Sales Management

Retail & Distribution Management

SALES MANAGEMENT:

It has been defined as the management of a firm’s

personal selling function while distribution is the
management of the indirect selling effort i.e.selling
through extra corporate organizations which form
the distribution network of the firm. The sales
management task thus includes analysis, planning,
organizing, directing and controlling of the
company’s sales effort.
 Sales Management
• Sales management, apart, from the management of
personal selling, encompasses marketing activities like
advertising, sales promotion, marketing research,
physical distribution, pricing, merchandising and so on.
Sales management is defined by the
• American Marketing Association (AMA) as: ‘The
planning, direction and control of personal selling,
including recruiting, selecting, equipping, assigning,
routing, supervising, paying and motivating as these
tasks, apply to the personal sales force’.
• Sales volume, contribution to profits and growth are
the three major objectives of the sales function.
 DISTRIBUTION MANAGEMENT

• Distribution (or place) is one of the four elements

of marketing mix. An organization or set of
organizations (go-betweens) involved in the
process of making a product or service available
for use or consumption by a consumer or
business user.
• Distribution Management comprises
management of channel institutions as well as
physical distribution functions.
EXCHANGE PROCESS

• It is the sale and delivery of goods/services

from the manufacturer to the consumer can
be consummated directly i.e. by the firm itself
through its own sales force or indirectly
through a network of middleman such as
wholesalers and retailers.
 Essential tasks need to be performed
in order to consummate successful exchange

• Contact- finding and communicating with prospective buyer

• Prospecting- Bringing together the marketers offering and the
prospective buyer
• Negotiation- Reaching an agreement on price and other terms
of the offer so that ownership and possession can be
transferred.
• Promotion- Of the marketers offerings, and his satisfaction
generating potential
• Physical distribution- Actual transfer of possession
• Collection- Of relevant consumers information and revenue in
exchange of goods or services
 Interdependence of Sales
and Distribution
• All organizations use their own sales force or distribution
network to reach out to their customers.Activities of the
sales organization would have to be coordinated with
channel operations if sales goals have to be effectively
realized.
• The decision of the organization to allocate certain
responsibility in the exchange process to its channel
members would define the scope of responsibility of its own
sales force and thereby would determine the type of
personnel and training required.
 Interdependence of Sales
and Distribution

• Even though, an organization may decide to deal directly

with its wholesaler, semi wholesaler, retailer or
consumer,it is required to decide upon the type of help it
will provide to the first and subsequent level of
intermediaries.
• The choice before an organization to have direct
distribution, indirect distribution or a combination of the
two is of strategic importance and depends upon factors
such as the degree of control, flexibility, costs and financial
requirements etc.The scope of distribution would define
that of the other.
 Interdependence of Sales
and Distribution

• To implement overall marketing strategy, the

manufacturers need the cooperation of distribution outlets
in terms of adequate stock maintenance, in-store displays,
local advertising, point of purchase promotion.Within the
corporation, the sales organization is the initiator as well as
the implementer of these dealer support operations.This
would mean that the sales management has the
responsibility of structuring organizational relationship
within their own department and with interacting
organizational entities.
 What is a marketing channel
Marketing channels are behind every product

Institutions specializing in manufacturing, wholesaling, retailing join forces to

reach the end consumer.

These institutions deliver everything

Books to Mutual Funds
Medical equipments to telephony
Office Suppliers to Toiletries
Milk to Newspapers
The list can go on and on……..
 Marketing Channel Defined
• A set of interdependent organizations involved
in the process of making a product or service
available for use or consumption.
 Importance of Studying Marketing
Channels
• Important asset of marketing strategy
– Differentiator
– Difficult to replicate
• End-user satisfaction
– Overall brand image
• Awareness of channel importance is low
– Opportunity for competitive advantage
• Difficult to create and maintain channel
– Difficult and costly to change
– Right the first time
 Marketing Flows
• Processes flow through the channel
• Done at different points in time by different
channel members
 Marketing Flows
• The Eight Universal Marketing Channel Flows
1. Physical possession
2. Ownership
3. Promotion
4. Negotiation
5. Financing
6. Risking
7. Ordering
8. Payment
• Flow of information
 What is a marketing channel….
Personal Computers:
IBM sold its first PC in the early 1980s through its employee sales force –
direct to the end user.
Questions on merit the high cost of direct distribution
Channel quickly changed to VARs (Value-added retailers)
Dell (founded in 1984) changed the rules of the game – first through
telephone ordering and now over the Internet.
By 1999, Dell surpassed Compaq in the US with over 30 % MS.
Books:
Publishers, Book Wholesalers, Book Retailers
Today it is necessary to operate on-line bookstores
Amazon.com / Books.com / BestBookBuys.com
These developments threaten traditional book shops but provide new
opportunities for shippers like UPS and Fedex
 Basic Definition

“A marketing channel is a set of interdependent organizations involved

in the process of making a product or service available for use or
consumption.”

It is not just one firm doing its best in the market – many entities are involved
– each entity dependent on the other.
It is a process and not an event.

Purpose of the process:

Satisfy the end users in the market.

