Sales&distribution mgt. mm 6

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  • 1. SALES& DISTRIBUTION MANAGEMENT (MM-6) UNIT - 1Q: 1:- Define Sales Management? What are the objectives of this area of Management? What rolesdoes a Sales Manager perform?Ans: - INTRODUCTION Nowadays the entire Sales Executives are professionals they plan & build the effectiveorganisation. Basically the professional approach requires thorough Analysis. Appropriate sales policiesand personal selling strategy. Sales executive are responsible towards customers and society. RESPONSIBILITIES OF SALES EXECUTIVES TOWARDS CUSTOMER RESPONSIBILITY Obtaining Sales Provide Profit Contributing Business Volume Contribution GrowthThe management is responsible towards the efficiency and planning of the product. So, this concept willemerge as a concept i.e. Sales Management.SALES MANAGEMENTSales management is management of sales force. It basically refers to the direction of sales forcepersonnel in an organisation.Definition:“IN addition to the management of personal selling Sales Management means Management of allactivities, including advertising, Sales Promotion, Marketing Research, Pricing, Physical Distribution &Product merchandising.According to American Marketing Association“Sales Management is the Planning, Direction and Control of Personal Selling including Recruiting,Selecting, Equipping, Assigning Routing, Supervising, Paying & Motivating as these applies to personalsales force. Control Recruitment Selection Motivation Sales Management Compensation Supervision Training OrientationPankaj Kumar, Rai Business School, Mob 9910665814
  • 2. OBJECTIVE OF SALES MANAGEMENT1. Maintain Effective Communications The main objective of sales Management is to maintain effective communication of salesdepartment with the other organizational units. This will ensure or help in increasing the sales of thecompany.2. Develop an effective Distribution Network Outside the company, the sales manager serves as a key contact with customers and otherexternal publics and is responsible for building & marinating an effective distribution network so thatpeople come to know about the company.3. Marketing Decisions The next objective of sales management is to take various marketing decisions like: Sales PromotionAdvertising Product Decision Marketing DecisionPricing Distribution Channel PoliciesThe sales management must care of these decisions before taking an action regarding the product.1. Sales volume: Generally the top management has the final responsibility because the top management isresponsible for the success & failure of an enterprise but the top management has lot of work to do so. Delegates Delegates Top Marketing Sales Management Management Management Authority to Authority to2. Contributions to profits:The next objective of sales manager is to make future operations in such a way that it contribute orincrease the profits of the company. The sales manager must analyze the market opportunities so thathe may be able to meet the competition.Pankaj Kumar, Rai Business School, Mob 9910665814
  • 3. 3 Continuing growth: The sales manager must work in the direction, which helps in increasing the market share. The progress of the entire company depends upon the sales management, so the sales manager tries to meet the competitive edge so as to make organisation grow continuously. Role of Sales Manager: In an organisation a sales manager plays a variety of roles to related to the sale of a given Product. Preparation of Sales Program.Sales Force Mgt. Role of sales Maintain Relations Manager Marketing Decision 1. Sales Force Management: The Sales Manager checks the sources of recruitment and sets the standards for selections. The sales manager must provide training to new employees in such a manner that the high level of performance is achieved in short possible time. 2. Maintain Relations: The sales manager must maintain the internal and external relations of sales department with the departments of other companies or units as well as within the organisation. The sales manager develop & maintain effective working relations with sales, training & other key personnel as well as with the customers to ensure that the effort is beneficial to both the parties. 3. Communication The sales manager should establish a system of communication with other sales personnel that keep them informed of overall department’s sales objectives, results & problems. It also keeps the sale manager informed about their needs & problems. 4. Control The sales manager must consult with the production manager time to time because they are closely related with the sales needs. The sales manager reviews the revenues & expenses of the company and checks the actual sale and compare it with the corrective action may be taken in time. So, the sales manager maintains the proper balance of time spent on various activities and keeps a check on the activities of the sales force. 5. Organisation The sales manager establishes an effective plan of organisation a d methods of controlling the activities of members, so that the work will be completed in time. The activities are identified & grouped and hence assigned to individuals responsible for selling a given product. Pankaj Kumar, Rai Business School, Mob 9910665814
