Sales Management: An Introduction

• It exclusively refers to the direction of sales force personnel.

• It is the planning , direction and control of personnel selling, including

recruiting, routing, supervising, paying and motivating, as these tasks
apply to the personal sales force.

Scope of Sales Management

Sales managers are responsible for organising the sales effort, both within and
outside their companies.

• Within the company the sales manager builds formal and informal
organisational structures that ensure effective communication not only
inside the sales department but ensures effective relation with other
units.

• Outside the company, sales manager serves as a key contact with

customers and other external publics and is responsible for creating and
maintaining an effective distribution network.

Personal Selling

• It is a highly distinctive form of promotion.

• It is a two way communication involving not only individual but social

behaviour also.

• It aims at bringing the right products to the right customers.

• It is employed for the purpose of creating product awareness,

stimulating interest, developing brand preference, negotiating price etc.

Importance

• In the absence of the availability of all India media many companies find
it expedient to extensively use personal selling to achieve their
promotional objective

• Companies which can not afford a large outlay for advertising on a

regular basis.
• Low level of literacy and lack of adequate customer education regarding
various products, make personal selling a very effective method.

Personal Selling Objective

Qualitative:

• To do the entire promotional job when there are no other elements in

promotional mix.

• To provide service to the existing accounts.

• To search out and obtain new customers .

• To keep customers informed on changes in the product line and other

aspects of marketing.

• To provide technical advice and assistance to customers.

• To handle/ assist training of middlemen’s sales personnel.

Quantitative:

• To capture and retain a certain market share.

• To obtain some number of new accounts of given type.

• To keep personnel selling expenses within a given limit.

• To secure targeted % of certain accounts business.

Situations Conducive for Personal Selling

• Product Situation:

1. When is of a high unit value.

2. When a product is in the introductory state of its lifecycle and requires

creation of core demand.

3. A product that requires personal attention to match specific consumer

needs. (insurance policy)

4. Product that requires demonstration. (indstrl pdt)

5. Product that has no brand loyalty or poor loyalty.

• Market Situation:

1. Company is selling to a small number of large size buyers.

2. A company sells in a small local market or in governmental or industrial

market.

• Company Situations:

1. The company is not in a position to identify and make use of suitable

non-personal communication media.

2. Company can not afford to have a large and regular advertising outlay.

• Consumer Behaviour Situation:

1. Purchase are valuable but infrequent.

2. Consumer needs instant answers to his questions.

3. Consumer requires persuasions and follow-up in the face of competitive

pressure.

 The Selling Process

Prospecting
The selling process begins with prospecting or finding qualified potential
customers.It
involves two major activities
• Identifying Potential Customers or Prospects
• Qualifying them in order to determine whether they are valid prospects
Identifying Prospects
It is not an easy job, especially for a new salesperson. Rejection rate is
quite high.
Sources are:
• Present Customers
• Endless Chain — Satisfied customers are used as source of referrals.
Sales representatives ask current customers for names of friends or
 business associates who might need similar products or services. Then
more referrals are solicited.

• Center of Influence — He is a person with information about other

people or influence over them.
• Spotters— Spotters are usually ‘ Sales trainees’ who help to identify
prospects.
• Cold Calls/ Unsolicited Calls — Knocking on doors

Qualifying Prospects
MAN approach:
• Money- Does the prospect have the money or resources to purchase a
product or service? i.e Ability to Pay
• Authority-Does the prospect have the authority to make commitment?
• Need – Does the prospect need the product or service? Otherwise
Customer will refuse or dissatisfied with the purchase in post purchase
situation.

Preparation
It involves Two steps:
• Pre Approach: Collection of information about the prospects.
• Call Planning : It involves a specific planning sequence.

Presentation
The objective of Presentation is to explain how the product meets the
special needs of
the consumers. Types:
• Fully Automated – It is the most structured approach based on film or
slide presentation.
• Semi- Automated —Sales person reads from brochures and add
comments when necessary.
• Memorized – Here the sales person presents the prepared material
verbally and may initiate few changes.
• Organised – The most popular and the most effective sales presentation
is the organised presentation. Here sales person has complete flexibility
 in verbal communication keeping in mind the company prepared outline
and checklist.

Presentation : Steps
• Approach
1. Introductory approach
2. Product approach
3. Consumer benefit approach
4. Referral approach

• Demonstration: Two factors should be taken into consideration in

preparing an effective demonstration.
1. It should be carefully rehearsed to reduce the possibility of even a minor
malfunction.
2. The demonstration should be designed to give customer ‘hand on’
experience with the product wherever possible.

