and incentives to follow with customer.

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Close the loop: If a customer complaint leads to corrective measure the company should tell the customer about •theimprovement.Evenifsomethingcan’tbefixed,thecompanyshouldexplainittothecustomer.Effectivewayof closing the loop includes making timely telephone calls and letting the customer know that his suggestions might be implemented.

8.9 Service GuaranteesWhen you buy consumer durables like refrigerator, T.V., Washing machine etc. they invariably came with a •product warranty wherein the company agrees to replace or repair the product if something goes wrong. As compared to manufactured products, guarantees in case of services are a more recent phenomenon. Because of the intangible nature of services it was often thought as to what can be guaranteed. However, now more andmoreservicefirmsareofferingserviceguaranteeswhichmaytaketheformofasatisfactionguaranteeorguarantyingspecificaspectofservicedelivery.Abankmayofferaguaranteethatanaccountwillbeopenedoracreditcardwillbeissuedwithinaspecified•numberofworkingdaysotherwiseitwillpaythecustomeraspecifiedamountdependingontheperiodofdelay.A restaurant may offer home delivery within a guaranteed time, say 30 minutes, failing which the customer may begivenspecifiedprice-offs.Ahotelmayofferanunconditionalsatisfactionguarantee.Moreandmoreservicefirmshavestartedtorealisethatagoodguaranteecanactasamarketingtoolforattracting•customers as well as help in retaining customers. It also helps in cultivating and maintaining quality throughout anorganisation.Someofthebenefitsofaneffectiveserviceguaranteearehighlightedbelow:

Implementing a guarantee forces a company to focus on customers. �Offering a guarantee provides employees with a service related goal and facilitates goal alignment between �employees and the organisation. It can also increase employee morale and loyalty.It encourages customers to complain and provides the opportunity to the organisation to make amends, �thereby retaining the customers.Invoking of guarantee by the customer guarantees important and immediate customer feedback. In the �long run, analysing information collected about why guarantees were invoked by customers can provide meaningful information for making improvements in service design and delivery.A well designed service guarantee can lead to increased service quality expectations, lower perceived risk �and increased purchase intent.Service companies have a greater opportunity than manufacturers to differentiate themselves through a �guarantee.

With a guarantee, advertising is more effective, which attracts more customers.

Features of a good service guaranteeAserviceguaranteecantaketheformofanunconditionalguaranteeofsatisfactionorspecificoutcomeguaranteesallowing a company to spell out exactly which elements of the service it wants to stand behind. Unconditional guaranteesarepowerfulandacompany’spromisetomeetallofitscustomer’sexpectations.Specificguarantees,onthe other hand, though smaller in scope, can still be quite powerful. Whatever may be the type of guarantee; there are certain features which make the guarantee effective. Hart summarises them into following main characteristics.

Unconditional:A guarantee should not have “ifs”, “and”, or “buts”. It should make the promise•unconditionally.Easy to understand and communicate: It should be easy to understand for the customers as to what to expect •as well as for the employees as to what to do. The message should be short and memorable and the standard clear.Meaningful: The guarantee should be meaningful in terms of what is being promised (things that customers •care about) as well as in terms of the payout.Easy to invoke and collect: A good guarantee should be easy to invoke. Service marketers should understand •that once poor service has been delivered, easy and quick settlement should be ensured.

