Sales management By Rajiv P. Kumar (Buddhist)Presentation Transcript
Sales Management MM - 302
By: Rajiv P. Kumar (Buddhist)
What is Sales?
Two party : Buyer & Seller.
Transfer of Goods & Services.
Transfer of Ownership.
Profit to the Seller.
Benefits to the Buyer.
Satisfying the need of the Buyer.
Why Sales Management?
Which department generates maximum of total revenue?
Which department establishes the link b.w the firm and the bread and butter of the firm (Customers)?
Organizations large or small are into selling something or the other for their survival and growth
It may be a product
Evolution of Sales Management
The history of salesmanship is as old as human civilization – Paul Herman
Sales people were not held in high esteem by the society
Scene before Industrial revolution begins
Scene after Industrial revolution started
The techniques of modern sales management and selling techniques were refined by John Henry Patterson – Father of Modern Sales Management
He was the pathfinder who showed the strategy and skill required to transform a sales force into an effective work force for generating sales and profits.
A salesperson is no longer an order taker or information provider
It costs 5 times to register a new customer than to sell a product or service to an existing customer.
The domain of sales management has become multi disciplinary
What is sales management
American Marketing Association
Sales management means the planning, direction and control of personal selling, including recruiting , selecting, equipping, assigning, routing, supervising, paying and motivating as these tasks apply to the personal sales force
In above definition there is a confusion b.w sales management and management of sales force
Nature and Scope of Sales Management
The nature or characteristics of sales management can be explained by
Its integration with marketing management
Varying sales responsibilities
Integration with Marketing Management
Sales planning should be integrated with marketing planning.
A company’s marketing plan typically consist of two basic groups
a) Field selling teams
Contacting existing and prospective customers
b) Head quarter marketing team
Performs support and service functions or activities to assist or help field salespeople in their jobs in following manner
Consists of advertising, sales promotion, publicity
Collecting and interpreting information on customers, competitors, products, markets and so on
Physical distribution of finished goods including warehousing, inventory, transportation.
Pre sales and post sales service as well as delivery service to existing and prospective customers
Between customers, company’s salespeople and production or operations
Buyers and salespeople, who do business together have some type of business relationship
Where after the product or service is sold, the customer is not contacted again and hence the relationship is not extended
Value added relationship/selling
In the case of value added exchange the focus is on
the salesperson understanding the current and future needs of the customer correctly and meeting those needs better than the competitiors
Collaborative/ Partnering relationship/selling
It means important or major customers need continuous attention through partnering or collaborative relationships.
Varying sales responsibilities
Selling includes a variety of sales jobs, which are different from one another.
Delivery of a product to household consumers or to business customers
Acts mainly as an inside order taker, who responds to customer demands
Sales support people
Expected to build goodwill and educate the decider, instead of the purchaser or user of the product
Technical sales support / sales engineer
High level of technical knowledge, professional consulting
Demand creator or Order getter
Actively seek orders, and use creative and problem solving selling
A salesperson whose expertise is in solving of a business customer’s problem, with the company’s products and services.
Sales Management Objectives
Sales Volume & Sales Growth.
Share of each product in the total volume.
Expansion of Channels.
Proportion of Cash & Credit Sales.
After sales services.
Training of dealers &(Customer in some cases).
Functions of sales manager
Sales manager has to make a win-win situation for
The owners and shareholders, through higher sales at increased profits
The consumers, by giving them a perception of greater satisfaction by the usage of the product
To the staff working along with him, to make them feel they have delivered the best
To the trade, e.d distributors, traders and sellers, retailers by ensuring their profitability levels are maintained
In order to achieve all this, he has to perform various functions as follows
a) Execution of CEO’s vision
Forecasting, Budgeting and Planning Sales
b) Planning the selling policy and strategy
c) Selecting and organising the sales team
d) Selection of salesmen/ sales force
e) Induction, training and placement of salesmen
f) Devising compensation policy. Promotion avenues and long term career plans
g) Controlling the field force
h) Direction and coordination of sales force
i) Link between top management and field
j) Advertising and sales promotion
k) Winning trust and confidence of trade and customers
Theories of Selling
Is selling a Science – Easily taught basic concepts
Or an Art – Learned through experience
In a survey of 173 marketing executives, 46% perceived selling as an art, 8% as a science and 46% as and art evolving into a science
Types of theories
Seller oriented theories
Right set of circumstances
Buyer oriented theories
Buying formula theory of selling
Behavioral equation emphasizes the buyer
AIDAS Theory of Selling
According to this theory, during the successful selling interview the prospect’s mind passes through five successive mental states:
Attention, Interest, Desire, Action, and Satisfaction
Implicit in this theory is the notion that the prospect goes through these five stages consciously, so the sales presentation must lead the prospect through them in the right sequence if a sale is to result
Getting the attention of the prospect by making favorable comments about the prospect
Proper dress, neatness, a genuine smile and a cheerful expression
The objective of the first few minutes of the meeting is to put the prospect into a receptive state of mind.