Handling Objections
All sales person confront sales resistance by a
prospect that postpone, hinder or prevent the
completion of sale.
• Timing: Find out the reason for delay and point out the advantage of
making decision immediately.
• Price: Point out the better quality and other advantages.
• Source: It results from negative feelings, which may be real or imagined,
that the prospect has about the product or company.
• Competition: When the present supplier is satisfactory, Prospects are
unwilling to change. Point out additional benefits the company provides.

Closing
It is the stage to ask for the order from the Prospect.
When to Close?
• Observing Buying Signals i.e Indication that the prospect is ready to buy:
° Verbal buying signal
° Body language, Facial Expressions and Physical Action of the prospect
 How to Close?
• Action Close: Action is taken to complete the sale.
• Gift Close: An incentive is offered for immediate purchase.
• One more Yes Close:Restate the benefits in a series of questions that
may result in positive response by the prospect.
• Direct Close: Directly ask for a decision.

Types of Sales Job

• Delivery Sales Person: Deliver product to the customers as per request-
bread, milk. Timely service and pleasant personality generate more
sales.
• Inside order taker: Retail sales person standing behind a counter. Mainly
follow the order,may give suggestions
• Outside order taker: Call on retailers to supply bread, soap spice.
• Missionary Sales people: Not expected or permitted to solicit an order.
Job is to build goodwill or to educate actual or potential user to provide
service to customers.
• Creative sales person of Tangible products: Prospects may not aware of
their need for the product / how the product will satisfy them.
(Encyclopedia).
• Creative sales person of Intangible products: Insurance, advertising
services, consulting services where benefits can not be demonstrated.
• Direct Sales: Sales directly to the ultimate consumers. Emotional Appeal
is associated. Strong Persuasive ability is needed.
• Consultative Sale:
Product is sold at the higher level of the organization. Costly Product so
low pressure approach by the sales person. Strong knowledge about the
product and patience to discuss the product with several people are
required.

Virtual value chain

The virtual value chain, created by John Sviokla and Jeffrey Rayport, is a business model
describing the dissemination of value-generating information services throughout an
Extended Enterprise. This value chain begins with the content supplied by the provider,
which is then distributed and supported by the information infrastructure; thereupon the
context provider supplies actual customer interaction. It supports the physical value chain of
procurement, manufacturing, distribution and sales of traditional companies.

To illustrate the distinction between the two

value chains consider the following: “when
consumers use answering machines to leave
a message, they are using an object that is
both made and sold in the physical world,
however when they buy electronic
answering services from the phone
company they are using the marketspace—
a virtual realm where products and services
are digital information and are delivered through information-based channels.” (Rayport et al.
1996) There are many businesses that employ both value chains including banks which
provide services to customers in the physical world at their branch offices and virtually
online. The value chain is separated into two separate chains because both the marketplace
(physical) and the marketspace (virtual) need to be managed in different ways to be effective
and efficient (Samuelson 1981). Nonetheless, the linkage between the two is critical for
effective supply chain management.

wheel of retailing
The lifecycle of retailers, moving from an entry position with low prices to gain market
share to eventually moving upscale with higher-quality products aimed at more affluent
consumers. Japanese automobile manufacturers moved along this cycle after entering
the U.S. market with inexpensive vehicles that captured market share and then
gradually moving upscale with higher-priced vehicles that offered higher margins to the
manufacturers.

Channels of Marketing

A marketing channel can be understood as an organized network of agencies and

institutions, which perform activities required to link producers with users to accomplish
the marketing task. Marketing channels are of a dynamic nature as managers constantly
seek to improve or make them better and thereby leverage them as a competitive
advantage. Marketing channels perform various roles which range from filling the gaps
that occur between the production and consumption process, reduction in time and
expenditure of the manufacturer in reaching the customers, aggregating the narrow
product ranges of individual producers to provide the wide product assortment that
customers require, appraising manufacturers from time to time of the requirements of
customers and promoting the products of manufacturers through efficient product
displays and other promotional techniques.

Depending on the number of intermediaries required at each level, the three major
choices of distribution available to producers are: intensive distribution, exclusive
distribution and selective distribution. Besides distribution of products, channel members
also participate in the distribution of services.

Marketing channels perform the function of facilitating the exchange process, alleviating
discrepancies, standardizing transactions, matching buyers and sellers, and providing
customer service.

