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Sales & distribution full syllabus for Bharathiar University



Sales & distribution full syllabus for Bharathiar University

Sales & distribution full syllabus for Bharathiar University



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Sales & distribution full syllabus for Bharathiar University Sales & distribution full syllabus for Bharathiar University Presentation Transcript

  • Sales & Distribution Prepared by B.V. Manjunath Rao 02/01/14 1
  • Sales Management Defined It is the attainment of an organization's sales goals in an effective & efficient manner through planning, staffing, training, leading & controlling organizational resources.  Revenue, sales, and sources of funds fuel organizations and the management of that process is the most important function... 02/01/14 2
  • Evolution of Sales Management Start of Industrial Revolution in UK &USA brought in the concept of Sales Management in a very focussed and scientific manner. As the production volumes increased substantially, the focus shifted from Manufacturing to Sales Management, customer service , Distribution channel, ware housing etc, leading to customer satisfaction. Separate functions like Sales, Marketing, Production, Quality, Service , Finance, Accounts etc got established in many organizations to improve Revenue and profitability. 02/01/14 3
  • Characteristics of Sales Management Sales Management is always a function of Marketing Management and both are closely integrated with each other. It is a very important function of every organization. It is the only function which earns the revenue while all other functions spend money Builds Relationship or Bond between the buyer and the seller Takes various responsibilities like generating sales (Money), Collection (Money),understanding consumer behaviour, reccommending changes , new product introduction, customer satisfaction, building relationship. Generally has a larger team than any other function in any organization. 02/01/14 4
  • Typical Marketing Org. Structure Head Marketing Manager Sales 02/01/14 Manager Manager Manager Sales Promotion Mkt Research Logistics Manager Cust.Service 5
  • Assignment-1 Write a short note Differentiating between Sales and Marketing Functions 02/01/14 6
  • Relationship Selling Sales creates Relationship (Bonding) between the Buyer and the Seller Relationship creates Loyalty between the two parties Loyalty generates long term business to the company Range of Relationship – 1.Transactional Relationship – Associated with low price, low margin and high turnover products with very low servicebility and low repeat order chances. Here sales persons attention to customer needs are Low 2.Value Added Relationship - Associated with high price, high margin and high turnover products with very high serviceability and high repeat order chances Here sales persons attention to customer needs are High 02/01/14 7
  • 3.Collaborative Relationship Here the buyer and the seller collaborate with each other to a very great extent to understand each others requirements and expectations and create a product and service tailor made for that customer or a set of such customers. Here sales persons ( and in fact entire organisation’s )attention to customer needs are very High. Very high value addition and long term customer loyalty is generated 02/01/14 8
  • Assignment - 2 List 5 products in each of the 3 types of relationship selling 02/01/14 9
  • MANAGEMENT POSITIONS CEO TOP LEVEL MANGERS (Strategic Function ) VP Sales National Sales Manager Regional/Div./Zonal Sales Manager Branch/Area/Sales Manager MIDDLE LEVEL MANAGERS (Tactical Function ) FIRST LEVEL MANAGERS (Operational Function ) Sales Representatives/ Trainees 02/01/14 (Tactical Function 10 )
  • SALES MANAGEMENT Specific Responsibilities and Accountabilities *Direct all sales activities for the achievement of short and long term business objectives, increased profit, and market control. *Establish and co‑ordinate the sales objectives, policies and programme within the context of the overall corporate plan and, where appropriate, recommend standards and set targets and quotas. *Prepare or arrange for preparation of the budgets, reports and forecasts and ensure they are presented in a timely manner to the Chief Executive. *Appraise the activities of the sales staff according to overall sales strategies. Monitor and evaluate the performance, and the efficiency of staff and procedures. 02/01/14 11
  • SALES MANAGEMENT Specific Responsibilities and Accountabilities * Direct the development of initiatives such as new products, incentive bonus schemes and the dropping of unprofitable products. * Maintain necessary contact and negotiations with major suppliers, key customers, industry associations and government representatives to achieve the objectives of the division. * May assist in the direction of merchandising methods and distribution policy. * Select, or approve the selection and training of staff. Establish lines of control and delegate responsibilities to Junior staff 02/01/14 12
  • SALES MANAGEMENT Specific Responsibilities and Accountabilities * Co‑ordinate subordinate staff to optimise the use of human and material resources to achieve goals. Consult with subordinate staff and review recommendations and reports. *Direct the preparation of operational matters including volume and profit objectives, promotion distribution, pricing and selling. 02/01/14 13
  • SALES MANAGEMENT Specific Responsibilities and Accountabilities *Direct sales activities by setting product mix, geographical sales areas and customer service standards. *Control and monitor sales methods, key customer strategies and arrangements by recommending prices, discount policies, credit arrangements, and conditions of sale. *Monitor customer service, invoicing, expenditure, payments and administration costs. 02/01/14 14
  • Skills of a Sales Manager People Skills :Ability to Lead Motivate Communicate Coordinate with all concerned Team Approach V/s Individual Approach Mentor the team mates To coach and work towards improving the performances of others Managerial Skills Planning Organising Execution Decision Making  Meeting the deadlines 02/01/14 15
  • Skills of a Sales Manager Technical Skills :Ability to Understand the technicalities Negotiate with Customers Train others Solve complex business problems Take correct decisions 02/01/14 16
  • What are the goals of sales manager? Sales Revenues Profits Market Share Controlling Internal Costs… 02/01/14 17
  • How do they obtain their goals? Knowledge of the sales environment Planning for sales Recruiting the sales force Training the sales force Motivating the sales force Supervising the sales force…. 02/01/14 18
  • Sales Planning * It is to answer the question: “Where will all the sales come from?” The sales plan isn’t a guesstimate. * It takes its direction from the marketing strategy and is based on through research and a considered positioning of the company within the market place. * Sales planning involves predicting demand for the product and demand on the sales assets (machines, people, or a combination of both). * Failure to plan always means lost sales. … 02/01/14 19
  • Sales Planning Contd.. * It should allow for meeting increasing customer demand for more products, services and/or customization as the business is growing, but also react quickly when demand decreases. * Sales planning improves efficiency and decreases unfocused and uncoordinated activity within the sales process. * Planning ensures that when a consumer wishes to purchase the product, the product is available, but it also means opportunities for additional sales are presented and the sales assets are available to exploit these opportunities. ….. 02/01/14 20
  • DUTIES OF THE SALES MANAGER * Holds a unique position in the sales organisation. * Plans, organises, directs, staffs & coordinates whole sales organisation. * He is the person who steers the wheels of sales organisation. * His status and power depends on the size of the organisation in his charge. * In small firms the general manager or managing director performs this duty. * But in big manufacturing firms there’s usually a sales manger. In giant sized companies for some territories and/or products sales managers are appointed. * Whatever the position of the sales manager, he is the guiding and driving force of the sales organisation. 02/01/14 21
  • FUNDAMENTALS OF SUCCESSFUL SELLING * Proper Knowledge of products It is important to completely understand your products, its advantages and disadvantages, competitive positioning of your products, its price and profitability , product mix and its importance to your organisation etc * Customers buying Pattern OR What customers like most? Product quality, reliability, product credibility , service requirement, etc * Follow business ethics. * Avoidance of Unpleasant Mannerisms of social traits * Developing sales professionalism 02/01/14 22
  • Industrial Marketing Vs. Consumer Marketing Description Industrial Marketing Consumer Marketing Buyer Few buyer,Close Large buyer, non characteristi customer relationship, personal ship, less cs technical expertise Technical expertise Market structure Geographic concentric Geographic dispersed Channel Price Product & service Direct &indirect List price on standard Technical complex Prompt service Indirect & multiple List price Standard, service secondary 02/01/14 23
  • Distribution Management and its link with Sales Management * Distribution management serves the primary function of making the products or Services available to Customer with in an arms length * Distribution management takes care of Availability and Visibility * It provides Time, Place and possession utility to the customer * SM & DM are always interlinked with each other and Sales Manager is the Responsible person. * SM plans the strategy, operational details to achieve the desired sales objectives, profitability market share etc. DM is all about execution of the desired plans of Sales manager. 02/01/14 24
  • Distribution Management and its link with Sales Management Sales Management Task Distribution Management Role 1.Achieve Sales Volumes and Market Share Physical Availability of products, Movement, storage ,close to customers, ensure shelf life etc 2.Area coverage of Markets and Outlets Follow the Sales Call Plan , Milk Run Principles. Make each call a productive call, extend credit, collect the money etc. Push all products in each outlets, ensure high visibility, sell more than compatition 3.Manage Institutional Business and Key Accounts Get orders and Execute . Keep adequate stock, ensure product safety etc 4. Manage Distribution network- recruit 02/01/14 ,develop, evaluate and promote the network, Each distribution channel has to manage its 25 down stream channel, evaluate their
  • Distribution Management and its link with Sales Management Sales Management Task Distribution Management Role 5. Handling Customer Complaints First level interface with customer- Utmost care to be taken & immediately bring it to the notice of sales management Quickly resole the complaint. Quickly remove the defective products from the market. 6.Implement Marketing Plan , new product launches, product promotions etc Ensure wide distribution Ensure high visibility Ensure success of new product launches, promos etc. 7.Local advertising – Hoardings, Shop Boards, Paper advertisements, e mails, melas, fairs and exhibitions etc Ensure success of these events 02/01/14 8. Proper interface with concerned 26 Ensure task assigned by sales management is
  • Distribution Channels Own Sales force : Recruited by the company to manage Key Accounts and Distribution Channels C&F Agents - Carrying and Forwarding agents with own fleet of transportations Depots – to break the bulk. – Mostly company owned .They break the bulks and send the required order qty to Distributors/Dealers /Agents and Stockists. Distributors – They buy the goods from the company and sell it to Dealers/Agents/Stockists – They are mostly company specific. Dealers / Agents/ Stockists – Are at the fag end of the distribution channels. They may be company specific or may sell other company goods as well depending upon the products. 02/01/14 27
  • Distribution Channels Ware house operators – They ensure physical movement and safe keeping of Goods. They are managed by logistics Department. Mostly they are on contract basis only. There are a number of companies who specialize in ware house operations which includes collecting the goods from the company, reaching it to all its customers and even collecting the payment on behalf of the company.  Independent wholesalers – This is more relevant to consumer goods and Pharmaceutical products. Most of these distribution channels work on mark up basis Distribution channels are either be in house or out sourced Eureka Forbes , Bata , Raymonds etc have their own distribition channels M&M, LG, P&G have out sourced distribution channels. 02/01/14 28
  • Customer Service Sales Management and Distribution Function works together to take care of customer service Demand Management – Sales forecasting, Getting business to meet the sales targets etc is the function of Sales Management with the involvement of Distribution function. Supply management – Primary responsibility of Distribution management (under the guidance of Sales Management) with the help of the entire distribution channel as explained above. Customer Complaint Handling – ???????? All the above activities are always carried out strictly under the guidance and knowledge of Sales Managers ( who are in tern governed by the Marketing Function and its objectives) 02/01/14 29