  • 4. Conclusion: On the basis of above observations we can say that:• The sales manager must keep a close watch over the market to meet the competition.• The selection criteria should be in such a way that good employees are recruited.• Sales management is the management of the executives responsible for the sale of the product.Q2: How can the sale of a product are forecasted? How does it help in determining the size ofsales force?Ans: - Introduction: As the name indicates Sales Forecasting is an estimate of sales in a future period under aparticular marketing program. Forecasting is also made for the economic and other factors. A salesforecasting may be made for a single product or for an entire product line. Forecasting can be of twotypes: Forecast Long term Sales Forecast Short term Sales Forecast1. Short term Sales Forecast When a forecast is made for a manufacturer’s entire marketing area or for any sub division of itthen it is called as short term forecast. Because the market conditions are changing day by day, it is notpractical to predict & plan for very long future period.2. Long term Sales forecast Long-term sales forecast is that which is used for planning production capacity & for long runfinancial planning. This is the future period for which the decisions are taken in the present to save thefuture deficiencies. Basically between both the forecasts the short term forecast is important for SalesExecutive, because:* Operating or short-term sales forecast is the prediction of how much of a company’s particularproducts can be sold during a future period under a given marketing programme.OBJECTIVE OF SALES FORECASTING 1 To maintain good relationships with customers by providing them good quality products in the right quantity and at right time. 2 To check the sales of product and estimate of sales is made for future. Thereafter the actual sales are compared with the budgeted sales and if there are any deviations then corrective actions are taken. 3 To assist customers in choosing the product offor maintaining the competitive edge in the market. 4 Sales Forecasting is done to increase the market share of the company and to help the company grow.Pankaj Kumar, Rai Business School, Mob 9910665814
  • 5. To collect the market information, the above are the objective of Sales Forecasting.HOW CAN SALES OF A PRODUCT ARE FORECASTED A Sales forecasting is the procedure of estimating how much a given product can be sold if agiven marketing programme is implemented. No sales forecasting can be absolutely correct, so there arevarious methods used for the sales forecasting of a product. These are:1. Jury of executive Opinion: This method is basically based upon the executive opinions. It means that the executives are wellinformed about the industry outlook, capabilities and marketing programmes. They express their opinionas to what according to them is the sale expected in future.Merits: a) Quick and easy way to forecast. b) Many experts poll their experience and judgement c) Qualitative results (expert’s knowledge) d) This method is used when the adequate information of the market is not available.Demerits: a) Affected by the personal views. b) More workload of key executives c) Only based on personal judgement and may be subjective or biased.2: Delphi Technique: This is basically the new version of the executive opinion. In this the people who are givingopinion are selected for their expertise. These experts give answers to the panel of questionnaires. Theresponse to one questionnaire leads to the next questionnaire. Some contend that the techniqueeliminates the band wagon effect of the majority opinion. As everyone gets a chance to be heard.3. Pool of sales Force opinion This method is often referred to as “The Grass Roots approach”.According to this the forecast is combined and cumulated in such a way that management may use it forthe company. It appeals to practical sales managers because the responsibility an assigned to those whoproduce results. Thus the sales force responsible to produce results gives own prediction about thefuture expected sales.Merits: a) Specialized knowledge b) Close touch with the market conditions c) More confidence (forecast is correct) d) More flexible- it can be changed according to the market needs.4. Projections of past sales This method of sales forecasting takes a variety of forms. This is very simple. To set the salesforecast for the coming year either we choose the same figures as the current year’s actual sales orPankaj Kumar, Rai Business School, Mob 9910665814
  • 6. forecast may be made by adding a set percentage to last year’s sales or to several past years. Theformula of calculating the next year’s sale is:Next year’s sales = this year’s sales/ Last year’s sales.I) Time Series Analysis It is basically based on past year sales. It helps in measuring the sales variation. TYPES OF SALES VARIATIONLong term Cyclic Seasonal Irregular Trends Changes Variations FluctuationsMerits:(i) Helpful in making long-term forecast.(ii) Based on past year sales therefore has an authentic base.Demerits:(I) Difficult to “call the turns”(ii) Exponential Smoothing This method is most useful I short range forecasting. Exponential smoothing is type of movingaverage represent a weighted sum of all past numbers in a time series, with the heaviest weight placedon the most recent data.5. Econometric model building and simulation This is very attractive method of sales forecasting. This stimulation method is used for companiesmarketing durable goods. In this, set of equation is used which represent the relationship between salesand demand. By “plugging in” various for each independent variable sales are forecasted.Econometric Model It shows the relationship among a set of variables and parameters are estimated by statisticalanalysis of past date. It is expressed in equation form.For e.g. the sales equation of durable goods can be written as follows: S= R + NS= Total Sales R= Replacement Demand N= New Owner Demand Total sales of durable goods consist of purchase made to replace units that have been scrapedand purchases by new owners.DETERMINE THE SIZE OF SALES FORCEPankaj Kumar, Rai Business School, Mob 9910665814
