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Amit Kumar Sharma Business Analyst B.

Tech, MBA, PHR|SHRM, SAP (HCM)/ BI/BW

Marketing function splits into sales and other functions like market research, advertising, physical distribution Sales Management: The process of planning, directing, and controlling of personal selling, including recruiting, selecting, equipping, assigning, supervising, paying, and motivating the personal sales force.

Its integration with marketing management


HeadMarketing

ManagerPromotion

Manager Market Research

Manager Sales

Manager Market Logistics

Manager Customer Service

Relationship Selling
Transactional Relationship Selling Value added Collaborative / Relationship / Partnering Selling Relationship Selling / /

Varying Sales Responsibilities / Positions / Jobs


Sales Position Brief Description Examples Delivery of products to business Milk, newspapers to households customers or households. Also takes orders. Soft drinks, bread to retail stores. Inside order taker Behind counter in a garment shop Telemarketing salesperson takes Pharma products orders from orders over telephone nursing homes Outside order taker. Also Food, clothing products orders performs other tasks from retailers Provide information, build Medical reps. in pharma industry goodwill, introduce new products Technical information, assistance Steel, Chemical industries

Delivery salesperson

Order taker (Response selling)

Sales support Missionary selling Technical selling

Order-getter (Creative, Problem- Getting orders from existing and Automobiles, refrigerators, solving, Consultative selling) new household consumers insurance policies Getting orders from business Software and business solutions customers, by solving their business and technology problems

The only function / department in a company that generates revenue / income The financial results of a firm depend on the performance of the sales department / management Many salespeople are among the best paid people in business It is one of the fastest and surest routes to the top management

Some of the important roles of the modern sales manager are:


A member of the strategic management team A member of the corporate team to achieve objectives A team leader, working with salespeople Managing multiple sales / marketing channels Using latest technologies (like CRM) to build superior buyer-seller relationships Continually updating information on changes in marketing environment

People skills include abilities to motivate, lead, communicate, coordinate, teamoriented relationship, and mentoring Managing skills consist of planning, organizing, controlling and decision making Technical skills include training, selling, negotiating, problem-solving, and use of computers

CEO / President V. P. Sales / V. P. Marketing

Top-Level Sales Managers / Leaders

National Sales Manager

Regional / Zonal / Divisional Sales Managers


District / Branch / Area Sales Managers

Middle-Level Sales Managers

First / Lower Level Sales Managers

Sales Trainee / Sales Person / Sales Representative

The main components of planning in a company are objectives, strategies and tactics. Their relationship is shown below
Decide / Set Objectives
Develop Strategies Evolve Tactics / Action Plans

E.G. A company wants to increase sales of electric motors by 15 percent, as one of the sales objectives. (see next slide)

Sales Goals / Objectives

Marketing Strategy

Sales and Distribution Strategy

Tactics / Action plans

Increase sales volume by 15 percent

Enter export markets

Identify the countries Decide distribution channels

Marketing / sales head to get relevant information Negotiate and sign agreements in 3-5 months with intermediaries

Penetrate existing domestic markets

Review and improve salesforce training, motivation and compensation Use effective and efficient channels

Add channels and members Train salespeople in deficient areas Train field salesmanagers in effective supervision Link sales volume quotas to the incentive scheme of the compensation plan

Global perspective Revolution in technology Customer relationship management (CRM) Salesforce diversity Team selling approach Managing multi-channels Ethical and social issues Sales professionalism

Distribution management serves the primary function of ensuring the product available to the consumer within an arms length. Distribution management takes care of the availability and the visibility. It provides time',' place and possession utility to the consumer. Distribution is an integral part of Sales Management. It is the heartbeat of Sales Management

Sales Management Actions / Tasks

Distribution Management Role

Strategy for effective coverage Follow call plan / beat plan of markets and outlets Make customer call productive Use multi-channel approach Strategy for handling customer complaints Prompt action at the customer interface level If the problem persists, involve senior sales and service people

Planning of local advertising and sales promotion

Co-ordination with distribution channels Responsibility of execution with distribution channels Expenses are shared between the company and intermediaries

Own Sales force C&F or Depots Distributors, Dealers, Agents, Stockiest Transporters, Warehouse operators Independent whole sellers in the market Independent retailers in the market

List of markets to be covered in schedule Market Share objective to be achieved Tracking competition Ensuring highest call productivity Market working methods and tool Sales Promotion efforts New Product launches Shelf space maximization Reports and records

Personal selling objectives


Stimulus (Sales Presentation) Buyers decision making process Response (buy or no buy)

If a sales person makes a presentation, the prospect may or may not buy The above buyer behaviour model does not tell us the reasons of buying or not buying To understand the psychological aspects of selling or buying, salespeople should study consumer or buyer behaviour, including buying process and situations

Five stage model for household customers 1. Problem / need recognition

Eight stage model for business buyers 1. Problem / need recognition 2. Characteristics and quantity determination 3. Specification development

2. Information search / collection

4. Supplier search and qualification 5. Obtain and analyse supplier proposals


6. Evaluation and selection of suppliers 7. Selection of purchase order routine 8. Performance feedback and postpurchase evaluation

3. Evaluate alternatives 4. Purchase decision 5. Post purchase behaviour

Household customers Routine decision-making Limited decision-making Extensive decision-making

Business Buyers New task / New purchase Modified rebuy / change in supplier Straight rebuy / Repeat purchase

Buying process and situations differ for household consumers and business buyers. Consumers / Buyers may skip or reverse some stages in buying process. E.G. A consumer buying toothpaste

