Unit-1

Sales and Distribution Management:

Sales and Distribution Management Compiled by : Rohit Rajwanshi Ashish Gadekar Yogita Narang Ravi Pathak 1

Slide 2:

2 Lecture Unit Contents Slide no. 1 1 Selling as a Part of Marketing 2-4 2 1 Sales Management process 5 2 1 Role of Sales Manager 6 3 1 Sales Management and Salesmanship 7-8 4 1 Process of Personal Selling, Concept of Personal Selling, The Ones of Personal Selling 9-24 5 1 Qualities of a Successful Salesman. 25 6 1 Goal Setting Process in Sales Management, 26-27 7-8 1 Analyzing Market Demand and Sales Potential, 28-30 9-10 1 Techniques of Sales Forecasting, 31-43 11 1 Preparation of Sales Budget 44-45 12 1 Formulating Selling Strategies 46-48 13-14 1 Designing Sales Territories and Sales Quota 48-70 Objectives /Short Questions References

Slide 3:

Selling Concept Customer will not buy product unless they are persuaded Marketing Concept This concept proposes that the reason for success lies in company's ability to create , deliver and communicate a better value proposition through its marketing offer. 3

Marketing vs. Selling:

Marketing vs. Selling Emphasis on product Company manufactures the product first and then decides to sell it. Mgmt is sales vol oriented Planning is short term oriented in terms of today’s product and markets. Emphasis on staying with existing technology and reducing costs. Different departments work as highly separate watertight compartments. Cost determines the price Emphasis on consumer needs and wants. Customer need is first determined and then delivery of product is decided Mgmt is profit oriented Planning is long term oriented in terms of new product and future growth. Emphasis on innovation in every sphere All deptt. Work in an integrated manner. Consumer determines the price 4

What is Sales Management?:

What is Sales Management? One definition: “The management of the personal selling part of a company’s marketing function.” Another definition: “The process of planning, directing, and controlling of personal selling, including recruiting, selecting, equipping, assigning, supervising, paying, and motivating the personal sales force. 5

Process of Sales Mgmt :

Process of Sales Mgmt Formulation of Sales Management The strategic sales program should consider the environmental issues effecting the business. It should organized and planned the company’s overall personal selling efforts and integrate these with the other elements of the firm’s marketing strategy Implementation It involves selecting appropriate sales personnel, training them, leading them and motivating them, designing and implementing of policies and procedures that will direct the efforts of the sales people towards achieving corporate objectives Evaluation It involves developing methods and practices for monitoring and evaluating the individual sales force performance. Refer Sales and Distribution Management- Oxford pub Tapan K.Panda ,page no 26-page no.31 6

Roles of a Sales Manager:

Roles of a Sales Manager Some of the important roles of the modern sales manager are: A member of the strategic management team A member of the corporate team to achieve objectives A team leader, working with salespeople Managing multiple sales / marketing channels Using latest technologies (like CRM) to build superior buyer-seller relationships Continually updating information on changes in marketing environment 7

Salesmanship:

Salesmanship It is a seller initiated effort that provides prospective buyer with information and motivates or persuades them to make favorable buying decision concerning the seller’s products or services. Salesmanship is an attempt to induce people to buy goods---- W.G. Carter It is the ability to persuade people to buy goods or services at a profit to the seller and benefit to the buyer .----- National Association of Marketing Teachers of America 8

Functions of Salesmanship:

Functions of Salesmanship To introduce products to customers To help the customers to make buying decisions. To see how the customer’s needs are transformed into wants and demand. To negotiate and conduct effective selling at least cost. To gather information about markets and competitor’s products and transmit it to the company. 9

Personal Selling –concepts:

Personal Selling –concepts The only function / department in a company that generates revenue / income The financial results of a firm depend on the performance of the sales department / management Many salespeople are among the best paid people in business It is one of the fastest and surest routes to the top management 10

Continue……:

Continue…… If a sales person makes a presentation, the prospect may or may not buy The above “buyer behaviour model” does not tell us the reasons of buying or not buying To understand the psychological aspects of selling or buying, salespeople should study consumer or buyer behaviour, including buying process and situations Stimulus (Sales Presentation) Response (buy or no buy) Buyer’s decision making process