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SummaryMassmarketingfosteredgrowththrougheconomiesofscaleandefficienciesofreach,constructsasoldasthe•Industrial Revolution kept relevant by the post-war boom in population and uninterrupted gains in discretionary income.Speedy-computer connections help in the communication among channel members and also have the added •effect of creating a relationship between a buyer and a seller.Atamacrolevel,therecognitionthatmarketinginfluencesawiderangeofareasincludingcustomer,employee,•supply,internal,referral,and`influencer’marketssuchasthegovernmentalandfinancialmarkets.At the micro level, the recognition that the nature of interrelations with customers is changing. The emphasis •is on moving from a transaction focus to a relationship focus.The retailing industry plays an important role in the success of relationship marketing as it serves as the major •link between the supplier and customers. Therefore, it engages, maintains, and enhances the relationship with the ultimate entity of the value chain, which in turn determines the success of all the members of the value chainCustomer Relationship Marketing (CRM) strategies refer to any effort that is actively made by a seller towards •a buyer, and is intended to contribute to the buyer’s customer value above and beyond the core product and/or the service provided.The intense levels of buyer - seller communication will help in increases the probability of discovering behaviours •that generate rewards.Providingcustomerswithtangiblerewardsisoftenreferredtoas`levelonerelationshipmarketing’.Thislevel•of CRM relies primarily on pricing incentives and money savings to secure customers’ loyalty.The organised retailers provide various standardised services to their customers. Large retail formats with high •quality ambience and courteous and well-trained sales staff is the distinguishing features of these retailers.The challenge for a retail unit is to bring three critical areas, namely marketing, customer service, and quality, •into closer alignment and the attempt of CRM is to bring these three areas together.

ReferencesCRM• [pdf] Available at: <http://www.egyankosh.ac.in> [Accessed 11 October 2011].Customer retention• . [pdf] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/2128/1/Unit-10.pdf> [Accessed 11 October 2011].Customer Relationship Marketing• [Online] Available at: <http://www.management-crm.com/customer_relationship_marketing.php> [Accessed 11 October 2011].What is Customer Loyalty?• [Online] Available at: <http://www.customerloyalty.org/> [Accessed 11 October 2011].Customer Relationship Marketing • [Online]Available at: <http://www.zunch.com/zunch/files/Zunch_CRM.pdf> [Accessed 11 October 2011].computershopsite• , 2008. Customer Relationship Marketing. [Video Online] Available at: <http://www.youtube.com/watch?v=SL8BrjjlqiA>. [Accessed 10 October 2011].Cooper, S., 2011.• Customer Relationship Marketing Scott Cooper. [Video Online] Available at: <http://www.youtube.com/watch?v=UerMd70FMwQ> . [Accessed 10 October 2011].j• arroff11., 2009. Best Customer Retention Strategy Customer Loyalty Campaign. [Video Online] Available at: <http://www.youtube.com/watch?v=xCSIkoRKVXA>. [Accessed 10 October 2011].

Recommended ReadingStone, M., Woodcock• , N. & Machtynger.L.,2000. Customer relationship marketing: get to know your customers and win their., 2nd ed. Kogan Page Publishers.Foss, B., 2001.• Successful customer relationship marketing: new thinking, new strategies .Kogan Page Publishers

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Peelen, 2008. • Customer Relationship Management . Pearson Education India, Brink, A. & Berndt, A., 2009. • Relationship Marketing and Customer Relationship Management .Juta and Company Ltd.

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Self AssessmentAta_________ level, therecognition thatmarketing influencesawiderangeofareas includingcustomer,1. employee,supply,internal,referral,and`influencer’marketssuchasthegovernmentalandfinancialmarkets.

macroa. microb. globalc. universald.

At the _________ level, the recognition that the nature of interrelations with customers is changing. The emphasis 2. is on moving from a transaction focus to a relationship focus.

macroa. microb. globalc. universald.

____________ strategies refer to any effort that is actively made by a seller towards a buyer, and is intended to 3. contribute to the buyer’s customer value above and beyond the core product and/or the service provided.

AHTa. CMRb. CRMc. Microd.

_______________ refers to the way in which employees relate to customers as people - cold and impersonal 4. at one end, and warm and personal at the other.

Rewarda. Communicationb. Specialtreatmentbenefitsc. Personalisationd.

____________________enhances thepredictionofbehaviourof theotherpartyandclarifieseachother’s5. roles.

Rewarda. Communicationb. Specialtreatmentbenefitsc. Personalisationd.

___________ should be designed to promote long-term behaviour and discourage short-term deal-seeking 6. behaviour.

Rewarda. Communicationb. Specialtreatmentbenefitsc. Personalisationd.

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_____________,operateinfixedpoint-of-salelocations,locatedanddesignedtoattractahighvolumeofwalk-7. in customers.

In-store retailersa. Non store retailersb. Organised retailersc. Unorganised retailersd.