The goal is the use or consumption of the product or service being sold
It is critical that all channel members focus their attention on the end
consumer – “Happy Customers”
 Definitions
“Channel of distribution is a path traced in the direct or indirect transfer
of the title to a product as it moves from a producer to ultimate
consumers or industrial users”
EW Cundiff & RS Still

“The course taken in the transfer of the title to a commodity constitutes

its channel of distribution. It is the route taken by the title to a product
in its passage from its owner, an agricultural producer, or a
manufacturer, as the case may be, to the last owner, the ultimate
consumer or the business user”.
Beckman and Others

“A channel of distribution or marketing channel is a structure of intra-

company organisation, units and intra-company agents and dealers,
wholesalers and retailers through which a commodity product or service
is marketed”
American Marketing Association
 Viewed as a key strategic asset
$ 70 billion merger in 1998 – Citicorp and Travelers Group – “Citigroup”

Citicorp Travelers
 World’s biggest bank  Focused on insurance, mutual
funds and investment banking.
 World-wide distribution 10300 Brokers

network of branch banks  80000 financial services

insurance agents.
10000 travelers insurance
agents.
 Marketing Channel Decisions

What does the example show:

Marketing channel decisions play a role of strategic importance.

“Financial products “manufactured” in various parts of our

company will be distributed through a broad range of
methods, from the Internet and other technology –based
methods to branch office locations in one hundred
countries around the world to fully individualized, in-home
service.”

Marketing channels and structures have changed over time.

 Why marketing channels are there ?
Demand Side Factors:
Searching – End-users are uncertain about where to find the
products and sellers are uncertain about how to reach the
target end users.

Intermediaries facilitate ……..

If intermediaries are not there how would sellers reach

customers with an unknown brand name.

They are trusted by the end-consumers…..being the first

point of contact.

Intermediaries facilitate on both ends of the channel.

Channel Development and Change
• Demand-side factors • Supply-side factors
 Demand-Side Factors
• Facilitation of search
• Adjustment for assortment discrepancy
– Sorting
– Accumulation
– Allocation (breaking bulk)
– Assorting
 Supply-Side Factors
• Routinization of transactions
– Continuous replenishment programs (CRP)
• Reduction in number of contacts
Manufacturers

Retailers
Manufacturers

Wholesaler

Retailers
 Why marketing channels are there ?

Demand Side Factors:

Sorting Out: breaking down heterogeneous supplies

For example a fruit-seller sorting out oranges by size and
grade.

Accumulation: Similar stocks from a number of sources.

Wholesalers accumulate for retailers and retailers
accumulate for end-consumers.

Allocation: Breaking the bulk. Lorry-loads to case lots etc.

Assorting: Assortment of products for resale in association with

each other.
 Why marketing channels are there ?
Supply Side Factors:

Routinization of Transactions: Ordering, Valuating, Paying for

goods and services.

Electronic Data Interchange (EDI): Standardizing the

management of business documents.

Continuous Replenishment: Neither understocked / Nor

overstocked. Shippers would typically increase frequency
but decrease in size per shipment.
 Why marketing channels are there ?
Reduction in Number of contacts:

Imagine a small village of 20 families……

Their number of transactions.
They draw all their supplies from one Shop:

Grocery
Hardware
Milk
Vegetables
Medicine
Telephony

Number of contacts involve cost. And in this example the next-

door neighbour store is the most cost-effective.
 Why marketing channels are there ?

Manufacturer Manufacturer Manufacturer Manufacturer

Ret.1 Ret.2 Ret.3 Ret.4 Ret.5 Ret.6 Ret.7 Ret.8 Ret.9 Ret.10
 Why marketing channels are there ?

Manufacturer Manufacturer Manufacturer Manufacturer

W/S 1 W/S 2

Ret.1 Ret.2 Ret.3 Ret.4 Ret.5 Ret.6 Ret.7 Ret.8 Ret.9 Ret.10
 Why marketing channels are there ?
Reduction in Number of contacts:

Contact costs may vary by the structure you choose with or without
intermediaries.

Four Manufacturers 40 Contact

reaching ten retailers lines
directly.
Four manufacturers 14 Contact
reaching ten retailers lines
through one
wholesalers
Four manufacturers 28 Contact
reaching ten retailers lines
through two
wholesalers
 Value Network view
Kotler:
Establish channels for different target markets and aim for
efficiency, control and adaptability.

Companies are increasingly taking a value network view –

Supply Chan Management.

But even Supply Chain is a “make-and-sell view”.

Because it starts from raw materials and suppliers’ suppliers
and so on…..

A better term for distribution would be demand chain and

therefore a “sense-and-respond”.

Even this view is challenged with the impact of technology.

 Objectives of Channels of Distribution
1. To ensure availability of products at the point of sale.

2. To build channel member’s loyalty

3. To stimulate channel member to put greater selling

efforts

4. To develop managerial efficiency in channel

organisation

5. To have an efficient and effective distribution system.

 Role of Channels
Major Focus of channel of distribution is DELIVERY.

Issues of Availability
How much available ?

Role of Intermediaries

For efficiency of the process

Arrangement of routes of transactions
Searching the customer
Sorting the customer base
 Marketing Intermediaries
Middlemen:
• Just about anybody acting as an intermediary between the
producer and customer
Agents or Broker:
• Intermediaries with legal authority to market goods and
services
• Agents generally work in continuity
• Brokers may be engaged for a particular deal
• Sometimes agents and brokers tend to work for buyer
rather than seller – should you allow it ? Real Estate brokers
have to satisfy both.
Wholesaler
• Organisations that buy from producers and sell to retailers.
• Bulk Buyers
• Put in effort and investment and expect a return on their
investment.
 Marketing Intermediaries
Retailer:
Last link to the consumer
Sell directly to the final consumer
Either purchase from wholesaler or from the direct channel

Distributor:
General term used for various intermediaries
Perform several functions – inventory management, personal
selling, financing.
Sometimes wholesalers act as distributors.