  • 7. After determining the kind of sales person that best fits the company’s needs, management nowdetermines how many are required to meet the sales volume and profit objectives. If the company hastoo few sales persons, opportunity for sales and profit go unexploited. If the no. of sales persons is moreit reduces the net profits.Basically three approaches are used:1. The workload method: In this method the number of sales executives recruited is based on dividing the total actualworkload in an organization by the average work performed by an average sales staff. However, thismethod is too quantitative and does not give due considerations to the qualitative activities performed bythe sales executives.For e.g. Telecalling, Prospecting, After Sales Support.2. Sales potential Method: This method is modified version of the workload approach. In this approach, the workload iscalculated considering the sales expected to be achieved in any future period of time. This potential isdivided by average contribution of the executive. The resultant is the sales executives required toperform the sales task of an organisation. VARIOUS STEPS INVOLVED IN RECRUITING AND SELECTING To evaluate the sources from which Sales personnel can be obtained To tap the identified recruiting sources and build a supply of prospective sales personnel Selection of candidatesSOURCES OF SALES FORCE RECRUITSEach source should be analyzed quantitatively & qualitatively. One source may provide numerousrecruits but few successful candidates and a second source may provide a few but more successfulcandidates. Sources of sale force recruitmentInside the company outside the company - Direct unsolicited applications- Company Sales Personnel - Employment Agencies- Company Executives - Salespeople making calls on- Internal Transfers The company - Employees of customers - Sales executive clubs - Sales Force of non- Competing firmsPankaj Kumar, Rai Business School, Mob 9910665814 - Sales competing institutions - Retired persons
  • 8. Sales Force required = Sales potential/ Average contribution of a sales executive.3. The incremental method This is building up approach. In this method the effort of one individual is added upto another.This is done till the time the total sales task to be performed is assigned.Conclusion: An organisation may use any of the methods to determine the number of sales executives at anygiven point of time. However much depends upon several other factors. Capabilities of the sales force Demand for the product Effective supervision Product Availability Competition & Substitutes UNIT - 1Q.3: What are the commonly used methods of recruiting the sales force? Discuss advantagesand disadvantages of the sameAns: Recruitment & Selection Both the HR functions are an important part of implementing the selling strategy. But it is notenough. Training is also very necessary. The implementation of this process is not simple. It has to consider both the kind and number ofthe sales personnel.INTERNAL SOURCES OF RECRUITMENT1. Company Sales Personnel: Most of the people apply in the company in which they know some employee in any of thedepartment of the organisation, as recommendation of these people exerts influence in recruitingprocess.Advantages A) These people are aware of the company policies so can start their work immediately. B) This is a good method when jobs are to be filled in remote areas. C) Sales people of a particular area know much more about that area so their recommendation should be considered.DisadvantagesPankaj Kumar, Rai Business School, Mob 9910665814
  • 9. Sales personnel may show discrimination and less potential employees may be selected.2. Company Sales Personnel: Here recommendations of sales manager the president and other marketing executive areconsidered.Advantages: a) These people understand much better the needed qualification so their recommendation yield top caliber people. b) These people are experienced so their judgement is quite fair.Disadvantages:a) The chances of discrimination occur though to a very small extent3. Internal transfers The other sources of recruitment are internal transfer from other departments and non-sellingsection of sales department.Advantages: a) These people know each and everything about the company. b) Company on the other hand also know every thing about the employees c) These people exhibit excellent knowledge about the product.Disadvantages: Nothing is known about the selling aptitude of these persons.4. Direct unsolicited applications Every company receives uninvited, “Walk in” and “Write- in” application for sales positions, theseare direct unsolicited applications.Advantages: a) This is quite a useful method because most of the managers think that these people are imitative takers and exhibit selling aggressiveness. b) This is economical method.Disadvantages: a) Some times the proportion of the qualified applicants from this source is low. b) It does not provide a steady flow of applicants.5. Employment agencies Seeking and taking help of these agencies is other method of recruitment. Employment agenciesmaintain a Pl of qualified applicants and provide the organisation, when required for fees.Advantages:- a) A lot of time of employees is saved, as recruitment and selection are very long processes. b) Agencies often conduct a number of tests to find out the potential candidate, best suitable to an organisation.Disadvantages: a) Sometimes agencies nominate wrong people just to get the placement fees.6. Sales people making calls on the company Here the purchasing Director is in contact with the sales personnel from other Companies and ina position to evaluate their on –the –job performance.Advantage: High caliber people may be approached.Disadvantages: a) Salary offered to them is usually high. Thus it is more costlyPankaj Kumar, Rai Business School, Mob 9910665814