__________reachouttothecustomersattheirhomesoroffices.8. In-store retailersa. Non store retailersb. Organised retailersc. Unorganised retailersd.

_________________ have a wide range of merchandise stocked with them so that the customers can enjoy a 9. wider choice.

In-store retailersa. Non store retailersb. Organised retailersc. Unorganised retailersd.

The ________________ in India, comprise of the small independent stores located in neighbourhood centres 10. and central business districts of a city.

in-store retailersa. non store retailersb. organised retailersc. unorganised retailersd.

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Case Study I

Training for Sales Force

Few years ago, ABC Company developed a training strategy for training its global sales force. An important feature of the strategy was to create a master training plan for each year. The organisation’s strategic plans, objectives, and functional tactics would drive this plan. Once an initial procedure was designed it was then evaluated and critiqued by the top management, different units, and training council. The input from these stakeholders would be summarised and transferred into a master training plan.

Themajor question thatwas askedby the designers of training programwas, “what results are needed fromsalespeople after the training program is over?” Answer to this question becomes the objective of the training program.

Then training content was designed, videos were made. The videos took 3 to 6 months to produce. Video contains liveproductionplants,client’soffices,partneroffices,suppliers,manufacturer’slocations,andotherlocations.

Videos were used to train sales people in various areas, such as:Market information i.e. about customer profile,market updates, and computer integratedmanufacturing•applications, etcSalesProcessi.e.howtodealinthesituationofconflictswithcustomer,coachingonundesirablebehaviour,•supplement skills developed during live coursesProduct information such as product usage, applications, system description, product description, comparison •with competitor’s products, etc. Policies and procedures, i.e. about sales contests, incentive plans on achieving targets, annual bonuses, winners receiving the best salesperson award to motivate the sales force.

Aroundthousandsofsalespersonsweregettingaspecificvideotraining.Thesalespeopleweregettingtrainingmaterial along with the video. Sales representatives then watch video, follow the directions, and refer to the material if faces any problem. When salespeople feel they have mastered the material, they would take an exam and call a toll-free number to transmit responses to exam.

Salespeople who successfully passed an exam were factored into performance and merit reviews as well as promotional opportunities. Those who couldn’t pass the exam were asked to go through the material and video again before retakingtheexam.Ifthesalespersonfailedanexamagain,thereportingmanagerwasnotified.

Source: <http://traininganddevelopment.naukrihub.com/methods-of-training/video.html>

Questions:

In today’s technological world, is video still the best way to deliver the training?1. AnswerVideo is a good way of showing and telling the trainees about how to perform the tasks. They can present factual and conceptual information with visual illustrations, animations, and graphics. This type of media is portable and can be made available to the trainees anywhere and anytime. It can easily be duplicated and is reusable and portable. Videos can be used by the trainees at their convenience, can save the travel expenses and reduce costs in turn. This method is rated as second best after classroom instruction.

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What is the disadvantage of using Video method as a training tool and how to overcome it? 2. AnswerVideo is a one-way communication system and has a disadvantage of being non interactive. The other disadvantages are as follows:Informationmaynotbespecifictothetrainingbutitmustappealtolargeaudience.•Trainees control the process of learning, which can sometimes lead to leniency on the part of trainees causing •waste of resources, time, and moneyLearning at homes can bring many distractions, which in turn may result that trainee can stop the video anytime •for his personal work.Traineemayalsofast-forwardmanyparts,ifhefindsthevideoboring.•Therefore, evaluating learning becomes very important when this type of training technique is used.Therefore, many times companies use video along with other training methods like Discussion Method. Video is used to enhance the training program.

What role did cost of development play in selection of video delivery system3. ?AnswerDeveloping in-house videos is quite expensive because each component of multimedia must be developed, thendigitised,andintegratedintologicallyflowingpackage.Thecostalsoincludeslabourcost,equipment,etc.Though the method is expensive but per-person cost can be low if the population of the trainee is large enough. Most employees also use VCRs and televisions in their homes as well as in company; therefore the organisation is not required to buy much equipment. But its one disadvantage is that only small group of people can easily see at the same time.