Sales Knowledge

Marketing Policies

Company knowledge
Product knowledge Customer knowledge Competitor knowledge

Pricing and Payment policies


Product policies Distribution policies Promotional policies

Major reasons for giving above information / knowledge through training programmes to salespeople are: increase their self-confidence Meet customers expectations Increase sales Overcome competition

Personal Selling Process


As a part of selling activities, if salespeople follow the steps or phases shown below, their chances of success are far better.
Prospecting & Qualifying
Preapproach / Precall planning Approach Presentation & Demonstration Overcoming Objections

Follow-up & Service

Trail close / Closing the sale

The sequence of above steps may change to meet the sales situation in hand. Some of the above steps may not be applicable for selling to the trade We now discuss application of above steps to industrial selling

Theories of Selling
Prospecting

It is identifying or finding prospects i.e. prospective or potential customers. Methods of prospecting or sales lead generation are: (1) referrals from existing customers, (2) company sources (website, ads., tradeshow, teleprospecting), (3) external sources (suppliers, intermediaries, trade associations), (4) salespersons networking, (5) industrial directories, (6) cold canvassing

Qualifying

Companies qualify sales leads by contacting them by mail or phone to find their interests (or needs) and financial capacity. Leads are categorized as: Hot, Warm, and Cool

Information gathering about the prospect. Sources of information: the Internet, industrial directories, government publications, intermediaries, etc. Precall planning
Setting call objectives Tentative planning of sales strategy: which products, features and benefits may meet the customer needs

Make an appointment to meet the prospect Make favourable first impression Select an approach technique:
Introductory Customer benefit Product Question Praise The approach takes a few minutes of a call, but it can make or break a sale

There are four components:


Understanding the buyers needs Knowing sales presentation methods / strategies Developing an effective presentation Using demonstration as a tool for selling

We will examine each of the above points

Firms and consumers buy products / services to satisfy needs To understand buyers needs, ask questions and listen In business situations, problem identification and impact questions are important E.G. Have you experienced any problems on quality and delivery from the existing supplies? What impact the quality and delivery problems will have on your costs and customer satisfaction?

Firms have developed different methods / styles / strategies of sales presentation Stimulus response method / canned approach. It is a memorised sales talk or a prepared sales presentation. The sales person talks without knowing the prospects needs. E.G. Used by tele-marketing people Formula method / formulated approach. It is also based on stimulus response thinking that all prospects are similar. The salesperson uses a standard formula AIDA (attention, interest, desire, and action). It is used if time is short and prospects are similar. Shortcomings are: prospects needs are not uncovered and uses same standard formula for different prospects.

Need satisfaction method

Consultative selling solving approach

Interactive sales presentation First find prospects needs, by asking questions and listening Use FAB approach: Features, Advantages, Benefits Effective method, as it focuses on customers

method

Problem-

Salespeople use cross-functional expertise Firms adopt team selling approach It is used by software / consulting firms

Some of the guidelines are:

Plan the sales call Adopt presentation to the situation and person Communicate the benefits of the purchase Present relevant and limited information at a time Use the prospects language Make the presentation convincing give evidence Use technology like multi-media presentation

Sales presentation can be improved by demonstration Demonstration is one of the important selling tools EGs: Test drive of cars; demonstration of industrial products in use Benefits of using demonstration for selling are:

Buyers objections are cleared Improves the buyers purchasing interest Helps to find specific benefits of the prospect The prospect can experience the benefit

Objections take place during presentations / when the order is asked Two types of sales objections:
Psychological / hidden Logical (real or practical)

Methods for handling and overcoming objections: (a) ask questions, (b) turn an objection into a benefit, (c) deny objections tactfully, (d) third-party certificate, (e) compensation

Trial close checks the attitude or opinion of the prospect, before closing the sale (or asking for the order) If the response to trial close question is favourable, then the salesperson should close the sale Some of the techniques used for closing the sale are: (a) alternative-choice, (b) minor points, (c) assumptive, (d) summary-ofbenefits, (e) T-account, (f) special-offer, (g) probability, and (h) negotiation

Necessary for customer satisfaction Successful salespeople follow-up in different ways: For example,
Check order details Follow through delivery schedule Visit when the product is delivered Build long-term relationship Arrange warranty service

Salespeople, particularly in business to business selling, need negotiating skills When to negotiate? (a) When the buyer puts certain conditions for buying to the seller, (b) When agreement between the buyer and the seller is needed on several factors, (c) When the product is customised, (d) When the final price is to be decided How to prepare for negotiation? (a) planning, (b) building relationship, (c) purpose Styles of negotiation (a) I win, you lose, (b) Both of us win (or win-win style), (c) You win, I lose, and (d) Both of us lose

Needed to increase effectiveness of sales force Done by expanding basic sales organization Basis of specialization
Geography Type of product Market Combination of above

Criteria for selection (1) nature of product, (2) sales force abilities, (3) demands of selling job, (4) customer and market facts

Head-Marketing

Marketing Research Manager

General Sales Manager

Promotion Manager

Customer Service Manager

Branch Sales Manager-1

Branch Sales Manager-2

Branch Sales Manager-3

Branch Sales Manager-4

Salespeople

Salespeople

Salespeople

Salespeople

Characteristics: salespeople, assigned geographic areas, are responsible for all selling activities to all customers within assigned areas. Branch sales managers adjust marketing plan to local needs Advantages: Better market coverage and customer service, more control over salesforce, quick response to local conditions & competition Disadvantages: Limited specialisation of marketing tasks. Hence, it is combined with product / market sales organisation

Used when the company has many products and / or brands Two types of product specialisation

(x). Sales organisation with product specialised salesforce (y). Sales organisation with product managers as staff specialists
Head-Marketing