  • 10. b) These people are less trust worthy.7. Employees of Customers. Some companies regard their customers as recruiting source and attract Sales staff from them.Advantages: a) Usually customer recommends top calibrated people for the job. b) Such transfers may have favourable effect on the morale of the customer’s organisation.8. Sales Executive Club Many Sales Executive Club operates placement services at Club meeting exchange of usefulinformation jay occur by informal discussions. The platform may be used to attract a performingexecutive in an organisation.9. Sales Force of Non-competing CompaniesIn this source individual’s who are working as sales personnel in other non-competing firms are attractedto fill in a vacancy in an organisation.Advantages: a) Selling experiences. b) These people can tell about product line if they are working in related companies. c) This source provides a channel for career advancement for dead-=end jobs.10. Sales force of competing companies. In this source individual’s who are working as sales personnel in other non-competing firms areattracted to fill in a vacancy in an organisation.Advantages: a) They have experience of selling similar products to similar markets. b) Require minimal training.Disadvantages: a) Costly method as attract a competitor’s sales force may require offering an attractive package. b) The selected person may be less trust worthy.11. Educational Institutions: Here recruitment is done from Colleges and Universities, Community Colleges, BusinessSchools, High Schools and night schools.Advantages:- a) These people are mature enough and have reached a certain educational level. b) These students would be in search of job and new to the industry so work with full labour and energy.Disadvantages: a) Lack of experience b) A rigorous and expensive training session is required. An appropriate and effective method should be used soConclusion:That high potential and top caliber people are recruited and selected.*******************************************************************************************Pankaj Kumar, Rai Business School, Mob 9910665814
  • 11. UNIT - 2Q.4: What are sales territories? Discuss the process involved in designated different salesterritories.Ans: TERRITORY MANAGEMENT Sales people are not only responsible for individual customers (account management) but theyare also responsible for a group of accounts (territory management) establishment of sales territoriesfacilities matching selling effort with sales opportunity. Sales personal are assigned the responsibility forserving particular grouping of customers.Sales territory It is configuration of current and potential account for which responsibility has been assigned to aparticular sales representative. Whether designated geographical or not, a sales territory is a grouping ofcustomers and prospects that can be called upon conveniently and economically by an individualsalesperson.Major Account: Customers whose significance to the company business requires special attention andexperienceDirect Account Large account involving special arrangements in terms of principle credit or product design.House Account An account not designed to an individual not to an individual salesperson but one handled byexecutives in the organisation head/division offices.Territory Management It is the planning, implementation and control salespersons activities with the goal of realizing thesales and profit potential their assigned territories.Reasons for establishing territoriesReasons Benefits Customer related1. Provide intensive market coverage - produce higher salary2. Provide excellent customer service - produce greater satisfaction Supervision related3. Foster enthusiasm and moral - leads to less turnover and high job satisfaction4. Facilitates performance evaluation - offer reward related to efforts. Managerial5. Enhance control and evaluation - reduce expense6. Coordinate promotion - give more bangs for buck7. Control selling expenses - avoids promotional wastage8. Aids is coordinating of personnel selling and advertisingReasons for revising territories1. Major accounts-open/close down facilities. - Move into/out of an area - Shift the nature of their business.2. Major accounts become subsidiary of other company3. Competition may have intensified in a territory that is domestic and international.4. Sales management may have overestimated the potential in a territory.Reasons for not establishing sales territory 1. Company is small 2. Social relationship; /personal friendships.Pankaj Kumar, Rai Business School, Mob 9910665814
  • 12. 3. High technology application.Territory management problems and remedies Problems Remedies1. Inadequate coverage 1. Split territory2. Inadequate size 2. Enlarge territory3. Revision 3. Prepare salespeople4. Shifting accounts 4. Revise territory5. Direct accounts 5. Clarify at hiring6. Inadequate support 6. Assist salespersons7. Territory jumping 7. Eliminate practice.8. Overlapping territory 8. Minimize crossovers9. Selling cost variations 9. Review cost figure10. High turnover 10. Rectify casual factorProcedure for developing territoryI. Objectives for territory formulationa) Determine optimum number of territory Lack of coverage, too fragmented, high turnoverb) Selecting a basic geographical control unit. Traditional area, city, metro, village, district etc. it determines the sale potential each control unit. Combination of control unit into tentative sales territory.Shapes of sales territory in wide use.a) Circle When account and prospect are evenly distributed throughout the areab) Wedge -shaped This shape is appropriate for territory containing both urban and non-urban area. It radiate outfrom densely populated urban centers.c) Clover leaf: It is desirable when accounts are located randomly through territory.c) Equalization of territory potentiald) Adequate challenging territory by taking into consideration - Coverage difficulty - Salespersons varying abilitiesPankaj Kumar, Rai Business School, Mob 9910665814
