Chapter 1 Sales Management Strategy-Sales and Distribution Management

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Chapter 1 Sales 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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Cont…. 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 Objective Setting Training for Sales Policies Designing Sales Force: Structure and Size Deciding Sales Force Compensation Recruiting and Selecting Sales Force Guiding and Motivating Sales Force Performance Rating of Sales Force

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Cont…. 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: Organising sales research, product research, etc. Getting the best output from the sales force under him. Setting and controlling the targets, territories, sales experiences, distribution expenses, etc. Advising the company on various media, sales promotion schemes, etc. Monitoring the company’s sales policies.

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Cont…. 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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Cont…. 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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Cont…. Problems of Sales Management Designing and Managing Sales Force Actual supervision of, and guidance to, individual salesmen is also a sine qua non of a sound sales manager. 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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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. 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 Strategy The 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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Cont…. 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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Cont…. 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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Cont…. 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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Cont…. 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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Cont…. 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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Cont…. 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 CHAIN management PROCESS management leading to customer loyalty and lasting relationship

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Cont…. 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

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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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Cont…. 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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Cont…. 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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Cont…. 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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Cont…. 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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Cont…. 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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Cont…. 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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Cont…. 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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Cont…. 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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Cont…. How to Add Value Through Direct Selling Create direct selling process Is salesman empowered to be flexible? Ensure increase in customer value Follow up sale with prompt service Close deal quickly Ensure product Performance at demo Choose suitable time for demo and pitch Make appointment with customer Identify the customer Is the process clearly structured? Yes No Yes Yes 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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Cont…. National Sales Manager In carrying out these responsibilities, sales mangers do the following things: Prepare sales plans and budgets Set sales force goals and objectives Estimate demand and forecast sales Determine the size and structure of the sales force organization Recruit, select and train sales people Design sales territories, set sales quotas and define performance standards Compensate, motivate and lead the sales force Conduct sales volume, cost and profit analysis Evaluate sales force performance Monitor the ethical and social conduct of the sales force.

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Cont…. 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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Cont…. Stand Points of Sales Representative The stand points of sales representatives and the managers are as follows: To protect drastic fluctuations in income so that regular monthly expenses for home mortgage, food and utilities can be paid/balanced without hardship. Expenses in direct relations to the amount of effort Earnings to be equitable in terms of experience, ability, cost of living.

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Organization uses two types of compensations: Financial 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. 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. The plan should be simple and easy to understand for the salesman. It should be economical and should induce competition amongst salesman. 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: A straight salary A straight commission on sales Salary and commission on sales Salary and commission on sales above a certain amount Salary and different rate of commission on varying totals or for different types of goods Salary and share in the profits

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Expenses Accounts The major sales expenses accounts are categorized as follows: Salary accounts Commission accounts Bonuses Meals and entertainment Air travel Automobiles rentals Lodging Travel accounts Tour expenses accounts (Advance accounts) Communication and services expenses accounts.

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Cont…. Fringe Benefits Types of fringe benefits are: Company Car Supplemental life insurance and medical insurance Tax-return preparation Personal tax and financial planning Low or no interest loans Deferred compensation Supplemental retirement benefits Air travel and First class A.C. for Train Travel Relocation allowance Stationary facilities

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Laundry benefits, while on the tour Special perquisites for outstanding performance by getting travel prizes recognition for outstanding performance Medical expenses Special business associations membership Exclusive developmental programs by IIM, Ahmedabad, by Shiv Khera, etc.