Dealer:
Another general term that can apply to just about any
intermediary.
 Wholesaler
Establishments that sell to retailers or other merchants but
do not sell insignificant amounts.

Merchant Wholesalers
Independently owned and separate from suppliers.
Take ownership and associated risks.

Agent Wholesalers
Tied up with main wholesaler-distributor of the Company.
Brokers / Commission Merchants / Selling Agents /
Commercial auction companies.

Manufacturers sales branches and offices – Stockists, Stock-

Carrying Points.
 Wholesaler
Full Function Service Wholesalers:
Distributor
They perform all the functions in a given territory for the interest
of the principal.

Limited Function Wholesalers:

Cash and carry
Drop Shippers
 Retailer
The final connection with the customer / consumer -
End-user contact.
• Adds value through time, space which also forms part of the
price that the end-user is paying for.
• Collect products and assort as per consumer preferences.
• Provides information
• Marks prices and pay for gods
• Concludes transaction with the final consumer

Direct coverage relates to reaching the retailers and create a

trade-partnership with them to promote your business.
 Marketing Intermediaries
Value-added resellers (VARs)
• Intermediaries who buy the basic product, add value and
then sell it
• Some do their own labels.

Merchants:
• Assume ownership and may speculate.

Facilitating Agents (C&F)

• Transportation and storage
• Covering the risk (insurance)
• Financial services / Invoicing etc.
 Types of Channels

1. Direct-marketing channel (or Zero Level)

2. Indirect Marketing Channel:

One Level: Producer…..Retailer……Consumer
(White goods)
Two Level: Producer….Distributor….Retailer….Consumer

Three Level:
Producer…Distributor…Wholesaler…Retailer…Consumer.
What is the work of the marketing channel
Producer
 Physical Possession / Ownership
 Promotion
 Negotiation W/S
 Financing
 Risking
Ret.
 Ordering
 Payment
Consumer

Outsourcing: Services – After Sales

Finance by Cars and Real Estate
 Channel Selection Criteria
Since the controls change, it is a complicated process.

The following elements are examined:

Market Factors:
 Customer Preference (Where do they buy ?)
 Organizational Customers (Institutional Buyers)
 Geography (Where is he located ?)
 Competitive Pressures (Replacing your product with theirs)

Product Factors:
 Life Cycle
 Complexity
 Value
 Size & Weight etc.

Personal Factors:
 Financial stability – future requirements
 Succession
 Managerial capabilities.
 Growth of Multichannel Marketing Systems

• A shift from single-market and single-channel

• Proliferation of customer segments and channel possibilities
• Multi-channel helps in
Increased market coverage
Lower cost
More customized selling
• Companies also add channels where existing channels
cannot reach – e.g. selling by phone (impact of technology)
• Companies may also add a channel whose features fit with
the customer requirements e.g. retail malls and watch
show-rooms, banking and insurance counters.
 Channel Members
• Manufacturers
• Intermediaries
– Retailers
– Wholesalers
• End-users
 Channel Members
• Channel formats—combinations of channel
members
– Specialization
• Third-party logistics (3PL)

• Channel captain
• Manufacturer brands
• Private brands
 Segmentation
• Splitting market into groups of end-users
– Similar within groups
– Different between groups
– Based on demands for the outputs of the
marketing channel
• Added value
• Service outputs
 Segmentation
• Example: Segments of book end-users
– Recreational readers
– University students
• Convenience-oriented
• Price-oriented
 Channel Power
• Ability to control other channel members
• Necessary to implement channel design
• May be used to optimize channel to benefit of
all channel members
• May be used to achieve own ends without
regard to other channel members
 Channel Conflict
• Actions of channel members prevent channel
from achieving its goals
• Goal conflict
• Domain conflict
• Perceptual conflict
 Manage/Diffuse Conflict
• Identify sources of conflict
– Poor channel design
– Poor performance
• Take action
– Exercise channel power
 Channel Coordination
• Result of
– Channel designed to meet service output
demands of target end-user segments
– Application of channel power to ensure smooth
implementation of the channel design
• Ongoing process
Insights for Specific Channel Institutions

• Retailers
• Wholesalers
• Logistics firms
• Supply chain issues
• Franchises
The sales management process
Stages and
objectives of the
personal selling
process
Key Account Selling
 Definition of Key Account
What is a Key Account?
• Key Accounts are the 20% of customers who provide
80% of your profits
• Key Accounts are defined as the prospects or existing
customers who have the potential or now fall in the
80/20 category.
• Any customer that is of strategic importance to your
company – loss of it of inability to secure potential
future revenue would cause a significant impact.
ACCOUNTS PROFITS
20%

80%
80%

20%
 80/20 principle
• For all corporations, some form of 80/20 rule
operates.
• e.g. 80% of the firm’s revenues is supplied by 20% of
its customers.
• If this rule, or a close variant (90/10; 75/25),
operates in the firm’s customer environment, the
critical business implication is that these 20% (or
10% or 25%) of customers have an importance to the
firm’s long-run future that exceeds that of the
“average” customer
 Definition of
Key Account Selling
A systematic set of processes in identification &
profiling of key accounts, design and
adaptation of information-based & value-
added selling strategies, profiling own market
positioning for high sustainability of growth in
sales.
• Key account management is a strategy used by suppliers to target
and serve high potential customers with complex needs by
providing them with special treatment in the areas of marketing,
administration and service. In order to receive key account status, a
customer must have high sales potential.

