sales and distribution management

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Sales and Distribution Management:

Sales and Distribution Management Sales and Distribution Strategy Sales involves delivery and transfer of ownership of the product or service to the customer It forms the beginning of the latter part of the supply chain post manufacture Sales constitutes the direct and most intimate contact of the firm makes with its customers Sales is responsible for the fulfillment of the promise made to the customer by its predecessor function-marketing While marketing is responsible for creation of a customer, sales and after sales service are responsible for servicing and retention of the customers

Areas of Sales Management Responsibilities:

Areas of Sales Management Responsibilities Forecasting of aggregate and product wise sales, using past data and incorporating current and future trends Designing and managing the sales workforce to meet the forecast and build long term relations with associates Decide on critical aspects of sales policy including pricing, credit terms to customers and settlement of claims To closely liaise with After Sales service to present a united customer care front to associates and consumers

Role of Sales Management:

Role of Sales Management The larger concept of marketing is the creation, servicing and retention of customers and markets This comprises identifying customer wants, designing and developing products/services to meet these wants Designing products, deciding initial pricing,building awareness, persuasion-role of marketing function Sales role-Actual delivery of products/services to the customer maximizing convenience and ensuring satisfaction Finally fulfilling the promise made to the customer through sincere and effective after sales service

Role of Sales Management:

Role of Sales Management Marketing covers want identification and development of appropriate products/services Sales involves transfer of ownership and possession to the customer in exchange for the price she pays Retention of the customer takes place in the after sales and customer service part of the larger marketing chain

Role of Sales Management:

Role of Sales Management Effective transfer of possession and ownership to the customer This has to be done in the right place, right time and the right manner Choice of channel members, deciding the terms of engagement with channel partners, Sales promotion and merchandising are key responsibilities Effective liaising with Marketing and manufacturing are essential ingredients for successful selling

Role of Sales Management:

Role of Sales Management Timely and accurate information on gross sales and by product, studying current sales trends and projecting future trends are important responsibility elements Sales has to be the secondary/tertiary sales which represents consumer off take and not as is usually the case reflect primary i.e. “push sales” Sales constitutes the first point contact with primary and secondary customers Image of a company and its business prospects are critically impacted by the attitude and the performance of the sales force

Managing the sales force:

Managing the sales force Three fundamental issues: the right organization, the right sales force and the right evaluation and compensation system Key to sales force organization is the level of aggregation over product lines and choice of geographical coverage Most Indian companies have common sales force for all product categories. A few like Philips have segmented sales force viz. audio and video products have separate sales force Deciding the mix between specialized segmental skills and the cost benefit analysis to justify the decision is key to sales force organization

Sales force strength and organization:

Sales force strength and organization No of persons required at various levels and positions is decided based on geographical coverage and intensity of coverage of channel outlets (Break bulk, distributor and retail) Benchmarking with key competitors is useful for new sales force as well as updating existing sales force Back office and infrastructural support are key inputs in determining the sales force composition Establishing performance standards, being “best in the class” should be the objective Qualification should include aptitude as well as attitudinal requirements. Learning curve inputs also vital

Compensation and Incentive Systems:

Compensation and Incentive Systems Compensation should be competitive both externally and internally. In India “in hand” is relevant An effective incentive system sets aggressive but achievable and transparent targets (most Indian companies fail here) Should reflect business priorities, be simple and easy to administer Supporting requirements are reliable forecasts and rational budgeting Most important- focus to be on secondary i.e. consumer sales and not primary i.e. Invoice numbers

Managing the Sales Force:

Managing the Sales Force Deploy according to desired territorial configuration: ensure adequate coverage breadth wise and depth wise Continuous interaction with all channel members to be ensured. Partnership is the focus Role of senior and top management crucial. Every senior/top person to make sales visits. Helps to be in touch with market realities Sales persons whereabouts to be continuously monitored. Regular sales visit and performance reports a must Training both class room and on the job to be a continuous and evolving initiative. Mentorship to be institutionalized Regular periodic transfers between marketing, sales and after sales service personnel helps to improve integration and versatility between the three arms of the larger marketing function