  • 13. - Territorial sales potential.e) Effective sales territory- no significant sales opportunity lies unexploited Efficient – neither money not time is wasted. Important to consider, salespersons work lad and nature of the job (a prospecting salespersoncan handle a larger territory than a person who must provide full service for each account)Redistricting to adjust for coverage difficulty1. Determine the number, location and size of customers and prospects in each tentative territory.2. Estimate time required for each sales call.3. Determine length of time between calls that is the amount of time required to travel from one customer to the next.4. Decide all frequencies.5. Calculate the number of calls possible within a given period.6. Adjust the number of calls possible during a given period by the desired call frequencies for the different classes of customers and prospects.7. Check out the territory with sales personnel who work or who have worked in each area, and make further adjustment as required.II. Basis for territories1. Geography2. Potential3. Servicing requirement4. Workload5. Type of customerIII. Methods of devising territoriesa) Build up method: Designing territory through combining enough pieces of a company overall market to create unitsthat offer sufficient sales challenge.b) Breakdown method: Determining the number of territory by dividing projected average sales per salespersoninto an overall sales forecast.c) Incremental method: Establishing territory as long as the marginal profit generated by the territory exceeds thecost of servicing them.d) Assigning salespersons to territory.Q.5: Write short note on: a) Sales meeting b) Sales contests c) Sales quotasAns: - a) Sales meetingSales meeting are important for both communication and motivational purposes. They provide occasionfor management to stimulate the group to raise its standards as to reasonable and acceptableperformance.Planning Sales MeetingPankaj Kumar, Rai Business School, Mob 9910665814
  • 14. A C M E EDeciding the Deciding Methods Executing EvaluationSpecific meeting - short & - speakers -feedbackMeeting aim content participative - seminars - sales meeting GD - meeting site evaluation form - Time - compare with aims -duration -Room arrangementA) National Sales Meetings: This Sales Meeting is more of incentive and motivations organized at a Grand National Level. Incause of an announcement of a new product or and technology or may be a new strategic planning,these are easy be made at the common get-together of the executives across the country. The salesstaff from different rungs of the market share common platform and may interact to learn about themarket.B) Regional Sales Meeting: Regional Sales Meetings are organized at the middle level organizational hierarchy of theOrganisation. For e.g. District or state level. It facilitates discussions on regional level common issueproblem & focus etc. the frequency of organizing such meetings can be high as compared to the nationallevel meetings, as it does not in much expenditure.C) Local sales meeting: These meetings are organized at the branch level itself. The basic purpose is to give personalattention to the individual sales staff, solve their problems and motivate them for improved performance.Generally the senior may call his team daily for such a meeting. It may not be very formal affair and mayjust be for a few minutes.D) Traveling sales meeting The senior maybe interested in updating himself on the performance the Sales Executive. If it isnot possible to meet him in person, meeting may be held even while traveling. This method is fastcatching up with the intensive use of Mobiles and Internet. - By telephone - T home - By internet/conferencingb) Sales context A sale context is a specific selling campaign offering incentives in the form of award beyond thosein the compensation plan.- Provide extra incentive to increase sales volume- Aim to fulfill individual needs for achievement and recognition- Develop team spirit, boost morale.Objectives 1. To obtain new customers. 2. To secure larger orders per sales call 3. To push moving items 4. To overcome a seasonal sales slumps 5. To improve performance of distributors sales personnel. 6. To get reorders. 7. To sell a more profitable mix of productPankaj Kumar, Rai Business School, Mob 9910665814
