Chapter 1 sales management strategy sales and distribution management

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Copyright © 2010, S L Gupta Excel Books Sales and Distribution Management Text & Cases (2 nd Edition) S L Gupta 1-1 Sales Management Strategy Basics of Sales Management Ch-1 Block : I Chapte r 1 Sales Management Strategy

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Sales Management Strategy

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Chapter

1Sales Management Strategy

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Introduction

Sales management is defined 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”.

Definition Committee of the American Marketing Association.

Sales force is responsible for the sale of products of a company and to add profit

to the business operations and fulfill social obligations. Sales force should be

hardworking, result oriented, well educated and competent to handle changing

situations. Technical developments which are taking place at a rapid speed have

made the task of sales force more challenging.

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Nature and Importance of Sales Management Sales management helps to achieve the organizational objectives.

The main objectives of sales management is that products should be sold at

that price which realizes profits.

Buyers and sellers both have same types of business relationships. This

relationship is based on exchange of goods, services and money.

Sales person develops a positive relationship with the customers. The role of

sales team is interdependent and success of one team member depends on

the other.

The sales team continuously monitor the customer preference, competitors‘

situation, government policy and other regulatory bodies.

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Relationship-based selling

Relationship-based selling works because people would rather buy what they

need to buy anyway from those they have come to relationship.

Relationship-based selling means doing business in such a way that

company is worthy of the customer's trust.

Relationship selling is mainly personal not institutional, and buying is heavily

personal as well.

It is not selling centric. It's buyer-based.

The objective of relationship selling is to help the buyer do the right thing for

the buyer.

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Managing the Sales Force

Successful sales force management means:

The right organisation and aggregation against product lines and

geographies.

The right strength and qualification.

The right compensation and incentive system.

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Steps in Designing and Managing a Sales Force

1. Objective Setting

2. Training for Sales Policies

3. Designing Sales Force: Structure and Size

4. Deciding Sales Force Compensation

5. Recruiting and Selecting Sales Force

6. Guiding and Motivating Sales Force

7. Performance Rating of Sales Force

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Sales Manager’s Duties and Responsibilities

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

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

of the principal duties of a sales manager:

1. Organising sales research, product research, etc.

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

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

expenses, etc.

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

5. Monitoring the company’s sales policies.

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

To yourself To your company To your customers

Increase basic selling skills.

Develop management abilities.

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

Study the latest products, promotion policies and procedures.

Be alert to new sales and merchandising ideas.

Be proud of your association with your company.

Maintain the company standing and standards with all customers.

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

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

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

Point out the advantages of an association with your company.

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

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

Territory Sales Manager’s Job Responsibilities

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

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

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

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

Check demand and movement of products in the territory.

Report activities of the competitors.

Strive to reach the best goals.

Ask for help, when you need it.

Cooperate with other departments of the company.

Inform the customers about the trends in their areas.

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

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

Organise presentations to inform and save time.

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

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

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Problems of Sales Management

1. Designing and Managing Sales Force

Actual supervision of, and guidance to, individual salesmen is also a sine

qua non of a sound sales manager.

2. Sales Force Authority

sales force requires delegation of authority with respect to the following:

Changing or fixing prices

Credit facilities to old and existing customers

Assurance regarding quality and after-sale service

Payment terms and settlement of claims.

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3. Target-setting

Sales targets are fixed on the basis of past experience, time period and

brand positioning in the market. The targets should be fixed in such a manner

that they are achievable.

4. Sales Forecasting

Sales forecasts must change as conditions change. Accuracy depends on

meticulous planning and dynamic strategies.

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Sales Management — Formulation of Sales StrategyThe following are key decision areas in sales management which are particularly relevant to strategy formulation:

Determining the size of the sales force

Decision regarding type and quality of sales force required

Designing the sales organisation

Territory designing

Recruitment and training procedures

Task allocation

Compensation of sales force

Performance appraisal and control system

Feedback mechanism to be adopted

Managing channel relationships

Coordination with marketing departments.

