Concepts of sales management


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Basic description of the Sales management and the allied topics like CRM and Sales Force Automation.

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Concepts of sales management

  1. 1. CONCEPT OF SALES MANAGEMENT 1 | D e b a y a n D u t t a Sales Management Sales management is a business discipline which is focussed on the practical application of sales techniques and management of a firm’s sales operations. It is an important business function as net sales through sale of products and services and resulting profit drives most commercial business. Marketing Approaches Marketing Strategy deals with company orientation towards market place. It deals with mainly 4 concepts. 1. Production Concept: The idea that the consumers will favour products those are available and highly affordable. Example Lenovo 2. Product Concept: The idea that the consumers will favour products that offers most in quality performance and innovative features. 3. Selling Concept: The idea that the consumers will not buy enough of the firm’s products unless it undertakes a large scale selling and promotion effort. Example insurance 4. Marketing Concept: The marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than the competitors do. Marketing Vs Sales Sales as a process implies exchanging the products or services in exchange for money in such a manner that what you get from it is more than what you put into it. In other words, difference between the realized sales price and the cost of manufacturing is the profit for the organisation from sales. Marketing on the other hand includes understanding the value proposition in the minds of the customer and designing products and services accordingly. Coordinating Marketing and Sales Ideally the sales force and the firm’s other marketing functions should work together closely to jointly create value for both customers and the company. Unfortunately however some companies still treat marketing and sales as separate functions. When this happens often the two separated functions don’t get along well. When things go wrong, the marketers (marketing planners, brand managers and researchers) blame the sales force for its poor execution of an otherwise splendid strategy. In return the sales team Marketing Strategy Production Concepts Product Concept Selling Concept Marketing Concept
  2. 2. CONCEPT OF SALES MANAGEMENT 2 | D e b a y a n D u t t a blames the marketers for being out of touch for what really going on with the customers. The marketers sometimes fee that the sales people have their “feet stuck in the mud”, whereas salespeople feel that the marketers have their “heads stuck in the clouds”. A company can take several actions to help brings its marketing and sales functions closer together. At the most basic level it can increase communication between the two groups by arranging joint meetings and creating joint assignment. Fig: 2.1 Components of Marketing Mix Fig: 2.2 Profits through customer satisfaction Integrated Marketing Customer NeedsMarket Profits through sales volume Selling and Promoting Existing Products Factory Marketing Mix Product Price Promotion Advertising Public Relations Personal Selling Sales Promotion Place Starting Point Focus Means Ends The selling concept The marketing concept SALES MANAGEMENT
  3. 3. CONCEPT OF SALES MANAGEMENT 3 | D e b a y a n D u t t a Personal Selling Personal Selling consists of interpersonal interactions with customers and prospects to make sales and maintain customer relationships. Personal selling is the interpersonal arm of the promotion mix. A company’s sales people create and communicate customer value through personal interaction with customers. Example:  One of the oldest examples of personal selling is LIC. NATURE OF PERSONAL SELLING Personal Selling is one of the oldest professions in the world. The people who do the selling go by many names: salespeople, sales representatives, agents, sales engineers, sales consultants etc. People may hold many stereotypes of sales people – including some unfavourable one. However modern salespeople are a far cry from these unfortunate stereotypes. Today most sales people are well educated, well trained professionals who add value for customers and maintain long term customer relationships. They listen to their customers, assess customer needs, and organize the company’s efforts to solve the customer problems. Robert Louis Stevenson once noted that “everyone lives by selling something”. Sales are longer the avenue of choice for washouts. In today’s hypermarkets, “buying is not about transactions anymore”. The term salesperson covers a wide range of positions. At one extreme a salesperson might be largely an order taker, (ex: retail store person standing behind the counter) at the other extreme are order getters, whose positions demand creative selling and relationship building. ROLE OF SALES FORCE The sales force serves as a critical link between a company and its customers. In many cases the salespeople serves both masters – the seller and the buyer. First, they represent the company to the customers at the same time they represent customers to the company. In fact to many customers the salesperson is the company – the only tangible manifestation of the company they see. Hence customers become loyal to sales people as well as to the company and the product they represent. This concept of “salesperson owned loyalty” lends even more importance to the salesperson’s customer relationship building abilities.