Marketing Research Manager

General Sales Manager

Promotion Manager

Sales Training Manager

Area Sales Managers Product Group A

Area Sales Managers Product Group B

Salespeople Product Gr. A

Salespeople Product Gr. B

Fig. x Sales Organisation with product specialised salesforce

Product Specialisation (Continued)


Head-Marketing

Marketing Research Manager

Promotion Manager

General Sales Manager Area Sales Managers Salespeople

Product Manager Product Gr. A

Product Manager Product Gr. B

In fig. x: Characteristics: Salespeople in each product group sell only the products in that group Advantage: Each product gets specialized attention from the salesforce Disadvantage: Sometimes, more salespeople contact the same customer, resulting in customer dissatisfaction and higher cost In fig. y: Characteristics: Each product manager plans and implements marketing plan, for a product group Advantage: Corrects the problem of duplication calls on a customer by salespeople Disadvantage: Lack of product specialization by salespeople

General Sales Manager

Sales ManagerInternationalMarkets

Sales ManagerCommercial

Sales ManagerGovernment

Sales ManagerConsumer Markets

Area Sales Mgrs International

Area Sales ManagerCommercial

Area Sales ManagerGovernment

Area Sales MgrsConsumer Markets

Sales Executives

Salespeople

Salespeople

Salespeople

Characteristics: Desirable when customers are classified by type, user industry, or channel. Salespeople carry out all activities for all

products only for specific customer groups

Advantages: Meets needs of specific customer groups, implements customer-centred philosophy of the company Disadvantages: Geographic duplication, high cost

Director Sales & Marketing

General Manager Sales - North

General Manager Sales - East

General Manager Sales - West

General Manager Sales - South

Regional Sales Mgr. Govt.

Regional Sales Mgr. - Commercial

Regional Sales Mgr. - Dealers

Salespeople

Salespeople

Salespeople

Characteristics: Many firms use some combination of specialisation organisations, called hybrid or combination sales organisation, with a view to minimise disadvantages and maximise advantages of specialisation organisations Figure above shows combination of geographic and market specialisations

Major accounts / customers are called by various names like key accounts, corporate accounts, house accounts They make up a large share of a firms sales volume and profits Firms use the following alternative approaches to deal effectively with them Create a position of major / national account manager Use existing territory sales managers Create a separate division Create a separate salesforce

How many salespeople needed (or salesforce size) to achieve a firms sales and profit objectives is a key decision Methods available to decide optimum salesforce size are as follows:
Workload Sales potential (or breakdown) Incremental

We shall discuss these methods briefly:

Assumption: All salespeople have equal workload Steps involved to calculate salesforce size are: 1) Classify customers as per their sales potential 2) Decide time per sales call and call frequencies for each class of customers 3) Calculate total market workload = (1) x (2) in hours 4) Decide total work time available per salesperson 5) Divide total work time available by different activities per salesperson in hours 6) Calculate total number of salespeople needed
total market workload (3) total selling time available per salesperson (5)

Advantages: simple method, conceptually sound, used for all types of selling situations Disadvantages: Neglects sales productivity & sales force turnover this method, the Sales Manager assumes the productivity of the average sales person. N=Number of salespeople needed, or sales force size
N S (1 T ) P

Workload Method (Continued)

In

Sales Potential / Breakdown Method

S=Annual sales forecast for the company in value (Rs. Million) P=Estimated productivity of the average salesperson in sales (Rs. Million) T=Estimated percentage of annual sales force turnover Advantages: Simple and straight forward Disadvantages: Conceptually weak; lead time needed for a new salesperson to reach average productivity

It is based on marginal analysis theory of economics Basic concept: Net profits will increase when additional salespeople are added, if the incremental sales revenues exceed the incremental costs Merit: Conceptually accurate, as it quantifies relationships between salesforce size, sales, costs, profits Demerit: Can not be used if historical data on sales and costs are not available

It is one of the most challenging and important responsibilities / activities of sales management Salesforce Staffing Process includes following stages: Planning Recruiting Selecting Hiring Socialisation We shall briefly discuss each of the above stages

It consists of three steps: Establish responsibility for staffing process Decide number of salespeople needed Outline the type of salespeople needed Establish responsibility for staffing process Company management decides responsibilities for various stages / activities of staffing process Generally in a medium / large size company, middle and senior levels H.R. and sales managers are responsible Proper coordination needed between sales, marketing, and HR executives

Steps followed by each territory sales manager to plan requirement of sales people: 1) Decide optimum salesforce size (using methods discussed earlier) 2) Add number of promotions, retirements, transfers out, terminations, resignations expected from existing salespeople 3) Subtract expected transfers into the territory and existing salesforce 4) Make a total of new salespersons needed Territory sales managers submit their requirements to national / general sales manager, who calculates the total number of new salespersons to be hired

The steps involved in the process are: Conducting a job analysis Preparing a job description Developing job qualifications / specifications

Conducting a Job Analysis


It is done by a person from sales / H. R. department, or a consultant. It consists of two tasks: (1) Analyse environment in which the salesperson would work E.G. nature of customers, competitors, products. (2) Determine duties and responsibilities of the salesperson. Obtain information from sales managers, customers, etc.