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Different Sales Strategies

Relationship Strategy

In this strategy, a major key to success in selling is the ability to establish

working relationships with customers in which mutual support, trust and goals are

nurtured over time.

The sales force that builds effective relationships with the customer and

provides valuable service are usually high performers and top achievers.

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A Selling Partner

P - Prepares strategically for a long-term, high-quality relationship that

solves customer’s problems.

A - Asks questions to get on the customer’s agenda.

R - Restates customer needs with confirmation questions.

T - Teams with support people to provide the customer with solutions.

N - Negotiates double-win solutions with joint decision making.

E - Exceeds customer expectations whenever possible.

R - Re-examines the ongoing quality of the relationship frequently.

A Selling Partner

P - Prepares strategically for a long-term, high-quality relationship that

solves customer’s problems.

A - Asks questions to get on the customer’s agenda.

R - Restates customer needs with confirmation questions.

T - Teams with support people to provide the customer with solutions.

N - Negotiates double-win solutions with joint decision making.

E - Exceeds customer expectations whenever possible.

R - Re-examines the ongoing quality of the relationship frequently.

In this model, a customer is treated as a partner. Therefore, maintaining a good

relationship with the customer is important.

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The Double-Win Strategy

In this strategy, both the customer and the salesperson come out of the sale

with a sense of satisfaction. The salesperson not only obtains the order but

sets the stage for a long-term relationship, repeat business and future referrals.

They both come out of the sale feeling satisfied, knowing that neither has

taken advantage of the other and that both have profited, personally and

professionally, from the transaction.

However, some salespeople have still not accepted the merits of the win-win

approach. They have adopted a win-lose approach which means that the

salesperson wins at the buyer’s expense.

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Win – Lose approach vs. Win – Win attitude

The starting point to the development of a double-win philosophy is to compare

the behaviour of persons who have adopted the win-lose approach with that of

persons who have adopted the win-win approach (Figure).

Win - Lose People Win - Win People

See a problem Help others solve their problem

Fix the blame Fix what caused the problem

Let life happen to them Make life a joyous happening for others and themselves

Live in the past Learn from the past, live in the present and set goals for the future

Make promises they never keep Make commitments to themselves and to others and keep both of them

Double-Win Strategy

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Instant Service

It is in this context of providing almost “instant service” to the customer that the concept of “supply chain management” has caught the imagination of managements the world over.

No matter how efficiently and effectively goods/services are produced, if they cannot be delivered to the customer in the quickest possible time, all efforts

made earlier are in vain, particularly in the context of very short product life cycle – counted in months rather than years.

As depicted in Figure below, a combination of effective process plus supply chain management is what is required to cope with the challenges of the international market-place.

One cannot survive in a highly competitive market without conforming to the so called Q-C-D triangle – Highest Quality, Lowest Cost and Least Delivery times.

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Simplified Model for Ensuring Customer Delight

Customer Delight

After sales service

Unique selling propositioning/brand equity

Exceeding customer expectations

Competitive price

Reliability of product or service

On time delivery

Novelty/uniqueness of product/service

SUPPLY CHAINmanagement

PROCESSmanagement

leading to customer loyalty and lasting relationship

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Hard Sell Versus Soft Sell Strategy

Strategies for Identifying Customers

Hard Sell Soft Sell

Concern for self Concern for customer

Canned presentation Questions for discussion

Talking Listening

Pushing product Providing buying opportunities

Presenting features Presenting benefits

Advocating without acknowledging Acknowledging needs

Hard Sell Soft Sell

Concern for self Concern for customer

Canned presentation Questions for discussion

Talking Listening

Pushing product Providing buying opportunities

Presenting features Presenting benefits

Advocating without acknowledging Acknowledging needs

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Product-centered Selling and Client-centered Selling

Product-centred Selling Client-centred Selling

1. Seller puts in efforts for research and development of product.

1. Seller puts in efforts on research and development of relationship with clients.

2. Product centred selling emphasises knowledge of product.

2. Client centred selling emphasises knowledge of client.

3. Selling strategies and tactics tend to be most influenced by past performances of products and competition and present situations.