  • 15. Reward/contest prizes 1. Cash 2. Travel package 3. Special Honour and privilege. 4. Merchandise.Managerial evaluation of contesta) Contest versus alternatives: If serious defects exist in key aspect of sales force management, a sales contest is notlikely to provide more than a temporary improvement in the sales result.b) Short and long term effect: A sales contest accomplishes its purpose if it increase sales volume and profit both inshort and the long run. No contest is a real success if it borrows sales from preceding months,succeeding months or both.c) Design: A well designed contest provides motivation to achieve the underlying specific purpose byleast expenditure.d) Fairness: All sales personnel should feel that the contest format and rule give everyone a fairchance of winning the reward.e) Impact on sales force moral: Successful sales contest results in permanent higher level of sales force moral.Conclusion: Thus a judicious use of sales contests builds individual and sales force morale helps toaccomplish company goal.C) Sales quotas: Quotas are quantitative objectives assigned to sales organisational until they specify desiredperformance level for sales volume such as:Expenses, gross margins, net profits & return on investment, selling & non-selling related activities, orsome combination of these items. Some companies set sales quota for organisational units such as individual, district & salespersonnel. Quotas are devices for directing & controlling sales operations. Their effectiveness depends uponthe kind, amount & accuracy of marketing information used setting them & upon management skills inadministering the quota system.Objectives in using quotas 1. To provide quantitative performance standard; 2. To obtain tighter sales and expense control; 3. To motivate desired performance 4. To use in connection with sales contestTypes of quotas 1. Sales Volume Quota 2. Budget Quotas - Expense quota - Gross margin/net profit quota 3. Activity Quota: The Company defines the important activities sales personnel perform, and then it set target performance frequencies.Pankaj Kumar, Rai Business School, Mob 9910665814
  • 16. 4. Combination quotaBudgeting by the objective and task method:The manage starts with the sales objectives. Then he determines the task must be accomplished inorder to achieve the objectives. If the cost are too high, the manager may inclined to find different waysto achieve the objectives until the management satisfied with both the objectives and the means ofachieving them. Many firms use this method with some variations.Budget for sales department activities: Administrative Budget Sales Budget Selling expensesSales Budget: It is revenue or unit volume anticipated from sales of the final products. It is the key budget and isbased on the sales budget forecast management estimates the sales of each product may makeseparate forecast each segment.Selling expense budget: It anticipates various expenditure for personal selling activities e.g. Salaries, Commissions &other expenses for the sales forecast must be closely coordinated with the sales budget.Administrative budget: There may be several assistant sales manager, sale supervisors, sales trainers, salesdepartment secretaries and office workers etc. Budgetary provisions must be made for their salaries andtheir staff, administrative budget must also budget for sales office operating expenses salaries, rent,power, light, office equipment and general overhead. Q.6: What is sales budget? Why and how is it prepared?Ans: Sales Budget: A budget is simply a tool, a financial plan that an administrator uses to plan for profits byanticipating revenues and expenditure. Sales budget is a detailed blue print of who is going to sell howmuch of what during operating period and to which class of customers. It consists of estimates of anoperating period’s probable rupee and unit sales and likely selling expense.Purpose of Sales Budget:-1. Planning:- The company formulates marketing and sales objectives; the budget determines how theseobjectives will be met through a detailed breakdown of the sales budget among products, territories andcustomers.2. Co-ordination:- The budget establishes what the cost of various heads be thereby maintaining a desiredrelationship between expenditure and revenues. The budget enables sales executives to coordinateexpenses with sales. It also restricts the sales executives form spending more that their share of ethfunds helping to prevent expenses from getting out of control.Pankaj Kumar, Rai Business School, Mob 9910665814
  • 17. 3. Evaluation:- Sales department budgets become tools to evaluate the department’s performance. By meeting the sales & cost goals set forth in the budget, a sales manager may prove himself to be a successful executive. Sales budget can be determined on the basis of following categories: • BUDGETING BY PERCENTAGE OF SALES METHOD: Using this method, the manager multiplies the sales forecast into various expense heads by percentages. The percentage used for each category may be based on the manager’s experience. The expense allocation follows the direction of change in sales. E.g. if sales are forecasted to decline, then the budget allocation for all expenses heads will decrease as well. However, the effectiveness of this method is dependent on the firm having accurate sales forecasts. Despite the limitations, the managers know that if expenses are kept within their percentage budgets, final operations will come out as planned. FLOW OF INFORMATION FOR BUDGETING Sales BudgetSales dept-expense budget Production-department(advertising, selling costs) Administrative expense budget budgets Cost budgets Profit & loss Budget Revenues Expenses Budget periods: Budgets may be created yearly, semiannually and quarterly. Some firms prefer annual budgets to reduce the amount of paper work and time involved. Others make shorter budgets to make it more accurate and specifically designed for each selling season. Budgetary procedures There are two basic planning styles for making a budget. Top down:- Top management sets objectives and drafts the plans for all organisational units. Bottom up: Different organisational units or departments prepare their own tentative Objective and plans. These are forwarded to the top management for consideration. The sales budgeting procedure differ from company to company with most differences tracing back to differences in basic planning styles. Budgeting making procedure:- 1. Translate the Sales forecast into the work that must be done to achieve the forecast. Pankaj Kumar, Rai Business School, Mob 9910665814