The Process of Personal Selling:

The Process of Personal Selling As a part of selling activities, if salespeople follow the steps or phases shown below, their chances of success are far better. Prospecting & Qualifying Preapproach / Precall planning Approach Presentation & Demonstration Follow-up & Service Trail close / Closing the sale Overcoming Objections The sequence of above steps may change to meet the sales situation in hand. Some of the above steps may not be applicable for selling to the trade We now discuss application of above steps to industrial selling *source: Sales and distribution Management TMH-Hawaldar 12

Slide 13:

Prospecting It is identifying or finding prospects i.e. prospective or potential customers. Methods of prospecting or sales lead generation are: (1) referrals from existing customers, (2) company sources (website, ads., tradeshow, teleprospecting ), (3) external sources (suppliers, intermediaries, trade associations), (4) salespersons’ networking, (5) industrial directories, (6) cold canvassing Qualifying Companies qualify sales leads by contacting them by mail or phone to find their interests (or needs) and financial capacity. Leads are categorized as: Hot , Warm , and Cool 13

Pre-approach:

Pre-approach Information gathering about the prospect. Sources of information: the Internet, industrial directories, government publications, intermediaries, etc. Precall planning Setting call objectives Tentative planning of sales strategy: which products, features and benefits may meet the customer needs 14

Approach:

Approach Make an appointment to meet the prospect Make favourable first impression Select an approach technique: Introductory Customer benefit Product Question Praise The approach takes a few minutes of a call, but it can make or break a sale 15

Presentation and Demonstration:

Presentation and Demonstration There are four components: Understanding the buyer’s needs Knowing sales presentation methods / strategies Developing an effective presentation Using demonstration as a tool for selling We will examine each of the above points 16

Understanding the buyer’s needs:

Understanding the buyer’s needs Firms and consumers buy products / services to satisfy needs To understand buyer’s needs, ask questions and listen In business situations, problem identification and impact questions are important E.G. Have you experienced any problems on quality and delivery from the existing supplies? What impact the quality and delivery problems will have on your costs and customer satisfaction? 17

Knowing Sales Presentation Methods/Strategies:

Knowing Sales Presentation Methods/Strategies Firms have developed different methods / styles / strategies of sales presentation Stimulus response method / canned approach. It is a memorised sales talk or a prepared sales presentation. The sales person talks without knowing the prospect’s needs. E.G. Used by tele-marketing people Formula method / formulated approach. It is also based on stimulus response thinking that all prospects are similar. The salesperson uses a standard formula – AIDA (attention, interest, desire, and action). It is used if time is short and prospects are similar. Shortcomings are: prospects’ needs are not uncovered and uses same standard formula for different prospects. 18

Sales Presentation Methods (Continued):

Sales Presentation Methods (Continued) Need – satisfaction method Interactive sales presentation First find prospect’s needs, by asking questions and listening Use FAB approach: Features, Advantages, Benefits Effective method, as it focuses on customers Consultative selling method / Problem-solving approach Salespeople use cross-functional expertise Firms adopt team selling approach It is used by software / consulting firms 19

Developing an Effective Presentation:

Developing an Effective Presentation Plan the sales call Some of the guidelines are: Adopt presentation to the situation and person Communicate the benefits of the purchase Present relevant and limited information at a time Use the prospect’s language Make the presentation convincing – give evidence Use technology like multi-media presentation 20

Using Demonstration:

Using Demonstration Sales presentation can be improved by demonstration Demonstration is one of the important selling tools EGs: Test drive of cars; demonstration of industrial products in use Benefits of using demonstration for selling are: Buyers’ objections are cleared Improves the buyer’s purchasing interest Helps to find specific benefits of the prospect The prospect can experience the benefit 21

Overcoming Sales Objections / Resistances:

Overcoming Sales Objections / Resistances Objections take place during presentations / when the order is asked Two types of sales objections: Psychological / hidden Logical (real or practical) Methods for handling and overcoming objections: (a) ask questions, (b) turn an objection into a benefit, (c) deny objections tactfully, (d) third-party certificate, (e) compensation 22

Trial close and Closing the sale:

Trial close and Closing the sale Trial close checks the attitude or opinion of the prospect, before closing the sale (or asking for the order) If the response to trial close question is favorable, then the salesperson should close the sale Some of the techniques used for closing the sale are: (a) alternative-choice, (b) minor points, (c) assumptive, (d) summary-of-benefits, (e) T-account, (f) special-offer, (g) probability, and (h) negotiation 23

Follow-up and Service:

Follow-up and Service Necessary for customer satisfaction Successful salespeople follow-up in different ways: For example, Check order details Follow through delivery schedule Visit when the product is delivered Build long-term relationship Arrange warranty service 24

Negotiation:

Negotiation Salespeople, particularly in business to business selling, need negotiating skills When to negotiate? (a) When the buyer puts certain conditions for buying to the seller, (b) When agreement between the buyer and the seller is needed on several factors, (c) When the product is customized, (d) When the final price is to be decided How to prepare for negotiation? (a) planning, (b) building relationship, (c) purpose Styles of negotiation (a) I win, you lose, (b) Both of us win (or win-win style), (c) You win, I lose, and (d) Both of us lose 25

Qualities of a Successful Sales manager:

Qualities of a Successful Sales manager People skills include abilities to motivate, lead, communicate, coordinate, team-oriented relationship, and mentoring Managing skills consist of planning, organizing, controlling and decision making Technical skills include training, selling, negotiating, problem-solving, and use of computers 26

Goal Setting:

Goal Setting Companies set different objectives for their sales force, depending upon their overall corporate objectives and the nature of commercial activities. From company’s point of view there are three general objectives of goal setting Maintaining continual growth Achieving sufficient sales volume Providing sufficient contribution to profits. 27

Setting goals by Objectives:

Setting goals by Objectives The setting goals by objectives is a process consisting of two steps: Setting goals jointly with the salesman Planning strategy to reach the objectives. 28

Market Demand and Sales Potential:

Market Demand and Sales Potential Market demand for a product or service is the estimated total sales volume in a market (or industry) for a specific time period in a defined marketing environment, under a defined marketing program or expenditure. Market demand is a function associated with varying levels of industry marketing expenditure. 29

Cont….:

Cont…. Market potential is the maximum market (or industry) demand, resulting from a very high level of industry marketing expenditure, where further increases in expenditure would have little effect on increase in demand Company demand is the company’s estimated share of market demand for a product or service at alternative levels of the company marketing efforts (or expenditures) in a specific time period Market Potential Market Forecast Market Minimum Fig. Market Demand Functions Industry marketing expenditure Market demand

Cont…:

Cont… Company sales potential is the maximum estimated company sales of a product or service, based on maximum share (or percentage) of market potential expected by the company Company sales forecast is the estimated company sales of a product or service, based on a chosen (or proposed) marketing expenditure plan, for a specific time period, in a assumed marketing environment Sales budget is the estimate of expected sales volume in units or revenues from the company’s products and services, and the selling expenses. It is set slightly lower than the company sales forecast, to avoid excessive risks 31

Forecasting:

Forecasting Market (or industry) forecast (or market size) is the expected market (or industry) demand at one level of industry marketing expenditure 32

Forecasting Approaches:

Forecasting Approaches Two basic approaches: Top-down or Break-down approach Bottom-up or Build-up approach Some companies use both approaches to increase their confidence in the forecast 33

Steps followed in Top-down / Break-down Approach:

Steps followed in Top-down / Break-down Approach Forecast relevant external environmental factors Estimate industry sales or market potential Calculate company sales potential = market potential x company share Decide company sales forecast (lower than company sales potential because sales potential is maximum estimated sales, without any constraints) 34

Steps followed in Bottom-up / Build-up Approach:

Steps followed in Bottom-up / Build-up Approach Salespersons estimate sales expected from their customers Area / Branch managers combine sales forecasts received from salespersons Regional / Zonal managers combine sales forecasts received from area / branch managers Sales / marketing head combines sales forecasts received from regional / zonal managers into company sales forecast, which is presented to CEO for discussion and approval 35

Sales Forecasting Methods:

Sales Forecasting Methods Qualitative Methods Quantitative Methods Executive opinion Moving averages Delphi method Exponential smoothing Salesforce composite Decomposition Survey of buyers’ intentions Naïve / Ratio method Test marketing Regression analysis Econometric analysis

Slide 37:

Executive opinion method Most widely used Procedure includes discussions and / or average of all executives’ individual opinion Advantages: quick forecast, less expensive Disadvantages: subjective, no breakdown into subunits Accuracy: fair; time required: short to medium (1 – 4 weeks) Delphi method Process includes a coordinator getting forecasts separately from experts, summarizing the forecasts, giving the summary report to experts, who are asked to make another prediction; the process is repeated till some consensus is reached Experts are company managers, consultants, intermediaries, and trade associations 37

Delphi Method (Continued):

Delphi Method (Continued) Advantages: objective, good accuracy Disadvantages: getting experts, no breakdown into subunits, time required: medium (3/4 weeks) to long (2/3 months) Salesforce composite method An example of bottom-up or grass-roots approach Procedure consists of each salesperson estimating sales. Company sales forecast is made up of all salespersons’ sales estimates Advantages: Salespeople are involved, breakdown into subunits possible Disadvantages: Optimistic or pessimistic forecasts, medium to long time required Accuracy: fair to good (if trained) 38

Slide 39:

Survey of Buyers’ Intentions Method Process includes asking customers about their intentions to buy the company’s products and services Questionnaire may contain other relevant questions Advantages: gives more market information, can forecast new and existing products, good accuracy Disadvantages: some buyers’ unwilling to respond, time required is long (3-6 months), medium to high cost Test Marketing Method Methods used for consumer market testing: full blown, controlled, and simulated test marketing Methods used for business market testing: alpha and beta testing 39

Slide 40:

Test Marketing Method (Continued) Advantages: used for new or modified products, good accuracy, minimizes risk of national launch Disadvantages: Competitors may disturb if some methods are used, medium to high cost, medium to long time required Moving Average Method Procedure is to calculate the average company sales for previous years Moving averages name is due to dropping sales in the oldest period and replacing it by sales in the newest period Advantages: simple and easy to calculate, low cost, less time, good accuracy for short term and stable conditions Disadvantages: can not predict downturn / upturn, not used for unstable market conditions and long-term forecasts 40

Exponential Smoothing Method:

Exponential Smoothing Method The forecaster allows sales in certain periods to influence the sales forecast more than sales in other periods Equation used: Sales forecast for next period=(L)(actual sales of this year)+(1-L)(this year’s sales forecast), where (L) is a smoothing constant, ranging greater than zero and less than 1 Advantages: simple method, forecaster’s knowledge used, low cost, less time, good accuracy for short term forecast Disadvantages: smoothing constant is arbitrary, not used for long-term and new product forecast 41

Slide 42:

Decomposition Method Process includes breaking down the company’s previous periods’ sales data into components like trend, cycle, seasonal, and erratic events. These components are recombined to produce sales forecast Advantages: Conceptually sound, fair to good accuracy, low cost, less time Disadvantages: complex statistical method, historical data needed, used for short-term forecasting only Naive / Ratio Method Assumes: what happened in the immediate past will happen in immediate future Simple formula used: Advantages: simple to calculate, low cost, less time, accuracy good for short-term forecasting Disadvantages: less accurate if past sales fluctuate 42

Regression Analysis Method:

Regression Analysis Method It is a statistical forecasting method Process consists of identifying causal relationship between company sales (dependent variable, y) and independent variable (x), which influences sales If one independent variable is used, it is called linear (or simple) regression, using formula; y=a+bx, where ‘a’ is the intercept and ‘b’ is the slope of the trend line In practice, company sales are influenced by several independent variables, like price, population, promotional expenditure. The method used is multiple regression analysis Advantages: Objective, good accuracy, predicts upturn / downturn, short to medium time, low to medium cost Disadvantages: technically complex, large historical data needed, software packages essential 43

Econometric Analysis Method:

Econometric Analysis Method Procedure includes developing many regression equations representing (i) relationships between sales and independent variables which influence sales, and (ii) interrelationships between variables. Forecast is prepared by solving these equations Computers and software packages are used Advantages: Good accuracy of forecasts of economic conditions and industry sales Disadvantages: need expertise & large historical data, medium to long time, medium to high cost 44