To overcome this disadvantage, videos can also be projected onto large screens with a projector.

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Case Study II

Sales and Distribution Management

Modern Engineering Works LimitedMr Ramesh Chauhan, General Manager of Modern Engineering Works Limited (MEW), Jaipur, recommended a salescontesttoimprovedecliningsalesperformance.Thiswashisresponseto,first-quarterresultsthatsawsalesfall substantially below quota. Mr Chauhan believed that a sales contest would, among other things, provide the incentive to get sales up to or beyond territorial quotas:

MEW distributed a complete line of electrical motors, pumps, ports, switch-gear and accessories in the state of Rajasthan. Itssales forceofsixtypersonsoperatedoutof tenbranchoffices locatedatJaipur,Ajmer,Jodhpur,Bikaner, Udaipur, Sriganganagar, Alwar, Bharatpur, Kota and Pali, in Rajasthan.

The sales force’s compensation plan consisted of a base salary and a bonus. The bonus was based upon the territorial quota, which was set by the general manager, in consultation with the branch sales manager. Mr Chauhan proposed a sales contest which would, in his opinion, motivate sales personnel to achieve their quotas.

The details of the contest were as under:The duration of the contest would be a quarter, i.e., 13 weeks.a. There would be a weekly sales volume quota for each salesperson determined by the general manager and b. respective branch manager.Each of the ten branches would also have a branch sales volume quota for the quarter.c. A cash bonus of Rs 500 each week would go to the sales person exceeding his/her quota by the greatest d. percentage. Mr Chauhan wanted to use total sales volume instead of percentage but settled for the percentage eventually.Each sales person who achieves the quarter-quota would get a bonus of Rs 1000.e. A cash bonus of Rs 2000 would be paid to the sales person exceeding his/ her quarterly sales quota by the f. greatest percentage. Bonus of Rs 1000, Rs 750 and Rs 500 would go to sales persons in second, third and fourth places respectively.In the competition amongst branches, the branch exceeding its quota by greatest percentage would receive g. Rs 4000 as prize which would be shared equally among the sales persons associated with that branch. Second, third and fourth places in an inter-branch competition would receive Rs 3000, Rs 2000nd Rs 1000 respectively.All sales persons, who achieve their quotas and those who are to receive bonuses at the end of the quarter, h. would be invited for a grand award function at Hotel Rajputana Sheraton, Jaipur, and a leading 5-star hotel. The award would be handed out by Mr Naresh, the Executive Director of MEW.

When Mr Chauhan formally proposed his plan for a sales contest, many objections were raised. All these objections related to usual objections in sales contests like disappointment and frustration amongst sales persons who would not win, disruption in normal pace of work, over aggressiveness amongst some people, the likely fall in sales during the quarter succeeding the contest-quarter and so on.

Mr Chauhan felt that a contest would correct the poor sales performance, raise and kindle a competitive spirit amongst its sales by giving them an opportunity to get their achievements recognised, and raise the morale of the entire sales force.

In spite of a disagreement, Mr Chauhan scheduled a meeting of his staff and branch managers to discuss the advisability of conducting a sales contest.

Source: <http://www.distpub.com/ADL-44-AM1.htm>

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QuestionsShould Modern Engineering Works Limited go ahead with a sales contest to motivate its sales personnel for 1. better sales performance? Support the answer with reason.What is the purpose of organising a contest amongst branches? Should individual performance based contests 2. be run concurrently with group-performance based contests? Support the answer with reason.Suggest some other proposal to motivate sales personnel to achieve sales quota.3.

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Case Study III

Indian Two-wheeler Automotive Industry

Automobile is one of the largest industries in the global market. Being the leader in product and process technologies in the manufacturing sector, it has been recognised as one of the drivers of economic growth. During the last decade, well directed efforts have been made to provide a new look to the automobile policy for realising the sector’s full potential for the economy. Two-wheeler segment is one of the most important components of the automobile sector. The two-wheeler industry has been in existence in India since 1955. It consists of three segments viz. scooters, motorcyclesandmopeds.AccordingtothefigurespublishedbySocietyofIndianAutomobileManufacturers(SIAM),the share of two-wheelers in automobile sector in terms of units sold was about 80 per cent during 2009-10. This highfiguresitselfissuggestiveoftheimportanceofthesector.