  4. 4. CONCEPT OF SALES MANAGEMENT 4 | D e b a y a n D u t t a Managing Sales Force The definition of sales force management is the analysis, planning, implementation and control of sales force activities. There are broadly 6 sales force activities … Fig: 2.3 Sales Force Structure A company can divide sales responsibilities along any of several lines. There are broadly 4 sales force structures  Territorial Sales Force Structure: A sales force organization that assigns each salesperson to an exclusive geographic territory in which the salesperson sales the company’s full line.  Product Sales Force Structure: A sales force organization under which the salespeople specialize in selling only a portion of the company’s product lines. Ex: GE  Customer Sales Force Structure: A sales force organization under which salespeople specialize in selling only to certain customers or industries. Ex: Sony has a separate sales force structure to handle large organized retailers like E-Zone and Croma  Complex Sales Force Structure: When a company sells a wide variety of products to many types of customers over a broad geographic area, it often combines several types of sales force structure. Salespeople can be specialized by customer and territory, by product and territory, by product and customer, or by territory, product and customer. No single structure is best for all companies and situations. Each company select a sales force structure that best serves the needs of its customers and fits its overall marketing strategy. Sales management must also decide who will be involved in the selling effort and how various sales support people will work together. The company may have an outside sales force (or field sales force), an inside sales force, or both. Outside Salespeople travel to call on customers in field. Inside Salespeople conduct business from their offices via telephone, internet, or visits from buyers. As products become more complex, and as customers grow larger and more demanding, a single salesperson simply can’t handle all of a large customer’s needs. Instead most companies now use team selling to service large, complex accounts. Such teams might include experts from any area or level of the selling firm – sales, marketing, technical and support services, R&D, engineering, operations, finance and others. Designing sales force strategy Recruiting and selecting salespeople Training Salespeople Compensating Salespeople Sueprvising Salespeople Evaluating Salespeople Major Steps in Sales Force Management
  5. 5. CONCEPT OF SALES MANAGEMENT 5 | D e b a y a n D u t t a Example: IBM, Xerox, P&G have used the team selling concept for a long time. P&G sales rep are organized into “customer business development (CBD) teams”. Each CBD team is assigned to a major P&G customer, such as Wal-Mart, Safeway, or CVS Pharmacy. These teams consists of customer business development manager, several account executives (each responsible for specific category of P&G products), and specialist in marketing strategy, operations, information systems, logistics, and finance. This organization places the focus on serving the complete needs of each important customer. Recruiting and selecting Salespeople At the heart of any successful sales force operation is the recruitment and selection of good salespeople. In typical sales force, the top 30% of the salespeople might bring in 60% of the sales. What sets great salespeople apart from the rest? In an effort to profile top sales performers, Gallup Management Consulting Group, interviewed hundreds and thousands of salespeople. Its research suggests that the best salespeople possess four key talents: intrinsic motivation, disciplined work style, the ability to close sale, and perhaps the most important, the ability to build relationships with customers. Training Salespeople New salespeople may spend anywhere from a week or months to a year or more in training. Then most companies provide continuing sales training via seminars, sales meetings, and Web e-learning throughout the sales person’s career. In all U.S. companies spend more than $ 7 billion annually on training salespeople. Training programs have several goals. First the salespeople need to know about customers and how to build relationships with them. So the training program must teach them about different types of customers and their needs, buying motives, and buying habits. And it must teach them how to sell effectively and train them in the basics of the selling process. Salespeople also need to know and identify with the company, its products and its competitors. So an effective training program teaches them about the company’s objectives, organization, and chief products and markets, and about the strategies of major competitors. Compensating Salespeople To attract good salespeople, a company must have an appealing compensation plan. Compensation is made up of several elements – a fixed amount, a variable amount, expenses, and fringe benefits. The fixed amount, usually a salary, gives the salesperson some stable income. The variable amount, which might be commissions or bonuses based on sales performance, rewards the salesperson for greater effort and success.