• A second characteristic is that of complex buying behaviour; for

example, large decision-making units with many choice criteria are
often found in dispersed geographical locations. The decision-
making unit may be located in a different functional area. Third, key
account status is more likely to be given to customers willing to
enter into a long-term alliance or partnership.

• Such relationships offer buyers many benefits including reliability of

supply, risk reduction, easier problem solving, better
communications and high levels of service.

• Key accounts that are geographically spread are often called

national accounts.
 What has it to do with 80/20
principle?
• Understand who are your 80/20 customers, their
needs and profile
• Redeployment of sales efforts and resources
• Understand your own ranking, positioning, growth
potential or 80/20 status in your key customers
suppliers profile – seek improvement – adopt
aggressive growth strategy
Product,
Market, and
Geographic
Structures
 Types of Divisional Structures
• Product Structure
– Managers place each distinct product line or
business in its own self-contained division
– Divisional managers have the responsibility for
devising an appropriate business-level strategy
to allow the division to compete effectively in its
industry
 Product Structure
• Allows functional managers to specialize in
one product area
• Division managers become experts in their
area
• Removes need for direct supervision of
division by corporate managers
• Divisional management improves the use of
resources
 Types of Divisional Structures
• Geographic Structure
– Divisions are broken down by geographic location
• Global geographic structure
– Managers locate different divisions in each of the
world regions where the organization operates.
– Generally, occurs when managers are
pursuing a multi-domestic strategy
 Types of Divisional Structures
• Global Product Structure
– Each product division takes responsibility for
deciding where to manufacture its products and
how to market them in foreign countries
worldwide
 Global Geographic and
Global Product Structures
 Types of Divisional Structures
• Market Structure
– Groups divisions according to the particular
kinds of customers they serve
– Allows managers to be responsive to the needs
of their customers and act flexibly in making
decisions in response to customers’ changing
needs
 Matrix Design Structure
• Matrix Structure
– An organizational structure that simultaneously
groups people and resources by function and
product.
• Results in a complex network of superior-
subordinate reporting relationships.
• The structure is very flexible and can respond rapidly
to the need for change.
• Each employee has two bosses (functional manager
and product manager) and possibly cannot satisfy
both.
Matrix Structure
 Product Team Design Structure
• Product Team Structure
– Does away with dual reporting relationships and
two-boss managers
– Functional employees are permanently assigned
to a cross-functional team that is empowered to
bring a new or redesigned product to work
 Product Team Design Structure
• Product Team Structure
– Cross-functional team is composed of a group of
managers from different departments working
together to perform organizational tasks.
Product Team Structure
 Hybrid Structures
• Hybrid Structure
– The structure of a large organization that has
many divisions and simultaneously uses many
different organizational structures
 Sales Organization Concepts

Specialization
The degree to which individuals perform some of the required
tasks to the exclusion of others. Individuals can become
experts on certain tasks, leading to better performance for the
entire organization.

Centralization
The degree two which important decisions and tasks performed
at higher levels in the management hierarchy. Centralized
structures place authority and responsibility at higher
management levels.
 Sales Force Specialization Continuum

Generalists Specialists
Some specialization
All selling activities Certain selling
of selling activities,
and all products to activities for certain
products, and/or
all customers products for certain
customers
customers
 Size of the Salesforce

• How many salespeople needed (or salesforce size) to

achieve a firm’s 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:
 Workload Method

• 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)
 Workload Method (Continued)
• Advantages: simple method, conceptually sound, used for all types of
selling situations
• Disadvantages: Neglects sales productivity & salesforce turnover
Sales Potential / Breakdown Method
• The formula used is: N  PS
(1  T ,) where

N=Number of salespeople needed, or salesforce size

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 salesforce turnover
• Advantages: Simple and straight forward
• Disadvantages: Conceptually weak; lead time needed for a new
salesperson to reach average productivity
 Incremental Method

• 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
 Salesforce Staffing
• 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
 Planning Stage
• 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
 Planning Stage
Decide the number of salespeople needed
• 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
 Outline Type of Salespeople Needed
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.
 Preparing a Job Description

• 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
 Developing Job Qualifications / Specifications
• These are generally based on job description
• Job specifications / qualifications include education, sales
experience, skills, and personality traits
• Many studies done, but no generally accepted job
qualifications for selecting salespeople, due to many types of
sales jobs
• Some methods used for developing job specifications are as
under:
• Study job description. Useful for a new company
• Analyse personal histories of salespersons
• Ask customers
 Recruiting Salesforce
• 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
 Finding the Sources of Sales Recruits
• For identifying prospective candidates, firms use internal and
external sources. They include:

Internal Sources External Sources

• Employee referral
programmes
• Current employees
• Promotions and transfers
• Advertisements in
newspapers and journals /
magazines
• The Internet (job sites)
• Educational institutions
• Employment agencies
• Job fairs
• Other companies
The Recruiting Process
 Variables Which Influence the Forecasting of Sales Force Requirements
Internal and External External Sources Internal Sources
Sources Analysis of sources Analysis of current
l Market conditions such as workforce
l Economic status l Competitors l Abilities
l Demographic conditions l Other industry sources l Skills
l Operational plan l Universities l Talents
l Technological l Colleges l Promotions
development l Employment agencies l Transfers
l Terminations