Growth perspectiveThe composition of the two-wheeler industry has witnessed major changes in the post-reform period. In 2003, the share of scooters was about 50 per cent of the total 2-wheeler demand in the Indian market. Motorcycle and moped had been experiencing almost equal level of shares in the total number of two-wheelers. In 2009-10, the share of motorcycles increased to 78 Per cent of the total two-wheelers, while the shares of scooters and mopeds declined to the level of 16 and 6 per cent respectively. A clear picture of the motorcycle segment’s gaining importance during this period is exhibited by the Figures 1, 2 and 3 depicting total sales, share and annual growth during the period 2003-04 through 2009-10.

Demand forecastEstimations were based on Panel Regression, which takes into account both time series and cross section variation in data. A panel data of 16 major states over a period of 5 years ending 2009 was used for the estimation of parameters. The models considered a large number of macro-economic, demographic and socio-economic variables to arrive at the best estimations for different two-wheeler segments. The projections have been made at all India and regional levels. Different scenarios have been presented based on different assumptions regarding the demand drivers of the two-wheeler industry. The most likely scenario assumed annual growth rate of Gross Domestic Product (GDP) to be 5.5 per cent during 2003-04 and was anticipated to increase gradually to 6.5 per cent during 2011-12. The all-India and region wise projected growth trends for the motorcycles and scooters are presented in Table 1. The above-mentioned forecast presents a long-term growth for a period of 10 years. The high growth rate in motorcycle segment at present is forecast to stabilise after a certain point beyond which a condition of equilibrium

MotorcyclesScootersMopeds

Uni

ts so

ld

Year2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 20010-11 (till September)

5000000

4500000

4000000

3500000

3000000

2500000

2000000

1500000

1000000

500000

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Shar

e (%

)

Year2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 20010-11 (till September)

90

80

70

60

50

40

30

20

10

0

MotorcyclesScootersMopeds

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 20010-11 (till September)

MotorcyclesScootersMopeds

50

40

30

20

10

0-10

-20

-30

-40

-50

Gro

th R

ate

(%)

will set the growth path.

Table 1 suggests two important dimensions for the two-wheeler industry. The region-wise numbers of motorcycle and scooter suggest the future market for these segments. At the all India level, the demand for motorcycles will be almost 10 times of that of the scooters, the same in the western region will be almost 20 times. It is also evident fromthetablethatmotorcyclewillfinditsmajormarketinthewesternregionofthecountry,whichwillaccountformore than 40 per cent of its total demand. The south and the north-central region will follow this. The demand for scooters will be the maximum in the northern region, which will account for more than 50 per cent of the demand for scooters in 2011-12.

2- Wheeler Segment

RegionsSouth West North – Central East and North- East All India

Motorcycle Scooter

2835 (12.9) 203 (2.6)

4327 (16.8)219 (3.5)

2624 (12.5)602 (2.8)

883 (11.1)99 (2.0)

10669 (14.0)1124 (2.08)

Table 1 Demand Forecast for Motorcycles and Scooters for 2011-12

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ConclusionThere is a large market in semi-urban and rural areas of the country. Any Sales planning for the two-wheeler industry needstoidentifythesemarketswiththehelpofavailablestatisticaltechniques.Potentialmarketscanbeidentifiedas well as prioritised using these techniques with the help of secondary data on socio-economic parameters. For the two-wheeler industry, it is also important to identify the target groups for various categories of Motorcycles and scooters. With the formal introduction of second hand car market by the reputed car manufacturers and easy loan availability for new as well as used cars, the two-wheeler industry needs to upgrade its market information system to capture the new market and to maintain its already existing markets. Availability of easy credit for two-wheelers in rural and smaller urban areas also requires more focussed attention. It is also imperative.

To initiate measures to make the presence of Indian two-wheeler industry felt in the global market. Adequate incentives for promoting exports and setting up of institutional mechanism such as Automobile Export Promotion Council would be of great help for further surge in demand for the Indian two-wheeler industry.

