Introduction to Sales Management

Evolution of Sales Department: -

1. Prior to Industrial Revolution manufacturers were concentrating more on production than selling as the demand was
grater than supply. The reasons for the same were as following;

a) Age-old technology.
b) Lack of skilled workforce.

2. After Industrial Revolution by virtue of improved technology manufacturers were able to produce large quantities of
goods. The earlier situation changed i.e. supply was greater than demand.

3. These necessitated the need for selling & market expansion as the local & nearby markets were not able to absorb the
excess quantity of goods. For market expansion you need to have your own set up which includes land, building,
machinery, workers & capital to raise the same.

4. This led to corporate form of business wherein separate functional departments were established.

Sales Management: -
Definition: -
“Sales Management is the planning, direction, & control of personal selling, including recruiting, selecting, equipping,
assigning, routing, supervising, paying & motivating, as these tasks apply to the personal sales force.”

Objectives of Sales Management

1. Sales volume.
2. Contribution to profit

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 3. Continuing growth
Major functions of Sales Management: -
a) Selection of sales force
b) Training of sales force
c) Motivating the sales force [[

d) Controlling the sales force

Functions of Sales Manager: -

1) Preparation of sales plan & budget

2) Setting sales force objectives
3) Estimating demand & forecast sales
4) Determining the size & kind of sales force
5) Recruiting , selecting & training sales persons
6) Designing sales territories, setting sales quotas & defining performance standards
7) Compensating, motivating & leading the sales force.
8) Conduct sales volume, cost & profit analysis.
9) Evaluating sales force performance & taking corrective actions.

Personal selling

Personal Selling: -

Personal selling is a method of communication, wherein a salesperson communicates on an individual basis with a
prospect.

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 Salesmanship: -

It is an art of successfully persuading prospects or customers to buy products or services form which they can derive
suitable benefits which in turn will increase their total satisfaction.

Setting Personal Selling objectives

Being one of the elements of Promotion Mix the exact role of Personal Selling is determined by Marketing Management
in consultation with Sales Management.

Marketing planners sets personal selling objectives, determines sales related marketing policies, formulates personal
selling strategies & finalises the sales budget.

Types of Personal Selling objectives: -

1) Qualitative objectives
2) Quantitative objectives

Qualitative Objectives: -

Qualitative objectives are generally carried over from one period’s promotional program to the next. On the basis of
company objectives following qualitative objectives may be assigned;

1) To do the entire selling job if there are no other elements of promotion mix.
2) To service existing customers i.e. maintain contacts with present customers, take orders & so on.
3) To search out & obtain new customers.
4) To secure & maintain customers’ co-operation in stocking & promoting the product lines.

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 5) To keep customers informed on changes in the product line & other aspects of marketing strategies.
6) To assist customers in selling the product line
7) To provide technical advice & assistance to customers in case the product is complex in nature & tailor made. E.g.
Personal Computers.
8) To assist with the training of middlemen’s sales personnel.
9) To collect & report market information related to the company’s interests.

Quantitative objectives: -

Quantitative objectives are short term & adjusted from one promotional period to another. Quantitative objectives are either
related or derived from sales volume objective. They are as following;

1) To capture & retain a certain market share.

2) To obtain sales volume in ways that contributes to profitability.
3) To obtain new accounts of given types.
4) To keep personal selling expenses within set limits.

Some important terms that assists in setting sales volume objectives.

• Market potential: - it is an estimation of the maximum sales opportunities present in a particular market segment
which open to all sellers of a good or service during a stated future period.
E.g. Small car segment

• Sales potential: - it is an estimation of maximum sales opportunities present in a particular market segment open to a
specified company during stated future period.

E.g. Maruti Suzuki

• Sales forecast: - It is an estimation of sales in terms of Rupees or Units in a future period under a particular
marketing programme & an assumed set of economic & other factors outside the unit for which the forecast is made.

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Analysing market potential: - following are the steps involved in this process;

1) Market identification: - It includes

• Who buys the product?

• Who uses it?
• Who are the prospective buyers or users?

