Sales and Distribution Management: An Introduction

SALES AND DISTRIBUTION MANAGEMENT

Dr. Rahul Pratap Singh Kaurav

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Session I

SALES MANAGEMENT:

ITS NATURE, REWARDS, AND

RESPONSIBILITIES

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WHAT IS SALES MANAGEMENT?

Sales management is the attainment of sales force goals in an effective and efficient manner through:

• Planning

• Staffing

• Training

• Leading

• Controlling organizational resources3

FIGURE: THE SALES MANAGEMENT PROCESS

Sales Management Functions

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PLANNING

The conscious, systemic process of making decisions about goals and activities that an individual, group, work unit, or organization will pursue in the future and the use of resources needed to attain them.

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STAFFING

Activities undertaken to attract, develop, and maintain effective sales personnel within an organization.

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SALES TRAINING

The effort put forth by an employer to provide the salesperson job-related culture, skills, knowledge, and attitudes that result in improved performance in the selling environment.

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LEADING

The ability to influence other people toward the attainment of objectives.

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CONTROLLING

Monitoring sales personnel’s activities, determining whether the organization is on target toward its goals, and making corrections as necessary.

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Sales Management is the attainment of sales goals in an ethical, efficient, and effective manner.

SALES PERFORMANCE

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The sales manager is the most important person in a sales organisation. All

activities are based on his functions and responsibilities. The following are

some of the principal duties of a sales manager:

1. Organising sales research, product research, etc.

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

3. Setting and controlling the targets, territories, sales experiences,

distribution expenses, etc.

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

5. Monitoring the company’s sales policies.

Roles of Sales Manager: Duties and Responsibilities

Cont….

In the table, Al Reid gives the steps necessary for getting success in selling:

To yourself To your company To your customers

Increase basic selling skills.

Develop management abilities.

Keep pace with changes, trends and developments in your territory.

Study the latest products, promotion policies and procedures.

Be alert to new sales and merchandising ideas.

Be proud of your association with your company.

Maintain the company standing and standards with all customers.

Inform the headquarters and your supervisors, through established channels, about changes and developments in your territory.

Be prompt in handling records, reports, correspondence, etc.

Work closely with decision-takers and influencers in each account.

Point out the advantages of an association with your company.

Keep accounts current and up-to-date on all company advertising and promotional activities.

Suggest ideas, methods, techniques and tips that can stimulate sales.

Territory Sales Manager’s Job Responsibilities

Cont….

Grow, so that you can assume greater responsibilities as opportunities permit.

Maintain the appearance and goodwill expected of a territory sales manager.

Analyse your weak and strong points and then think about them.

Cut selling costs by economical routing, good use of time, planning and greater awareness of opportunity.

Check demand and movement of products in the territory.

Report activities of the competitors.

Strive to reach the best goals.

Ask for help, when you need it.

Cooperate with other departments of the company.

Inform the customers about the trends in their areas.

Handle complaints effectively and to the complete satisfaction of the complainants.

Suggest the best technique for selling your products to the customers.

Organise presentations to inform and save time.

Make the customers aware of the changes in the company’s policies or procedures.

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

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Functions of Personal Selling

Personal selling is an oral presentation in face to face conversation with one

or more prospective customers for the purpose of making sales. The main

functions of personal selling are as follows:

1. Provide service to customers (Introduce the product, explain the right

use, Convince them etc.)

2. To sell the product

3. Maintain the sales record

4. Executive Function

5. Develop goodwill

6. Achieve sales target

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Changing Face of Personal SellingModern sales approach is based on the following parameters

1. Value Sharing.

2. Relation Building.

3. Role Playing.

4. Changing Approach.

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Benefits of personal selling

1. Availability of expertise

2. Early access to relevant market information

3. Availability to be flexible regarding processes, timing

4. Faster, shorter contracts

5. Economies of information sharing

6. Lower cost of selling

7. Knowledge of other uses or applications

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Steps in Personal Selling

Successful personal selling calls for an integrated

approach devised from the experience of the sales

personnel. The approach comprises the steps as shown in

the figure here. Each of these steps are further described

in brief. Steps in Personal Selling

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Prospecting

Prospecting is the process of identifying prospective buyers of the product. A prospect is qualified if he has the authority, need, ability and eligibility to buy. There are different ways to identify prospects. Some of the most frequently used methods are described below: Acquaintance References Cold Calling Centre of Influence Method Personal Observation Method Direct Mail or Telephone Method Company’s Records Newspapers Retailers

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Pre-approachIt emphasises that the salesman should know, after identifying the prospect in the prospecting stage, the prospect’s likes and dislikes, his needs, preferences, habits, nature, behaviour, economic and social status etc.