It is always a good strategy for a salesperson to make an appointment with the prospect
Leads the prospect’s mind to second stage of gaining an interest
Which aspects or factors of the product or service appeals or attracts the prospect
Different methods are used:-
Carrying a sample of the product if it is not bulky
Carrying visual aids like CD, the product leaflet, photographs
Ask relevant questions to understand the buyer’s needs or problems as well as to identify the strongest appeal or interest.
The objective in this stage is to arouse a strong feeling in the prospect of wanting to have the product or service
Salesperson continues with presentation that how his product/service can solve the buyer’s problem
In this process, the buyer may raise some objections, which need to be answered properly
If there is an external interruptions
Buying action or closing the sale
Some salespeople use trial close to test whether the prospect is ready to buy.
If no the salesperson continues with the presentation to fully convince the prospect about his proposal
After the customer has given the order, the salesperson should reassure the customer that the decision was correct
Thanking the customer for the order, and attending to such matters as making certain that the order is filled as written, and following up on promises made
Right Set of Circumstances Theory
‘ Everything was right for that sale’ sums up the second theory.
This theory, sometimes called the ‘situation response theory’ holds that the particular circumstances prevailing in a given selling situation cause the prospect to respond in a predictable way
The more skilled the salesperson is in handling the set of circumstances, the more predictable is the response
Buying Formula Theory of Selling
Salespeople must understand that household and individual as well as business or industrial) buyers pass through certain stages or steps in buying a product.
In consumer markets, individual and household consumers make buying decision based on five mental stages of buying process as follows
Problem (or need) Recognition
The consumer buying process starts when the prospective consumer recognizes a problem or need.
Salesperson must identify the buyer’s needs to know what information about the product benefits should be given so as to satisfy the buyer’s needs.
Information Search (Collection)
An aroused consumer will search for more information.
For low involvement products it may be mild for high involvement products the person may want an active information search
Evaluation of alternatives
Following factors in the evaluation process used by consumers mostly on a rational basis:
The consumer is trying to satisfy a need, or solve a problem
The consumer is looking for certain advantages or benefits from the product or service that satisfies the need or solves his problem
The consumer knows that each alternative product or brand a set of characteristics that try to satisfy his need
The importance and relevance of attributes vary from product or product
The consumer forms preferences among the brands and also an intention to buy the most preferred brand, in the evaluation stage.
Intentions can be changed by three factors
Attitude of others
Unanticipated situational factors
Post purchase behavior
After buying the product or service, the customer experiences some level of satisfaction or dissatisfaction
The salesperson’s job does not end when the product is purchased
It is a known fact that the buyer’s satisfaction is high, if the product perceived performance is more than the buyer’s expectations.
Buying Decision Process of Business Buyers
In business or industrial markets, the decision making process includes three additional stages as compared to the five stages of consumer buying process
Determination of characteristics and quantity of needed product or service
Development of specifications of product or service, needed and
Obtaining and analyzing supplier proposals
Behavioral Equation Theory
PERSONAL SELLING & SALESMANSHIP
Meaning & Concept
Essentials of Personal Selling
Method of Personal Selling
Types of Sales Persons
Phases of Selling Process
Personal Selling is also known as Direct Selling.
Most important tool of Sales Promotion.
Directly persuade the prospect for buying the Product & Services.
It is Oral presentation of Goods & Services.
It is two way communication b/n Seller & the Buyer.
Identifying the ability of Sales Person.
Some Important Aspects
It enhances customer's confidence in the seller
It promotes long-term business relations through personal intimacy
It provides a human touch to business transactions
It helps facilitate the seller to understand each customer’s needs and preferences more clearly
It helps satisfy a customer by modifying the product as per the customer’s choice and preference
Personal selling followed by personal service helps build long-term relations between the business and the customer
It helps keep up with the competition in the market, based on product customization as per customer’s preferences
It is powerful an effective tool for convincing the customer about the product
Buyer Seller Dyads
Dyads describe a situation in which two People interact
The Sales Person & the prospect interacting with each other constitutes one example of Buyer Seller dyads.