Forecast of sales Comparison Forecast of External Forecast of Internal

force needed of Supply of Sales Forces Supply of Sales Forces
l Numbers l Numbers l Numbers
l Work experience l Work experience l Work experience
l Abilities l Abilities l Abilities

Reconciliation of any
differences
Preparing The Job Description And Specification
The sales manager should prepare the job description before recruiting the sales force.
The following factors should be included in any job description:

a. Title of the job

b. Duties and responsibilities

c. Reporting methods

d. Technical requirements

e. Territory to be covered

f. Degree of autonomy
Recruitment Sources
There are five main sources of recruitment:

1. Advertisements

2. From inside — the company’s own staff

3. Recruitment agencies

4. Educational institutes

5. Competitors and other industries

Selection Procedure
 Selection, as the name implies, involves picking and hiring a few people from
the total number of candidates applying for the sales job.
 Selection is done by comparing the requirements of a job with the applicant’s
qualifications.
The following are
some common steps in any selection process: 7 Job offer

6 Physical examination

5 Reference check

4 Psychological testing

3 Interview

2 Application scrutiny

1 Hiring profile
Sales Force Training
 The purpose of sales training is to achieve improved job performance. In the
absence of training, job performance improves with experience. Training
substitutes for job experience so that trained sales personnel achieve high
job performance levels faster.

 The overall efficiency of a company’s personal selling operation is influenced

by the state of relations with customers and prospects. The sales force plays
a crucial role in moulding and maintaining these relations. Contrasted with
inexperienced sales personnel, experienced sales personnel maintain better
continuing relations and make better impressions on prospects. Sales training
contributes by accelerating the process of learning through experience.
 Aim of Training

 Building Sales Training Programmes

 Identifying Initial Training Needs

 Training on Market Place

 Training in Handling the Competition

 Training on Communication

 Training on Negotiating

 Training Methods
 Definition
• Sales Force Management
– The analysis, planning, implementation, and
control of sales force activities. It includes
setting and designing sales force strategy;
and recruiting, selecting, training,
supervising, compensating, and evaluating
the firm’s salespeople.
Sales Forecasting, Quotas
and Territory Management
Introduction
Demand forecasting is a useful tool for planning. It helps estimate and forecast the
market share of a firm. Most firms are very often confronted with the task of projecting
future sales of their product. Identifying future sales problems is no easy task for
companies, small or big. In some cases, it is very difficult to get any information about
future market sales. Sales forecasting is not just an estimation of sales; it is also matching
sales opportunities — actual and potential—with sales planning and procedures.
Sales Forecasting
Sales forecasting, according to Cundiff and Still, is “an estimate of sales during a specified
future period which is tied to a proposed marketing plan and which assumes a particular
set of uncontrollable and competitive forces.”
Purpose of sales forecasting
Steps in Sales Forecasting
1. Defining the objectives to be achieved.
2. Dividing various products into homogeneous groups.
3. Analysing the importance of various factors to be studied for sales
forecasting.
4. Selecting the method.
5. Collecting and analysing the related information.
6. Drawing conclusions from the analysis made.
7. Implementing the decisions taken.
8. Reviewing and revising the sales forecasting from time to time.
Types of Forecast
The term forecast is ordinarily used to refer to a prediction for a future period.
Although this usage is technically correct, it is too general for managerial value.
Best Possible Expected Results
Results for given strategy
Industry Level Market Potential Market Potential

Firm Level Sales Potential Sales Potential

A useful way for viewing what is being forecast is presented in figure above.
Four different types of forecasts emerge from this classification scheme:
1. Market Potential
2. Market Forecast
3. Sales Potential
4. Sales Forecast
Meaning of Sales Forecast
 The sales forecast is a prediction of expected sales for a specified period. It
is an estimate for sales in rupee or units for a specified future period. In
other words, it is basic tool for anticipating the nature of future sales or
sales prediction.
 According to Cundiff and Still, is “an estimate of sales during a specified
future period which period is tied to a proposed marketing plan and which
assumes a particular set of uncontrollable and competitive forces”.
 According to Stuits, “A sales forecast is an estimate of the amount or unit
for a specified future period under marketing plan or programme”.
 According to American marketing Association “forecasting is an estimate
of sales in dollars or physical units for a specified future period under a
proposed marketing plan or program and under an assumed set of
economic and other forces outside the unit for which the forecast is made. The
forecast may be for a specified item of merchandise or for an entire line.”
Objectives of Sales Forecasting

The objectives of sales forecasting may be studied under the following two major heads

1. Short - run (range) objectives.

2. Long - run (range) objectives.

Short - Run objectives
1. Formulation of suitable production policy so as to meet the demand as per
the sales forecast.
2. To make provision for the regular supply of raw material etc. for the
production on the basis of sales forecast.
3. To make the best utilization of machines on the basis of sales forecast.
4. To make the regular supply of labour force as per the sales forecast.
5. To determine an appropriate price policy for a given period.
6. To estimate and provide the requisite working capital on the basis of sales
forecast.
7. To establish sales quotes targets for different market segments.
8. To estimate stock requirements for unfinished semi-unfinished and finished
products for a specified period of time.
Long Run objectives
1. Estimating cash inflows from sales.
2. Provision for capital expenditure.
3. Planning of plant capacity so as to meet the future demand.
4. Manpower planning so that production and distribution may not suffer in
the long run.
5. Planning for acquisition of raw materials so as to meet the future demand.
6. Determining the dividend policy.
7. Establishing coordination between various functions of on organization.
8. Reducing selling costs and thereby reduces the final cost of the product.
9. To estimate future profits of the business enterprise.
Factors affecting or Influencing sales forecasting