Significance of Pre-Approach

1. Salesman concentrates only on the prospects and not the suspects.

2. S/He is able to give a sales presentation more efficiently, effectively and with confidence.

3. It does not waste the prospect’s time and energy since the salesman is already aware of the needs and preferences of the prospect.

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Cont….

Approaching

In this stage the prospect and the salesman come in contact with

each other face to face.

The salesman has an opportunity to understand and interact with

the prospect in a better way.

Salesman should put forward his best efforts to make the best use

of this opportunity in getting the attention of the prospect and to

convince him to buy the product.

Getting the attention of the prospect and persuading him to buy

are the two main objectives of a salesman.

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Cont….

Key guidelines for successful approach

Prior Appointment

Timing

Command

Relaxed Atmosphere

Open Mindedness

Courtesies

Effective Presentation

Follow up

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Cont….

Presentation

Quick presentation creates a good impression.

Attractively packaged, decorated and well-organised.

Should explain the product with its features and price

advantage to the customer in simple and easy terms.

Customer be shown the kind of quality that he is looking for.

Helps the salesman to prove the features of the product and

emphasise its genuineness.

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Cont….

Demonstration

Demonstration is an exercise to prove the characteristics of the

product.

It highlights various attributes of the product such as utility,

performance, service and quality.

It is only during the demonstration that the customer gets an

opportunity to verify the facts about the product.

Demonstration is imperative and essential for a prospect to make

a buying decision.

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The Close

This is the last stage of any sales presentation.

The main aim of the close is to convince the prospect to sign

the order form or to place an order immediately rather than in

the future.

It is also important that through proper planning, prospecting,

presentation and demonstration the salesman should try to

capture the attention of the prospect and not let the prospect

change his mind.

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Cont….

Relationship of Salesmanship with Sales Management

and personal Selling

Salesmanship & Personal Selling

1. The ability to quickly develop rapport with their prospective

customers.

2. A desire to truly help their customers.

3. The habit of asking questions to gather information before making a

pitch.

4. Sticking to a consistent, proven sales process.

5. A never ending desire to learn more about how to sell more

effectively.

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FORECASTING MARKET DEMAND

A marketing decision support system (MDSS) is an ongoing, future-oriented structure designed to generate, process, store, and later retrieve information to aid decision making in an organization’s marketing program.

It involves problem-solving technology composed of people, knowledge, software, and hardware “wired” into the sales management process.

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USES OF SALES FORECASTS

A sales forecast is the estimated ` or unit sales for a specific future time period based on - proposed marketing plan - assumed market environment.

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1. A sales forecast becomes a basis for setting and maintaining a production schedule – manufacturing.

2. It determines the quantity and timing of needs for labor, equipment, tools, parts, and raw materials – purchasing, personnel.

3. It influences the amount of borrowed capital needed to finance the production and the necessary cash flow to operate the business – controller.

4. It provides a basis for sales quota assignments to various segments of the sales force – sales management.

5. It is the overall base that determines the company’s business and marketing plans, which are further broken down into specific goals – marketing officer.

A sales forecast is important for at least five reasons:

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M arketing P lan

Sales Fo recasts Sales Fo rce B udget

FIGURE: PLANNING/FORECASTING/BUDGETING SEQUENCE

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THE FORECASTING PROCESS

The forecasting process refers to a series of procedures used to forecast.

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F oreca st O bjective

D eterm ine D ependen t a nd I ndepen den t V a ria bles

D evelop F oreca st P rocedure

S elect F oreca st A na lysis M ethod

T ota l F oreca st P rocedure

G a ther an d A na lyz e D a ta

P resen t A ssu m ptions a bou t D a ta

M ak e a n d F ina liz e F oreca st

E va lua te R esu lts versu s F oreca st

FIGURE: THE FORECASTING PROCESS

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FIGURE 5.3 BASIC STEPS IN BREAKDOWN METHOD OF FORECASTING SALES

G eneral E nv iro n m ent Fo recastI n d ustry Sales F o recast

C o m p an y Sales P o ten tialC o m p an y Sales Fo recast

P ro d uct L in esI n d iv id ual P ro d ucts fo r

Customers-Territories-Regions-Devisions-India-World

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Industry sales forecast, or market potential, is the estimated sales for all sellers.

Company sales potential is the maximum estimated or potential sales the company may reach in a defined time period under given conditions.

The company’s share of the estimated sales for an entire industry is referred to as market share.

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SALES FORECASTING METHODS

• Survey methods are qualitative and include executive opinion, sales force composite, and customer’s intention surveys.

• Mathematical methods are test markets, market factors, trend analysis, and

correlation analysis.