2) Market motivation: - It includes finding out the motivating factors which led to the buying decisions of existing
customers & potential customers. In simple words it includes finding out answers to following questions

• Why do people buy?

• Why don’t people buy?

Answers to these questions helps in estimating market potential & assists the sales executive in increasing the
effectiveness of promotional programmes.

3) Analysis of market potential: - The third logical step is to analyse the market potential. Generally market potential
cannot be analysed directly, so analysis makes use of market factors (market features or characteristics related to the
product’s demand. E.g. no of males reaching an age where they start shaving.)

Sales Forecasting Methods: -

.
• Jury of Executive Opinion
• Poll of Sales force opinion
• Delphi Technique

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Recruiting & Selecting sales personnel

What is Recruitment?

Recruitment is finding potential job applicants, telling them about the company & getting them to apply. Through this
process the employer tries to find out applicants who are having potential to be a good employee, as the entire Sales
Organisation depends on a successful recruiting approach.

Process of Recruitment: -

Preparation of Job Description & specification

Identification of sources of recruitment & methods of communication

Designing an effective application form & preparing a short list

Interviewing

Selection

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 1) Preparation of Job description & specification: - at this stage following factors should be kept in mind;

• The title of the job

• Duties & responsibilities
• Reporting
• Technical requirements
• Location & geographical area to be covered
• Degree of autonomy

Personal specifications: -

• Physical requirements – appearance, speech

• Attainment – qualifications, experience
• Aptitude & qualities – ability to communicate, self motivation

2) Identification of sources of recruitment: - Major sources of recruitment are as following ;

• Internal source or persons within the company.

• Recruitment agencies
• Educational institutes
• Competitors
• Other industries
• Advertisements
Factors to be considered in evaluating the sources of recruitment: -
• Nature of the product: - E.g.: - highly technical product requires an experienced & knowledgeable
person.
• Nature of the market: - Aware prospects or high level Executives.

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 • Recruiting Budget: -
• Legal Considerations.
3) Inviting applications & short listing.
4) Interviewing.
5) Selection: - The selection process includes following steps;

• Initial screening interviews: - it varies from company to company depending on the size of the
company, the number of sales persons required etc.
Purpose: - to eliminate undesirable recruits. It may start with application form which consists of
details like qualifications, experience, personal interview or test.
• Group discussions
• Final interview
• Reference check.

Developing & conducting Sales Training Programmes: -

* Purpose of Sales Training: - to achieve improved job performance.

Importance of sales training: -

Sales training is necessary for following reasons;

a) High employee turnover ratio.

b) In case of inexperience it helps in achieving improved job performance as it acts as a substitute for or
supplements experience
c) It helps in reducing the rate of employee turnover & in turn helps in cutting down the recruitment & selection
costs

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Building sales training programmes: -

Building sales training programmes requires decision making related to training aims, content, training methods and
execution of training programmes & evaluation procedures.

Defining Training Aims: -

In general, all sales training programmes have the goals like;

1. Improving sales performance
2. Improving productivity of sales persons.
3. Imparting product knowledge
4. Improving communication skills & so on….

In order to operationalise these general aims it needs to be converted into specific aims, which derives from training needs.
Identification of Initial Training Needs: -

While determining the initial training needs following factors needs to be analyzed;

a) Job specifications.: - It helps in identifying the areas where new personnel requires training like;

• Time Management
• Approaches to selling etc.

b) Trainee’s background & experience: - The gap between qualifications in the job specifications & the trainee’s
qualifications decide the nature & amount of training required..

c) Sales related marketing policies: -

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Identification of Continuing Training Needs: -

Determining the specific aims for continuing sales training programme necessitates, identification of specific training needs
of experienced sales personnel which arises due to

1) Changes in sales related marketing policies.

2) Changes in the market condition.

Sales Training Content: -

1) Product knowledge.
2) Sales Techniques.
3) Market
4) Company information.