It is a written document developed from the job analysis The detailed job description is a useful tool for recruiting, selecting, training, compensating, and evaluating salespeople Some of the points it generally covers are: Job title, reporting relationship, types of products / services sold, types of customers, duties and responsibilities, location and geographic area to be covered

Recruiting include activities to get individuals who will apply for the job The general purpose of recruitment is to get enough qualified candidates, to enable company select the right persons H.R. and sales managers must update information on government employment regulations Recruiting stage / process includes following activities: Finding the sources of sales recruits Evaluating and selecting recruiting sources Contacting candidates through the selected source

For identifying prospective candidates, firms use internal and external sources. They include: Internal Sources External Sources Advertisements in newspapers and journals / magazines The Internet (job sites) Educational institutions Employment agencies Job fairs Other companies

Employee referral programmes Current employees Promotions and transfers

Recruiting sources are evaluated based on the database built over number of years Evaluating factors are: Performance rating of salespeople, after 2 years working Percentage of salespeople retained, after 2 years working Total cost of recruiting Selecting most effective source of recruiting at least cost For a new company, selection depends on cost Contacting candidates through the selected source is done by H. R. department

Selection process consists of seven major selection steps / tools Companies differ in using selection tools, depending on expenditure budget and time available Major selection tools / steps are: Screening resumes Application blank Initial interview Intensive interview Testing Reference check Physical examination

It is done when the company receives many resumes This step / tool not required, if somebody else like employment agency does initial screening Initial screening of resumes are done by comparing with job specifications

Screening Resumes

Widely used, it is a methodical way of collecting relevant information from the applicant Advantages of using application blank (also called formal application form) are: (1) Easy comparison of many applicants (2) Useful for asking question during interview sessions

Application Blank

Widely used selection tool A good predictor of the candidates performance Initial interviews are used for screening candidates Intensive interviews are conducted to get indepth view of candidates Interview structure / type of interviews: Structured / patterned / guided interviews Unstructured / non-directed / informal interviews Semi-structured interviews Behaviour and performance based interviews Stress interviews Purpose is to decide a candidates fitness for a job

Many firms use tests as a selection tool EG P&G, IBM Purpose of testing: To find whether applicants have traits / characteristics that lead to success in sales job Type of selection tests: Aptitude tests measure ability for selling and learning Intelligence tests find out mental intelligence or intelligence quotient (IQ) Interest tests find out level of interest in a sales career Knowledge tests measure knowledge of products, markets, etc Personality tests find out attitude or traits like empathy, self-confidence Tests must have reliability and validity Tests should be one of the selection tools and not the only tool

They are important due to possibilities of resume frauds and false personal information They are done by letters / e-mails, telephones, or personal visits Instead of candidates references, previous employers / customers to be included for reference checks

Reference Checks

Objective is to find a physical problem that may prevent job performance of an applicant Most companies want their prospective employees to undergo physical examination Increasing number of firms ask applicant to complete the health information form without seeing a medical doctor

Physical Examination

After completing selection process, a list of candidates to be hired is made In hiring stage, two activities are performed: (1) The company making the job offer (2) Persuading the applicant to accept it It is the process through which new salespeople learn values, norms, attitudes, and behaviour of people working in the firm Socialisation process starts before the new salesperson accepts the job offer and continues until the person is assimilated into the company culture Assimilation is the second stage of socialisation process Companies have this process, in order to retain new salespeople

Hiring Stage

Socialisation Stage

Compensation and Motivation of Sales Force

Motivational theories or behavioural concepts that are relevant to motivation of salespeople are: Maslows hierarchy of needs Hertzbergs dual-factor Vrooms expectancy Churchill, Ford, and Walker model of salesforce motivation, shown hereunder:

Motivation

Effort

Performance

Reward

Satisfaction

Sales manager should know each salesperson and understand his / her specific needs For designing or selecting a mix of motivational tools, a compromise between differing needs of customers, salespeople, and the company management becomes necessary Motivational tools are divided into (1) financial, and (2) non-financial. These are shown in the next slide

Financial Financial compensation plan Salary Commission/Incentive Bonus Fringe benefits Combination Sales contests

Non Financial

Promotion Sense of accomplishment Personal growth opportunities Recognition Job security Sales meetings Sales training programmes Job enrichment Supervision Financial compensation is the most widely used tool of motivation, as salespeople give highest value to it

A good compensation plan should consider objectives from the companys and salespeoples viewpoint Objectives of compensation plan from the companys viewpoint To attract, retain, and motivate competent salespeople To control salespeoples activities To be competitive, yet economical: It is difficult to balance these two objectives To be flexible to adapt to new products, changing markets, and differing territory sales potentials

To have both regular and incentive income

Regular income by fixed salary to take care of living expenses


Incentive income for above average performance

To have a simple plan, for easy understanding


This is in conflict with the objective of flexibility To have a fair payment plan

Fair or just payment to all salespeople is ensured by selecting measurable and controllable factors

Designing a new compensation plan or revising an existing plan consists of the following steps:
Examine job descriptions

Set up specific objectives for salespeople


Decide levels of pay / compensation Develop the compensation mix Decide indirect payment plan or fringe benefits Pretest, administer, and evaluate the plan

We shall examine these steps briefly

Examine Job Descriptions

Separate job descriptions are required for different sales positions or jobs E.G. missionary salesperson, senior salesperson, key account executive

Each job description should include responsibilities and key performance standards, to decide how much to pay

Set up Specific Objectives for Salespeople

These are derived from companys sales and marketing objectives


Salespeople should have some control on the objectives E.G. number of sales calls made Objectives should be measurable. E.G. sales volume, selling expenses

It means the average pay or money earned per year (or month) It is important to decide levels of pay for all sales positions It is decided based on the following factors: Levels of pay for similar positions in the industry Levels of pay for comparable jobs in the company Education, experience, and skills required to do sales job Cost of living in different metros and cities Annual average pay levels vary between industries, within the same industry, and sometimes within the company Firms decide a range of average pay, instead of a specific pay Salespeople earn pay depending on their and company performance