Designing of the distribution channels deals with those decisions that are associated with
forming a new distribution channel or modifying an existing one. While designing a
channel, marketers need to take into consideration the utility that the channel needs to
serve. The four types of utility that marketing channels can serve include lot size utility,
convenience utility, selection utility and service utility. A firm’s selection of a specific
channel for distribution of its products or services depends on three criteria – economic,
control and adaptive. Management of marketing channels involves several issues such as
channel member selection, their training, motivation and evaluation, modifying channel
arrangement, and legal and ethical issues like dual distribution, exclusive dealing
agreement, refusal to deal, restricted sales territoriesand dealer’s rights.

Channel dynamics involves the study of the impact of environmental forces such as
economic, legal, political, social, technological and competitive forces on marketing
channels. In order to reduce costs, achieve economies of scale, stabilize supplies,
achieve coordination among themselves and overcome conflicts, the various channel
members need to integrate their functions under the directions of a channel leader,
either horizontally or vertically. This gives rise to the horizontal marketing system and
vertical marketing systems. A horizontal marketing system is the process of sharing
resources amongst two or more unrelated businesses at the same level of operations to
attain common benefits. The vertical marketing system (VMS) is a process in which
producers, wholesalers and retailers perform the marketing activities jointly. The various
types of vertical marketing systems are corporate, administered and contractual vertical
marketing system. Contractual vertical marketing systems are again of three types –
retailer-sponsored cooperative organizations, wholesaler sponsored voluntary
organizations and franchise organizations.

Multichannel marketing is where a single firm uses two or more marketing channels to
reach one or more market segments. This process is also known as ‘dual distribution.’
Although additional channels increase the market coverage of the firm, they also result
in greater conflict between the channel members, especially if the members are vying for
the same market segments.

Conflicts arise between marketing channel members when one member of the marketing
channel thinks that another member is preventing or impeding it from achieving its
marketing goals. Channel conflicts can be of three types – vertical, horizontal, and
multichannel conflicts.

Conflicts may arise due to various reasons such as a difference in the aim of producer
and channel members, lack of clearly defined roles and responsibilities and both
manufacturer and channel members fighting for the same market.

The various methods for solving and managing conflicts include negotiation, problem-
solving strategies, persuasive mechanisms, legalistic strategies, and climate
management. Obtaining the cooperation and coordination of the channel members helps
firms leverage their limited resources to achieve organizational objectives through the
combined efforts of the channel members.

Logistics and Wholesaling

Logistics management is one of the major concerns of business firms today. Logistics is
the process of delivering products and services to the desired locations at the required
time. Managers across the globe are developing strategies to leverage the benefits of
effective logistics management. Effective logistics management helps organizations
ensure superior customer service by meeting customer expectations of delivery of
consignment on time with maximum accuracy, and without any damage to the products.

Companies are increasingly outsourcing their distribution processes to specialized firms

in order to reduce the costs involved in distribution as well to increase their focus on
core areas. The cycle time involved in procuring the raw materials from the suppliers has
also been greatly reduced. Market logistic decisions involve decisions regarding order
processing, inventory management, and the transportation process. Inventory
management involves reorder point, order lead time, usage rate, safety stock, EOQ, JIT,
and fixed order interval system.

Warehouses form an important component of logistics. A warehouse is a place, which

holds raw material or finished goods. Normally, warehousing is of two types, storage
warehousing and distribution warehousing. Warehouses perform various functions such
as holding goods in storage, stock mixing, transloading or cross docking, and protecting
the organization from contingencies.

All the business transactions that take place with the intermediaries are called wholesale
transactions. Classification of wholesalers and retailers is done on the basis of who the
purchasers are and not on the amount of purchase that has been made. A simple
method of classifying is, if more than 50 percent of the total sales are made to other
intermediaries, then the seller is termed as a wholesaler, and if more than 50 percent of
the sales are made to the final customers, then the intermediary is called a retailer.
Normally, there are two types of wholesalers, merchant wholesalers and functional
wholesalers. The different market decisions that are to be taken in the wholesaling
process pertain to the target market, price, promotion, and place decisions.

Retailing
Retailing involves selling of products/services to customers for their non-commercial
individual or family use. Normally, retailing is the last stage of the distribution process.
The Indian retail market has seen immense transformation in the post-liberalization era.
With the vast increase in the availability of product varieties and the purchasing power of
consumers, companies achieving economies of scale with superior supply chain
management and a world-class customer service, the Indian retail market is witnessing
tremendous growth.

However, in India, the government is still protecting the retail sector and foreign direct
investment is not allowed. However, once this sector opens up to foreign competition
like other sectors, it will witness substantial changes and the Indian consumer will be the
benefited the most. Generally retailers are classified based on ownership, the extent of
product lines handled, the service vs. goods retail strategy mix, and non-store based
retailing.