  • Importance of Sales Function to any organization. Why choose a sales career? What’s so special about a career in Sales and Distribution? Sales is the only function which generates revenue for the organization while all other functions spend money. Sales function develops relationship (bondage) between the buyer (customer) and the seller (Company) Sales function directly contributes to the growth of Top line and Bottom line of any organization. Sales function drive the organization in terms of current and future business plans, new product development, new market development etc. The health of any organization can be gauged by the effectiveness of the sales force in meeting the various business objectives By and large sales function has the largest manpower strength in most of the organization. Sales function is very challenging , demanding and also rewarding 02/01/14 30
  • Many companies offer incentives to sales staff over and above the salary – better compensation than many other functions. There is never a dull moment in the life of a sales person – Everyday offers more chances of interactions with new clients, new challenges in all functions of sales. Sales function requires one to develop many skills like Technical skills, communication skills, negotiation skill, organization skill, time management, people management, knowledge of products and processes, commercial skills – costing, pricing, discounting, local laws, ethical behaviors etc etc. Best performing Sales persons are often offered many goodies like additional training in India and abroad, white goods as gifts , trips to hill stations with family etc etc over and above the salary and incentives. 02/01/14 31
  • In many companies the Top positions like CEOs ,COOs, Presidents are chosen from the sales functions with many years of experience as they bring the over all and the best perspective of Customers, Market, service requirements, product requirements etc, etc. All the above is true for a sales person who puts in years of hard work in various sales functions of any organization. 02/01/14 32
  • UNIT 2 Personal Selling : The psychology in selling,  Preparation and Proess Types of Purchases Effective Communication Sales Related Policies Sales forecasting and Budgeting in detail 02/01/14 33
  • Concept of Selling When the Consumers and Factories, if left alone , will not buy enough of the organization's products. The organizations must, therefore , take an aggressive selling and promotional efforts. The selling concept as expressed by Coca Cola company : The purpose of selling is to sell more goods/services to more people ,more often for more money in order to make more profit. 02/01/14 34
  • Psychology in Selling Buyer Behavior Model Stimulus (Sales Presentation) Buyer’s Decision Making Process Response (Buy OR Sell) It is important to understand the buyer’s decision making process. 02/01/14 35
  • Consumer’s Decision Making Process Need/Want Recognition 02/01/14 Information Collection Evaluate Purchase Alternatives Decision Post Purchase Behavior 36
  • 1.Need / Want/ Problem Internal Need Internal Stimulus could be due to a)Necessity b)Hunger/Thirst c)Prestige d)Social Status / Official Status External Need a)Advertisements in many channels –Hoardings/Paper TV ads on a new products, new innovation etc, etc b)Product display Irrespective of external or internal needs of the consumer, the sales person must identify the consumer needs and be prepared with the information ( The features and Benefits of the product) that should be discussed with the consumer to sell the product. 02/01/14 37
  • 2.Information Collection a)Visiting Retail stores / sites etc b) Attending exhibitions c)Discussing with friends, Family members etc d)Discussing with the sales reps/ Sales Managers etc on features, benefits, advantages, disadvantages, price, discounts if any, quality, warranty, payment terms, credits etc etc… e)Net Search 02/01/14 38
  • 3.Evaluation of Alternatives: a)Done to satisfy the needs fully b)Done to seek better features, Advantages leading to many benefits c)Done to get the best value for money 02/01/14 39
  • 3.1 Brand / Supplier Evaluation Method: Ex: Buying a 1000 sft Flat in Bangalore – Brigade Builders – 12 km to city center at Rs 3750/- sft Attributes Weightage % Consumer Belief Supplier Score Price 25 0.80 20 Location 20 0.65 13 Quality 20 0.75 15 Legal Compliances 15 1.0 15 Bilders Reputation 10 0.75 7.5 Loan Eligibility 10 1.0 10 Total 100 02/01/14 80.50 40
  • 3.1 Brand / Supplier Evaluation Method: Ex: Buying a 1000 sft Flat in Bangalore – DS Max Builders – 9 km from city center @ Rs 3500/- Attributes Weightage % Consumer Belief (Satisfaction level) Supplier Score Price 25 0.65 16.25 Location 20 0.25 5.0 Quality 20 0.55 11 Legal Compliances 15 1.0 15 Bilders Reputation 10 0.22 2.2 Loan Eligibility 10 1.0 10 Total 100 02/01/14 59.45 41
  • 4.Purchase Decision : a)Decision taken to buy or to not to buy based on the evaluation technique b)Timing of purchase c)How much to buy d)Payment mode (method) 02/01/14 42
  • 5. Post Purchase Decision : a)Any purchase leads to certain levels of satisfaction levels. b)If the product performance is more than the customers expectations he gets High Satisfaction levels ( Customer is delighted)……. What does it lead to? c) If the product performance is as per than the customers expectations he gets Satisfied……. What does it lead to? d) If the product performance is below the customers expectations he gets un satisfied…… What does it lead to? 02/01/14 43
  • Types of Purchases 1.For Individuals and House hold Purchases a.Routine Purchase Decision Low price, low risk, routine purchases…. Consumer does not give much attention to all 5 decision making steps…. Except when a competitive product is offered in the market at an attractive price with more features. Ex:……….. b.Limited Purchase Decisions Medium price, High utility value to consumer …. Here consumer does evaluation of many brands on its merits and demerits……. Ex: c. Extensive Purchase Decisions High investment in time to select, high price , Very high Utility value …. All 5 steps of decision making is adopted by the consumer. Ex: …. 02/01/14 44
  • Types of Purchases 2. For Industries and Factories a.New Purchase Ex:….. b.Change in supplier Ex:……….. c.Repeat Purchase ( Re buy) Ex:………. 02/01/14 45
  • Sales Preparation 1.Effective Communication Effective communication is defined as Transmission of verbal and non verbal Information and Understanding between a sales person and the consumer/ customer in an un ambiguous manner. Tools used are : Words, visual aids, gestures, body languages etc For proper and effective communication, cultural differences , outside interferences etc should be avoided Non verbal communications: Physical space between buyer and seller, hand shake, body movements, appearance, good mannerism, eye contact, be in tune with current trend etc Ask relevant inquisitive questions to know what customer is seeking Empathize with buyers feeling, ideas, feedback etc 02/01/14 46
  • Sales Preparation….. Develop trust with customer by being truthful, do not over commit and give wrong information juts to attract the customer Be a good listener to understand what customer is looking for. Use proof statement like a letter from satisfied customers – this adds credibility Collect an appreciation letter from all your satisfied customers and use it as a tool to develop loyalty with new customers. 02/01/14 47
  • Sales Preperation 2.Sales Knowledge About your company About your products and services offered About price, taxes and duties, discount , payment policies etc About your competitive products, their prices, advantages, FEATURES ADVANTAGES AND BENEFITS (FAB) About your company’s distribution network, service network, promptness in attending to customer requirements, etc When a Sales Person ( at any level ) is enthusiastic, energetic and exhibits all the above qualities during a sales meeting, the customer develops confidence in the sales person which results in Positively closing the sale. This leads to INCREASED sales to your company. 02/01/14 48
  • Sales Preparation….. 3. Product knowledge.. 4. Sales related Policies of your company. Guidelines on price, discount, delivery, Warranty, Guarantee, Certain objectives like product mix 5. Pricing Policy/ Credit policy/Discount policy/Service Policy etc 6.Promotional Policies Like Advertisement – Image building exercise..Hoardings, through print, electronic media , use if IT  Sales promotion – For short term benefits free samples, product displays, trade shows, seminars, Contests for sales peoples etc  Publicity – Sponsoring events like a music concert, Cricket Match Personal selling and Direct Marketing. 02/01/14 49
  • Sales Preparation….. 7.New Product development Ideas… based on the interactions with customers, customer’s feedback , knowledge of the competitors products etc. 8. GROWTH Policies OF YOUR COMPANY. 02/01/14 50
  • Sales Process 1.Prospecting and Qualifying 2.Pre call Planning 3.Approach 4.Presentation & Demonstration 5.Overcoming Objections 6.Closing the Sale 7.Follow up & Service 02/01/14 51
  • Prospecting and Qualifying What’s a Prospect? A Prospect is an individual, a family or an organization who needs the product or the services that a sales person is selling and has the financial capability to buy the same. What’s a Sales Lead? A Lead is an information about an individual or an organization that is a probable prospect. Once the Sales Lead wants the product and has the ability to buy, it has all the potential to become Valued Customer. 02/01/14 52
  • Why prospecting is an important activity?  To increase the customer base To increase the sales volome For Growth When the existing customer becomes stagnant , its important to add more customers to keep in tune with the Growth objectives When sales are declining, its important to add more customers and hence the activity of prospecting. 02/01/14 53
  • What are the prospecting methods?  Referrals from Exisisting Customers Referrals from functions with in the organisations Referrals from External sources – suppliers, vendors, Banks, trade associates etc Networking from sales personals – friends, meeting members at clubs or at similar social meetings Industrial or trade directories Cold Canvassing 02/01/14 54
  • Qualifying  Assessing or qualifying the probable prospect to find out if they have 1.Need for the product or service 2.Whether the prospect has the capability to buy the Product or Service Qualifying them as 1.Hot prospect 2.Warm Prospect 3.Cool prospect Constant follow up of prospects till they are converted into potential customers. Prospecting and Qualifying is done by the sales persons of the company. Of late this activity is outsourced to external agency so that sales persons can concentrate on actual sales. 02/01/14 55
  • Pre Call Planning & Approach This is a process of collecting more in depth information on the prospect & Planning the sales call on the prospect Information Collection : Information on Prospect’s business, its products and services, what do they require, how much they require, who is the current supplier, is there any problems with the current supllier, what is their quality requirement, who are the key people to take decision etc , etc 02/01/14 56
  • Pre Call Planning & Approach Planning the sales call : Set the objectives of the sales call Plan the sales strategy When to meet, whom to meet, what to talk (FAB) and get a judgment of which of your products is most likely to suit the prospects requirements. Approach Actual meeting with the prospect (for the first time): Takes a few minutes but can make or break a sale. 02/01/14 57
  • Pre Call Planning & Approach Approach contd….. Create favorable impact in the very first meeting Develop soft skills ( firm hand shake, pleasant smile, opening conversation……. Just to create a favorable beginning Commonly used approach methods 1.Self Introduction – Exchange of business cards, Self introduction starting with yr name, designation etc ,about yr company, brief history , products you manufacture etc 2.FAB method 3.New product approach – present the samples (FOC) 4.Ask Questions like what is his key take away from the product? 02/01/14 58
  • Presentation & Demonstration The sales person has to first understand A) Buyer’s needs B)Develop a strategy for presentation C)Develop an effective presentation. To understand the buyers needs, ask the following questions 1)Situational questions – who is the key decision maker? What is your daily / weekly requirements? Are u buying this product for the first time? Are u replacing the existing product? 2) Problem identification question - What are your difficulties in the existing product like quality, service, delivery problems etc 3)Impact questions -Which of QCDS will have maximum impact? 02/01/14 59
  • Presentation & Demonstration 4) Solution Value Questions – Questions related to value of solutions …. If the quality of our product / service is very high due to very low rejection rate, how would it impact on your company’s products… lower rejection ppm, proven software like CRM etc 02/01/14 60