1. Business Environment

2. Conditions within the industry

3. Internal Conditions of the business Enterprise

4. Socio Economic Conditions

5. Factors Affecting Export Trade

Steps in sales Forecasting
1. Forecasting of General Economic Conditions: General economic
conditions within the boundaries of the nation, do effect the purchasing
power of the individual customer. The standard yardstick for assessing
general economic conditions will be: gross national product, per capita
income, personal income, personal consumption expenditure, level of
employment and the consumer price index.
2. Forecast of Industry Sales: Though the industry forecast are available from
the trade associations and chambers of commerce, a SWOT analysis of the
competition prevailing could throw much light on the competition within
the industry.
3. Preparing Forecast of Company Sales: The sales manager, while
preparing the sales budgets of the company has to forecast the company
and product sales for the coming year. The entire planning of the
organization for production, manpower, financial arrangements, and
revenue calculations will depend upon the accuracy of the sales manager's
forecast.
Choice Modeling
Discrete choice, volumetric choice, and conjoint models are analytical methods
used to understand the behaviour of consumer purchasing behaviour. Our
Advanced Analytics Consultants set up carefully controlled experiments in
which consumers are simply asked to choose how many of each product to buy,
given predetermined sets of realistic conditions.
Discrete Modeling
Discrete choice modeling is ideal for each product categories where only one
purchase is made over a longer period of time. In these carefully controlled
experiments, current and potential customers are asked which one product
they would buy, given a realistic scenario including all of the products of
services that compete with one another in the marketplace. In each scenario,
the respondent is presented with a different set of marketing stimuli and asked
which brand or product would be purchased. The type of decision that the
respondents make in each scenario is designed to mimic the real market, and
again each variables' importance is being determined implicitly.
Marketing Mix Modeling

• Marketing mix modeling measures the potential value of all marketing

inputs and identifies marketing investments that are most likely to produce
long- term revenue growth.

• Typically, Marketing Mix Modeling involves the use of multiple regression

techniques to help predict the optimal mix of marketing variables.
Regression is based on a number of inputs and how these relate to an
outcome such as sales or profits. Once the model is built and validated, the
input variables can be manipulated to determine the net effect on a
company's sales or profits.
The data that go into creating a Marketing Mix Model include:
• Economic data
• Industry data
• Category data
• Advertising data
• Promotional data
• Competitive data
• Service data
• Product Data
• Pricing Data
• Features & Performance
• Market Outcome Data
• Sales
• Revenues
• Profits
Methods of Sales Forecasting
Survey Method
The survey method is based on the opinion of buyers and consumers. It is useful
with respect to industrial products but not as far as consumer goods are
concerned.
Expert Opinion
According to this method, a company invites the opinions of executives and
consultants who are acknowledged experts in studying sales trends.
Market Studies Method
This method is commonly used by marketers for consumer goods. It is also
known as the Market Test Method. A market test provides data about
consumers and the marketing mix.
Sales Force Opinion Method
This method estimates the buyers intentions from experienced personnel in the
sales force. They can easily forecast for their respective territories.
Statistical Methods
Statistical methods are considered to be superior techniques of sales
forecasting because their reliability is higher than that of other techniques.
Some commonly used statistical methods are given below:
Commonly Used Statistical Methods
Trend Method
This method provides a rough trend of the forecast on the basis of past
experience. It does not, however, take into account the changing environment.
It is a simple method for business forecasting on the basis of past performance.
Graphical Method
According to this method, sales data are plotted on graph paper and a graph is
drawn for a number of years. This is a simple and inexpensive method.
Time Series Method
This method is used for long periods duly taking into account cyclical changes,
seasonal variations and irregular fluctuations.
Time Series Method y

Sales
(Rs)

0 X
1980 1981 1982 1983 1984 1985
Years
“A time series may be defined as a collection of magnitudes belonging to different time
periods, of some variable or composite variables, such as production of steel, per capita
income, gross national product, price of tobacco, or index of industrial production.”
Freehold or Graphical y

Method:

This is the simplest method

for obtaining a straight
line. A trend line is fitted by Sales
freehand to know future (Rs)

sales.

0 X
1988 1989 1990 1991 1992 1993
Years
Semi Average Method: According to this method, data are divided into two parts,
preferably with the same number of years.

For example, (3-year semi-averages)

y
Year Sale
(Rs. Lakhs)
Actual Line
1986 12
1987 13
SALES
in (Rs) Trend Line
1988 12
Lakhs
1989 14
1990 13
1991 16 0 X
1986 1987 1988 1989 1990 1991
Years
Moving Averages Method: According to this method, a trend is determined by moving
averages. Therefore, out of the averages such as 3-yearly moving, 5-yearly moving and 7-
yearly moving average, the five-yearly moving average will be computed as follows:

A BCDE BCDEF CDEFG

5
Least Squares 5 in practice. The straight line
5 is most commonly used
Method: This method
is represented by the equation:
yc = a + bx
For example: Fit a straight line trend for the following series. Estimate the value for 1994.