  • 18. 2. Each administrative unit must determine how much money it will need to meet the performance goals for it. a) Surveying each of the activities, the unit must perform. b) Determining the materials and supplies required to accomplish the jobs. c) Determining the materials and supplies required to accomplish the jobs.3. Sales department budgets are complied into one man budget and it is forwarded to the financial executive who disseminates the information to the other department.Administrative heads tend to be overly generous in their estimates of funds they need for the comingyear. Few work under tight budgets. Generally in with managed organisation all budgets are tight.Stages involved in Actual sales budget preparation:-a) Each district sales manager estimates district sales volume and expenses for coming period and the districts contribution to the overhead.b) The top sales executive must argue effectively for an equitable share funds from the marketing division. The amount of money finally allocated the sales department depends upon value of individual budgetary propose to company as a whole.c) The top management appraises the proposal by looking at intrinsic men and probable value to the whole organization. Starting point is a carrel assessment of wants and needs of the prospects.d) The top management divides the available funds among the department and the share each receives depends on the ability of the department to accrue for the plan.******************************************************************************************** UNIT - 4Q.7:- What is sales control? How can it be effectively implemented?Ans: - SALES CONTROL “Control” is knowing what you want to do and being able to do. This definition applies whether it refersto a driver driving an automobile, to a captain commanding his ships, to a quarterback leading his team,or to a sales manager supervising his men. However, a more precise definition of control for the salesmanager might ‘know what you want your sales manager to do & bring able to get them to do it. When troops panic under fire and scatter in all directions, their commander has ‘lost control’ heknows what he want his met to do, but he is unable to make them do it. Similarly, when one of salesmanfails to meet a reasonable quota, or only makes half the calls he is expected to make, or neglect animportant customer to the point where he loses the account, the manger lost control. Control is the essence of supervision; indeed, it is the purpose of supervision. A sales manager’sjob is to multiply his selling effectiveness through these salesmen. But unless he can control the activitiesof his men, unless he can lead to do the right things at the right time, such multiplication of effectivenessis almost impossible.What is being control?a) General Behaviour The Sales Manager might view his job as if there were three separate areas in which he mustexercise control over his salesmen.• CONTROLLING: First, he must control their general behaviour i.e. he must discipline them making certain they conform to the company’s standards of conduct & appearance. Controlling salesmen’s personal conduct is seldom a problem with good managers. Their leadership is firm, & the salesman knows that they are expected to conform to the company’s standards of decorum & appearance. Horseplay at meeting or in the office is generally not tailored or even attempted. The men come to work on time, they dress in keeping with their jobPankaj Kumar, Rai Business School, Mob 9910665814
  • 19. and the area in which they work, they perform the minor duties expected of them, such as keeping their equipment serviced & clean. When breaches of discipline do occur, reprimands a firm, just & immediate.• ATTITUDES: Then he must control the attitudes. He must see to it that they have genuine respect for their company, for their job, and their customer’s prospects. By the same token, the control of attitude in seldom a problem with good managers. Good attitudes are the natural result of good leadership. When a manager shows respect for company’s rules & procedure when he exhibits pride in the selling profession, and when he takes the sales group’s tasks seriously, he is shaping his salesmen’s attitude well.• WORK PATTERNS Finally, the sales manager must control his salesman’s work pattern must set goals, assigns tasks, and redirect efforts.STEPS IN OBTAINING WORK CONTROL A good ‘system’ for controlling salesmen’s work involves these four basic steps: Deciding what goals your group should strive to attain; and deciding what activities yoursalesmen should undertake in order to reach these goals. Communicating the group’s objectives- in terms of specific activities so that each salesmanknows what he is expected to do and how he is expected to do it. Checking to see if the salesmen have done what was expected of them. Redirecting efforts when salesmen go astray & rewarding performance that meets expectations.Controlling daily activity Control through day to day contact Follow-up on given directions.Method of sales control Expenses to sales Miles-traveled to sales Actual day s worked to working days available Active prospects to active account. New customers sold to repeat customer sold. Rupee volume of new business to repeat business. Total expenses to total calls. Miles traveled of days worked Productive call to total calls. THE ICEBERG EFFECTIt may be explained with the help of an e.g.: Take a salesman of a wide line of sporting goods. His job is to sell to sporting goods shops,hardware stores, and department stores. His experience, prior to taking this present job, has been inhardware merchandising, and, as a consequence, he favors selling to this group. This man’s sellingrecord was good. However, his manager noticed that a preponderance of his orders came from hardwarestores, although this, he felt was not the pattern of the other salesmen in his orders came from hardwarestores, although this, he felt, was not ht pattern of the other salesman in his group. So he decided toanalyze the man’s sales by types of account- something he had never bothered to do before. He alsomade a similar study of the five other salesmen in his group. The six-month record looked like this. Percent of sales toPankaj Kumar, Rai Business School, Mob 9910665814