Widely used elements of compensation mix are: (1) salaries, (2) commissions, (3) bonuses, (4) fringe benefits (or perquisites) Expense allowances or reimbursements like travel, lodging, etc are not included Basic types of compensation plans are: Straight salary Straight commission Combination of salary, commission, and / or bonus 68 percent companies use combination plan and balance 32 percent firms use straight salary or straight commission We shall briefly examine above compensation plans

Characteristics: 100 percent compensation is salary, which is a fixed component No concern for sales performance or salespersons efforts This plan is suitable for sales trainees, missionary salespeople, and when a company wants to introduce a new product or enter a new territory Advantages: Salespeople get secured income to cover living expenses Salespeople willing to perform non-selling activities like payment collection, report writing Simple to administer Disadvantages: No financial incentive to salespeople for more efforts and better performance. Hence, superior performance may not be achieved May be a burden for new and loss-making firms

Characteristics: It is opposite of straight-salary plan Most popular commission base is sales volume or profitability Commission rate is a percentage of sales or gross profit This plan is generally used by real estate, insurance, and direct-sales (or network marketing) industries Advantages: Strong financial incentive attracts high performance, removes ineffective salespeople and improves results Controls selling costs and requires less supervision Disadvantages: Focus is on sales and not on customer relationship Salespeople may pay less attention to non-selling activities

Characteristics: Combines straight salary & straight commission plan Four types of combination plans used by companies: 1) Salary plus commission: suitable for getting improved sales and customer service 2) Salary plus bonus: a bonus is a lumpsum, single payment, for achieving short-term objectives. This plan is used for rewarding team performance 3) Salary plus commission plus bonus: suitable for increasing sales, controlling salesforce activities, and achieving short-term goals. Also suitable for selling seasonal products like fans 4) Commission plus bonus: Not popular. Used for team selling activities for selling to major customers

Advantages: Flexible to reward and control salesforce activities Security for living costs and incentives for superior performance for salespeople Rewards specific sales performance Different plans for different sales positions / jobs Disadvantages: Complex and difficult to administer May not achieve objectives if not properly planned, implemented and understood Indirect payment plan, also called fringe benefits or perquisites, help in attracting and retaining people, but have now come under government tax in India

Pretesting the new / proposed Compensation Plan: Companies pretest a new (or proposed) plan, before adoption Either it is simulated on a computer, or pretested at one / more branches for 6-12 months It should involve all concerned people Administering the new compensation plan Announce the plan in advance Explain the new plan and reasons for changing the previous plan Outsource administration if plans are changed frequently Evaluating the new compensation plan Find if objectives of the plan are achieved Some companies audit compensation plans

Leading the Salesforce

Leadership is the ability to influence people to achievement of objectives Leadership is necessary for a sales managers effectiveness

Leadership Styles

Transactional leadership equates to supervision relating to day-to-day operations & control, and taskorientation Transformational leadership changes values and attitudes of followers, who perform beyond expectations Situational leadership uses a style that fits the situation

Leadership skills

Leadership skills required by an effective sales manager are: communication, problem-solving, and interpersonal

Supervising is directing and controlling day-to-day activities of salespeople It is a part of leadership Sales managers use a combination of methods to supervise salespeople Methods of supervision are classified into two categories direct and indirect Indirect Supervisory Methods Sales reports Compensation plan Sales analysis Expense accounts

Direct Supervisory Methods Telecommunications Sales meetings Personal contacts Coaching / Mentoring

Sales training process consists of need assessment, designing, executing, evaluating, and reinforcing Methods used for need assessment include observation, survey, performance testing, job description, and audit of salesforce Designing sales training programme require five decisions, called ACMEE: Aims, Content, Methods, Execution, Evaluation Execution of training programme includes preparing time-table, arranging trainers, travel booking, conference hall, teaching aids, etc. Evaluation of training is done to improve design & implementation, and find if expenditure was worthwhile Methods used for reinforcement include refresher training, web-based, and coaching salespeople

Motivation is the effort salesperson makes to perform various activities of sales job Out of the various financial and non-financial tools of motivation, financial compensation is most widely used 68 percent companies use combination compensation plan, and 32 percent use straight salary / commission plans Leadership is necessary for a sales managers effectiveness Leadership styles are transactional, transformational, and situational Leadership skills include communication, problemsolving, and interpersonal Supervising, a part of leadership, is directing & controlling day-to-day activities of salespeople

Companies use sales meetings and conventions as an additional motivating tool to stimulate sales force effort. Regularly held sales meeting provide:
A break from routine A chance to meet senior managers and other sales people It is important tool for motivation Important tool for communication and education

Meeting can be in form of National or Regional Convention Local meetings are held weekly or monthly at the district or at branch offices. Many companies are realizing the benefits of videoconferencing and are using them to inform and motivate the entire sales force of the company at one time.

Sales Training Program


Job enrichment Supervision

Sales contests are short term Incentive programmes that can be effective motivational tool. A sales contest should have a specific purpose, such as:
Increase in Sales Sales of slow-moving products Getting new customers

The design of the sales contest should consider the following points

Each Sales person has an equal opportunity to win Use of Sales Quotas Prizes should be attractive, consisting of cash prizes, merchandize and travel At least 10% of the contest budget should be spent on promotion Care should be taken to ensure that salespersons do not use undesirable methods.