Two categories of sales forecasting methods exist:

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Survey M eth o d s

E xecutiv e O p in io n

U ser’s E x p ectatio n

Sales Fo rce C o m p o site

B u ild - to - O rd er

M ath em atical M eth o d s

T est M arket R egressio n

N aive T ren d

M o v in g A v erage

E x p o n en tial Sm o o th in g

FIGURE: THE MORE POPULAR OF MANY FORECASTING METHODS

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SURVEY FORECASTING METHODS

Four basic survey methods are

• Executive Opinion• Sales Force Composite• User’s Expectations• Build-to-Order

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Executive Opinion

1. By one seasoned individual (usually in a small company).

2. By a group of individuals, sometimes called a “jury of executive opinion.”

Executive forecasting is done in two ways:

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Delphi Method

Administering a series of questionnaires to panels of experts.

Sales Force Composite

Obtaining the opinions of sales personnel concerning future sales.

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User’s Expectations

Consumer and industrial companies often poll their actual or potential customers.

Build-to-Order

Companies build final products only after firm orders are placed.

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MATHEMATICAL FORECASTING METHODS

Test markets are a popular method of measuring consumer acceptance of new products.

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Time Series Projections

Time series methods use chronologically ordered raw data.

Naïve Method

Next Year’s Sales = This Year’s Sales X This Year’s SalesLast Year’s Sales

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Moving Average

Moving averages are used to allow for marketplace factors changing at different rates and at different times.Regression Analysis

Regression analysis is a statistical method used to incorporate independent factors that are thought to influence sales into the forecasting procedure.

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L inear R elationship

P op ulation (A )

Sale

s

0

C urvilinear R elationship

P op ulation (B )

Sale

s

0

FIGURE: REGRESSION ANALYSIS

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H ave Y ou D eveloped a G ood

Sales F orecasting P rocess?

M arket D ecision Sup p ort System

B reakdow n U se M ultip le F orecasting M ethod s B uild up

FIGURE: QUESTIONS TO ANSWER TO IMPROVE CHANCES OF HITTING THE FORECASTING BULL’S-EYE

Hav

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C ould O utside

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C ould the C omputer

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90%80%70%60%

140%130%120%110%F

O R E C A S T

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TABLE: GUIDE TO SELECT BEST FORECASTING METHOD

FORCASTINGMETHOD TIME SPAN

MATHEMATICALSOPHISTICATION

COMPUTERNEED ACCURACY

Executive Opinion Short to medium Minimal Not essential Limited

Delphi Method Medium to long Minimal Not essential Limited; good in dynamic conditions

Sales Force Composite Short to medium Minimal Not essential Accurate under dynamic conditions

User’s Expectations Short to medium Minimal Not essential Limited

Test Markets Medium Needed Needed Accurate

Naïve Method Present to medium

Minimal Not essential Limited

Moving Average Short to long Minimal Helpful Accurate under stable conditions

Exponential Smoothing Short to medium Minimal Helpful Accurate under stable conditions

Least Squares Short to long Needed Desirable Varies widely

Regression Analysis Short to Medium Needed Essential Accurate if variable relationships stable

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THE SALES MANGAGER’S BUDGET

The sales force budget is the amount of money available or assigned for a definite period, usually one year.

• Planning

• Coordination

• Control

BUDGET

PURPOSES

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TABLE: SALES FORCE OPERATING COSTS

1. Base salaries 4. Special incentives

a. Management 5. Office expenses

b. Salespeople 6. Product samples

2. Commissions 7. Selling aids

3. Other compensation 8. Transportation expenses

a. Social Security 9. Entertainment

b. Retirement plan 10. Travel

c. Stock options  

d. Hospitalization  

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BUDGETS SHOULD BE FLEXIBLE

Sales, costs, prices, or the competition’s marketing efforts are some factors that may be higher or lower than expected.

WHAT IS A SALES TERRITORY?

A sales territory is composed of a group of customers or a geographic area assigned to a salesperson.

WHO IS RESPONSIBLE FOR

TERRITORIAL DEVELOPMENT?

Development of sales territories is usually the responsibility of the sales manager overseeing the larger sales units within the organization.

WHY ESTABLISH SALES TERRITORIES?

• To obtain thorough coverage of the market.• To establish a salesperson’s responsibility.• To evaluate performance.• To improve customer relations.• To reduce sales expense.• To allow better matching of salesperson to customer.• To benefit salespeople and the company.

Why sales territories may not be developed?

• Salespeople may be more motivated if they are not restricted.

• The company may be too small.

• Management may not want to take the time, or have the know-how.

• Personal friendship may be the basis for attracting customers.

FACTORS TO CONSIDER WHEN DESIGNING SALES

TERRITORIES

Sales force objectives may be based on factors such as - contribution to profits, - return on assets, - sales/cost ratios, - market share, or - customer satisfaction.