Slide 45:

What is a Sales Budget? It includes estimates of sales volume and selling expenses Sales volume budget is derived from the company sales forecast – generally slightly lower than the company sales forecast, to avoid excessive risks Selling expenses budget consists of personal selling expenses budget and sales administration expenses budget Sales budget gives a detailed break-down of estimates of sales revenue and selling expenditure Purposes of the Sales Budget Planning Coordination Control 45

Sales Budget Process:

Sales Budget Process Many firms follow a process for preparation of annual sales and company budgets. It generally includes: Review past, current, and future situations Communicate information to all managers on budget preparation – guidelines, formats, timetable Use build-up approach, starting with first-line sales managers Get approval of sales budget from top management Prepare budgets of other departments 46

Marketing and Sales Strategies:

Marketing and Sales Strategies Figure below shows how sales strategy is developed from marketing strategy Marketing Strategy * IMC: Integrated Marketing Communication Target market strategy (Long-term) Marketing mix strategy (Short-term) Product / service strategy Promotion / IMC* strategy Price strategy Distribution strategy Sales promotion strategy Advertising strategy Personal selling / sales strategy Public relations & Publicity strategy Direct marketing strategy *source: Sales and distribution Management TMH-Hawaldar 47

Components of Sales Strategy:

Components of Sales Strategy Classifying market segments and individual customers within a target segment Each firm should first decide on target market segments and if possible, to classify customers into high, medium, low sales & profit potentials Sales strategy is developed accordingly Relationship strategy Whether a selling firm should use transactional, value-added, or collaborative relationship depends on both the seller and the customer Each selling firm to decide which segments and individual customers respond profitably to collaborative relationship 48

Components of Sales Strategy (Continued):

Components of Sales Strategy (Continued) Selling Methods These are: (1) Stimulus response, (2) formula, (3) need-satisfaction, (4) team selling, (5) consultative Selection of appropriate selling method depends on relationship strategy Channel Strategy There are many sales / marketing channels. For example: company salesforce, distributors, franchisees, agents, the internet, brokers, discount stores Selection of a suitable channel depends on both the buyer and the seller, products / services, and markets 49

Slide 50:

Sales Territories A sales territory consists of existing and potential customers, assigned to a salesperson Most companies allot salespeople to geographic territories, consisting of current & prospective customers Major Reasons / Benefits of Sales Territories Increase market / customer coverage Control selling expenses and time Enable better evaluation of salesforce performance Improve customer relationships Increase salesforce effectiveness Improve sales and profit performance 50

Procedure for Designing Sales Territories:

Procedure for Designing Sales Territories Select a control unit* Find location and potential of present and prospective customers within control units** Decide basic territories by using Build-up method, Or Break-down method *A control unit is a geographical territorial base **Unnecessary & expensive for consumer products 51

Procedure in Build-up Method:

Procedure in Build-up Method Decide customer call frequencies Calculate total customer calls in each control unit Estimate workload capacity of a salesperson Make tentative territories Develop final territories Objective is to equalise the workload of salespeople 52

Procedure in Breakdown Method:

Procedure in Breakdown Method Estimate company sales potential for total market Forecast sales potential for each control unit Estimate sales volume expected from each salesperson Make tentative territories Develop final territories Objective is to equalise sales potential of territories 53

Slide 54:

Assigning Salespeople to Territories Sales Manager should consider two criteria: Relative ability of salespeople Based on key evaluation factors: (1) Product knowledge, (2) market knowledge, (3) past sales performance, (4) communication, (5) selling skills (B) Salesperson’s Effectiveness in a Territory Decided by comparing social, cultural, and physical characteristics of the salesperson with those of the territory Objective is to match salesperson to the territory 54

Management of Territorial Coverage:

Management of Territorial Coverage It means: How salesperson should cover the assigned sales territory It includes three tasks for a sales manager: Planning efficient routes for salespeople Scheduling salespeople’s time Using time-management tools 55

Routing:

Routing Routing is a travel plan used by a salesperson for making customer calls in a territory Benefits of or Reasons for routing: Reduction in travel time and cost Improvement in territory coverage Importance of routing depends on the application: Nature of the product – Important for FMCG Type of jobs of salespeople – Important for driver-cum-salesperson job, but creative selling job needs a flexible route plan 56

Procedure for Setting up a Routing Plan:

Procedure for Setting up a Routing Plan Identify current and prospective customers on a territory map Classify each customer into high, medium, or low sales potential Decide call frequency for each class of customers Build route plan around locations of high potential customers Computerised mathematical models are developed Commonly used routing patterns are: B Circular B Clover Leaf Base (B) C5 C1 C4 C3 C2 Straight line / Hopscotch Sales and distribution Management TMH-Hawaldar 57

Scheduling:

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 58

Time Management Tools:

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 59

Sales Quotas:

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 60

Types of Quotas:

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 61

Sales Volume Quotas (Continued):

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 62

Financial Quotas:

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 63

Activity Quotas:

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 64

Combination Quotas:

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

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 66

Total Market Estimates Method:

Total Market Estimates Method The Process followed by established companies is as under: Estimate next year’s total market demand, or industry sales forecast, using sales forecasting methods Decide the company’s estimated market share for next year Company’s next year sales forecast= (1) x (2) Find each territory’s percentage share out of the total company sales in the previous year Territory sales quota = (3) x (4) 67

Territory Potential Method:

Territory Potential Method The procedure followed by new companies is as under: Estimate next year’s industry sales forecast or market potential, using sales forecasting methods Estimate multiple factor index (MFI) for each territory, based on factors that influence sales of the product. These factors are given weights corresponding to the degree of sales opportunity. Industry sales forecast in a territory (or territory market potential=(1)x(2) Territory sales quota = (3) x estimated market share of the company in the territory 68

Past Sales Experience Method:

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 69

Slide 70:

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 70

Slide 71:

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” 71

Objectives:

Objectives 1.A plan drawn up by sales managers to ensure that all prospective markets are visited by the sales team is known as a __________ plan Coverage (b) Beat (c) call (d) market 2.The schedule and sequence for visitng the outlets in any market is known as __________ plan . (a)Call (b) beat (C) outlet (d) visit 3.A _____________ made by sales managers is part of the demand management process. (a)promise (b) estimate (c) forecast (d) guess 4. A _____________ concept ensures that there is no wastage of effort and time in covering market. (a)Milk run (b) call plan (c) outlet coverage (d) scheduling 5. Breaking bulk storage and delivery to customers are the task performed by a ____________ (a)C&FA (b) Distributor (c) Transporter (d) Warehouse 72

Objectives:

Objectives 6. Sales Management has an important position in the organization because it is (a)Closer to customer (b) The only income generating function 7. Organizations many times use relationship selling approach to (a)Large (b) medium (c) few number of customers 8.Out of three important skills for the success of a sales manager the two are (a)managing and technical skills. The third skill is Communication (b) Negotiation (c) Problem solving (d) People 9.The first stage in buying decision process , in both consumer and business markets is (a)Information search (b) Deciding the characterstics and quality of needed product © Problem or need recognition (d) None of the above 10. A prospect who needs the product and has an ability to buy, is also referred to as a (a) Suspect (b) Sales lead (c) Probable prospect (d)potential customer 11. In defining a sales territory key word is (a) Sales (b) customers (c) geographic area (d)none of the above 73

Objectives:

Objectives 12. Effective territories design and allocation of sales people to territories result in (a) improves sales force performance (b) improves company performance (c) growth of above 13 In designing sales territories , the sales manager should start the process by selecting a geographic control unit that is Small (b) large (c) medium size (d) any size 14. Basic territories can be determined by using (a) build up method (b) breakdown method (c) both the above method 15.In build up method company tries to (a) equalize the sales potential of territories (B) equalize the workload of sales people (c) equalize both sales potential of territories and workload 74

References:

References Sales and Distribution Management: K. Havaldar, Cavale.: Tata Mcgrawhill Sales and Distribution Management: Tapan K panda, Sahdev : Oxford publication Sales Management : Cundiff . 75