Non Financial Rewards


Promotion Sense of accomplishment Personal Growth opportunities Recognition Job Security

What are Sales Quotas? Sales quotas are sales goals or targets set by a company for its marketing / sales units for a time period Marketing / sales units are regions, branches, territories, salespeople, and intermediaries Generally, company sales budget is broken down to sales quotas for various marketing units Objectives of Sales Quotas To use quotas as performance standards or performance goals To control performance To motivate people by linking quotas to compensation plans To identify strengths and weaknesses of the company

Organisations set many types of sales quotas: (1) sales volume, (2) financial, (3) activity, (4) combination Sales volume quotas For effective control, sales volume quota should be set for the smallest marketing units, such as salesperson, districts / branches, product items / brands Sales volume quotas can be stated in (a) rupees / dollars, (b) units, or (c) points Rupees / dollars sales volume quotas are appropriate when salespeople are required to sell many products

Unit sales volume quotas are suitable when


Salespeople are selling a few products
Prices of the product fluctuate rapidly Price of each product / service is high

Point sales volume quotas are appropriate


when the company wants salespeople to sell products that contribute more to profits

Financial quotas control (a) gross margin or net profits, and (b) expenses of marketing units Gross-margin / Net-profit quotas Calculate gross margin by subtracting cost of goods sold (i.e. cost of manufacturing) from sales volume. Sales managers are not responsible for cost of manufacturing Net profit quotas are generally accepted by sales mangers as it is calculated by subtracting direct selling expenses from the gross margin Expense quotas In many companies, expense quotas are stated as a percentage of sales Expense quotas to be administered with flexibility, to make salespeople cost conscious, allowing reasonable expenses

These are set when salespeople perform both selling and non-selling activities Objective is to direct salespeople to carry out important activities For effective implementation, activity quotas are combined with sales volume and financial quotas E.G. Calling on high potential customers, payment collection from defaulting customers

Used when companies want to control salesforce performance on key selling and non-selling activities Focus on a few types of quotas, to avoid confusing salespeople. An example:
Quota Actual Percent Weight Quota (Importance)
90 3

Type of Quota

Percent Quota x Weight


270

Sales Volume (Rs)

5,00,000 4,50,000

Receivables (days)
New Customers (Nos)

45
04

50
05

89
125 Total

2
1 6

178
125 573

Total point score=573/6=95.5 for a salesperson Typically use points as a common measure to resolve the problem of different measures used by various types of quotas

Several methods are used for establishing sales quotas In practice, companies use more than one of the following methods to increase their confidence in sales quotas Total market estimates Territory potential Past sales experience Executive judgement Salespeoples estimates Compensation plan We shall briefly discuss each of the above methods

1) Estimate next years total market demand, or industry sales forecast, using sales forecasting methods 2) Decide the companys estimated market share for next year 3) Companys next year sales forecast= (1) x (2) 4) Find each territorys percentage share out of the total company sales in the previous year 5) Territory sales quota = (3) x (4)

The Process followed companies is as under:

by

established

1) 2)

3)

4)

The procedure followed by new companies is as under: Estimate next years industry sales forecast or market potential, using sales forecasting methods Estimate multiple factor index (MFI) for each territory, based on factors that influence sales of the product. These factors are given weights corresponding to the degree of sales opportunity. Industry sales forecast in a territory (or territory market potential=(1)x(2) Territory sales quota = (3) x estimated market share of the company in the territory

The process consists of taking past one years sales (or an average of previous 3 to 5 years sales), adding an arbitrary percentage (or a percentage by which the market is expected to grow), and thus setting each territory sales quota The assumption that future sales are related to past sales may not be always correct This method should not be the only method used Past sales should be one of the factors used for deciding sales quotas

Executive Judgement Method


Senior executives use their judgement when the product, territories, and the company are new or very little market information is available Executives predict company sales budgets and also territory sales quotas This method should generally be used along with other methods Some firms ask their salespeople to set their own quotas Many salespersons either set very high or too low sales quotas
Salespeoples Estimate Method

Set realistic quotas Understand problems in setting quotas Ensure salespeople understand quotas By allowing salespeople to participate in the process By continuous feedback to salespeople on their performance compared to quotas Have flexibility in administering quotas Change quotas in cases of major changes in market demand or company strategies Use monthly or quarterly quotas for incentives and annual quotas for performance evaluation Select a few quotas that have relationships with marketing environment and sales situations

Sales Territories

A sales territory consists of existing and potential customers, assigned to a salesperson Most companies allot salespeople to geographic territories, consisting of current & prospective customers

Major Reasons / Benefits of Sales Territories

Increase market / customer coverage Control selling expenses and time Enable better evaluation of salesforce performance Improve customer relationships Increase salesforce effectiveness Improve sales and profit performance

Select a control unit* Find location and potential of present and prospective customers within control units** Decide basic territories by using Build-up method, Or Break-down method *A control unit is a geographical territorial base **Unnecessary & expensive for consumer products

Decide customer call frequencies

Calculate total customer calls in each control


Estimate workload capacity of a salesperson Make tentative territories Develop final territories

unit

Objective is to equalise the workload of


salespeople

Estimate company sales potential for total market Forecast sales potential for each control unit

Estimate sales volume expected from each


salesperson Make tentative territories Develop final territories

Objective is to equalise sales potential of

territories

Assigning Salespeople to Territories Sales Manager should consider two criteria: (A)Relative ability of salespeople Based on key evaluation factors: (1) Product knowledge, (2) market knowledge, (3) past sales performance, (4) communication, (5) selling skills (B) Salespersons Effectiveness in a Territory Decided by comparing social, cultural, and physical characteristics of the salesperson with those of the territory Objective is to match salesperson to the territory

It means: How salesperson should cover the assigned sales territory It includes three tasks for a sales manager:
Planning efficient routes for salespeople
Scheduling salespeoples time Using time-management tools

Routing is a travel plan used by a salesperson for making customer calls in a territory Benefits of or Reasons for routing: Reduction in travel time and cost Improvement in territory coverage Importance of routing depends on the application: Nature of the product Important for FMCG Type of jobs of salespeople Important for driver-cum-salesperson job, but creative selling job needs a flexible route plan