  • Presentation Methods 1. Stimulas Response Method or Canned Approach Here a standard ( prepared) presentation method is used. Sales person does most of the talking with out knowing the needs of the customer. Sales person gives the FAB of the product and expects the customer to take a decision on buying. Mostly used for consumer goods, pharma products, low value product, tele marketing, door to door selling etc The main dis advantages of this method is that the FAB may not be important to buyer 02/01/14 61
  • Presentation Methods 2. Formula Method - It uses a well known formula AIDA (Attention, Interest, Desire& Action) Attention – Here the sales person gets the attention of the buyer by creating very good first impression with his dress, style, smile, soft skills thro which he arouses the customers interest. Interest – The sales person finds which aspects of the products/ Service ( QCDS) attracts the customer most.  Desire –The objective of this stage is to arouse a strong feeling in the minds of the customer for your product or service. Customer may raise some objections which need to be answered convincingly Action – Buying action or closing the sale. If the buyer is convinced you can close the sale. Otherwise keep clarifying all his doubts till he is ready to close the sale. 02/01/14 62
  • Presentation Method 3) Need Satisfaction Method Most Challenging and creative method The seller first understands the buyer’s needs by asking several questions ( ref slide 59, 60) and records them. Only after understanding the buyers needs he goes on to explain the FAB of his products which meets customers requirements This is the most commonly used method for all engineering products. This method focuses on the requirements every customer and solutions are tailor made for that customer. 02/01/14 63
  • Presentation Method 3) Team Selling Approach Used for very high value, complex products / services, integrating many functions CFT is involved at buyers end and sellers end Typical CFT consists of people from sales, accounts, logistics, technical support ( D&D), IT from selling team on one side and People from Purchase team, accounts, Supply Chain dept., Production / Design from the buyers side are present for discussions. As it involves many CFT members, its an expensive process. Here emphasis is on building a long term relationship 02/01/14 64
  • Demonstration 02/01/14 65
  • Strategic Planning! What’s this? Strategic Planning is a very important process where in the top executives of the company derive the Long term Objectives and Strategies to achieve them. Normally the strategic planning is done for 3 OR 5 years (on a rolling basis) What is the Purpose of Strategic Plan? To derive the Company’s Mission & Objectives To derive the SBU’s Mission & Objectives Allocation of Resources – (4 Ms) Men, Materials, Machines & Money Derive a Broad plan to convert the strategies into an Achievable Plan 02/01/14 66
  • Presentation Method 4)Group Presentation When a sales person makes the sales presentation to a group of decision makers from the customers side. Some guidelines are Analyze the need, understand their problems, concerns after talking to all the persons concerned Introduction- introduce self, company and state the purpose FAB Convincing : Attend to all objections, concerns, use testimonials, TP certifications, quality systems in the organization etc 02/01/14 67
  • Presentation Method 5)Consultative Selling Method (problem –solution method) 02/01/14 68
  • Strategic Planning Sales Forecasting & Budgeting Prepared by B.V. Manjunath Rao 02/01/14 69
  • Strategic Planning Who is responsible? Senior management team is responsible for Strategic Planning Strategic Planning is done at 3 levels i)Corporate Level - Corporate Strategic Plan (ii)Strategic Business Unit Level (iii) Product Functional Level 02/01/14 70
  • Strategic Planning…… Typical Org. Structure Corp. Stg.Planning (Long Term Plan) CORPORATE OFFICE SBU A PROD 1 02/01/14 PROD 2 PROD 3 SBU B PROD 4 PROD 5 SBU C PROD 6 SBU Stg.Planning (Long Term Plan) PROD 7 PROD 8 PROD 9 Prod. Level Stg.Planning 71 (ShortTerm Plan)
  • Corporate Strategic Planning…… Company level mission is developed as a guideline for the entire company. Mission statement derived based on the company’s 1.Turn over / Growth policy ( Strategies on Domestic/ Export, Growth YOY, Emphasis on certain Business Units, etc ) 2.Quality Policy/ Innovation Policy ( Comprehensive quality policy for all business units) 3.Investments (on 4 m) 02/01/14 72
  • Corporate Strategic Planning…… The Toyota Motor Corporation mission statement "Toyota will lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people. Through our commitment to quality,constant innovation and respect for the planet,we aim to exceed expectations and be rewarded with a smile. We will meet our challenging goals by engaging the talent and passion of people, who believe there is always a better way." 02/01/14 73
  • Corporate Strategic Planning…… Samsung mission statement 2013 “At Samsung, we follow a simple business philosophy: to devote our talent and technology to creating superior products and services that contribute to a better global society.” 02/01/14 74
  • Corporate Strategic Planning…… Mission Statement of Hindustan Unilever Limited Hindustan Unilever's mission is to add Vitality to life. We meet everyday needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life. 02/01/14 75
  • Role of Marketing at Corporate Level 1.To communicate long term customer strategy as a policy of the company so as to achieve the strategic goals of the company. 2.To provide information on competition and customers 3, Strategic Marketing Team develops long term strategic plan 4. It gives directions to achieve the long term plan. 02/01/14 76
  • Business Unit Strategic Planning…… ( Long Term…….) 1.Defiuning the SBUs Mission 2.Analysis of impact of Global and National Econamic Scenario 3.Analysis of SWOT 4.Development of Long term and Short term Business Goals 5.Formulating Strategies for achieving Short Term and Long Term Goals 6.Formulating Action Plan for achieving Short Term and Long Term Goals 7.Monitoring results and taking course corrections 02/01/14 77
  • Functional Level Strategic Planning…… ( Short Term – Current year – 1 year) Applicable to all the functions like Sales, Marketing, Production, Materials, Accounts, HR,Finance, Maintenance etc. 1.Develoment of operational plan for each product line, Function line 2.Develop specific System &Procedure to achieve the Plan 3.Focus is on achieving the Business Plan,Product Mix, Customer development, retention, price, etc etc for Sales Function 02/01/14 78
  • Role of Sale & Marketing at Functional Level 1.To evolve a plan to achieve the product mix, price mix, distribution mix … to achieve the short term plan 2.To co ordinate marketing activities to achieve the goal 3.Allocating the resources and lend all support to Sales Team 4.Classification of accounts 5. Relationship strategy 6.Selling approaches , developing sales channel, and achieving the sales paln. 02/01/14 79
  • Role of Sale & Marketing at Functional Level Integrated Marketing Communications (IMC) It’s the strategic integration of various communication tools such as Advertising, sales promotion, personal selling, public relations publicity, direct marketing etc to have maximum impact of sales and price and with minimum cost to company. Advertising Getting sales lead Telemarketing to qualify the customers Classification of customers – ABCD analysis Clasiification of customers on the relation ship strategy- Transactional, Value Added and collaborative relationship A & B Class customers are contacted by Company reps. C&D 02/01/14 customers are contacted by Channels Class 80
  • Role of Sale & Marketing at Functional Level A.Selling Methods/Selling Approaches Stimulus Response Method /Canned Approach or Formula Approach Need Satisfaction Approach /Team selling Approach B.Distribution Channel Strategy Company Sales Force / Distributors or Dealers / Independent Reps / Telemarketing / through iternets 02/01/14 81
  • Sales Forecast Forecasting means predicting the future. Sales forecasting is an estimated sales value for specific time frame based on certain assumed market environment and spaecific market plan Sales Forecasting is done on 3 levels a)Total sales - Industry sale/ Domestic sale/ User wise sale/ Variants wise sale/Product wise / spares / service b) Time Period - Short term , Medium Term & Long Term c) On Geographic level – Area wise, district wise, state wise, export or domestic 02/01/14 82
  • Sales Forecast Approach Commonly used terminologies Market Potential ( Industry sales forecast) (Ex.10, 00 , 000) Market Forecast/ Market Size – (250,000) Sales Potential – ( 100,000) Sales Forecast ( SOB 55% - 55,000) Sales Budget ( N- 15000, S-15,000, E- 5000, W-20000) Sales Quota (N – 15000 – A, B C D …) 02/01/14 83
  • Sales Forecast Approach Several Approaches are followed Top - Down Approach Executive Opinion Approach Delphi Approach Advantages / Disadvantages Bottom– Up Approach / Market Build Up Approach Forecast is collected from grass roots level , combined into branch / area sales forecast , combined into Regional /Zonal sales forecast , combined into national sales forecast. 02/01/14 84
  • Sales Forecast Approach 1.Moving Averages Method ( 3 years or 6 years ) 2.Exponential Smoothing Factor Salesforecast next year = Actual Sales This year + (1-L) Actual Forecast this year Where L is the smoothing factor 3.Decomposition Method Or Break down method This method involves breaking down of the previous years data in to 4 major components such as Trend – Growth in sales due to ………. Cycle – Business cycle like recession Effect of Season on the business Effect02/01/14 of erratic events like cyclone, terrorist attacks, etc 85
  • Sales Forecast Approach 4.Sales Regression method This is a more complex statistical method used to determine the sales forecast considering the effect of sales on price, sales calls, expenditure etc. Many companies use more than one method to arrive at the accurate sales forecast. What are the effects of correct and in correct sales forecast? 02/01/14 86
  • Sales Budgeting 1.Sales budget consists of estimated Sales Volumes and selling expenditure 2. Sales Budget is arrived after the sales forecasting . 3.Sales budget consists of revenue and expenditure 4. Sales Revenue consists of very fine details of sales area wise, product wise, territory, dealer wise etc . 5. Sales expenditure consists of all the expenses involved in promoting the sales in a given area. 02/01/14 87
  • Sales Budgeting Purpose of Sales Budget Planning the expenses to meet the Forecast S , T, P –Control Expenses Co ordination at the Corporate level to drive the teams once the budget is finalized Co ordination at Marketing and Sales Managers level to control expenses Control – Budgeted v/ s Actual of all key parameters 02/01/14 88
  • Sales Budgeting Methods used in deciding the sales expenditure Budget 1. Percentage of sales Budget Actual expenses incurred (as % of sale) ia the current year is taken as a base for arriving at the figure for the next year. Genarally accepted norm : Travel expenses budget : 0.30% Advertisement: 1.0 to 1.25% Sales promotion expenses : 0.60 to 0.80 % 2. Executive judgement method Sales managers & their superiors exercise their judgment based on their experience 02/01/14 89
  • Sales Budgeting 3.Objective and Task method. a)Sales forecast is prepared b)Based on the startegies and tactics used to achieve the Goal, the tasks,objectives of every sales person and their distributors are tracked c)Cost of executing such tasks and objectives are then calculated.The cost of all such activities are added up to get the total cost. d)then the cost as % of sale is calculated 02/01/14 90
  • Sales Budgeting 4.Sales Budget Process 1. Sales Review Past data ( 3-5 years), current years data, trends- past and present, market situation, macro and micro economic conditions,govt. policies affecting the business , product mix, prfitability etc are all reviewed before arrving at sales budget 2.Communication Sales Managers send a clear comminication to ASM, RM,DM, ETC to get all the relevant data in a pre fixed format . They also ask for the individuals to come out with their exp budget in a pre fixed formats 3.Subordinate Budget Sales and exp. budget of all subordinates is prepared for all the above manner 4.Approval of Sales Budget 5.Budgeting of other departments 91 02/01/14
  • Distribution Management Marketing Mix consists of 4 Ps Product Price Place Promotion Distribution management deals with the “Place” part of 4 p. Definition of DM Distribution channel is a set of independent organizations involved in making a product or services available to customers as and when it is required in what ever qty the customer requires. 02/01/14 92
  • Distribution management & Marketing Mix Role of Distributor/ Dealer etc Place Utility Pocessions Utility 02/01/14 Time Utility 93
  • Role of Distribution Management 1.To carry out activities which facilitates movement of goods and co ordination of demand and supply in the Time and Space Utility. 2.To carry out activities of getting the requirements, Stocking them , maintaining them in good condition and distributing them 3.All activities of Carrying and forwarding of Finished Goods from Factory to end users. 4.Collect and pass on information on customers, competitors, price etc 5. Carry out sales promotions activities etc.. 02/01/14 94