  6. 6. CONCEPT OF SALES MANAGEMENT 6 | D e b a y a n D u t t a Active Selling 10% Prospectin g 10% Problem Solving 14% Personal Downtime 17% Travel Time 18% Administra tion 31% How salespeople spend their time Management must decide what mix of these compensation elements makes the most sense for each sales job. An American study of sales force compensation showed that the average salesperson’s pay consists of about 67% salary and 33% incentive pay. Fig: 2.4 Supervising and Motivating Salespeople The goal of supervision is to help salespeople “work smart” by doing the right things in the right ways. The goal of motivation is to encourage salespeople to “work hard” and energetically towards sales force goals. Companies vary in how closely they supervise their salespeople. Many help their salespeople to identify their target customers and set call norms. Some may also specify how much time the sale force should spend prospecting for new accounts and set other time management priorities. One tool is weekly, monthly, annual Call Plan that shows which customers and prospects to call on and which activities to carry out. Another tool is time and duty analysis. Fig: 2.5 On an average the active selling time accounts for only 10% of the total working time. Fixed Component Variable Component
  7. 7. CONCEPT OF SALES MANAGEMENT 7 | D e b a y a n D u t t a Beyond directing salespeople, sales manager must also motivate them. Selling can also be frustrating. Salespeople often work alone and they must sometimes travel away from home. They may face aggressive competing salespeople and difficult customers. Therefore salespeople often need special encouragement to do their best. Management can boost sales force morale and performance through its Organizational Climate, Sales Quotas, and Positive Incentives. Organizational Climate describes the feeling that salespeople have about their opportunities, value, and rewards for a good performance. Sales quota is a standard that states the amount a salesperson should sell and how sales should be divided among the company’s products. Companies also sponsor sales contests to spur sales force to make a selling effort above what would normally be expected. Evaluating sales force and salespeople performance Management gets information about its salespeople in several ways. The most important source is sales report, including weekly or monthly work plans and longer term territory marketing plans. Using various sales force reports and other information, sales management evaluates members of the sales force. It evaluates salespeople on their ability to “Plan their work and work their plan”. Formal evaluation forces management to develop and communicate clear standards for judging performance. It also provides salespeople with constructive feedback and motivates them to perform well. On a broader level, management should evaluate the performance of the sales force as a whole. Is the sales force accomplishing its customer relationship, sales, and profit objectives? Is it working well with other areas of marketing? Are sales force costs in line with the outcomes? As with other marketing activities, the company wants to measure its return on sales investment.
  8. 8. CONCEPT OF SALES MANAGEMENT 8 | D e b a y a n D u t t a The Personal Selling Process The selling process consists of several steps that the salesperson must master. These steps focus on the goal of getting new customers and getting orders from them. STEPS IN THE SELLING PROCESS The selling process consists of 7 steps: Prospecting and qualifying, pre-approach, approach, presentation and demonstration, handling objections, closing and follow-up. Fig: 2.6  Prospecting and qualifying: The first step in the selling process is prospecting - Identifying qualified potential customers. The salesperson often approach many prospects to get just a few sales. The best source is referrals. Salespeople can ask the current customer for referrals and cultivate other referral sources, such as noncompeting salespeople, bankers, dealers etc. They can also search for prospects in directories or on the Web and track down these leads using the telephone and direct mails. Salespeople also need to know how to qualify leads – that is, how to identify the good ones and screen out the poor ones. This can be done by looking at their financial ability, volume of business, special needs, location, and possibility of growth.  Preapproach: Before calling on a prospect, the salesperson should learn as much as possible about the prospective customer. Preapproach begins with good research. The salesperson can consult standard industry and online sources, acquaintances, and others to learn about the prospective customer. Then the salesperson must apply research to develop a customer strategy. “You need to translate data into something useful for your clients”.  Approach: During the approach step the salesperson should know how to meet and greet the buyer and get the relationship off to a good start. The steps involve the salesperson’s appearance, the opening lines and the follow-up remarks.  Presentation and demonstration: During this stage the salesperson tells the “value story” to the buyer, showing how the company’s offer solves the customer’s problem. The customer-solution approach fits best with today’s relationship marketing focus. The solution approach calls for a good listening and problem solving skills. “God gave us two Prospecti ng and qualifying Pre approach Approach Presentati on and demonstr ation Handling objections Closing Follow-up
  9. 9. CONCEPT OF SALES MANAGEMENT 9 | D e b a y a n D u t t a ears and one mouth, to use in that proportion”. The quality that the buyer dislike most in salespeople include being pushy, late, deceitful, and unprepared and disorganized. The qualities that they value the most include good listening, empathy, honesty, dependability, thoroughness, and follow-through. The goal of a sales presentation is to deliver a clear, concise, and consistent message to your prospects about your product and your brand, as well as why you are better than the competitors.  Handling Objections: The step in the sales process in which the salesperson seeks out, clarifies, and overcome customer objections to buying.  Closing: The step in the selling process in which the salesperson asks the customer for an order. Some salesperson may lack confidence, feel guilty about asking for the order, or fail to recognize the right moment to close the sale. Salesperson should know how to recognize the closing signals from the buyer, including physical actions, comments and questions. Ex: The customer might sit forward and nod approvingly or ask about prices and credit terms.  Follow-up: The last step in sales process in which the salesperson follows up after the sale to ensure customer satisfaction and repeat business.