Identify current and prospective customers on a territory map Classify each customer into high, medium, or low sales potential Decide call frequency for each class of customers Build route plan around locations of high potential customers Computerised mathematical models are developed Commonly used routing patterns are:
C 1

Base (B)

B B

C 5

C 4

C 3

C 2

Straight line / Hopscotch

Circular

Clover Leaf

Scheduling is planning a salespersons visit time to customers. It deals with time allocation issue How to allocate salespersons time? Sales manager communicates to salesperson major activities and time allocation for each activity Salesperson records actual time spent on various activities for 2 weeks Sales manager and salesperson discuss and decide how to increase time spent on major activities Companies specify call norms for current customers, based on sales and profit potentials, and also for prospective customers

To help outside salespeople* to manage their time efficiently and productively, the tools available are: High-tech equipment like laptop computers and cellular phones Inside salespeople to provide clerical support, technical support, and for prospecting, and qualifying, as they remain within the company Outside salespeople can then spend more time getting more orders & building relationships with major customers *Outside salespeople travel outside the organisation

Salesforce expenses include travel, meals, lodging, telephone, and customer entertainment Firms have salesforce expense plans to ensure proper spending Objectives / Criteria of effective expense plans are: It should be Fair to the salesperson and company Simple and economical to administer Clear to prevent misunderstanding Reimbursed without much delay Allowing differences in expenses among different territories

Four types of salesforce expense plans Salespeople pay all expenses

Merits: Simple, less cost for company, salespeople get income tax advantage Demerits: Less control on salespeoples activities; non-selling activities not done properly Company pays all expenses / Unlimited payment plan Merits: Good control on salespersons activities; no anxiety for sales people on spending money Demerits: Salespeople spend more and may make money unethically

Company partially pays expenses / Limited payment

plan
Merits: Useful in budget planning; less disputes; better control on salespersons activities

Demerits: Needs more time to set expense limits and administer; Inflexible plan, not liked by good salespeople

Combination plan / Expense-quota plan


Combines limited and unlimited plans Advantages of both plans

Company has control on selling expenses; salespeople have flexibility within total expense

Salesforce or sales management audit is a part of marketing audit A marketing or salesforce audit is a comprehensive,

systematic, diagnostic, and prescriptive tool, to be used


periodically

Purpose.

To

assess

adequacy

of

process,

improve

performance, recommend changes

Evaluation process of salesforce audit. It has 3 stages. Company management should find out: What happened by comparing actual performance with goals Why it happened by identifying factors contributing to negative variance. Difficult and time consuming task

Purposes / objectives / importance of performance evaluation of salespeople are: Mainly to find how salespeople have performed This information is used for other purposes, such as: Improving salespersons performance, by identifying causes of unsatisfactory performance Deciding salary increments and incentive payments Identifying salespeople for promotion Determining training needs Motivating salespeople through recognition and reward Understanding strengths and weaknesses of salespeople

The steps involved in the procedure are:


Set policies on performance evaluation and control Decide bases evaluation of salespersons performance

Establish performance standards


Compare actual performance with the standards Review performance evaluation with salespeople

Decide sales management actions and control

We shall describe above steps briefly

Most companies establish basic policies. Examples are: Frequency of evaluation. Mostly once a year. Who conducts evaluation? Mainly immediate supervisor Assessment techniques to be used. E.G. Management by objectives (MBO), 360-degree feedback Sources of information. Sales analysis, new business reports, lost business reports, call plans, etc Bases of salesforce evaluation. (next slide) Conducting performance review sessions with salespeople

A firm should decide which of the following bases / criteria it would use: (1) result / outcome based, (2) efforts / behavioural based, or (3) both results & efforts based A company selects performance bases or criteria from a list of alternatives, some of them shown below: Quantitative efforts / Qualitative efforts / behavioural bases / criteria behavioural bases / criteria Customer calls No. of calls per day No. of calls per customer Non-selling activities overdue payments collected No. of reports sent Personal skills Selling skills Planning ability Team player Personality & Attitudes Cooperation Enthusiasm

Quantitative results / outcome bases / criteria Sales volume In value / units Percentage of quota by products & segments Accounts / customers New accounts nos. Lost accounts nos.

Performance standards are also called sales goals, targets, sales quotas, sales objectives Performance standards for quantitative results are related to the companys sales volume or market share goals Performance standards for efforts / behavioural criteria are difficult to set For this, companies do time and duty analysis or use executive judgement Performance standards should not be too high or too low After establishing standards, salespeople must be informed

Salespersons actual performance is measured and compared with the performance standards For this, sales managers use different methods or forms: Graphic rating scales Ranking Behaviourally anchored rating scale (BARS) Management by Objectives (MBO) Descriptive statements Companies combine some of the above methods for an effective evaluation system

Performance review / appraisal session is conducted, after evaluation of the salespersons performance Sales manager should first review high / good ratings, and then review other ratings Both should decide objectives / goals and action plan for future period After the review, sales manager should write about performance evaluation & objectives for the future Guidelines for reviewing performance of salespersons First discuss performance standards / criteria / bases Ask the salesperson to review his performance Sales manager presents his views Establish mutual agreement on the performance

Many companies combine this step with the previous step i.e. performance review During performance review meeting with salesperson, sales manager does the following: Identifies the problem areas. E.G. Sales quotas not achieved Finds causes. E.G. less sales calls, poor market coverage, or superior performance of competitors Decides sales management actions E.G. train salesperson, redesign territories, or review companys sales / marketing strategies If a salespersons performance is good, he / she should be rewarded and recognised