  • Role of Distribution Management Evolution of Distribution Management since 1990 in India after the liberalization of Economy. 02/01/14 95
  • Role of Distribution Management How DM typically Functions? Manufacturers C & F Agents I N T E R M E D I R I E S (Bulk Transporters) Distribution centers (Bulk Breakers) Distributers Retailers ( Smaller lots) Consumers 02/01/14 ( Small Lots) ( Any qty) 96
  • Distribution Management Role of Intermediaries 1.To create infrastructure for transportation, storage, handling, bulk breaking of one or more produts. 2.To develop infrastructure for buying and re selling – such as invoicing maintain the inventory, etc 3.To provide information to both the seller and buyer to help them manage their business better 4.To reduce the “Touch points “ to company so that the whole logistics can be managed better 5. To Make the products available where ever and when ever required 6.To reduce the cost to company 02/01/14 97
  • Distribution Management Role of Intermediary Company 1 Company 2 Company 3 Company 4 INTERMEDIARY LARGE NUMBERS OF CUSTOMERS 02/01/14 98
  • Distribution Management Are Intermediaries necessary? Depends on company to company. Exceptions are like Dell computers & Amezon in US Bata Shoe Eureka Forbes Some Engineering Products Technically complicated products like medical diagnostic products 02/01/14 99
  • Distribution Management How Distribution add value to Selling Function? 1.Reduce cost of products 2. Efficient management of logistics, storage and inventory 3. In some cases they also handle installations etc.TVS, IT HARD WARE 4.Collect market informations on price, comp., products….. Some companies use a combination of Direct selling and selling through intermediaries … It depends on Nature of the products and services Nature and dispersal of company customers Business Goals of the company 02/01/14 100
  • Distribution Management Distribution Channel Strategy 1.DM is a part of top management strategy, where the DM Objectives and service objectives are very clearly defined. 2.DM policy is set at corporate level and not frequently changes or altered 3. Detailing of DM activity is done at middle level and the at the operational level 4. All the activities are well documented to avoid any sort of confusion 5.Performance Indicators of DM is very clearly defined 6.These days the Distribution is handled by independent companies or it is an outsourced activity 02/01/14 101
  • Distribution Management Setting DM Objectives Objectives 1.Service levels expected by Company is defined 2.Service level expected by customers are also captured in setting the objectives 3.Monthly sales forecast is estimated ( jointly with SM) 4.Inventory levels are determined 5.Developing the beat plan of market coverage 6.Market visits to sell products (Joint exercise) 7.To carry out promotional activities 8.To collect payment 9.Concentration of A Class and Major accounts 02/01/14 102
  • Distribution Management Distribution Channel Strategy 1.Defining customer Service Levels – What customer wants in terms of Time, Space and Pocession Utility Depending on the nature of the company and its products.. ABC Classification in terms of the criticality of the customers for the company Companys strategy to get better product mix and price mix 2.Defining distribution objectives to achieve the service levels To clearly spell out what is expected of the Channel network in meeting the customers expectations .. 02/01/14 103
  • Distribution Management 3.Outlining the activities to achieve distribution channel objective These activities are performed jointly by the company personnel and the Channel partners Monthly sales forecast Arranging the despatch of products from factory Developing the beat plan for market coverage by distibutors Developing visit plan for service engineers Developing Market visit plan by company personnel and Channel partners Carrying out promotional activities Special focus on A Class customers 02/01/14 104
  • Distribution Management 4.Deciding the structure of the network – C&FA, DISTRIBUTORS DEALERS, DISTRIBUTORS ETC. OR DIRECT COMPANY REPS OR A COMBINATION How much stock to keep? What kind of storing arrangement Credit ? 5. Define the policy and procedure To clearly define what is expected of the Channel network and Sales personnel and define some of the policies like Operating Policy , Credit, Grievence policy, Policy on Settlement of Disputes, Policy on Quality complaints reprisal etc. 02/01/14 105
  • Distribution Management 6.Defining the KPIs or KEY PERFORMANCE INDICATORS For the channel partnmers & Company sales personnel on a)Detailed sales targets region wise, product wise b)Share of Business c)Zero complaints from customers d)Stock returns e)Customer returns f)Market coverage g)Receivables h)Sales loss on account of stock out situation i)Damage of products 02/01/14 106
  • Distribution Management 7.Define KEY SUSSESS FACTORS for effectiveness of Channel Factors influencing the success of Channel Partners a)Clear cut policy and procedure b)Evoke serious commitments from the channel partners c)Fair dealings with all channel partners d)Clearly make the channel partners understand the customer service levels in terms of QCDS e)Effective and timely disbursement of compensation to channel partners 02/01/14 107
  • Distribution Management A distribution channel is a group of people and firms involved in the transfer of title or ownership as the product moves from manufacturer to end user. DC (Distribution Channel) is there as the manufacturer cannot reach out to all the end users. DC Multiply the reach and improve the marketing efficiency DC Creates time, space and pocession utilities DC in the hands of independent operators having core competency and reach which company may not have . DC is more cost effective DC can be further classified into a)Sales Channel b) Delivery Channel& c)Service Channel 02/01/14 108
  • Distribution Management Distribution Channel Members : C&FAs : 1. Basically the transporters who act as intermediaries between the manufacturers and the distributors. 2.They collect the material from the company and store it in Bulk to be distributed to distributors. 3.They are bulk breakers 4.They do not pay for the Goods. CSAs (CONSIGNMENT SELLING AGENTS ) : They act as C&Fas doing all the above functions in addition to selling the goods.They pay for the goods. 02/01/14 109
  • Distribution Management Distribution Channel Members : Distributors, Dealers, Stockists, They are intermediaries. They pay for the products and they get a fixed commission , margin or mark up for the service rendered. ( Margin = Profit /Selling Price & Mark up = Profit / Cost ) They may or may not get credit from the company. They may have to give credit to customers depending on product to product Many times they also do other value added activities like servicing , commissioning etc. 02/01/14 110
  • Distribution Management Distribution Channel Members : Wholesalers : They operate in the main markets in the city They may deal with the products of many companies , often non competing products They are not on contract with any company They normally deal with other retailers and institutions They normally take credit from the companies and extend xredit to distributors 02/01/14 111
  • Distribution Management Distribution Channel Members : Retailers : They are at the fag end of the DC. They cater to the needs of end users They make highest % profit in DC. They get other profitable terms like credit, promotions, display material free of cost, merchandises, gifts etc . They often arrange home delivery of products They also arrange for servicing, commissioning etc 02/01/14 112
  • Distribution Management Direct from producers to End Users : Used in the following situations Where small qty is produced Where there is limited number of buyers For markets and products where channels are difficult to find Where customers are located in clusters like SEZ, INDUSTRIAL BELTS For perishable products Where products require demos, intense negotiations etc Where the channel cost is more and un affordable Where service requirements are intense 02/01/14 113
  • Distribution Management Manufacturers to DC to End Customers : This system is used when Huge quantities are produced to reach the masses Products require intense distribution Where retailers can give good promotional support Where its cost effective to reach the mass consumers Market coverage is also financed by the intermediaries. 02/01/14 114
  • Distribution Management Distribution networks for Industrial products: Producer Producer Producer 02/01/14 Customer Agent Agent Customer Ind.Dist. Customer 115
  • Distribution Management Distribution networks for Consumer products - All FMCG Producer Distributor Wholesaler Retailer Customer C & FA 02/01/14 116
  • Distribution Management Distribution networks for Consumer Durable Products - All House hold products requiring servicing, installation etc . C & FA Producer Distributor Wholesaler Retailer Customer Service back up Service back up/ Installation etc can be thro the company directly or through a franchisee . 02/01/14 117
  • Distribution Management Distribution networks for Pharma Products C & FA Producer Distributor Wholesaler Retailer Customer Doctors Companys sales reps influence / promote the products thro Doctors 02/01/14 118
  • Distribution Management Distribution networks for Textile Products : C & FA Producer Distributor Wholesaler Retailer Customer Guarantor Companies take some gurantors to ensure prompt payments 02/01/14 119
  • Distribution Management Distribution networks for Engineering Products : C & FA Producer Agents Authorised Dealers Customer Service Service may be thro company reps or Franchisees. 02/01/14 120
  • Distribution Management Distribution networks for Cellular products : Producer Hardware software Services( own & Franchisee) Auth. Dealer Own sales team Customer 02/01/14 121
  • Marketing Channel Definition: Marketing Channels are defined as “The internal or External contractual organizations that management operates to achieve its distribution objectives”. Different Marketing Formats : 1.Producer Driven 2. Seller Driven 3.Service Driven 4. Other formats 02/01/14 122
  • Marketing Channel 1.Producer Driven Format: a) Manufacturers produce and directly try to reach to customers through their own out lets Ex: Petrol and diesel by oil companies Bata shoe company Watches – Titan, Rolex etc Branded Garments like Reymonds / Bombay Dyeing etc b)Licensed outlets : Bata, Petrol Pumps, KMF-Nandini milk c)Consignment Selling Agents – Here the company passes on the physical stock to Agents to sell the products. Company receives the money only after the consignment is sold. This arrangement is mostly prevailing in areas difficult to access like NE states. 02/01/14 123
  • Marketing Channel d)Franchisess : A franchise is a small company to whom the seller has granted the permission to sell the company's goods or services within a certain territory or location. They get exclusive rights to market the company’s products in a given area or location. They will buy the goods from the company and sell at the rate decided by the company. They get a commission on the sale. Ex: Pizza Parlours, Mobile Services, couriers etc e)Brokers: He is an intermediary adopted by the company to sell their products on behalf of the company with out taking the physical pocession of the goods. He gets commission on sale. Ex: Textile, Paper , Share transactions. f)Vending Machines : Beverages, coins vending etc 02/01/14 124
  • Marketing Channel 2) Seller Driven Format Here the company uses Wholesalers and Retailers in the final stage to reach their customers This format is widely used by FMCG Products and Pharma products. a)Departmental Stores b)Supermarkets, Malls, c)Wholesalers d)Retailers e)Discount stores f)Door to Door sales persons 02/01/14 125
  • Marketing Channel 3) Service Driven Format These marketing channels facilitate the distribution. a)All kind of transporters. b)Ware houses c)C&Fas d)Courier services 02/01/14 126
  • Marketing Channel 4.Other Formats a)Multi level marketing : A sales agent sells the products and earns the commission on his sales. He is also authorized to appoint more agents under him. He gets commission on this sale as well. Tupperware, Amway,Herbalife etc b)Co operative societies: Specially in rural areas. They are formed by the farmers to promote their produce with out the involvement of middlemen. This is becoming very popular c)Computer Kiosk: Railway ticket booking, Bus reservation etc d) TV Home shopping e)Internet buying: 02/01/14 127
  • Marketing Channel Marketing Channel Levels 1.Zero Level Channel Manufacturer End User 02/01/14 Zero Level Channel 128
  • Marketing Channel Marketing Channel Levels 1.One Level Channel Manufacturer Retailer End User 02/01/14 One Level Channel 129
  • Marketing Channel Marketing Channel Levels 1.Two Level Channel Manufacturer C&FAs Whole Saler/ Distributor Retailers End User 02/01/14 Two Level Channel 130
  • Marketing Channel What does customer expects out of the Marketing Channel? a)Variety of products to suit their needs made available at one place. b)Marketing Channel to be located closer to him. c) Speedy delivery d)To make the product available in the lot size that suits him 02/01/14 131