3. Strategies and tactics tend to be directed more to considerations of future growth and developments in the client’s world.

4. Representative seeks to be accepted as a reliable, credible source of information and service.

4. Representative strives to raise client’s expectations of personal excellence.

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Selling Process The selling process is defined as a process by which a salesperson identifies

and locates the prospects, separates the prospects from the suspects approaches them and makes a sales presentation, handles their objections. He also follows up the existing customers to identify further sales leads and measures the success and customer satisfaction level of the current products and service offerings. Selling concept refers to the exchange of goods or services for an amount of

money or its equivalent in kind. Selling helps an organization achieve its organizational goals. Thus, managing sales in an organization is a critical activity. A sales manager needs to ensure that the salesman are motivated to give their best performance. The sales team continuously look out the changes taking place in the external environment regarding competitors, customers, government policy and other regulatory agencies, advances in technology, and industry trends. This provides the sales personnel a vital information regarding trends in product sales, product development, and budgets.

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The economic slowdown is receding and budgets of companies are increasingly receptive to alternative direct marketing tools to sell their products. Telemarketing (TM), that is marketing products and services on the telephone, a direct marketing tool, which has touched a high in the last three years. Apart from professional TM service outfits, many companies, including MNCs, have set up their in-house TM cells. A TM outfit works through a well networked team of trained telemarketers who make calls to potential clients and customers and establish direct contact with them. The key lies in convincing the customer about the value of the product or service and fixing up an appointment. Direct customer marketing system allows customers complete flexibility to purchase our products. Orders can be placed via the Internet, over the phone, by mail, through our catalogue or through the company personnel.”

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Mail Order Sales

Mail order houses are retail trading organisations engaged in the mail order

business.

This is also known as carrying on business through post or mail. In this

method, customers do not visit the seller’s business premises, nor do they

make a personal examination of the goods before they are purchased. In this

system, orders are received from customers by post and the goods are

dispatched usually by VPP (Value Payable Parcel) or registered post.

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In case of the mail order business, the selling function is performed without

the intervention of the personal salesman.

The goods should be known for their utility so that there is no need of

convincing prospective buyers about their usefulness.

They must fetch a sufficient price to have a wide profit margin.

They must command wide demand.

They must not be easily perishable.

They should be available in large quantities throughout the year.

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Sales through Large Scale Fixed Shop Retailers

Concentration of population in urban areas, increasing flow of manufactured goods and improved methods of organising business have led to the expansion of retail business. This expansion was effected in different ways, giving rise to different types of retail establishments, which operate on a large scale. More prominent among them are the following:

Departmental stores

Chain stores

Mail order houses

Hire purchase shops

Super markets

Fixed price shops

Cooperative stores

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Sales through Wholesalers and Retailers

Wholesalers perform a number of functions in the marketing of goods as

listed below

Assembling and buying

Storing or warehousing

Transporting

Financing

Risk-bearing

Grading, packing and packaging

Providing market information.

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In the process of acting as a link between the wholesaler and the consumer,

a retailer performs many functions. The more important of them are given

below:

Buying and assembling

Warehousing or storing

Selling

Grading and packing

Financing

Supply of market information

Advertising.

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Direct Selling

Direct selling identifies the unfulfilled needs of ordinary customers.

Direct marketing companies have an advantage over conventional marketers

in that the relationship between the company and the customer starts

building even before a sale is made.

Lessons From Direct Selling

THE STRATEGY: Eureka Forbes structures its demos according to the time

at the customer’s disposal.

The Lesson: Keep the process flexible enough to accommodate individual

needs.