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 Sales Training Methods: -

Classroom / Conference Training Behavioral Learning Online Training

• Lectures • Role Playing • EPSS
• Demonstrations • Case Studies • IMT
• Group Discussions • Simulation Games • Distance Learning

Sales Training Methods

Absorption Training/ Self Study

On the Job Training
• Audio Cassettes
• Mentoring
• Manuals, Books
• Job Rotation
• CD-ROM

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Motivating Sales Personnel:-

What is Motivation?
• Motivation is nothing but a driving force, which induces a person to put in efforts for achieving the set
targets.
Importance of Motivation: -
• Financial performance depends upon the achievement of sales volume objective.
• Very few sales persons are confident, ambitious & self motivated.
• Majority of the sales persons are not adequately motivated, hence they require encouragement & incentives
from the management to achieve the set targets.
Motivational Mix: - Elements of motivational mix are as following;
• Financial rewards/ Compensation.

a) Salary.
b) Commission.
c) Bonus.
d) Fringe benefits/ perquisites.
e) Combinations.
f) Sales Contests.

• Non- financial rewards

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 a) Promotion.
b) Sense of accomplishment.
c) Personal Growth Opportunities.
d) Recognition.
e) Job security etc.

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Designing & administering Compensation Plan:-

The Structure of Sales force Compensation is as follows;

• Financial Compensation: -

a) Direct payment: - It includes Salary, commission & bonus.

b) Indirect payment: - It includes Fringe benefits/ perquisites
c) Combinations: -

• Non- Financial Compensation:-

a) Promotion.
b) Sense of accomplishment.
c) Personal Growth Opportunities.
d) Recognition.
e) Job security etc.

Designing effective Compensation Plan: -

The process of designing Compensation plan includes following steps;

1) Examine Job description.

2) Set up specific objectives.
3) Determine general levels of Compensation.
4) Develop Compensation Mix.
5) Pretest the Compensation Plan.
6) Administer the Compensation Plan.
7) Evaluate the Compensation Plan.

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Developing & Managing Sales Evaluation Programme: -
Objectives of Sales force Evaluation & Control –

• To determine how they have performed?

• To manage sales force in an effective way by using the outcome of their performance review.

Benefits of Sales performance review: -

• It helps in improving sales person’s performance by identifying the causes of unsatisfactory performance.
• It helps in decision making in regard to increments, incentives & attrition etc.
• It helps in identifying the salespeople who deserve promotion by virtue of their performance.
• It helps in determining the training needs of individual salespersons & the entire sales force.

Procedure for evaluating & controlling sales force performance: -

1) Set policies on performance evaluation & control: - In this stage the Management establishes the basic
policies regarding –

a) Frequency of evaluation: - E.g. yearly, half yearly, quarterly, monthly & weekly etc.
b) Evaluating Authority: - Who will evaluate the performance?
c) Management by Objectives: -
d) Sources of information: - like reports, supervisory calls, customer letters & complaints/ feedback.

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 2) Decide the bases of salespersons’ performance evaluation: -

1) Result based viewpoint.

2) Criteria based view point

3) Establish performance standards.

4) Recording actual performance.

5) Compare actual performance with standards.

6) Review performance evaluation with sales people: - The Sales Manager conducts a review session with
every salesperson on a predetermined day, date & time. In this session;

• Salesperson reviews his/ her own performance in accordance with the set standards.

• Sales Manager reviews the evaluation of each criterion. & summerises the total performance
evaluation.

• Immediately after the evaluation session is over the Sales Manager communicate to the salesperson
about the performance evaluation results & the objectives for the future period.

7) Take corrective actions.

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Designing & Allocating Sales Efforts

What is a Sales Territory?

• Sales Territory is a territory or a market which is made up of present & potential customers rather
than a geographical area.

E.g.: - Insurance Policy Sale, roping in members for MLM etc.

• But generally a salesperson is assigned to a geographical area consisting of present & potential
customers.