FIGURE: FACTORS TO CONSIDER WHEN DESIGNING TERRITORIES

S elect B a sic C on tr ol U n i t

A n a lyz e W ork loa d

D eterm in e B a sic T er r itor ies

A ssign to T er ri tories

C u stom er C on ta ct P la n

E va lu a te, R evise i f N eeded

SELECT BASIC CONTROL UNITS

• States• Counties• Cities and zip-code areas• Metropolitan statistical areas• Trading areas• Major/ Key accounts• A combination of two or more factors

ANALYZE SALESPEOPLE’S WORKLOADS

Workload is the quantity of work expected from sales personnel. Three of the main influences on workload involve - the nature of the job, - intensity of market coverage, and - type of products sold.

DETERMINE BASIC TERRITORIES

The breakdown approach uses factors such as sales, population, or number of customers.

Forecasted SalesAverage Sales per SalespersonSales Force Size =

1. Forecast sales and determine sales potentials.

4. Tentatively establish territories.

2. Determine the sales volume needed for each territory.

5. Determine the number of accounts for each territory.

3. Determine the number of territories.

6. Finalize the territories, and draw the boundary lines.

TABLE: SIX STEPS TO CONSIDER WHEN DETERMINING A FIRM’S BASIC TERRITORIES

CUSTOMER CONTACT PLAN

The customer contact plan involves scheduling sales calls and routing a salesperson’s movement around the territory.

Scheduling refers to establishing a fixed time when the salesperson will be at a customer’s place of business.

In theory, strict formal route designs enable the salesperson to:

1. Improve territorial coverage.

2. Minimize wasted time.

3. Establish communication between management and the sales force in terms of the location and activities of individual salespeople.

FIGURE: THREE BASIC ROUTING PATTERNS

B ase cc

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Straigh t- L in e P atternF irst C all

W o rk B ack

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OPEN SALES TERRITORIES

Open sales territories are those left vacant until new salespeople are assigned to them. Vacant territories experience the following:

• Lost sales due to the vacancy.

• Lost sales due to the time needed for the new salesperson to build sales

productivity.

THE SALES TERRITORY IS A BUSINESS

THE RIGHT SALESPERSON PAYS OFF

Sales leakage refers to the lost sales due to both the vacancy and the time required for the new salesperson to produce at average.

WHAT IS A QUOTA?

A quota refers to an expected performance objective.

Quotas are tactical in nature and thus derived from the sales force’s strategic objectives.

WHY ARE QUOTAS IMPORTANT?

• Quotas provide performance targets.• Quotas provide standards.• Quotas provide control.• Quotas provide change of direction.• Quotas are motivational.

TYPES OF QUOTAS

• Sales volume quotas.

• Breakdown total sales volume.• Profit quotas.• Expense quotas.• Activity quotas.• Quota combinations.

Sales volume quotas includes ` or product unit objectives for a specific period of time.

• Individual established and new products.

• Geographic areas based on how the sales organization is designed, which would

include:

• Sales division.

• Sales regions.

• Sales districts.

• Individual sales territories.

• Product lines.

• Gross margin quota determined by subtracting cost of goods sold from

sales volume.

• Net profit quota determined by subtracting cost of goods sold and salespeople’s

direct selling expense from sales volume.

The two types of profit quotas:

Expense quotas are aimed at controlling costs of sales units. Often expenses are related to sales volume or to the compensation plan.

Activity quotas set objectives for job-related duties useful toward reaching salespeople’s performance targets.

Customer satisfaction refers to feelings about any differences between what is expected and actual experiences with the purchase.

METHODS FOR SETTING SALES QUOTAS

• Quotas based on forecasts and potentials.• Quotas based on forecasts only.• Quotas based on past experience.• Quotas based on executive judgments.• Quotas salespeople set.• Quotas related to compensation.

TABLE: LEVELS OF ORGANIZATIONAL SALES PLANNING

LEVEL PURPOSE: WHAT IS PLANNED

WHO (USUALLY) IS INVOLVED

1. Marketing •Organizational goals (increase in market share or penetration, increase in customers, increase in sales dollars and units sold)

Upper management and sales and marketing executives

2. Regional plan •Priorities (which regions, markets, and products to emphasize)

Regional and district sales managers (which input from sales reps)

3. District plan •Dollar allotment (for promotion, advertising, new employees, sales incentives, and so on)

District managers and sales representatives

4. Territorial plan •Goals for number of new customers and for increased business with old customers in each region and territory

Sales representatives

A GOOD OBJECTIVE AND QUOTA PLAN IS

SMART

Specific

Measurable

Attainable

Realistic

Time specific