In both Advertising & Personal Selling , the Seller seeks to Motivate the Prospective Buyers to behave favorably towards the Seller.
Essentials of Personal Selling
Knowledge of Selling Process
Communication Skills & Selling Skills
Method of Personal Selling
Across the table Selling.
Selling at the Door Step
Types of Sales Person
It is the art of successfully persuading prospects or customers to buy product or services from which they can derive suitable benefits, thereby increasing their total satisfactions.
Inside Order Takers
Outside Order Takers
Process or Steps in Effective Selling Prospecting & Qualifying Preapproach Approach Presentation & Demonstration Overcoming Objections Closing Follow up & Maintenance
Steps in Personal Selling
Successful personal selling calls for an integrated approach devised from the experience of the sales personnel.
Following are the steps involved in personal selling
Prospecting is the process to identifying prospective buyers of the product.
The prospects are those who have a need or will to buy and the power to pay.
Prospects may be individuals or institutions
There are different ways to identify prospects
Satisfied customer can be a good source of information
This method of prospecting identifies the customer segment to whom the sales personnel might call upon without any reference but with an anticipation of converting the call into a sale.
Also called random prospecting
Centre of Influence Method
Using this approach, the salesmen obtain the references for prospects from the eminent people of society
Personal Observation Method
A salesman has ample opportunity to identify prospects on several occasions such as interacting with friends and acquaintances, attending seminars, social gatherings, functions, travelling etc.
Direct Mail or Telephone Method
A salesman can contact prospective buyers on the telephone and inform them about the product range, plus the benefits and price of the products available.
The salesman can refer to the company’s records and get in touch with several old and new contacts.
There are several people who advertise their requirements through newspapers
Pre-approach is the second step in the selling process
it emphasis that the salesman should have prospects personal information, after identifying the prospect in the prospecting stage.
Based on all this information, the salesman has the necessary tools to plan his visit/interview with the prospect and can give an effective sales presentation
Concentrates only on the prospects
Gain all the possible information about the prospect
It does not waste the prospect’s time and energy
In this stage the prospect and the salesman come in contact with each other face to face
Here the salesman has an opportunity to understand and interact with the prospect in a better way
Since salesmen are of two types, viz, the traveling salesmen and the counter salesmen, the approach adopted by each of these salesmen is obviously different
Approach adopted by traveling salesmen
Difficult to approach prospect since the prospects are generally a busy lot
Prospects may not be interested in buying the product
The salesman must keep on trying to obtain an interview with the prospect
If the prospect happens to be a high ranking executive or a senior officer
Different ways to gain access the prospect
May directly approach the prospect
Salesman can seek an appointment with a prospect could be by sending an advance mailer explaining his product and its benefits vis-à-vis other products available in the market
Can secure an appointment with a prospect than through a reference given by the friend, relative or business associate of the prospect
Another effective way is to give away gifts to the prospects before asking for an appointment
Sale letters have proved to be another kind of door opener.
Such letters provide ample detail about the product, benefits and scheme available with the product
Approach adopted by counter salesmen
Methods of Approaching
1.Cashing in on brand name or the company’s reputation
2. Customer benefit approach
3. Innovative product opens the door to the salesman
4. The premium approach
5. The shock approach
6. The survey approach
7. Interactive approach
Presentation and Demonstration
A good presentation is as important as a good product
A good presentation can be in the form of attractive packaging and display, conspicuous placement of the product in the display window, etc.
Requirements of good presentation
Attractively package, decorated and well organized articles create a good impression in the mind of the prospect
The salesman should explain the product with its features and price advantage to the customer in simple and easy terms
It is very important that the customer be shown the kind of quality that he is looking for
Demonstrating a product helps create a positive impression in the mind of the customer and increases his interest
This is the last stage of any sales presentation
The main aim of the close is to convince the prospect to sign the order form or to place an order immediately rather than in the future
The salesman should be alert and use his good judgment to spot an opportunity when he is in a position to close the sale
Follow up and Maintenance
Concept of Sales Forecasting
Steps in Sales Forecasting
Method of Sales Forecasting
According to Cundiff and Still
An estimate of sales during a specified future period which is tied to a proposed marketing plan and which assumes a particular set of uncontrollable and competitive forces
Sales forecast are used by other functions i.e., Manufacturing or Production
Human Resource Management
Steps in Sales Forecasting
Defining the Objective to be Achieved.