  • Marketing Channel While these marketing channels give services to customers, the interest of marketing channels and customers are protected by certain policies like: a)Pricing policy : MRP b)Clear Sales terms : Payment terms : Cash on delivery / Credit of 15, 30 days etc c)Delivery frequency d) MOQ e)Area coverage f) Margins and other facilities etc 02/01/14 132
  • Marketing Channel Marketing Channel Systems : 1)Vertical Marketing Systems (VMS) In this Vertical Channel Marketing System, the Manufacturer, Wholesaler, distributor, retailer etc work as one team with out any conflict to provide service to end user. Here all the members co operate and work together as one team. This co ordinate working improves efficiency, reduces un necessary cost and duplication of work. There are 2 types of A)Corporate VMS (B)Administered VMS A)Corporate VMS Here production and distribution is handled by one entity . It gives high degree of operational control and cost advantage to the company. 02/01/14 133
  • Marketing Channel Marketing Channel Systems : Ex: Medical Diagnostic equipment maker , Airline services, B)Administered VMS Here the distribution channel is with many entities. But there will be one distributor who will be a major force and he will be given the authority to control other distributors. One large distributor co ordinates the distribution activity and gains market power by dominating the channel. Ex: Pepsi, Coca Cola, Gillet, HUL, ETC 02/01/14 134
  • Marketing Channel Marketing Channel Systems : 2) Horizontal Marketing Systems (HMS) In this marketing system,2 or more companies tie up to work together with same distribution system .. This system can be for short term or long term. In this arrangement both the companies get maximum cost advantage and the distribution system also gets the benefit . Ex: ATMs HUL & P&G have similar arrangements for their non competive products 02/01/14 135
  • Marketing Channel Marketing Channel Systems : 3)Multi –Channel Marketing System ( MCMS) re In MCMS, the companies use more than one marketing channels to reach different customer segments. Many FMCG companies have different channels to service Retail trade and Institutional CUSTOMERS. MCMS is used in situations like a)Same products are sold to different market segments b)Different products are sold in same market: c)Reach is difficult in certain geographical locations like NE region 02/01/14 136
  • Marketing Channel Cost & Margins in Distribution Systems Cost incurred in distribution system 1.Capital Investment – Ware house, infrastructure, facilities, delivery vans, trucks, fork lifts etc 2.Working Capital : Creditors, debtors, inventory, 3.Operating Expenses : Salaries to staff, Wages to workers, promotional expenses , etc 02/01/14 137
  • Marketing Channel Companies pay the following For C&FAs - 2% OF TOTAL VALUE OF GOODS HANDLE Whole salers – 1-2% of TOTAL VALUE OF GOODS Distributors of FMCG – 5% MARK UP Retailers : 5 – 10% Mark Up Industrial Products - 10% Mark up ROI – End of Unit III 02/01/14 138
  • Unit IV – Retailing Definition : Any business entity selling products and services is called Retailing. What are the characteristics of Retailing ? 1.Order size is small but many in numbers 2.Retailers caters to wide variety of customers and hence has to keep many products in stock. 3.Display of goods is crucial due to impulsive nature of customer. 4.Managing inventory is crucial 5.Retailers strength should be to ensure Availability and Visibility 6.Customer mix decides the marketing mix which the Retailer has to decide. 02/01/14 139
  • Unit IV – Retailing How does the customer selects a Retailer? 1)Based on location – proximity, convenience, parking facility,safety.. 2)Based on Price – Value offered, credit, special discount 3)Product selection – Brands, quality of products and service offered 4)Special service –home delivery, gift wrap, valet parking 5)Effect of sales people – courteous, knowledgeable …. 6)Fair dealing – honesty, privilage of return/exhange 02/01/14 140
  • Unit IV – Retailing How does Retailer retain customers? 1)Performing a kind of marketing that enables the retailer to keep a wide variety of products 2)Helping create time, space and possession utility 3)Retailer’s service also helps to retain the customers 4)Services they add such as credit, delivery,extended store hours etc… 5)Stores location ….. ? 02/01/14 141
  • Unit IV – Retailing Retailers in Rural Market Retailer as a Salesman. Retailer is an influential agent ( or a salesman ) in the most crucial point of purchase. Most customers, typically , get confused by a variety of products and ultimately go by the opinion of the retailer. Hence retailer actually acts as a great sales man. Influence of Retailer in Rural market in India is even more due to ill literacy. Most Rural customers get easily influenced by the opinion of the Retailer. Retailer normally stocks a limited number of products and expects high return . 02/01/14 142
  • Unit IV – Retailing Many customers in Rural area has an account with their trusted retailer. Due to this credit facility they tend to buy the goods only thro this retailer. The retailer takes full advantage of this situation and he influences the customer to buy the brand where he gets maximum margin. 02/01/14 143
  • Unit IV – Retailing Theories in Retailing. I )The Malcomb Menair Theory : 1.A retail outlet starts with low prices, margin and simplicity.With time in order to improve the customer loyalty , the retailer adds additional services … This will add cost to his business… 2.In the second stage, this out let works on slightly higher prices ,better margins and better image. 3.In the third stage, the outlet builds a “Premium Image” 4. This creates a gap in the market, which gets filled up by an entirely new outlet which starts at stage 1 02/01/14 144
  • Unit IV – Retailing Theories in Retailing. II ) Retail Accordion Theory Or Hollander Theory: An outlet that starts as a general retailer “Grows” into a specialized retailer and in course of time becomes an even bigger General Retailer 02/01/14 145
  • Unit IV – Retailing Theories in Retailing. III) Theory of Natural Selection : The evolution of Retail Store is influenced by the environmental factors like economic, legal, and political factors . The retailers who successfully adapt to these factors are more successful. 02/01/14 146
  • Unit IV – Retailing Retail Scene In India : 1. There are more than 15 million retail stores in India of various sizes. 2. Most of them are in the un organized sectors in both urban market and rural market. 3.The small retail shops contribute to 96% of the retail population in India 4.The organized retail sector contributes to only 4-5% and are mostly located in the cities. 5.It is estimated that Retail sector in India is the second largest employer after agriculture . 6.Retail provides employment to 8% of adults in the country. 7.About 10 lacs more jobs are likely to be created in this sector 02/01/14 147
  • Unit IV – Retailing Retail Scene In India : 8.The contribution of the Organized sector is still very low but is catching up very fast in the A& B class cities in the country 9.With the opening of FDI in retail the Global leaders in Retail like Walmart, Tesco are setting up big retail stores in the country. 10.In the last 10-12 years, in the organized sector many of Indian big business houses like Tatas, Birlas, Reliance Pantaloon, Big Bazar , etc have entered into the Indian retail segment and they are fast expanding in many cities. 11.Apart from convenience, the customers looks the organized sectors to provide lower prices , good ambience, and feel of the products… ex Pantaloons, Big Bazar etc 02/01/14 148
  • Unit IV – Retailing Retail in Organized sector 1.Fastest growing sector. It has already caught the attention of Indian Heavy weight Industrialists like Tata, Birla, Reliance, Brarti Airtel Futures Group etc . 2.Large Format Stores like Super markets,Hyper Markets etc have come in large numbers in many A&B Class cities. 3.Many of them use higher technology like SAP- Supply management tools, Bar code systems etc. 4.They generate large employment 5.They are able to effectively manage their operations cost. 6.They are able to dictate terms to many manufacturers like HUL, P&G etc and get better terms. 02/01/14 149
  • Unit IV – Retailing Private label Brands of Organized Retail Companies like Big Bazar, Pantaloon , D Mart , Relaince etc have developed their own brands . They directly get in touch with the producers with out the involvement of middle men and get their own packaging done and sell in their own brand. This way they increase their margins and yet are able to sell their products more competitively. Some of the formats in Organized sector are: -Departmental stores -Super markets / Hyper markets -Discount stores -Specialty stores like Venfield, pantaloon etc 02/01/14 150
  • Unit IV – Retailing Retailing In Unorganized sector -Still dominates the retail sector by over 94% and will continue due to growth in Rural population. -- The Rural retail out lets are individually owned or family owned --Formats like kirana store, stationary store, pan beeda store etc exist -- Major generator of employment to youth in the country --Provide personalized service --Ofter give credit and dictate their terms , influence certain brands for their own gain. --Many of them open for long hours like 12 hrs --No technology is used… 02/01/14 151
  • Unit IV – Retailing Factors supporting Growth of Retail sector In India -Income levels have risen .More disposable money in the hands of the average middle class mass -India has the world’s 2nd largest consumer after China. -Consumers demand what they want and are no longer getting influenced by the retailer -Increased litreracy has created increased consciousness on bargaining -Better infrastructure like roads, comminication, technology etc --Relaxation of FDI by Govt. allowing foreign Big retail stores to set shops in India --Entrepreneurs willing to invest in samll and medium retail stores --Inflence of Successful trends in Foreign countries on Indian Market 02/01/14 152
  • Unit IV – Retailing Factors supporting Growth of organized Retail sector In India -The real estate prices have shot up across the country. It is becoming Difficult for the small timers to create new stores. Where as the big players can afford the prices due to their size and money power they have - Big players are creating their stores in A class cities and now moving to B & C class cities also . 02/01/14 153
  • Unit IV – Retailing Emerging Trends in Retailing: -ATMs in Buses stations, Railway station, Airports, departmental stores in Petrol filling stations, -Beverage vending machines everywhere – cold drinks, water bottles, chocolates etc -Professional management using latest technologies like SAP, CRM -Participation of foreign brands like Walmart, Tesco, Metro etc -Modern retail stores are not only for buying but also for socialising -Retailers developing their own brands – Relainace has aquired 10,000 acres of agri land in punjab to grow fresh vegetables, imported cattles for dairy farming and dairy food like ghee, butter etc, is planning to grow roses and export to Holland, USA ETC 02/01/14 154
  • Unit IV – Retailing -Evolution of Retail Sector in India Till the year 1960, the retail sector was typically an un organized sector. The emergence of an organized retail was seen in year 1960 with the emergence of Janata Bazar in Karnataka, Super Bazar in Delhi, Apna Bazar in Mumbai and some cities in Gujarat, Chintamani in Coimbatore etc. Many of these supported by respective governments. Then the private sector followed . Shoppers stop, Big Bazar, Subhiksha, and specialised outlets like Bombay Dyeing, Reymonds – Park Avenue etc started. After the liberalization of economy in year 1990, the organized retailing 02/01/14 155 started in a big way .
  • Unit IV – Retailing -Evolution of Retail Sector in India Infrastructure like roads , bridges, Railways got a big boost in the last 15 years. With that the services sector got a bog boost which has actually helped the emergence of Organised Retail format. In the last 10 years big companies like Tatas, Birlas , Ambanis , Futures Group , Metro, etc have given a big boost to Organized Retailing. The future looks very very bright for the Organized Retail. 02/01/14 156
  • Unit IV – Retailing Merchandising. Definition: Merchandising is a set of activities involved in acquiring goods and services & making them available at the places , times and quantities that enable a retailer to achieve his goals The definition completely covers all aspects of Retailing of making a product available to customer at his choice of place, as and when he requires and the quantity he requires. 02/01/14 157
  • Unit IV – Retailing Merchandising is any practice which contributes to the sale of products to a retail consumer. At a Retail Store level, merchandising refers to the variety of products available for sale and the display of those products in such a way that it stimulates interest and entices customers to make a purchase. Factors influencing Merchandising -Aims and objective of Retailer. -Demographic characteristics of customers in which the Retail store is located --The service level the Retailer is willing to provide --Level of competition in the location --Width and Depth of assortment ( like brand, style, model, color, size) the retailer was willing to provide. --Any other services that the retailer want to provide- like credit, home 02/01/14 158 delivery etc.