Retailing based on ownership is segmented into independent retailers, chain retailership,

leased departments, vertical marketing units, and consumer cooperatives. Based on the
extent of the product lines handled, retailers are categorized as general merchandise
retailers and include specialty stores, department stores, discount stores, supermarkets
and hypermarkets. Non-store retailing involves selling products in ways other than via
conventional retail stores. Non-store retailing can be in the form of direct selling, direct
marketing, and automatic vending.

Franchising is a contractual and legally binding agreement between a franchiser and a

franchisee. A franchiser may be the owner of a trademark or a trade name, a producer
of goods or a service provider and he gives the franchisee the right to do business using
his trademark, trade name, product, or service. There are three major types of
franchises – product distribution franchise, business format franchise, and trade name
franchise. There are advantages and disadvantages of franchising for both the franchiser
as well as the franchisee.
 Strategic issues in retailing involve an overall set of plans that help the retailer
effectively conduct his business. A retail strategy has six major elements. Situation
analysis, setting objectives, identification of target markets, developing an overall
strategy considering the controllable and uncontrollable variables and finally, developing
suitable strategies for control by evaluating the deviations and correcting them to attain
the retail organization’s objectives.

Channel Power
Strong channel partners often wield what’s called channel power and are referred to as
channel leaders, or channel captains. In the past, big manufacturers like Procter & Gamble
and Dell were often channel captains. But that is changing. More often today, big retailers
like Walmart and Target are commanding more channel power. They have millions of
customers and are bombarded with products wholesalers and manufacturers want them to
sell. As a result, these retailers increasingly are able to call the shots. In other words, they get
what they want.

Category killers are in a similar position. Consumers like you are gaining marketing channel
power, too. Regardless of what one manufacturer produces or what a local retailer has
available, you can use the Internet to find whatever product you want at the best price
available and have it delivered when, where, and how you want.

Channel Conflict
A dispute among channel members is called a channel conflict. Channel conflicts are
common. Part of the reason for this is that each channel member has its own goals, which are
unlike those of any other channel member. The relationship among them is not unlike the
relationship between you and your boss (assuming you have a job). Both of you want to serve
your organization’s customers well. However, your goals are different. Your boss might want
you to work on the weekend, but you might not want to because you need to study for a
Monday test.

All channel members want to have low inventory levels but immediate access to more
products. Who should bear the cost of holding the inventory? What if consumers don’t
purchase the products? Can they be returned to other channel members, or is the organization
in possession of the products responsible for disposing of them? Channel members try to
spell out details such as these in their contracts.

No matter how “airtight” their contracts are, there will still be points of contention among
channel members. Channel members are constantly asking their partners, “What have you
done (or not done) for me lately?” Wholesalers and retailers frequently lament that the
manufacturers they work with aren’t doing more to promote their products—for example,
distributing coupons for them, running TV ads, and so forth—so they will move off store
shelves more quickly. Meanwhile, manufacturers want to know why wholesalers aren’t
selling their products faster and why retailers are placing them at the bottom of shelves where
they are hard to see. Apple opened its own retail stores around the country, in part because it
didn’t like how its products were being displayed and sold in other companies’ stores.
Channel conflicts can also occur when manufacturers sell their products online. When they
do, wholesalers and retailers often feel like they are competing for the same customers when
they shouldn’t have to. Likewise, manufacturers often feel slighted when retailers dedicate
more shelf space to their own store brands. Store brands are products retailers produce
themselves or pay manufacturers to produce for them. Dr. Thunder is Walmart’s store-brand
equivalent of Dr. Pepper, for example. Because a retailer doesn’t have to promote its store
brands to get them on its own shelves like a “regular” manufacturer would, store brands are
often priced more cheaply. And some retailers sell their store brands to other retailers,
creating competition for manufacturers.

Vertical versus Horizontal Conflict

The conflicts we’ve described so far are examples of vertical conflict. A vertical conflict is
conflict that occurs between two different types of members in a channel—say a
manufacturer, an agent, a wholesaler, or a retailer. By contrast, a horizontal conflict is
conflict that occurs between organizations of the same type—say, two manufacturers that
each want a powerful wholesaler to carry only its products.

Horizontal conflict can be healthy because it’s competition driven. But it can create
problems, too. In 2005, Walmart experienced a horizontal conflict among its landline
telephone suppliers. The suppliers were in the middle of a price war and cutting the prices to
all the retail stores they sold to. Walmart wasn’t selling any additional phones due to the price
cuts. It was just selling them for less and making less of a profit on them.