Dividing Various Product in to homogeneous Group.
Analyzing the importance of various factors to be studied for Sales Forecasting.
Selecting The Method.
Collecting & Analyzing the Related Information.
Drawing Conclusion from the Analysis made.
Implementing the decision
Reviewing & Revising the Sales forecasting from time to time.
Method of Sales Forecasting
Expert Opinion Method.
Market Studies Method
Sales force Opinion Method
“ A Market Potential is an estimate of the maximum possible Sales Opportunities present in a particular market Segment and open to all seller of a good or service during a stated future period ” .
“ A Sales potential is an estimate of the maximum possible Sales opportunities present in a particular market segment open to a specified Company selling a goods or services during a stated future period ” .
Market identification Requires finding out:-
Who buys the Product?
Who uses it?
Who are the Prospective Buyers & Users?
Why do people buy?
Why don’t people buy?
How best to present the product in sales talk ?
DETERMINATION OF THE SIZE OF SALES FORCE
Sales Force Size
Sales Force Objectives
Sales Force Structure
Sales Force Size
Sales Representative are one of the Company ’ s most productive & Expensive Assets. Increasing in their number will increase both Sales & Cost .This method consist of the following five steps:
Customer are grouped in to size classes according to annual sales volume.
Desirable call frequencies are established for each Class.
The Number of accounts in each size class is multiplied by the corresponding call frequency to arrive at the total workload, in sales call for one year.
The average no. of call for a sales representative can make per year is determined.
V. The number of sakes person are needed is determined by dividing the total annual calls required by the average annual calls made by a sales representative .
Suppose the company estimate that there are 1,000 A accounts & 2,000 B accounts in any particular territories. A accounts required 36 Call in a year & b accounts require 12 calls a year. The Company need a Sales Force that can make 60,000 Sales call in a year. Suppose the average Rep. Can make 1,000 calls in a year. The company would need 60 full time sales Representative.
Sales Force Objectives
Prospecting Targeting Selling Servicing Information Gathering Allocating Sales Force Objectives
Sales Force Structure Sales Force Structure Product Based Structuring Territory Based Structuring Customer Based Structuring
Meaning & Function of Sales Org.
Types of Sales Organization
Developing a Sales Organization
Field Sales Organization
Organization means the systematic coordination of the function essential to achieving organizational objectives.
The objective of the sales organization is the performance of various activity necessary to promote sales.
Objectives of the Sales Organization
Define the line of Authority
Assure that all necessary activity are assigned & Performed.
Established lines of Communication
To achieve coordination & Balance
To economize of executive time.
Setting up a Sales Organization Defining the Objectives Determination of Activities Grouping activities in to position Assignment of Personnel to Position Provisions for coordination & Control
Recruitment is the process of locating and attracting job applicants
Recruitment and selecting a new sales force is an important aspect of the sales manager’s job
Preparing the job description an specification
Title of the job
Duties and responsibilities
Territory to be covered
There are five main sources of recruitment
Advertisements are both a source of recruits and a method of reaching them
Newspapers, magazines and trade journals are the most widely used media
From Inside – The organization's Staff
The advantage of this source is that the candidate is familiar with the working of the company and its product
Recruitment agencies provide bio-datas of potential candidates for a fee
This source includes management institutes, universities and technical institutes.
This source is used for placement at the entry level
Competitors and Other Industries
The advantage of this source is that the salesperson knows the market and its customers
Friends and Relatives
If they meet the necessary qualifications required for the job
If they are willing to return
Selection, involves picking and hiring a few people from the total number of candidates applying for the sales job
Selection is done by comparing the requirements of a job with the applicant’s qualifications
Steps Involved in Selection Process
The aim of the recruitment process is to attract a number of qualified candidates.
The manager should develop a hiring profile system
Basic Job Objectives
Remuneration and fringe benefits
(b) Application Scrutiny
Review the completed forms he has received
The main purpose of scrutinizing applications is to identify those candidates who fit the job specifications and can be called later for an interview and testing sessions
Job applied for
May I have your name
Your address where you can be contacted
Telephone where you can be contacted
What kind of a job you are looking Must be sales
What do you expect to earn Must be in line what is being offered
What are you earning now Compared with 5, is he being realistic
7. What are you doing now
How long for
And before that? Whom for? How long for?