E.g.: - Mumbai, Maharashtra & Goa

Reasons/ benefits of setting up or reviewing Sales Territories: -

1) Better coverage of market/customers: -

• A well designed Sales territory allows sales persons – i) to spend sufficient time with present &
potential customers which improves market coverage, ii) to win over competitor’s customers

2) Better control on selling expenses of Salespeople: -

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 • By having a well designed Sales Territories the sales persons spend less time in moving from one
place to another, fewer nights away from home, which in turn leads to reduction in the traveling cost,
lodging & boarding expenses

3) Better evaluation of Sales force: -

4) It helps in improving Customer Relations: -

5) It helps in increasing Sales force effectiveness:-

Procedure for designing Sales Territories:-

1) Select a Control Unit: - This is the first step in the designing of sales territory which is used for
territory analysis. Commonly used Control Units are States, Metros, Cities and Districts etc.
2) Find location & potential of customers: - The next step is to find location & sales potential of present
& prospective customers in each control unit.
3) Decide basic territories by using either Build up method or Break down method

• Build up Method: - This method helps in matching/ equalizing the work load of
salespeople with Sales Territory. Generally it is used by manufacturers of consumer
products & services who want intensive distribution.

a) Decide call frequency

b) Calculate total number of calls in each control unit.
c) Estimate workload capacity of a Salesperson.

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 d) Make tentative territories.
e) Develop final territories.

District X District Y This can be

1 2 3 4 5 6 explained with
Customer Call frequency /
No. of No. of No. of No. of the help of an
Type month example of
Customers calls/year Customers calls/year
A 4 3 144 4 192 call frequency
& customer
B 2 7 168 8 192
visits;
1 20 240 28 336
C
Total 30 552 40 720

A – High Sales & profit potential Customers

B – Moderate Sales & profit potential Customers
C – Low Sales & profit potential Customers

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District X: - Number of Calls per Year = Column 2 * Column 3 * 12

District Y: - Number of Calls per Year = Column 2 * Column 5 * 12

• Breakdown Method: - This is another method by which Sales Territories can be designed.
Generally it is used by manufacturers of industrial products who want either selective or
exclusive distribution.

a) Estimate company sales potential for total market.

b) Forecast sales potential for each control unit.
c) Estimate sales volume expected from each salesperson.
d) Make tentative territories.
e) Develop final territories.

a) Estimate company sales potential: -

The Sales Manager estimate the sales potential for the total market by using sales forecasting
methods.

b) Forecasting sales potential for each control unit: -

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 In order to forecast or estimate the sales potential the Sales Manager multiplies the total sales potential
of the company by Multiple Factor Buying Index of each control unit.

Multiple Factor Buying Index- It shows the major factors that influence the sales of a product or
service.

E.g. – Population, Personal income, Retail sales etc.

Estimation of sales potential for each control unit is explained with the help of following example.

E.g. – A company manufacturing & marketing premium bathing soaps all over India wants to find out
market potential for this kind of soaps in all major cities including Pune. The major factors that
influence sales of the said product are,

• Population
• Personal Income&
• Retail Sales.

The Sales Manager has given weights to these factors 40%, 30%, 30% respectively. In case of Pune, it has
7% of India’s population, 1% of India’s disposable income & 9 % of India’s retail sales. Then the Multiple
Factor Buying Index Pune would be;

0.40(0.07) + 0.30(0.01) + 0.30(0.09) = 0.058

Based on the premium bathing soap industry forecast of Rs. 55 Crores for the year 2006-2007, the sales
potential for Pune would be 0.058 % of Rs. 55 Crores, i.e. Rs. 3.19 Crores for the year 2006-2007.

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c) Estimate the sales volume expected from each salesperson: -

In this stage, the Sales Manager estimates the sales to be generated by individual salespersons in order to
Ensure profitable operation. While doing so, the Sales Manager has to consider factors like cost of goods
Sold & expected profit.

d) Make tentative territories: -

e) Develop final territories: -

Assigning Salespeople to territories: -

After the designing of sales territories, the Sales Manager allocates salespersons to each sales territory.
While doing so the Sales Manager should consider two criteria namely;

1) Relative ability of a Salesperson: - It is based on key factors like, product & market
information, past performance, ability in verbal & written communication & selling
skills.