  • 20. Hardware Sporting Department Stores Good shops StoresSalesman A 46 16 38Salesman B, C, D, E, F 21 22 57The ‘iceberg’ (total sales) showed that salesman “A” was actually over quota, but the detailed analysisindicated that the man might not be realizing the potential his territory as far as supporting goods storesand department stores well organized. It may be that, having got a complete view of the ‘iceberg’, themanager will want to make some of his effort to get this man to sell to the other outlets with the sameenthusiasm he shows for hardware outlets. At least, he is a position to exercise more precise controlover the salesman’s activities than was before he made his analysis. In addition, he may have at thesame time discovered that his other five salesmen could generate sales from hardware outlet if theyreallocated their efforts somewhat.Getting reliable reports from salesmen Here are three questions to be asked to determine just how necessary a report a request forinformation might be: 1. Is this information necessary to maintain control of the salesman’s activity “for routing purposes”, one company insisted that its salesmen file daily mileage reports. And yet, it was unable to demonstrate any way in which this information was ever used for routing control. Salesmen had complied freedom to route themselves. The only mileage figure actually needed available from the monthly expense report. 2. If there information is useful, is it being used? As already mentioned, reports that are not read and acted upon worthless even if they contain much potentially valuable information. The better to eliminate reports that you do not have time to use, because salesmen quickly discover whether or not they are performing worthwhile paperwork, ands they resent filling out reports that are of no practical value. 3. Is, there some other way to get this information? One manager was interested in the average number of calls his men had make on a customer before that prospect signed an order. He designed special form that showed the date of each call prior to the one in which the sale was made. The form was in use for 2 months before one of the salesmen suggested that they simply jot down the number of the order-getting call at the bottom of the order blank. This has the manager all the information he needed, and saved the salesman the trouble of completing the extra form. Don’t base discipline on what salesmen report. Show that the reported data is read & used. Check reported information personally from time to time. Other control mechanism, which may be used to evaluate the effectiveness of the personal selling effort.Sales Audit A sale audit is a systematic & comprehensive critical & unbiased review and appraisal ofthe basic objectives and the policies of the selling function and of the organization, methods, procedures& personnel employed to implement those policies & achieve those objectives. Fundamentally, itanswers the following questions: Who is buying what & how? Who is selling what & how? How is the competition doing? How are we doing?Pankaj Kumar, Rai Business School, Mob 9910665814
  • 21. Sales Analysis It is detailed study of sales volume Performa to gains insights on strong and weak territories,high-volumes & low-volume products and the types of customers providing satisfactory & unsatisfactorysales volume. Analysis of sales answers the following questions:• Analysis of sales territories answers how much is being sold.• Analysis of sales by customers answers who is buying how much.• It reveals salespersons with good or below average sales performance• What is being sold in the market?Cost Analysis The third tool available to control the sales effects in the organization is Market Cost Analysis. Itanalyses sales volume & selling expenses to determine relative profitability of particular aspects of salesoperations. It determines the relative profitability of particular aspects of sales operations steps in MarketingCost Analysis are: Sales Analysis By territories By Sales Personnel By product etc. Assign Selling Expenses By territories By Sales Personnel By product etc. ANALYSIS OF RELATIVE Profitability Exposing of relative Strengths & WeaknessesConclusion: Thus an appropriately chosen control technique contributes to the effectiveness salesmanagement. Periodic sales audits provide comprehensive appraisals of total personal-sellingoperations. It helps in identifying areas of strength potential for further exploitation & areas ofweaknesses with potential improvement. Marketing cost analysis goes beyond analysis of sales volumeprobes selling expenses to determine relative profitability of particular aspect sales operations. HencePankaj Kumar, Rai Business School, Mob 9910665814
  • 22. control of the sales executives last from the general to the scientific methods available to improve theeffectiveness of the person selling operations.*******************************************************************************************Pankaj Kumar, Rai Business School, Mob 9910665814