  • Unit IV – Retailing Merchandise Planning: It relates to planning of merchandise variety ( different kind of goods ) and merchandise assortment (relates to brand, colour, style, model etc ). THE CRUCIAL FACTORS AFFECTING MERCHANDISING PLANNING IS “STOCK TURNOVER RATIO” Stock Turn Over Ratio 02/01/14 = Cost of Merchandise Sold Value of Inventory 159
  • Unit IV – Retailing Merchandising Strategy : Wide Merchandising Strategy : A retailer stocking wide variety of goods like grocery, stationary, Books, electrinic items, utensils etc. it will be positioned as a one stop shop for the customer . In this case the retailer attract high loyalty of customers, as it would reduce the customers trouble of moving to many shops for all of his requirements. Best example is Big Bazar Outlets 02/01/14 160
  • Unit IV – Retailing Merchandising Strategy : Deep Assortment policy: Retail outlets keeping wide variety of products pertaining to one specific grooup. Like Bata ( only foot ware), Titan (only watches) Here you will have wide variety of products suiting all price paints in specific product group only. 02/01/14 161
  • Unit IV – Retailing Factors influencing / impacting the width and depth of Merchandising: -Strategic objective of the company -customers expectations -Space availability -Relationship with suppliers -Availability of trained people 02/01/14 162
  • Unit IV – Retailing Functions operating in a Retailer: Purchase function Stores & Storage Display Sales Finance & Accounts Maintenance HR 02/01/14 163
  • Unit IV – Retailing Functions Of Merchandise Manager: -Making products available in variety and width -Taking right decisions on introduction of new products -Procuring products at low prices to improve margins -Planning the display design -Inventory control -Training and managing the team -Maintain Stock turn ratio 02/01/14 164 -Maintain Gross Margin Return.
  • Unit IV – Retailing Customer Service by Retailer: As broad as the Retailer chooses to be ., Retailer decides his own service level Factors affecting service levels are : location, width and depth of goods , price , help and assistance retailer is willing to offer to customers. 02/01/14 165
  • Unit IV – Retailing Communication to Customer -Facilities available like , washroom, first aid, emergency exits, parking lot, availability of parking space , kids playing area etc -Discounts, MRP, ATMs availability, -Products promotions -Discounts aanouncements -Special offers during festival season -Stock clearance offers 02/01/14 166
  • Unit IV – Retailing Retail Strategy : Some of the factors to be considered are Retails select their strategy based on the following factors. -Markets and customers he is targetting -location of the store -Store image to be created -store design -mechandise to be offered -type of people to manage the store 02/01/14 167 -promotions to be undertaken to increase the footfalls
  • Unit IV – Retailing Retail Strategy : -supplier handling systems including credit and other terms -Terms offered to customers and prospects 02/01/14 168
  • Unit IV – Retailing Key Drivers for success of Retail Strategy : -Number of foot falls -Conversion ratio -Increase the depth of purchase of every customer -Customer retention / Regular and repeat customers -Price points to suit all customers -Operational efficiency -building long term relationship with customers 02/01/14 169
  • Unit IV – Retailing Key Drivers for success of Retail Strategy : -Number of foot falls -Conversion ratio -Increase the depth of purchase of every customer -Customer retention / Regular and repeat customers -Price points to suit all customers -Operational efficiency -Building long term relationship with customers -Background and experience of promoter -Profile of potential customers -Profitability expectations 02/01/14 170
  • Unit IV – Retailing Strategies for Success of Retail : -Positioning strategy -Product differentiation strategy -Operational Strategy -Store location 02/01/14 171
  • Unit IV – Retailing Strategies for Success of Retail : 1)Positioning strategy The store develops its identity in terms of what it has to offer to customers. Life style Brand of store Tanisq Jewellary store Food world outlet BIBA for ladies wera Manyata for mens salwar and kurtas Western union services India ltd for money transfer 02/01/14 172
  • Unit IV – Retailing Strategies for Success of Retail : 2)Product differentiation strategy The entire strategy is around the products the store deals in ..These could be national brads, only international brands, or the own brands of the store. Examples : Tanisq jewellery, Rado brand of watchesore location 3)Operational Superiority In this strategy the store thrives on offering unmatched and valuable service to its customers. Ex: Pizza corners who offer 30 minutes home delivery .. 02/01/14 173
  • Unit IV – Retailing Ex: ‘’Thyocare’’pathology service – they have 25,000 centers across the country and have central laboratory in Mumbai. All investigative samples are collected , BAR CODED , and sent by air cargo to Mumbai. Where they are processed and the results are sent through the web the same day. This is an exceptional service at very affordable rates to common man. 4) Store Location : Store location can be used as an effective strategy to get competitive advantage. Stores at transit locations ex. Mc Donads, Coffeee café, pizza huts , Nirulas in Delhi 02/01/14 174
  • Unit IV – Retailing Factors in developing retail strategy -Background and experience of the promoter -Products and merchandises to be sold in stores -Profiles of the customers to be sold -Location -Availability of good suppliers specially for a private branded stores -Profitability expectations 02/01/14 175
  • Unit IV – Retailing Retail Performance Evaluations The real estate prices are ever increasing. Retailers also have to keep Inventory of their goods. Retailers should get adequate returns on their investments in order to become viable in business. Some of the measures to evaluate their performance are -Gross margin Return on Inventory Ex : Sales is Rs 50 lacs pm. Inventory : Rs 10 lacs Sales to Inventory Ratio = Rs. 50 lacs / Rs 10 lacs = 5 Gross Margin is 20 % ( Rs. 10 lacs ) Goss margin Return on Inventory = Inventory turn x GM = 5x20=100 % Higher the better 02/01/14 176
  • Unit IV – Retailing Retail Performance Evaluations Gross Margin Per Employee Equivalent Gross Margin ( in rupee terms ) / No. of employees Gross Margin – Rs 10 lacs No. of employees – 20 Ex: Rs 10 lacs / 20 =Rs 50,000 per employee. Higher the better 02/01/14 177
  • Unit IV – Retailing Retail Performance Evaluations Gross Margin per Square foot Gross Margin – Rs 10 lacs Area of the store – 100 sft Groo Margin per square foot = Rs 10 lacs / 100 = Rs 10,000/sft Higher the number better 02/01/14 178
  • Unit IV – Retailing Retail Performance Evaluations -Return on Equity -Return on Sale -Hourly customer traffic -Number of foot falls -Sale per foot fall 02/01/14 179
  • Unit IV – Retailing -Store Design -Two important considerations in store design which forms the CHARACTER OF THE STORE are: -Functional Considerations This relates to the convenience to shopper ( consumer ) which include -Location , -Protection , security, free from thefts etc -Easy access, easy exis -Convenience , wash room, toilets, playing area for children, parking area -Information and proper display of merchandise -Ex: Mc Donalds, Café Coffee Shop -Ex: Big Bazar , Super Markets etc 02/01/14 180
  • Unit IV – Retailing -Store Design -Inside the store -Display of goods – Best example is Big BAZAR, where products are grouped separately like …….. -Fast moving items are always displayed at an eye level of the customers -Slow moving items are normally kept on the lower shelves Social Considerations Ambience Image Attractiveness 02/01/14 181
  • Unit IV – Retailing Foreign Direct Investment in India -GOI was not allowing the participation of Foreign Giants like Wal Mart, TEesco etc to have their operations directly in India. Why? Resistance from the organised Indian Retail Industry Resistance from unorganised sector ( 90%) small retailers like kirana stores etc – Threat Threat of loosing many jobs Advantages? Huge foreign investments in India Big reveneu to Govt. Employment opportunity in cities 02/01/14 182
  • Unit IV – Retailing Foreign Direct Investment in India -Exposure to world class retailing in India Govt is giving clearences in a phased manner 1)Govt allowed some foreign brands to be sold in India thro an Indian Partner / franchisee – KFC, Mc Donalds,Rado, Tag Heuer,Swatch etc 2)Govt Allowed foreign wholesalers to operate in Retail market In india – Metro AG of Germany 3)Govt is now allowing the Big Giants like Walmart, Tesco etc to operate as JV with 51% FDI 02/01/14 183
  • Unit IV – Retailing Foreign Direct Investment in India Arguments in favour of FDI These foreign companies will build food supply chains through out the country by setting up -Cold storage plants to handle fish, meat, fresh vegetables etc -Cold storage transportation facilities -Modern supply chain management -World class packaging – will give boost to packaging industry -World class marketing net work -Export possibilities to their chain of stores across the world -As the middle class income has really gone up, govt wants to encourage spending ……… why? 02/01/14 184
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  • Unit V – WHOLESALING Definition: The wholesaler is a trader who purchases goods in bulk or large quantities from manufacturer and sells it to the retailers , industrial consumers, commercial consumers or institutions in small quantities but do not sell in large quantities to end consumers. Wholesalers operate on the principles of optimum results for their efforts . They have minimum operational cost, work on high turnover with thin margins. They buy the goods for resale , keep inventory, take risk of price changes , negotiate terms with the companies , procure orders , and deliver them and at times extend credit. 02/01/14 186
  • Unit V – WHOLESALING -Wholesalers are of two kinds 1)Freelance Wholesaler : -They are not under contract with any one company -They operate from a very convenient place and mostly are old timers -They deal with competing products also. -They deal with an assortment of similar products in a particular group ex: An electrical wholesaler dealing in switches, MCB, WIRES, BULBS ETC deals in many brands. -Ex: Cigarette whole saler -They are often powerful distributers who negotiate better margins -New entry products really fall for them to get a foothold in the market and the wholesaler makes the most of it. -They create entry barriers to new distributors – why & how? 02/01/14 187
  • Unit V – WHOLESALING 2)Contracted Wholesalers -They are under contract with a particular manufacturer -They do not deal with competing products -They develop loyalty with their principles -They also dominate the principles over many years -They are bound by the companies rules strictly - 02/01/14 188
  • Unit V – WHOLESALING How are Wholesalers different from Retailers? -They are less bothered about their locations -They deal with distributors and retailers or other businessmen and not with consumers -they deal with specific group of products only -Their catchment area is much larger than that of Retailers -Their value per transaction is much higher than that of the retailers -Their margins are lower but turnover is very high. -They are more bothered about their returns on Rupee terms than 02/01/14 189
  • Unit V – WHOLESALING Wholesalers Deliver Value -They keep goods on hand that customers need and deliver them instantly -Customers can rely on their inventory -They operate on low margins and high volumes -Their profitability lies on how fast they turn over their inventory -Often they bargain hard for some extra margins -Some times they pass on their benefits to customers for a big volume How are they different from Retailers? -They are less bothered about their locations -They deal with distributors and retailers or other businessmen and 02/01/14 190 not with consumers
  • Unit V – WHOLESALING Functions of Wholesalers -They promote the products of the company of their choice -They break the bulk to customers requirements -They store and protect the goods till they are sold out -They take risk on the googs which often they cover it with an insurence -They undertake transportation of goods to their customersi -They finance the buying of their goods and at times give credit to their customers -They collect market information and pass it on to their customers 02/01/14 191
  • Unit V – WHOLESALING How Wholesalers help Manufacturers? -Wholesalers collect orders from many distributors / Retailers , consolidate and send a large orders to manufacturer. Then after supply is made, he breaks the bulk and supplies to retailers in smaller lots. -Manufacturers are able to produce in large qty and send a truck load to wholesalers. -Wholesalers place the orders in advance so that the producers are better equipped to keep inventory of RM and plan their production better -As wholesaler is in touch with the market, and understands the pulse of the market very well. This kind of information really helps as market research information -They act as an extension of the sales force of the company -Due to wholesalers, the companies need not keep huge inventory 02/01/14 192
  • Unit V – WHOLESALING How Wholesalers help Retailers . -Wholesalers acts as a resrvoir for the retailer so that retailer need not keep huge stock -Wholesaler helps the retailer manage his inventory well -Wholesaler delivers the products promptly, no waiting time. -He delivers best value for money for the retailrs -Wholesaler gives information to retailers on the new products,promotions etc and actually acts as an extension of the companys marketing personnel -A free lance wholesaler acts as a one – stop – shop …. -Wholesaler gives credit to retailers 02/01/14 193