2) Salesperson’s effectiveness in a territory: - This can be judged by comparing the

salesperson’s social, cultural & physical characteristics with those of the territories

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 E.g. A Salesperson who is born & brought up in urban area will find it difficult to deal
with the customers from rural area. But on the other hand if a sales person who is born &
brought up rural area will find it very comfortable in dealing with the customers from
rural area as he is well versed with the local language & customs of the territory.

Managing territorial coverage: -

After designing of sales territories & allocation of salespersons to different territories the next logical step
is to manage the territorial coverage. It includes following activities;

• Planning of efficient routes for sales people.

• Scheduling salesperson’s time.

Routing: -

It is a travel plan used by salespersons for making customer calls in a territory.

Advantages of routing: -

• Reduction in travel time & cost.

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 • Improved territorial coverage.
• Better communication between Sales Manager & salespersons.

Procedure for setting up a routing plan: -

• Identify present & potential customers on a territory map.

• Classify customers into high, medium or low sales potential customers.
• Decide call frequencies for each class of customers.

Routing Patterns: -

The Routing patterns are as following;

• Straight Line + Hopscotch: - In this type , the sales person starts from office or home base & makes
calls in one direction. This can be combined with Hopscotch pattern wherein a salesperson starts at
the farthest point from home or office base & makes sales calls on the customer way back to home or
office.

Base
C1
111

C4 C3 C2

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 C- Customer

• Circular route pattern: - In Circular route pattern a sales person starts from his base & moves in a
circle, making sales calls ending at home base or office.

Base
• Clover Leaf: - In clover leaf pattern the first route covers a part of the territory, in next trip a
salesperson covers the adjoining circle & continues till the entire territory is covered.

North

West Pune East

South

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Sales Organization: -

What is Organization?

“It is the process of identifying & grouping work to be performed, defining & delegating responsibility,
authority & establishing relationships for the purpose of enabling people to work most effectively, together
in accomplishing objectives.”

Need for sales organization

• Defines lines of authority

A sound sales organization crystallizes the relationships between people in the organization, in
terms of authority responsibility and accountability. In other words Sales Organization clearly
defines the flow of instructions, indicate where responsibility lies & who is accountable to whom.

• Ensures that all necessary activities are assigned and performed

The process of organizing presupposes identification of necessary activities, which have to be

performed to achieve the sales objectives. As companies grow, the tasks performed within the
organizations also multiply. Sales organization ensures that all “necessary” activities are assigned to
specific personnel, and also helps in supervising the performance of all these activities.

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 • Provides insight into avenues of advancement

The personnel in the sales department look at the organizational structures as one of the indications
of the direction in which their future careers may grow. A good use of the organization chart may
be made by the management, in communicating to the subordinates, the possible avenues of
growth. In short the organization chart depicts the normal promotion route to the subordinates.

• Facilitates proper utilization of executives’ time

As operations and activities in the sales department increase in number and complexity, delegation of
authority becomes imperative. A sound organization design allows effective use of specialization so
that executive may spend less time in operations and more on planning.

In other words organization provides a framework within which sales managers & salespersons are able to
discharge their duties efficiently & effectively as it clearly defines which task should be carried out by
whom.

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Basic concepts of sales organization: -
1. Degree of centralization.
2. Degree of specialization.
3. Line & staff positions.
4. Span of control.
Types of Sales Organization
1) Line Sales Organization: -

V.P. Marketing

G.M. Manager

Sales

Area Sales Area Sales Area Sales Area Sales

Manager 1 Manager 2 Manager 3 Manager 4

Sales people Sales people Sales people Sales people

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+

Advantages of line sales organization: -

1) Clarity in authority & responsibility: -

2) Quick decision making: -
3) Low cost: -

Disadvantages of line sales organization: -

1) Overburdened authorities: -
2) Lack of time for sales planning & analysis: -May lead to inefficiency: -

Applicable for small firms.

2. Functional Sales Organization.

3. Field Sales Organization: -

• Geographic Sales Organization.

• Sales Organization with product specialization.
• Sales Organization with market specialization.
• Hybrid Sales Organization.

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