Year: 1987 1988 1989 1990 1991 1992 1993

Sales: 80 90 92 83 94 99 92
Sales Quotas
A sales quota refers to an expected routine assignment to sales units, such as territory,
districts and branches, etc. Sales quotas are also assigned to individual salespeople over
a particular time period and are used to plan, control and evaluate the selling activities
of a company. Sales control is facilitated by setting quotas to use in appraising the
performances of sales force. Sales control is tightened by setting quotas on expenses and
profitability of sales volume. They are tactical in nature and are thus derived from the
sales force strategic objectives. Strategies stem from marketing and sales plans, sales
forecasts and budgets. Thus, quotas are guides for what needs to be done and a means
of evaluating how well they have been done.
Importance of Sales Quotas
Sales quotas serve several purposes. The important objectives are shown in the diagram
below:

Quotas provide performance targets

Sales Quotas provide standards Sales
Quotas Quotas provide control Objectives
Quotas are motivational
Purpose of setting sales quotas

• Provides Goals and Incentives.

• Evaluating performance.

• Controlling the sales person activities.

• Uncovering strengths and weaknesses in the selling structure.

• Improving the compensation Plan's effectiveness.

• Controlling the Selling Expenses.

• Enhancing sales Contests,

Types of Sales Quotas
A sales organisation can set many types of quotas. The most common quotas are shown
in the following diagram:

Types of Sales Quotas

Sales Volume Profit Expense Activity Quota

Quotas Quotas Quotas Quotas Combinations
Sales Volume Quotas
 Sales volume quotas include sales in rupees or product unit objectives for a
specific period of time.
 Sales volume quotas are first set for the entire year. The yearly total volume
quota is then set for shorter time periods, such as three months, six months
and nine months. The sales force is assigned their yearly quotas. Sales targets
are set for the year for sales force so their aim is to sell throughout the year to achieve
the total sales objective. The sales volume quotas can be set in the following areas:

Product line
Product range
Sales Sales division
Valume Sales territories
Quotas Sales districts
Branch offices
Sales force (Individual)
Profit Quotas

Profit quotas are particularly useful in multiproduct companies where different products
contribute to varying levels of profits. It creates opportunities for the salesperson to
make optimum use of time.

Expense Quotas

Expense quotas are related to selling costs within reasonable limits. Some companies set
quotas for expenses linked to different levels of sales attained by their sales force.
Activity Quotas
These quotas set objectives for job-related duties useful for attaining salespeople’s
performance targets. Activity quotas are required to make the sales force perform other
activities which have long-term implications on the goodwill of the firm. A sales
organisation must set a target level of performance for salespersons. Some common
types of activity quotas prevalent in Indian companies are as follows
Number of sales presentations made Common
Number of service calls made Types of
Number of dealers visited Activity
Number of calls made for recovery Quotas
Number
Activity quotas typically should not be a of new accounts opened
basis for rewards. Rather, their attachment helps
the manager better understand why salespeople do or do not meet their sales volume
quota.
Quota Combinations
Many companies use a combination of these quotas. The two most commonly combined
are sales volume and activity quotas. These quotas influence selling and non-selling
activities.
Territory Management
The following diagram outlines the activities of territory management

Trade relations/Dealer relations

Potential business
Coverage
Activities of Reports
Territory Territory size
Management Portfolio of accounts
Selling techniques
Customer satisfaction
Selling abilities
Why Establish Sales Territories?

A company can develop and use sales territories for various reasons. Some of the
reasons are as follows:

 To obtain entire coverage of the market

 To establish a salesperson’s responsibility

 To evaluate performance

 To improve customer relations

 To reduce sales expenses

 To allow better matching of salesperson to customer

 To benefit salespeople and the company.

Factors to be Considered when Designing Territories
In setting up or designing sales territories, these four steps must be followed:
1. Selecting a basic geographical control unit
2. Determining sales potentials in control unit
3. Combining control units into tentative territories
4. Adjusting for coverage difficulty and reallocating tentative territories.
The two basic approaches commonly used for designing sales territories are discussed
below.
 Market Build-up Approach
In this approach, an estimation of the present and potential products/services
demand is made by looking at how the market is built up, who are its
present/potential users, how much do they consume and at what frequency.
 The Workload Approach
This approach is designed by WJ Talley on the basis of the workload
performed by salespersons.
 W.J. Talley’s Workload Approach

Territories are created in terms of the workload of

salespersons. Customers are grouped into different
categories.
1. Call frequency for each territory is calculated.

2. Present and potential customers are then located

geographically and arranged category wise.

3. Number of customers in each category is multiplied by the

desired call frequency to get a total number of calls.
A geographical control unit is then established. It gives
adequate work load to each sales-person
Assigning to Territories
 Some salespeople can handle large territories and the travel associated with
them, some territories require experienced salespeople, and some are best
suited to new people. There are a few factors a manager needs to consider
when assigning both new and experienced people to territories.
 In today’s complex selling situation, the presence of a well-thought-out daily
and weekly route plan is required for effective management. The following
may be considered basic route patterns of a territory.

Straight Line Pattern Base First Call

C
C
C
Clover Leaf Pattern Major City Pattern

C
C
Base
2 3

C 1
C C
C 4 5

C
C
14-1
Reasons Companies Develop
and Use Sales Territories

• To obtain thorough coverage of the market.