Channel leaders like Walmart usually have a great deal of say when it comes to how channel
conflicts are handled, which is to say that they usually get what they want. But even the most
powerful channel leaders strive for cooperation. A manufacturer with channel power still
needs good retailers to sell its products; a retailer with channel power still needs good
suppliers from which to buy products. One member of a channel can’t squeeze all the profits
out of the other channel members and still hope to function well. Moreover, because each of
the channel partners is responsible for promoting a product through its channel, to some
extent they are all in the same boat. Each one of them has a vested interest in promoting the
product, and the success or failure of any one of them can affect that of the others.

Flash back to Walmart and how it managed to solve the conflict among its telephone
suppliers: Because the different brands of landline telephones were so similar, Walmart
decided it could consolidate and use fewer suppliers. It then divided its phone products into
market segments—inexpensive phones with basic functions, midpriced phones with more
features, and high-priced phones with many features. The suppliers chosen were asked to
provide products for one of the three segments. This gave Walmart’s customers the variety
they sought. And because the suppliers selected were able to sell more phones and compete
for different types of customers, they stopped undercutting each other’s prices.[142]
 Achieving Channel Cooperation Ethically
What if you’re not Walmart or a channel member with a great deal of power?
How do you build relationships with channel partners and get them to cooperate
with you? One way is by emphasizing the benefits of working with your firm.
For example, if you are a seller whose product and brand name are in demand,
you want to point out how being one of its “authorized sellers” can boost a
retailer’s store traffic and revenues.

Oftentimes companies produce informational materials and case studies

showing their partners how they can help boost their sales volumes and profits.
Channel partners also want to feel assured that the products coming through the
pipeline are genuine and not knockoffs and that there will be a steady supply of
them. Your goal is to show your channel partners that you understand issues
such as these and help them generate business.

Sometimes the shoe is on the other foot—retailers have to convince the makers
of products to do business with them instead of the other way around.
Beauty.com, an online retailer, is an example. Selling perfumes and cosmetics
online can be difficult because people want to be able to smell and feel the
products like they can at a department store. But Beauty.com has been able to
convince the makers of more than two hundred upscale cosmetic brands that
selling their products on its Web site is a great deal and can increase their
revenues. To reassure sellers that shoppers can get personalized service,
Beauty.com offers the site’s visitors free samples of products and the ability to
chat live online with skin and hair care consultants.

Channel Integration: Vertical and Horizontal Marketing

Systems
Another way to foster cooperation in a channel is to establish a vertical
marketing system. In a vertical marketing system, channel members formally
agree to closely cooperate with one another. (You have probably heard the
saying, “If you can’t beat ’em, join ’em.”) A vertical marketing system can also
be created by one channel member taking over the functions of another
member.

Procter & Gamble (P&G) has traditionally been a manufacturer of household

products, not a retailer of them. But the company’s long-term strategy is to
compete in every personal-care channel, including salons, where the men’s
business is underdeveloped. In 2009, P&G purchased The Art of Shaving, a
seller of pricey men’s shaving products located in upscale shopping malls. P&G
also runs retail boutiques around the globe that sell its prestigious SK-II skin-
care line.

Franchises are another type of vertical marketing system. They are used not
only to lessen channel conflicts but also to penetrate markets. Recall that a
franchise gives a person or group the right to market a company’s goods or
services within a certain territory or location.[147] McDonald’s sells meat, bread,
ice cream, and other products to its franchises, along with the right to own and
operate the stores. And each of the owners of the stores signs a contract with
McDonald’s agreeing to do business in a certain way.

By contrast, in a conventional marketing system the channel members have no

affiliation with one another. All of the members operate independently. If the
sale or the purchase of a product seems like a good deal at the time, an
organization pursues it. But there is no expectation among the channel members
that they have to work with one another in the future.

A horizontal marketing system is one in which two companies at the same

channel level—say, two manufacturers, two wholesalers, or two retailers—
agree to cooperate with another to sell their products or to make the most of
their marketing opportunities. The Internet phone service Skype and the mobile-
phone maker Nokia created a horizontal marketing system by teaming up to put
Skype’s service on Nokia’s phones. Skype hopes it will reach a new market
(mobile phone users) this way. And Nokia hopes to sell its phones to people
who like to use Skype on their personal computers (PCs).

Similarly, Via Technologies, a computer-chip maker that competes with Intel,

has teamed up with a number of Chinese companies with no PC-manufacturing
experience to produce $200 netbooks. Via Technologies predicts that the new,
cheaper netbooks the Chinese companies sell will quickly capture 20 percent of
the market. Of course, the more of them that are sold, the more computer chips
Via Technologies sells.