Sales managers responsibilities

and

salespeople

have

ethical

Some of the ethical situations are: Relations with the company. EGs. Expense statements, credit for damaged merchandise Relations with customers. EGs. Gifts, false information to get business, customer entertainment

Ethical guidelines A code of ethics developed by the company would be effective if it is enforced by top management

To know what happened, companies analyse their sales, costs, profits, and productivity Effectiveness model of a sales organisation
Sales Analysis Effectiveness of a Sales Organisation Cost Analysis Profitability Analysis Productivity Analysis

We shall examine each of the above factors

Sales analysis of a company can be done in different ways: Different alternatives are National and/or a frameworksales organisation shown in international levels below:
All levels In Sales Organisation Sales Analysis
Regional level Branch /district level Territory level Individual level Total sales of the company By type of products By type of distribution channels By type of customer classifications By size of orders Comparisons with sales quotas / targets Comparisons with previous periods Comparisons with industry / competitors Comparisons within sales organisations Comparisons with sales forecasts

Different Type of Sales

Different Type of Analysis

Sales analysis is done at all levels of the sales organisation Reasons (1) For evaluation and control: sales analysis needed at different organisation levels like regional, district, territory (2) For identifying problems: Use hierarchical sales analysis. E.G. Sales performance at national level below sales volume budget Find which regions have problems in achieving sales quotas Focus sales analysis of branches reporting to problematic regions Do sales analysis of territories under problematic branches Further analysis of problematic territories to be done by talking to salespeople, customers, branch managers Corrective actions can then be taken to improve sales Extend hierarchical sales analysis to different type of sales Out of different type of analysis, comparisons with sales quotas are widely used

Purpose: To measure profitability of companys marketing units such as territories, market segments, products, channels, & customers This information helps to decide which marketing units to be expanded, reduced, or eliminated in future. Procedure State purpose of the analysis Identity major functional (or activity) expenses Convert natural accounting expenses into functional expenses Allocate functional expenses to marketing units Prepare profitability of marketing units, by using full-cost approach, or contribution approach

Purpose of the Analysis

Before starting cost and profitability analysis, it is necessary to know for which marketing units the analysis would be done This helps to classify costs into direct and indirect. E.G. Salespersons salary is direct cost for territory analysis, but indirect cost for analysis of products or segments

Identify Major Functional Expenses

The company should prepare a list of major functions or activities with respect to marketing expenses E.G. Personal selling expenses, order processing expenses, packing and delivery expenses, warehousing and inventory expenses, administration expenses

Natural or traditional expenses are to be converted to functional expenses, for doing marketing cost analysis An example will make this point clear
Total
Personal Selling 20,000,000 10,000,000

Natural / Traditional Expenses


Salaries

Functional Expenses
Adv. and Sales Promotion 4,000,000 Warehousing & Inventory 2,000,000 Administration

4,000,000

Rent Travel
Adv. and Sales Promotion Total

10,000,000 5,000,000
15,000,000

2,500,000 5,000,000
__

1,000,000 __
15,000,000

5,000,000 __
__

1,500,000 __
__

50,000,000

17,500,000

20,000,000

7,000,000

5,500,000

Note: All figures are in Rupees

A better method for allocating costs is activity-based costing (ABC), which allocates costs based on cause of expenses

Functional expenses are allocated to the marketing unit under study, depending on several bases shown below, as examples Function Bases of allocation of expenses

Personal selling

Directly to sales territories Selling time given to each product and market segment Sales calls x average time per call to customers & channels
Circulation of media to sales territories Media space for each product & market segment Equal charges to customers & channels Equal charges for all marketing units

Advertising and sales promotion Administration

Above allocations are done to find marketing costs and profitability of marketing units

This is done by preparing profit & loss statements for the marketing units under study Two approaches are available in allocating marketing costs for profitability analysis: (1) Full-cost, (2) Contribution Full-cost approach: All marketing costs, both direct & indirect, are allocated to the marketing unit Useful for long-term profitability studies of products and market segments Contribution approach: Only direct marketing costs are allocated to the marketing unit Useful for short-term decisions like profitability of branches / regions

Productivity is generally measured by ratio between output & input Some of the productivity ratios in sales management are: Sales per salesperson (used by many companies) Selling expenses per salesperson Sales calls per salesperson Improvement in productivity leads to increase in profitability Some of the methods used by firms to improve productivity Reducing salesforce size Hiring manufacturers reps. or agents on commission basis Using the internet, telemarketing, direct mail to reach customers Increasing sales volume substantially

Corporate social responsibility means distinguishing right from wrong and doing the right Social responsibility is the managements responsibility to take decisions and actions for welfare and interests of society and the company A company has following four responsibilities to its eight stakeholders: Customers, Community, Creditors, Government, Owners, Managers, Employees, and Suppliers, acronym: CCCGOMES Ethical responsibilities. Deal with fairness, equity, impartiality Legal responsibilities. Follow laws and regulations Economic responsibilities. Produce and market goods / services that society wants, and make reasonable profits Voluntary responsibilities. Make social (EG philanthropic) contributions

Laws and regulations by local, state, or central governments have impact on sales management Price discrimination. As per MRTP act, 1969, seller should not discriminate prices among similar buyers (e.g. retailers) Price fixing. Under MRTP act, it is unlawful for suppliers to fix prices Consumer protection. As per Consumer Protection Act, 1986, it is illegal to make false or misleading claims about products / services Bribes. Payment of money or giving gifts to gain a customer is illegal under Indian Contracts Act 1872 and Sale of Goods act, 1930. Sales managers must take responsibility that laws are not violated