Source: <http://www.it.iitb.ac.in/~deepak/deepak/courses/eco/pdf/demand_sales_forecasting_in_indian_firms.pdf>

Design a sales plan which will help to increase the sales of two wheelers industry in the country.1. What is the major reason for two wheeler industry to upgrade its market information system to maintain its 2. existing market and capturing new market? Explain.Suggest some other solutions to increase the sales of two wheeler industry.3.

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What• is Selling? [ Online ] Available at: <http://www.mbaresearch.org/newlaps/SE_117/SE_117_st_PDF.pdf>.[Accessed 10 October 2011].Zarrabian, M., • Sales Training Effectiveness [Video Online] Available at: <http://www.bnet.com/videos/sales-training-effectiveness/253433>. [Accessed 10 October 2011].

Recommended ReadingBonomo, T. P., 2002.• Customer Service: Aiming for Excellence. Trafford Publishing.Brink, A. & Berndt, A., 2009. • Relationship Marketing and Customer Relationship Management .Juta and Company Ltd.Calvin, R. J., 2004. Sales Management, 2nd ed., McGraw-Hill Professional.•Carter, T., • Contemporary sales force management. Routledge.Churchill, A. G., 2000. • Sales force management, 6th ed, Irwin/McGraw-Hill.Denny, R., 2009.• Successful Selling Skills, Kogan Page Publishers.Ferguson,• 2009. Career Discovery Encyclopedia, 7thed, Infobase Publishing,Foss, B., 2001.• Successful customer relationship marketing: new thinking, new strategies .Kogan Page PublishersHayes, J. & Dredge, F., • Managing customer service, Gower Publishing, Ltd., Leland, K. & Bailey, K., 2006. • Customer service for dummies By Karen Leland, 3rd ed John Wiley & Sons.Manning, • Selling Today: Creating Customer Value, 9/e . Pearson Education IndiaMathur, U. C., 2008. Sales Management, New Age International.•Mentzer, J. T & Moom, A. M., 2005. Sales forecasting management: a demand. 2nd ed., Sage•Peelen, 2008. • Customer Relationship Management . Pearson Education India,Quinlan, K. A., • Customer Service Representative Capstone Pr Inc,Schiffman, S., 2007. • Sales Presentation Techniques: That Really Work 17th ed., Adams Media.Shook,• R. L ., 2001The Perfect Sales Presentation Random House Publishing Group.Spiro, 2003. • Management Of A Sales Force. Tata McGraw-Hill Education.Still, R. R., 2007. Sales Management, Richard R Pearson Education India.•Stone, M., Woodcock• , N. & Machtynger, L., 2000. Customer relationship marketing: get to know your customers and win their., 2nd ed. Kogan Page Publishers.Trehan• , M. & Trehan, R., Advertising and Sales Management, FK PublicationsTyagi, C. L. & Kumar, A., 2004. • Sales Management, Atlantic Publishers & Dist.Vashisht, K., 2006. • A Practical Approach to Sales Management, Atlantic Publishers & Dist.Wallace, F. Thomas., 2002. • Sales forecasting: a new approach: why and how to emphasize teamwork.Welz, G., 2007. • Methods to Identify Success in a Sales Organisation: Sales Controlling., Verlag,

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Self Assessment Answers

Chapter Ia1. b2. c3. d4. a5. d6. a7. c8. d9. a10.

Chapter IIa1. c2. c3. d4. a5. d6. a7. c8. c9. b10.

Chapter IIIa1. b2. c3. d4. a5. b6. a7. c8. a9. b10.

Chapter IVa1. b2. c3. d4. a5. d6. a7. b8. c9. b10.

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Chapter Va1. b2. c3. d4. d5. a6. b7. a8. a9. b10.

Chapter VIa1. b2. a3. c4. d5. a6. b7. a8. c9. a10.

Chapter VIIa1. b2. a3. c4. d5. b6. a7. a8. a9. d10.

Chapter VIIIa1. b2. c3. d4. b5. a6. a7. b8. c9. d10.