Sales Strategy-choice among several options:

Sales Strategy-choice among several options Relationship strategy aims at developing a holistic partnership with all those involved in the buying decision e.g. computers and industrial marketing Double win strategy ensures outcomes for both buyer and seller, requires empathizing from both, is essential part of any selling strategy Heroic sales strategy involves money back, free replacement and persistent after sales contact. Most successful in maximizing loyalty and retention Customer centric instead of product centric strategy shifts emphasis towards customer and away from short term sales person strategy which is increase numbers.

Methods of Selling:

Methods of Selling Selling through channel partners(distributors and dealers) Direct selling which bypasses channel associates works for some products(personal care,household-Avon,Amway, Eureka Forbes) Sales through large retail chains in house brands (Wal-Mart, Home Depot) Mail order sales(Sears), telemarketing of services increasingly popular-to be questioned in terms of appropriateness(standardized, low involvement products eligible)

Channel Management and Channel strategy:

Channel Management and Channel strategy Distribution channels have different members each forming a link in the chain between company and customer We start with Carrying and Forwarding agents who “break bulk” Distributors, wholesalers and retailers form the rest of the chain in that order(they are all primary customers) not final customers Most channel members operate on remuneration of fixed costs plus variable margins on goods sold or moved

Channel strategy decisions:

Channel strategy decisions Channel selection first step: no of factors include market factors, competitors, intermediary availability and product factors Market factors include customer preference for place of purchase viz. supermarket, departmental store, neighborhood outlet Geography is important(rural customers in India prefer centralized selling locations,whereas urban prefer to shop closer to home Sometimes new entrants can choose locations overlooked by incumbents (Wal-Mart rural Arkansas while incumbents preferred big cities)

Some Channel Definitions:

Some Channel Definitions Distributors are bulk buyers and sellers of company products/services. Perform all functions of primary customers viz. bulk storage, retailer servicing and participation in sales promotion Wholesalers sometime synonymous with distributors but at others one step down the logistic chain handling sub territory of larger distributor area Agents/brokers are channel partners who do not take title to company’s goods but act as intermediaries between seller and customers (primary or secondary) –resorted to in initial stages of establishing post manufacturing supply chain Retailers are the last link in the supply chain, interface with the consumer/customer and are responsible for creating and maintaining the firm’s image with them.

Channel selection criteria:

Channel selection criteria Most firms initially go for established channel members already partnering big players like H.L.L or Nestle Timex Watches decided to go in for enlightened, aggressive newcomers and this paid off handsomely Stage in product life cycle important. In initial stages risk with newcomers preferred. Later choice with company either veterans or more new comers High tech products like info. Hardware requires substantial company support through trained personnel. Low tech products in personal care, personal ware can do with fewer company support personnel Low value products can be sold through wholesalers and general retailers. However high value products including appliances, white goods require focused retailing and excellent after sales service infrastructure In all cases close contact with ultimate customers is a must. Companies ignore this basic wisdom at their peril.

Roles/responsibilities of channel members:

Roles/responsibilities of channel members Carrying &forwarding agents maintain company stock and move it to distributors/wholesalers. Invoicing to primary customers from C.F.As Wholesalers/distributors carry their own stocks and service retailers. Adequate territory coverage is their responsibility Retailers stock, display and sell to their customers. Key requirement is accurate and timely reporting of stocks based on which alone reliable records of demand can be built Retailers should also do the best in selling, and building rapport and goodwill with customers and in advising them and guiding with their best interests and the company’s as well in mind

Company responsibility to channel members:

Company responsibility to channel members Channel members should not be loaded with excess inventory which will cause resentment and lower their commitment Every channel member should be given appropriate mix of product-fast moving, medium and slow moving. Non moving product should be removed by company at periodic intervals. Discount schemes do not solve the problem Company should provide adequate primary and secondary display to channel members and point of purchase material Good appraisal and reward system should be put in place to reward the right partner performance. Non performers should be gradually weeded out. Long term orientation should be the key to assessing all channel partners Frequent and caring interaction with channel partners and prompt addressal of grievances will help to build and sustain enduring partnerships as opposed to opportunistic alliances

Indian Distribution Scenario:

Indian Distribution Scenario Traditional role of intermediaries viz. set up minimal infrastructure and expect guaranteed returns Extremely high cost of logistics Lowest margins in the world Expectation of extremely low prices from Indian mass market customers further pressurizes already low returns

Indian Distribution Scenario:

Indian Distribution Scenario Challenge of working with low product portfolios and low inventories not acceptable to firms as well as channel partners Poorly organized and managed distribution and retail operations. Company owned and managed facilities not much better Continuous pressure on sales force to achieve unrealistic targets results in equally unrealistic pressure on channel partners Prevailing mindsets have to change for both firms and channel partners

The Sales Organization:

The Sales Organization Functions include planning, administrative and executive functions Planning features forecasting, budgetting and formulation of sales policy Administrative function comprises recruitment of sales force, training, appraisal/reward systems and control Executive functions include sales promotion and selling routine i.e. execution of customer orders\ Objective of the sales organization is to ensure achievement of the company’s sales and profit targets


Forecasting Forecasting may be of total product/service sales or of sub product or individual products or combinations of all While forecasting is essentially a prediction of future sales, it usually is a projection of past sales incorporating credible trends Desirable to give more weightage to recent period sales. At least ten previous periods data should be taken for reliability.Most Indian firms ignore these to their cost


Forecasting For cyclical industries, need to know the length of the cycle(might change as for Indian auto industry from 4 yrs up to 1980s to 5 years post 1980s) Amplitude as % change to be measured Cycles include macro economic cycles, industry cycles and inventory cycles(most Indian companies do not include these in their forecasts Finally consumer sales to be measured and forecasted and not sales to channel members as is unfortunately done

Sales Budgets:

Sales Budgets Sales budgets are overall sales plans enumerated in financial terms The forecast by gross units, product groups and individual variants to be converted into Re terms Expenses for promotions and schemes as well as infrastructure like hoardings and shop signage to feature Allowances for spoiled and obsolete product withdrawals to be included Targetted levels of overall receivables and acceptable age of receivables also part of budget

Sales Budgets:

Sales Budgets Budgets should be approved by senior sales executives with their marketing and financial counterparts and finally approved by top management Budgets should be reviewed definitely on a quarterly basis and preferably on monthly basis Changes should be minimal but incorporated into revised budgets after approval by top management

Sales Policy:

Sales Policy Firstly the direct/indirect issue. Do we go for direct selling? Do we use distributors? If so how many in various territories and regions? How many in metros/large cities? Next to decide the terms of sale including credit terms and to whom various credit terms applicable(franchisees, direct and indirect dealers)

Sales Policy:

Sales Policy Deciding minimum infrastructure for channel partners Intensity and frequency of coverage by sales personnel I.e. weekly/monthly visits to specific retail outlets and distributors and CFAs Warranty policy and ASS infrastructure to be decided.Training and supervision of Channel staff for various functions including logistics, motivation of retailers and handling quality issues are part of sales policy Need to involve Marketing and QC personnel in formulation of relevant aspects of sales policy where their contribution is critical

Administrative Functions:

Administrative Functions First step is the selection of sales personnel. Various sources including media, placement agencies and educational/vocational training campuses have to be tapped Employee contacts are useful for experienced personnel. Poaching seems attractive but is a short term approach

Short term performance initiatives:

Short term performance initiatives These are short term inducements to customers to buy more of the firm’s products These include discount, coupon sales, lucky draws and contests These require involvement of Marketing and finance groups to ensure best synergy of market enhancing and profit achievement objectives Problem is that most of these only result in altering the timing of purchase and do not contribute to increased sales during the year Further these contribute to brand dilution and ambiguity about real pricing points for the brand offering

Some Suggestions:

Some Suggestions It is better to build brand credibility, offer real value propositions to customers through relevant communication and strategic pricing Associates should be supported through adequate infrastructure including signage and merchandising support Finally associate remuneration should be competitive and permissive of realistic long term earning prospects Information systems and good evaluation/incentive schemes with a view to build enduring partnerships should form the keystone of associate formation and development

Sales Organization Types:

Sales Organization Types Several types based on competitive specialization of selling orgn. Geographical orgn. most common where all firm’s products sold in each region -assumes demand patterns and associate capability uniformly spread Product type sales organization e.g. pharma cos have medicines, equipment and supplies organized in separate groups

Sales Organization Types:

Sales Organization Types Orgns. based on customer types viz. Industrial, Institutional and Consumer categorization. IBM, Xerox, Publishing cos Activity function based including telemarketing, direct selling, and field sales- telecom firms follow this approach Hybrid sales orgns. Large cos evolve into this form of orgn. over time

Recruitment,training and compensation of sales force:

Recruitment,training and compensation of sales force Recruitment is process of locating, selecting and employing suitable persons for the sales force Matching to positions on the orgn chart and to job specs is essential Objective criteria and sound methods of testing/evaluating ensure good recruitment Over reliance on criteria such as quantum of prior experience a pitfall

Recruitment contd.:

Recruitment contd. Reference check on previous employment experience and performance necessary Clear statement of expectations from new employees on conduct and performance a must Offer of emoluments and future prospects to be unambiguous(avoid vague “sky is the limit” promises-nobody believes them anyway)

Training of Sales force:

Training of Sales force Training needs flowing from job specs is the starting point. Understanding customer markets is critical Detailed product knowledge mandatory for all types of offerings. For low tangibility differentiated offerings(e.g.personal care), knowledge of emotional satisfiers helps Knowledge of the market place, competitors, channel associates and selling practices are focus areas Inventory management, good logistics practices and receivables management should be vital inputs

Training of Sales Force:

Training of Sales Force Frequency, timing and manner of sales visits to various channel associates is fundamental training input Communication skills a priority with emphasis on receiving and rapport building(listening and empathising) Training methods include formal class room formats, field training, seminars and interaction with senior/top mgmt On the job training by superiors combining concept with practice should co-exist with general functional and behavioural training

Compensation and Motivation of Sales Force:

Compensation and Motivation of Sales Force Sales compensation through salary,bonuses and perquisites Significant part of compensation to be performance based. Care to be taken to set realistic, real world targets.

Motivation of Sales Force:

Motivation of Sales Force Motivation is the driving force based on positive feelings that produces goal directed action It is necessary to reward goal directed action to ensure repetitive behaviour towards the goal/goals The first step obviously is to establish the right goals

Right Sales Goals-the right approach:

Right Sales Goals-the right approach Customer to be the focus always. Creation of new customers and retention of existing customers Primary and Secondary/final customers should merit equal focus. In fact primary customers are stakeholders too with their unique set of rightful expectations If we short change the primary customer, we are unlikely to fully meet the expectations of the end customer

The Sales Goals:

The Sales Goals The final goal has to be maximizing long term profits through optimizing the volume/margin relationship Channel inventory planning and control is critical Optimizing accounts receivables is another critical responsibility and therefore major performance variable Critical variable is retail sales which reflect consumer sales and therefore demand for company’s product/services

Sales goals:

Sales goals Unit of sales needs to be defined properly. For services like telecom, a unit of standard value (Rs. x representing a standard offering like monthly revenue) For merchandising, and signage joint goals for sales and marketing should be set Min. no of inventory turns for each channel partner should also be a sales goal. Recommended min 12 for every industry Min revenue/profit per sq.ft of space should be a retail target Regular and reliable reports should be a fundamental performance requirement

Rewarding Performance as well as Potential:

Rewarding Performance as well as Potential Rewarding current performance in financial and non financial measures is intrinsic to motivation Need to spot & assess and develop potential through training and award of challenging assignments is the greater part of motivation Involve sales personnel in critical customer service areas like new product selection, pre manufacturing logistics. Establish contributions from sales personnel(feedback they carry from customers primary and secondary is input) Role of mentors is very important. Attaining the position of a mentor could be the ultimate goal of outstanding performers. Nurturing mentorship throughout the sales organization is key to superior competitiveness

Channel Partner Management:

Channel Partner Management Need to select the right channel partners-new to the industry,new to business is the best Clear set of expectations to be communicated at selection(storage, inventory management, retailer servicing and support, timely and reliable information are key Competitive remuneration with accompanying rigorous performance standards Information about the sales responsibility domain, competitors and relevant socio,political, cultural impacters

Channel Partner Management:

Channel Partner Management Providing initial and ongoing training on product, technologies, logistics practices and Info systems critical Periodic visits to company facilities and interaction with company personnel over all relevant functions viz. marketing, manufacturing, Q.C. and Finance/accounts Rewards and recognition through channel partner conferences an important motivating and enabling device Most importantly fostering the partner identity in all channel partners

Company responsibility to channel members:

Company responsibility to channel members Channel members should not be loaded with excess inventory which will cause resentment and lower their commitment Every channel member should be given appropriate mix of product-fast moving, medium and slow moving. Non moving product should be removed by company at periodic intervals. Discount schemed do not solve the problem Company should provide adequate primary and secondary display to channel members and point of purchase material Good appraisal and reward system should be put in place to reward the right partner performance. Non performers should be gradually weeded out. Long term orientation should be the key to assessing all channel partners Frequent and caring interaction with channel partners and prompt addressal of grievances will help to build and sustain enduring partnerships as opposed to opportunistic alliances


Merchandising Merchandising is the process of increasing visibility and appeal of products to increase saleability It includes product packaging, placement, promotion and “special pricing” One other form of merchandising is using the brand power of one organization to sell products of another.(sports personalities and entertainment cos lending their brand names to various products)


Merchandising Mostly merchandising focusses on presentation of products including displays and special instore storage and packaging(gift bags, racks, trays), posters, danglers, special cards/brochures It also features discount schemes along with the pricing and packaging features Outdoor signage and on shop and in shop signage could also feature as part of merchandising

Planning and evaluation :

Planning and evaluation Some aspects like signage should be considered as longer term and should feature as investment Others including displays and special packaging and pricing initiatives would be shorter term and should be expensed All expenditure should be justified in terms of real sales increase(not changing the timing of purchase by customer as in most festival sales)

Planning and Evaluation:

Planning and Evaluation Test marketing and post purchase surveys of customers should be the basis of evaluation One tip is that all merchandising should keep the customer in mind. Need to avoid feeding the creative instincts or egos of marketing personnel in the company Merchandising should be the joint responsibility of Marketing and Sales sub functions of the larger Marketing function


Summary Defining larger Marketing process and Sales sub process Areas of Sales responsibility, forecasting, sales organization, selection, training and retention issues, compensation, motivation of sales force Sales strategy, types of selling viz direct selling, through channel members, mail order, e selling Sales budgeting, how to develop the budget as effective planning and control tool


Summary Essentials of space planning and inventory management Channel members types and roles, selection of channel partners Mutual expectations of firm and its chnl. Partners, training, rewards/recognition Sales goals optimizing the long term volume/margin combination


Summary Company responsibility to channel members including promotional and information systems support Merchandising basics, role of company and channel partners

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