  10. 10. CONCEPT OF SALES MANAGEMENT 10 | D e b a y a n D u t t a Some Related Topics Sales Force Automation In today’s competitive world managing salespeople is as challenging as managing customers. Companies face high attrition rate due to more opportunities for salespeople in the industry. Some companies have 100% attrition within a year. What would happen with the customer if the sales representative leaves the company and the customer is handled by other sales representatives? Many problems arise when the customer faces a new sales team. Customers will have to state all the requirements, budgets, features, and payment details to the new sales team, a process which can be time consuming and creates dissatisfaction among customers. This scenario demands a computer application which will not just maintain the customer information in the sales representative computer, but can also report the latest information to the sales manager in the company. This is where the implementation of sales force automation (SFA) software is required. Fig: 2.7 Various advantages of SFA include:  Centralized database for retrieval and updating customer information  Information sharing  Company has access to all latest information about customers  Sales team can be more responsible in entering right data, as company can track when the data was updated and by whom.  Data can be accessed anywhere irrespective of the location either using wired networks like LAN, WAN or wireless networks like WiFi.  Sales team can work from home as the data can be accessed anywhere
  11. 11. CONCEPT OF SALES MANAGEMENT 11 | D e b a y a n D u t t a  Since all customers’ data is stored in one place, it would be easy to know the efficiency of the sales teams, status of the targets etc.  Due to centralized data, many departments can access the customer data so multiple sales to the same customer by different teams can be avoided thereby using the time more efficiently. Some disadvantages  Complex scree may not be user friendly for all sales representative  Require continuous management and back-up facilities if data crashes.  SFA applications may be costly for the company where investments need to be justified implementing one. Customer Relationship Management (CRM) CRM deals with automating all customer related data related to the sales, marketing, customer care, technical, finance, and human resource departments. CRM is defined in the book “Sales Force Management” by Johnston and Marshall (2009) as “any application or initiative designed to help your company optimize interactions with customers, suppliers, or prospects via one or more touch points such as call centre, sales person, distributor, store, branch office, web or e-mail for the purpose of acquiring, retaining, or cross selling”. CRM aims at putting the customer at the centre of the business process. In a client meeting you see not only the sales representative but also may see members from marketing, finance, technical departments participating. A system is required to be in place where all these business operations need to be aligned. This is where the CRM applications come into picture. CRM application for the sales department provides the following benefits:  Improved sales planning and management  Automating the lead system  Managing sales opportunities effectively  Streamlining account management  Boosting sales productivity  Enhancing sales pipeline management  Simplifying workflow management  Analytics for improved decision making
  12. 12. CONCEPT OF SALES MANAGEMENT 12 | D e b a y a n D u t t a Value Merchants versus Value Spendthrifts It’s the company’s job to create a compelling value proposition for customers. Then, it’s the salesperson’s job to build profitable customer relationships based on that value proposition. Unfortunately in the heat of closing sales, salespeople too often take the easy way out by cutting prices rather than selling value. It’s usually much easier to win a sale by matching competitor’s lower prices than by working to convince a customer that your product’s greater value justifies its higher price. Value Spendthrifts Value Merchants  Prefer to give quick price concessions to close deals and move on to other business  Give price concessions without changes in the market offerings  Routinely trade more business for lower prices.  Give services away for free to close a deal  Sell primarily on price comparisons with competitors  Complain to the company that its prices are too high  Believe management pursues a volume driven strategy.  Tell the company that customers are only interested in price.  Make token unsupported claims about superior value to the customers  Focus on revenue and volume components of their compensation plan.  “Hang Tough” in the negotiations to gain better profitability out of each deal based on customer value  Only give price concessions in exchange for cost-saving reductions in the market offering  Routinely gain more business at the same price.  Strategically employ services to generate additional business  Sell primarily on cost of ownership comparisons versus competitors  Explain to the company that they need more proof of superior value  Believe management pursues a value driven strategy  Provide customer’s insights to improve the value of company’s offerings  Demonstrate and document claims about superior value in monetary terms to customers  Concentrate on gross margins and profitability component of their compensation plan.
  13. 13. CONCEPT OF SALES MANAGEMENT 13 | D e b a y a n D u t t a WORKBOOK 1. Briefly describe the activities involved in the sales force management 2. List the 10 most important qualities of a professional sales person 3. Discuss the personal selling process 4. Describe with example how can Sales Force Automation and Customer Relationship Management help companies? 5. Difference between Value Spendthrifts and Value Merchants GROUP ACTIVITY Work in a group of 5 to describe the stages in the selling process for a wealth management firm selling Financial Plans to the IT professionals of a MNC. Role play the actual selling process, from approach to close, with 3 team members acting as a sales team (Relationship Manager, Investment Advisor and Service Manager). The other 2 member of the team should act as a customer and raise at least 3 objections.