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How to Add Value Through Direct Selling

Create directselling

process

Is salesmanempowered to be

flexible?

Ensureincrease in

customer value

Follow up salewith prompt

service

Close dealquickly

Ensure productPerformance

at demo

Choose suitabletime for demo

and pitch

Makeappointment

with customer

Identify thecustomer

Is the process clearly

structured?

Yes

No

YesYes

Yes

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THE STRATEGY: Modi Telstra uses a clearly structured sales call process to

market its cell phone services.

THE LESSON: Simplify the process of negotiation to save the customer’s

time.

THE STRATEGY: Oriflame uses multilevel marketing to enlist direct sales

agents from its customer base.

THE LESSON: Use your customer to sell your product to other customers.

THE STRATEGY: INDAL empowers its sales force to take pricing decisions

on the spot when closing sales.

THE LESSON: Ensure that your direct seller can conclude a deal

immediately.

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National Sales ManagerIn carrying out these responsibilities, sales mangers do the following things:

1. Prepare sales plans and budgets

2. Set sales force goals and objectives

3. Estimate demand and forecast sales

4. Determine the size and structure of the sales force organization

5. Recruit, select and train sales people

6. Design sales territories, set sales quotas and define performance standards

7. Compensate, motivate and lead the sales force

8. Conduct sales volume, cost and profit analysis

9. Evaluate sales force performance

10. Monitor the ethical and social conduct of the sales force.

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Sales Manager

Regional Manager(North)

Regional Manager(South)

Regional Manager(East)

Regional Manager(West)

Regional Manager(Staff)

BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM BM

Field Staff Field Staff Field Staff Field Staff Field Staff

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Stand Points of Sales Representative

The stand points of sales representatives and the managers are as follows:

1. To protect drastic fluctuations in income so that regular monthly expenses for

home mortgage, food and utilities can be paid/balanced without hardship.

2. Expenses in direct relations to the amount of effort

3. Earnings to be equitable in terms of experience, ability, cost of living.

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Organization uses two types of compensations:

1. Financial

2. Non-Financial

Financial includes compensation, salary, incentives and fringe benefits.

Non-financial includes motivation and its implications to sales management.

But monetary compensation is one of the most direct and least ambiguous ways

of communicating to sales people about their performance.

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Reasons for Providing Financial Compensation

The compensation plan is undoubtedly to reward the salesman for his

performance. The plan includes.

1. The plan should provide a regular income at least at minimum level. In

addition to this regular income, it should provide adequate incentive to induce

minimum performance from the salesman.

2. The plan should be simple and easy to understand for the salesman.

3. It should be economical and should induce competition amongst salesman.

4. It should be fair to both the sales force and management.

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Methods of Remuneration

The sales force can be remunerated in the following ways:

1. A straight salary

2. A straight commission on sales

3. Salary and commission on sales

4. Salary and commission on sales above a certain amount

5. Salary and different rate of commission on varying totals or for different types

of goods

6. Salary and share in the profits

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Expenses AccountsThe major sales expenses accounts are categorized as follows:

1. Salary accounts

2. Commission accounts

3. Bonuses

4. Meals and entertainment

5. Air travel

6. Automobiles rentals

7. Lodging

8. Travel accounts

9. Tour expenses accounts (Advance accounts)

10. Communication and services expenses accounts.

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Fringe Benefits

Types of fringe benefits are:

1. Company Car

2. Supplemental life insurance and medical insurance

3. Tax-return preparation

4. Personal tax and financial planning

5. Low or no interest loans

6. Deferred compensation

7. Supplemental retirement benefits

8. Air travel and First class A.C. for Train Travel

9. Relocation allowance

10. Stationary facilities

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11. Laundry benefits, while on the tour

12. Special perquisites for outstanding performance by getting travel prizes

recognition for outstanding performance

13. Medical expenses

14. Special business associations membership

15. Exclusive developmental programs by IIM, Ahmedabad, by Shiv Khera,

etc.