  • Unit V – WHOLESALING -Classification of Wholesalers 1)Full Service Wholesalers They stock goods, sell goods, they offer credit , they give marketing information to retailers etc 2) Limited Service Wholesalers They offer limited services … ex- Metro Cash and carry 3) Merchant Wholesalers – Independent businesses which include distributors 02/01/14 194
  • Unit V – WHOLESALING Key tasks of wholesalers 1.Collecting and aggregating the orders -Wholesaler works for one company or many companies.He does the market coverage as per the plan given to him by the company. -Based on his knowledge of customers, buying pattern of the retailers, he is able to release a near accurate orders on the company at regular intervals as defined by the company 2.Warehousing of the Goods -Storing the goods. - Insuring the goods against damage, theft etc - Protecting the goods. – As per the nature of the goods, protection varies., 02/01/14 195
  • Unit V – WHOLESALING 3.Order Booking & Execution -He acts as an extension of company sales force -Books the order from dealers -Gives the orders to company, receives materials breaks the bulk & supplies to retailers 4.Transportation of Goods 5.He has to arrange finance for his business 6.Gives credit to his retailers 7.He takes risk on his stock 8.Collects market information and passes on to his principles 02/01/14 196
  • Unit V – WHOLESALING What are the Strategic issues in Wholesaling? Mainly there are 2 issues 1.Whom to sell Wholesalers have to take a strategic decision on whom to sell. Who should be his target customers ( Retailrs) Following factors are considered in deciding whom to sell -Location the wholesalers – which is normally in the main market of the city -Size and composition of the customers (retailers) -His catchment area -Purchasing habits of his likely customers -His competition – nature and composition of his competitors -Once he has answers to these questions, he can decide on his strategy/. 02/01/14 2.How to sell to them 197
  • Unit V – WHOLESALING What are the Strategic issues in Wholesaling? 2.How to sell to them The answer lies in Product Mix and on 4P ( Product,Price, Promotions & Place ) This particularly applies to Freelance Wholesaler, why ???? (The contracted wholesalers need not worry about these issues as they are all taken care by the company.) Product decisions :He decides what product to deal with and normally sticks to it for a long time. After deciding he also knows what operating margins he gets in that product. His challenge here would be to operate with minimum inventory to maximize his profitability. 02/01/14 198
  • Unit V – WHOLESALING What are the Strategic issues in Wholesaling? Pricing Decision : Normally a wholesaler maintains bare minimum margin and keeps lower operational cost. This determines his price. He normally passes on all the other benefits to customers , keeps his lowest margins and tries to maximize his turnover with lower inventory. His challenge would be to cover all of his operational expenses like Establishment cost, Inventory cost, transportation cost, cost of breaking bulk etc and then maintain his predetermined price. 02/01/14 199
  • Unit V – WHOLESALING What are the Strategic issues in Wholesaling? Promotion Decision : The simplest promotional decision that he takes is to keep the prices lowest. When companies run sales promotional activities, the wholesaler bargains hard and buys maximum quantities. Often he buys in the highest slabs so that his customers can get the benefits. Place Decision: Normally he chooses his place in the center of the market. Now due to high cost of land many wholesalers are setting their shops outside the city limits, where the prices are lower. 02/01/14 200
  • Unit V – WHOLESALING Major decisions in Wholesaling 1.Which Market to Operate in? The focus is on higher volumes. Why? Because with higher volumes they can negotiate higher margins. This is particularly true with freelance wholesalers. 2.Manpower This is not a major issue with the wholesalers. Major activities of buying, negotiating with companies , controlling inventories etc are all done with the help of the owner himself. It is not difficult to get the supporting staff to get the other work done. The front office employees and back office clerical staff to manage inventory, keep records, submit regular reports, file taxes and returns etc are generally available and does not pose any problems ……… 02/01/14 201
  • Unit V – WHOLESALING Major decisions in Wholesaling 3.Which Products to Sell ? Its about the width and depth of the merchandize to be sold as a wholesaler, its purchase policies, additional service offerings if any etc. The width and depth of merchandize to be sold is influenced by the customer profile in his catchment area and the amount of financing he has to manage to do the business. Similarly service offerings also play a major role in selecting the products he decides to sell. 02/01/14 202
  • Unit V – WHOLESALING Major decisions in Wholesaling 4.Promotional Support Most common promotional support is on the price offering as explained earlier. 5.Credit & Collection -Extending credit is a competitive necessity to retain customer and build loyalty. -In case of freelance wholesalers , they decide to what extent they have to extend the credit. -In case of contracted wholesalers, they are bound by the company regulations. For retail, credit is linked to sales volumes. 02/01/14 203
  • Unit V – WHOLESALING Major decisions in Wholesaling 6.Warehouse location and design : Wholesalers location is normally in the heart of the city and the distributors location is decided by the company. The freelance wholesalers are normally not worried about the design of the warehouse. The contracted wholesalers abide by the company rules. 02/01/14 204
  • Unit V – WHOLESALING Major decisions in Wholesaling 7.Inventory control: This aspect plays a major role in the success of the Wholesaler. As already explained INVENTORY IS A NECESSARY EVIL. One cannot manage without inventory and at the same time, more inventory is loss of money. The wholesalers have to learn to optimize the inventory levels. In the case of contracted wholesalers most companies decide what level of inventory the wholesalers have to keep. This is mandatory. Companies ensure that. 02/01/14 205
  • Unit V – WHOLESALING Some Other Types of Wholesalers -Cash and Carry wholesale : This is a very unique system of wholesaling successfully practiced in US and Europe. This format was conceptualized by Mr. Lawrence Batley in the US. -Here the goods are sold from a wholesale warehouse to customers either on a self service basis or on catalogue sale basis. -Here the customers are Retailers, companies, institutions, hotels etc -This is not a place for the “Aam Admi”. Here the customers have to be registered with sales tax dept or they have to be sponsered by the commercial institions . -Sales are made on cash and carry basis or through credit card. 02/01/14 206
  • Unit V – WHOLESALING Cash & Carry Wholesalers -The customer collects the goods and makes his own transport arrangements -MOQ for every product -They often promote on their brand name. -They bargain hard with their suppliers to get better terms. -They operate mostly below MRP -Very organized format. Customers cannot avoid any taxes. -FDI of 100% is permitted in India. -Metro AG of Germany is operating in India. 02/01/14 207
  • Unit V – WHOLESALING Distributors Definition : A distributor is a kind of a wholesaler nominated by the company to exclusively re distribute the company’s goods to all retailers and institutions in a designated territory. A distributors is not allowed to trade in competing products. Dealer Definition :A dealer has a similar role of a distributor but has two differences – 1)He may not have clearly defined territory to operate 2)He may deal with competing products also in some cases -Ex: Automobiles , petrol bunks – Exclusive -Garments dealers, Edible oil - Non exclusive 02/01/14 208
  • Unit V – WHOLESALING Distributor Management for FMCG Definition : A distributor is a person appointed by the company who has the responsibilities for: -Buying adequate quantities of all the products in different pack sizes for re – distribution. -Ensuring full market coverage of all customers in the territory assigned to him. -To finance his operations. He also extends credit to his customers . He either bears the cost of credit or charges it to his customers. -Maintaining adequate inventory. -Assisting the company in all of its sales promotional activities -He has the capacity to maximize the sales in the market 02/01/14 209
  • Unit V – WHOLESALING Why distributor is required? -For entering new area or town -For replacing the existing one -For adding another one What is expected of the distributor? -Achieving sales targets in terms of volumes, value & brand packs -Investments in infrastructure – storage space, vehicles for distribution -Manpower - for selling, inventory, reports etc -Distribution capabilities – market coverage with beat plan -Merchandising and displaying. 02/01/14 210
  • Unit V – WHOLESALING What is expected of the distributor? -Effectively handling promotions and schemes initiated by the company -Handling quality complaints -Managing inventories -Payments and remittances to the company -How do you select the distributors? -Based on company requirements , identifying 2/3 prospective distributors by the sales force responsible in that area. -Background checking in the market, bankers etc done discreetly -Meeting the prospects , explaining them company’s rules and regulations, and finding the interest levels of the prospect.Normally companies will have checklist to follow. 02/01/14 211
  • Unit V – WHOLESALING -How do you select the distributor? -After getting all the details the sales person evaluates them before recommending to higher ups. -Final decision is taken on the basis of highest marks among all the prospective distributors. -Once selected , company gives letter of authorization for a period of one year, renewable every year. Security Deposit -Most companies take security deposit before appointing. This is in the form of A Demand Draft to protect the company’s interest in the event of default of payment by the distributor. The deposit shall be to the extent of one month’s average sale, with out bearing any interest. 02/01/14 212
  • Unit V – WHOLESALING Payment by the distributors to company. Company takes 10-20 signed blank cheques from the distributors. Every time company dispatches the material through the C&FA , the value of the goods is entered in the cheque and encashed. Whenever the cheque bounces, the distributor is informed to deposit the money immediately to the bank account or through a DD The distributor has to make the next 2 transactions by cash to the company. Second time the distributor defaults in payments, he shall be disqualified. 02/01/14 213
  • Unit V – WHOLESALING Investment in Inventory The distributor is required to maintain certain levels of inventory in FMCG industry. It ranges from 3 to 4 weeks of salable stock at all times.It is important for the distributor to keep inventory of all brands and packs and not merely the fast moving goods. The sales personnel keeps on monitoring the inventory levels at all times and keep replenishing the stocks 02/01/14 214
  • Unit V – WHOLESALING Investment in Infrastructure -Storage space with a capacity for at least one month of average sales. This is the largest one time investment . -Next investment is on the manpower, namely the sales people. It depends upon the area coverage, beat plan. They also would require support staff to take care of office, keeping records , filing returns etc. -Investment in Inventory. 02/01/14 215
  • Unit V – WHOLESALING Market Coverage -The territory is decided by the company . The outlets to be covered shall also be decided. -The beat plan is drawn up . The beat plan covers the markets to be visited , frequency of visit etc. -Some times , during initial stages , company absorbs the cost of coverage of the when the area is too large . -It is a usual practice for the owner to visit the market himself -Collectively they track the competition , which is a very important function. 02/01/14 216
  • Unit V – WHOLESALING Motivational tools for Distributors - Visit of the company sales field force to work along with the distributors -Incentive on achieving sales target to distributors -Quantity purchase discounts -Attractive prizes on sales contest for success of new products or for liquidation of non moving stocks -Extending credit to Distributors -Subsidy on distribution cost -Sales contest for distributors sales personnel -Invitation for distributors and their staff to company visit during imp meetings, launch meetings and honoring them 02/01/14 217
  • Unit V – WHOLESALING Performance Evaluation This is done twice a year in a very transparent manner. -The evaluation parameters and their weightage is informed in advance to avoid any confusion. -The parameters are 1.Infrastructure – Storage space, communication facility, IT Support, Manpower etc 2.Coverage of – Area , outlet coverage, productivity 3.Achievement of Sales Volume 4.Handling of promotions 5.Inventory levels 6.New customer, new market additions etc 7.Complaints handling 8. Submission of reports in time 02/01/14 218
  • Unit V – WHOLESALING Distribution margins In FMCG the margin is normally around 5%. The company sells the goods to the distributor at price “x”. The distributor is allowed to sell his goods at price “y”. The difference is his margin which is normally @5%. Distributor has to manage his costs and profitability with in that 5%. Their expenses are normally with in 2%. They make nett 3% profit. At this 3% nett profit they make an ROI of around 30% 02/01/14 219