• To establish each salesperson's responsibilities.
• To evaluate performance.
• To improve customer relations.
• To reduce sales expense.
• To allow better matching of salesperson to customer’s
needs.
• To benefit both salespeople and the company.
14-2
Elements of Time and Territory Management
for the Salesperson

Salesperson’s Set account

territory’s Account analysis objectives and
sales quota sales quotas

Territory-time
allocation

Territory and
Scheduling and Customer sales
customer
routing planning
evaluation
14-3

Undifferentiated Selling Approach

Single-selling Target accounts

approach
14-6

Account Segmentation Approach

Multiple Selling Strategies Target Accounts

Extra Large
1
Large

Medium
2
Medium
 14-7

Multivariable Account Segmentation

A
Product
B
C

Retailer
Types of
Accounts Wholesaler

Government
$1,000 $25,000 $75,000 $200,000+
to to to
$25,000 $75,000 $200,000
Customer Sales Volume (ELMS)
 14-12A

Three Basic Routing Patterns

Straight-Line Pattern

First call
c

c c c
Work back
 14-12B

Three Basic Routing Patterns

Cloverleaf Pattern
c c

c c

c c
c c c c
c c
Base
c c c c
c c
c c
Each leaf out and
c c back the same day
c c
 14-12C

Three Basic Routing Patterns

Major-City Pattern

2 3
1 1 = Downtown

4 5
 Scheduling

• Scheduling is planning a salesperson’s visit time to customers.

It deals with time allocation issue
• How to allocate salesperson’s 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
 Time Management Tools
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
 Sales Quotas
• 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
 Types of Quotas
• 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
 Sales Volume Quotas (Continued)

• 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
• 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
 Activity Quotas
• 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
 Combination Quotas
• 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:

Type of Quota Quota Actual Percent Weight Percent

Quota (Importance) Quota x
Weight
Sales Volume (Rs) 5,00,000 4,50,000 90 3 270
Receivables (days) 45 50 89 2 178
New Customers 04 05 125 1 125
(Nos)
Total 6 573

• 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
 Methods for Setting Sales 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
• Salespeople’s estimates
• Compensation plan
We shall briefly discuss each of the above methods
 Total Market Estimates Method

• The Process followed by established companies is

as under:
1) Estimate next year’s total market demand, or
industry sales forecast, using sales forecasting
methods
2) Decide the company’s estimated market share for
next year
3) Company’s next year sales forecast= (1) x (2)
4) Find each territory’s percentage share out of the
total company sales in the previous year
5) Territory sales quota = (3) x (4)
 Territory Potential Method

• The procedure followed by new companies is as under:

1) Estimate next year’s industry sales forecast or market
potential, using sales forecasting methods
2) 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.
3) Industry sales forecast in a territory (or territory market
potential=(1)x(2)
4) Territory sales quota = (3) x estimated market share of the
company in the territory
 Past Sales Experience Method
• The process consists of taking past one year’s sales
(or an average of previous 3 to 5 year’s 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
Salespeople’s Estimate Method
• Some firms ask their salespeople to set their own
quotas
• Many salespersons either set very high or too low
sales quotas
 Salespeople’s Estimate Method (Continued)
• For setting proper quotas, many sales managers use 2 or 3 of
above methods, discuss with salespersons to get their inputs,
and decide sales quotas
Compensation Plan Method
• Some organizations set quotas to fit with their sales
compensation plan
• E.G. A company wants to pay a monthly salary of Rs 5000, and
a commission of 3% on monthly sales above Rs 1,00,000. The
quota of Rs 1,00,000 is set in such a way that salesperson
would find it very difficult to cross total compensation of Rs
8000 per month (5000+3000)
• Sales quotas should not be based only on this method,
because it would “put the cart before the horse”
Insight into Setting & Administration of Sales Quotas
• 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 Forecasting and Global Factors
 With globalization of trade, it has became difficult to forecast accurately,
more particularly for the long-term. Technological changes, sudden
appearance of a competitor from any part of the world, selling the goods at
competitive prices or even resorting to dumping, are some of the problems
faced in accurate forecasting. It requires a well planned effort to take into
consideration the factors influencing the sales strategy, so that sales
forecasting may be a realistic one, as far as possible. This situation has been
drafted by Warren J Keegan as follows:
 In terms of cultural sensitivity, consumer products are more sensitive than
industrial products. Another rule of thumb is that food products, especially
those served at home, frequently exhibit the highest degree of cultural
sensitivity. What this means to managers is that some products of daily life
use are likely to demand significant adaptation. Others require only partial
adaptation and still others are best left unchanged.
Companies differ in both their willingness and capability to identify and produce
profitable product adaptations. Unfortunately, too many stage one and stage
two companies are oblivious to the foregoing issues. One new-product expert
has described three stages that a company must go through as follows
1. Cave dweller. The primary motivation behind launching new products
internationally is to dispose of excess production or increase plant-capacity
utilization.
2. Naive nationalist. The company recognizes growth opportunities outside
the domestic market. It realizes that cultures and markets differ from country
to country and, as a result, it sees product adaptation as the only solution.
3. Globally sensitive. This company views regions or the entire world as a
competitive marketplace. New-product opportunities are evaluated across
countries, with some standardization planned as well as some
differentiation to accommodate cultural variances. New-product planning
processes and control systems are reasonably standardized.
 Reasons for and Benefit of Sales
Territories
• Customer Related
Provides intensive market coverage Produces higher sales
Provides excellent customer service Provides greater satisfaction

• SalesPerson related
More enthusiasm Leads to less turnover
Facilitates performance evaluation Offers rewards related to efforts

• Managerial
Enchances control Reduces expenses
Coordinates promotion Gives more ‘bang’ for the ‘buck’.
Territories act as morale builders, motivate sales people to give their
best and