  • Unit V – WHOLESALING Reports and Records from Distribution -Report on sales achieved -Report on Inventory -Sales tax registration , sales tax return filing every month -Record on receipt of goods from the company -Banking details of all payments made to company -Report on customer complaints -Report on stock returns -Report frequency- daily, weekly and monthly as per the norms of the company 02/01/14 220
  • Unit V – WHOLESALING Statutory compliances The distributors is supposed to comply with all the laws of the land concerning his business. Any violations will be at his own risk. Companies have zero tolerance on statutory compliances and it is all stated very clearly in the distributor agreement which he has signed. Any violation would amount to cancellation of distributorship. 02/01/14 221
  • Unit V – WHOLESALING Caes 1 Dealer xyz Yearly turn over – 92 lacs Investments – Rs 7 lacs Net profit ( nett of all expenses) = 2.99 lacs Incentives received from the company : 0.52 lacs Total of net profit = Rs.3.51 lac DISTRIBUTOR profit % = 3.51/92=3.81% DISTRIBUTOR ROI – 3.51/7.00=50% 02/01/14 222
  • Unit V – WHOLESALING Future of Wholesalers in India 02/01/14 223
  • Designing Channel System Factors that determine the nature of distribution channels at different situations -Nature of product or service being distributed -The deliverables of the system -Location and nature of Customers -Nature of market being covered -Intensity of distribution system Channel systems get built around local opportunities, conditions , and requirements . Marketing channel adds value to the product passing through it. 02/01/14 224
  • Designing Channel System Channel system is a bridge between the manufacturer and the ultimate customer. While deciding the most suitable Channel system, we need to consider its product mix , marketing mix ( product, services, price, promotional support, market coverage depth and width), long term commitment from channel partner, level of service the company is willing to deliver etc etc Variables that affect Channel Structure -Market Related - Consumer needs -Product Related – Physical nature of products like size, weight, unit value, perish ability, etc. Customized products require very short channel and mass consumer products require lengthier channel with many levels. -Company related – depends on the size of the company, its products, financial strengths,managerial capability , etc. Larger and bigger companies can exercise more “Power” on the system 02/01/14 225
  • Designing Channel System - Intermediary related – Type of channel available and cost of setting and successfully running the system. -Environment related – social, economical , legal etc 02/01/14 226
  • Designing Channel System Stages in Channel Planning 4 Stages -Segmentation stage -Positioning stage -Focus stage -Development Segmentation 02/01/14 Positioning Focus Development 227
  • Designing Channel System Segmentation Stage : It’s the segmentation of customers and their expectations. Ex: Pharma company has 3 segments . Doctors – who endorse a particular brand of medicine Chemists / Pharma outlets - Who stock and sell a large number of medicines Hospitals and Nursing Homes : They buy the medicines for treating their patients in large quantities Each segment has different requirements for the company and the channel servicing it. 02/01/14 228
  • Designing Channel System Positioning Stage : -It defines the channel element which is required to service each of the segment. -Each potential customer segment has its own unique expectations from the distribution channel and the Sales manager has to decide which channel partner is ideal to meet the expectations. -At this stage the type of intermediary is decided. -The sales manager defines the service objectives that each of the channel member is expected to deliver. -The structure of the Channel gets formed in this stage. 02/01/14 229
  • Designing Channel System Focus Stage : In the focus stage, the Sales Manager decides which segment that need to be addressed. This is a stage where the sales manager introspects on the suitability of the segments and decides which segment is most suitable and practical. The cost factor, environment factors, competitive factors, managerial control factors etc are decided Ex:They may decide on Focussing on Doctors in “A” Class cities, Chemists located in main markets & some Multi cpeciality hospitals etc 02/01/14 230
  • Designing Channel System Development Stage In this stage, the sales manager works out best possible alternatives ( for new channel ) He studies the channel systems followed by the competitors and studies them carefully to see if it suitability.( for existing channel) He will do all possible modifications where ever required. 02/01/14 231
  • Designing Channel System We need to understand certain things before Designing the channel. -Defining the customer Needs -Defining Channel Objectives -Finding Channel Alternatives -Cost of the Channel System -Number of Intermediaries in the Channel -Evaluation of Major Alternatives 02/01/14 232
  • Designing Channel System We need to understand certain things before Designing the channel. -Defining the customer Needs on Service levels The customer needs on service levels are in terms of lot size, varieties, waiting time and product service etc. It’s the most convenient size of the product that the customer can buy at a time : Ex, 200 gms toothpaste or 2kg pack of Wheat or 10 hp motor etc. Waiting time : It is the time to get the product after ordering. Consumer will have zero waiting time for a consumer product and may wait for a week 02/01/14 consumer durable goods. It depends on the product. 233 for a
  • Designing Channel System Choice to the customer: Company has to offer a variety of products to choose from.The retailer may offer a variety of products to choose from partaining to one company. But the consumer would like to have a competing product also. The channel system is required to provide this assortment. Place Utility Making the product / service available closer to consumer. The intensity of the distribution should be very high. Ex: Maruthi Service stations available at most remote corners of the country. 02/01/14 234
  • Designing Channel System Service Support : It is an add on support that the channel has to provide. For industrial products , it is after sales support , maintenance support, installation support. For consumer durable goods it can be credit, home delivery, installation etc Consumer may or may not pay for these additional services. Many times it is included in the price the customer pays for it. The channel designer has to consider all these factors in designing the channel system. 02/01/14 235
  • Designing Channel System Defining the channel objectives. Objectives are what channels are required to support the customer service . The channel objectives are dictated by the nature of the product characteristics . -Industrial products may require direct marketing by the company -Consumer products - The products have to be made available to large consumers at all times hence the channel system requires wholesalers, distributors, retailers etc. -Company selling frozen desserts like ice creams , or frozen meat, fish etc - the channel system should have cold storage chains. -Company selling seeds – Rural distribution system is the answer 02/01/14 236
  • Designing Channel System One kind of Channel system will not fit all products groups. One has to consider various channel systems that competitors develop . One has to consider the intermediaries required . One has to look at available intermediaries in the market. – Consumer goods, pharma products.. One has to look at What new channel members that need to be specially developed.. Roles and responsibilities of each of the channel members 02/01/14 237
  • Designing Channel System Cost of Channel system: While designing the channel system , cost of the system becomes important . Because ultimately the cost of the channel system is included in the cost of the product which the customer has to pay. Most complicated channel design would add more cost to the product and the product may become un competitive. So it is required to keep the channel simple. Cost components of Channel : -Margins of the channel partners -cost of transportation of goods -Cost of order booking and execution -cost of stock returns / expired stocks 02/01/14 - Cost of reverse logistics 238
  • Designing Channel System Hybrid Channels Companies which use multiple channels with hybrid channel structure. Here some parts of the system s managed by the company and some pert is managed by their intermediaries. Ex: Company selling the products thro on line and also selling through their intermediaries. B2B Transactions : Company sells the products directly to Major accounts and Intermediaries sell the products to many other customers with small potential. Ex: Industrial Products Ex: Mobile hand set is sold thro company retail out lets and also thro the intermediaries. 02/01/14 239
  • Designing Channel System Evaluation of Alternatives : The channel is designed to service the customers better, handle the growth etc Alternatives are evaluated based on 1.Cost 2.Ability to manage and control 3.Range and volume to be handled 4.Adaptabilitry 02/01/14 240
  • Designing Channel System Evaluation of Channel Systems for its effectiveness is measured on one or more of the following -Volume generated by each channel partner -Profit contribution of each partner -How exclusive is the channel? -Effectiveness of partner in supporting promotional activities -Partner’s ethical business practice -Extent of Customer relationship being built by the partner 02/01/14 241
  • Designing Channel System Implementation of Channel Design Implementation plan is outlined below. -First specify the criteria for appointing channel partners so that the channel owner is fully aware of the expectations of the company. Some of the criteria is (a) previous experience (b) investment capability, (c )storage space (d) manpower (e)transport facilities etc -Document the channel objectives for the company sales people and also for the various members of the channels so that every bodys role and responsibilities are very clearly understood with out any ambiguity. -Clearly understand the profile of the customers being serviced. - List down all the elements of customer service levels that will be delivered by the system. 02/01/14 242
  • Designing Channel System -Next list down all the tasks which will help achieve these objectives -The customer service objectives are delivered by a set of channel partners who together form a channel network. They are c&fas , whole salers, distributors, retailers and the company sales persons . -Each one has a role to play and hence list down the their roles and responsibilities and their KPIs. -There is cost associated with each channel members activity and all these cost will get added to the final price of the product. Hence it is important to have strict control on these costs. -Performance evaluation -Submission of reports 02/01/14 243
  • Designing Channel System Define Criteria for Appointment of Channel Partners Document the Channel Objectives for sales people Channel Partners Define profile of customers to be served List down customer service outputs in detail List the tasks in detail which will drive these service outputs Define the channel structure and channel partners who constitute it Allocate the tasks among the channel partners Work out cost of delivering Customer Service out put Prepare a budget Define performance appraisal system 02/01/14 List down reports , records and their frequency 244
  • Designing Channel System Non Store retailing & Electronic Channels : Selling Door To Door Selling through Vending Machine Selling through teleshopping networks Selling through catalogues Selling through electronic channels END OF COURCE 02/01/14 245
  • Case Studies In Germany the products were sold through dealers .The dealers would do the assembly, sale and service of the power packs. Arun fixed an appointment with 2M hyd and met the top officials to gather more information on the business oppertunities. Arun came back from angalore and briefed to his MD. Afet a week he received a mail from Mr.Srinivasa Rao of 2 M Hyd, asking him to make a detailed presentation to a team of Sr. Executives and have negotiation with them. Q1. How was RK Consultants approach to the customers requirements? Q2. Which presentation method and negotiation style Arun Pandey 02/01/14 246 would use ?
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  • Designing Channel System Non Store retailing & Electronic Channels : Selling Door To Door Selling through Vending Machine Selling through teleshopping networks Selling through catalogues Selling through electronic channels END OF COURCE 02/01/14 254
  • Designing Channel System Non Store retailing & Electronic Channels : Selling Door To Door Selling through Vending Machine Selling through teleshopping networks Selling through catalogues Selling through electronic channels END OF COURCE 02/01/14 255
  • Designing Channel System Non Store retailing & Electronic Channels : Selling Door To Door Selling through Vending Machine Selling through teleshopping networks Selling through catalogues Selling through electronic channels END OF COURCE 02/01/14 256
  • Designing Channel System Non Store retailing & Electronic Channels : Selling Door To Door Selling through Vending Machine Selling through teleshopping networks Selling through catalogues Selling through electronic channels END OF COURCE 02/01/14 257