When can you be available
Are you married
The interview is the most used but least scientific of the various tools of selecting employees
The personal interview is used to help determine if a person is right for the job
The following steps are generally involved
Reviewing background information
Preparing a question plan
Conducting the interview
Concluding the interview
Rating A- Excellent, B- Good, C- Fair, D- Poor
Traits Brief Notings Rating
Recommended for the position: Yes/No
Signature of the Interviewer
(d) Psychological testing
Psychological test is designed to measure such skills and abilities in a salesperson as are found to essential for successful job performance
(e) Reference check
Reference checks allow an organization to secure information not available from other sources
References are usually checked while the application form is being processed and before the final interview takes place
(f) Physical examination
Physical examination reveals whether or not a candidate possesses the required stamina, strength and tolerance needed under hard working conditions.
(g) Job Offer
When all other steps have been completed in the selection process, the company must decide whether or not to hire such an applicant
Sales training programme
The purpose of sales training is to achieve improved job performance
In the absence of training job performance improves with experience
Aim of Training
Represent the company better in the market
Make salesperson aware of new product
Identifying Initial Training Needs
The qualifications needed to perform jobs are detailed in job specifications
Trainee’s background and experience
Sales related marketing policies
Training on Market Place
Market place includes the wide client base upon which the selling process is focused.
During the training, sales staff should be informed about the location of the market where the company’s products are already sold.
Training on competitors
The sales force should have sufficient knowledge about he competition.
What is the current % market share
Training in Handling the competition
Create new needs
Present the product differently
Wait for the right opportunity
Training on Communication
It is an interaction between one or more persons
It is important to check that the message that the salesperson conveys is the same as the one his client receives
Trainees mainly watch and listen
Trainer and trainee jointly analyze the problems
Appropriate for conveying such topics as new products and selling techniques
This method involves trainees acting out parts in artificial problem solutions.
Also known as simulation, somewhat resembles role playing
On the Job Training (Coach and Pupil Method)
This method combines showing, telling, practicing and evaluating
Compensation plans for the sales force are designed to achieve several objectives
To assist the company in meeting its sales projections
To bring the earnings of the sales force to desired levels
Reward individual salesperson in direct proportion to their efforts and performace
Attitudes towards a Compensation Plan
Salespeople look for
Adequate income for adequate performance No conflict
Superior income for superior performance None here either
A base of fixed income for security purposes Many companies agree
4. At least primary fringe benefits
No argument here, but not all companies can afford full range
5. A yardstick to measure performance
Equally important for the company to measure performance
6. simplicity- easy to understand
The company agrees – the simpler the plan, the easier and cheaper to administer it
Designing Compensation Plan
Designing a new compensation plan consists of a number of steps as follows
Examine job descriptions
The first step is to examine the existing job descriptions prepared in the staffing process for all sales positions
Each position needs a separate job description, with detailed job responsibilities and key performance standards, to decide how much the company should pay
Set up specific objectives
An effective compensation plan should have specific objectives for the sales people and these objectives should be derived from the company's sales and marketing objectives
Decide levels of pay or compensation
A level of pay means the average pay or money earned by the salespeople per year (or per month).
The level of compensation or pay should be competitive to attract and retain good quality salespeople
Firms divide the levels of pay based on the following factors
The levels of pay for similar sales positions in the industry
The levels of pay for comparable jobs in the company
Education, experience and skills required to do the sales job
Developing the compensation mix
One of the key tasks in designing an effective sales compensation plan is to develop the compensation mix or the method by which the salespeople will be paid
An awareness that something has been achieved successfully
It is an intrinsic motivation and a firm can only facilitate
c) Personal growth opportunities
Many salespeople rank opportunities for personal growth high in the list of sales force rewards
Most sales managers realize that they must pay more attention to the individual salesperson’s higher order needs, such as recognition, appreciation, and admiration.
Formal and Informal recognition
e) Job Security
It is valued highly by older salespeople who are nearing retirement age, but is least valued reward among younger salespeople.
f) Sales meetings and Conventions
Companies use sales meetings and conventions as an additional motivating tool to stimulate sales force effort
g) Sales Training Programmes
A good sales training programme increases the performance of salespeople and in turn improves their sense of self esteem
Through supervision salesperson understand the personal needs and aspirations of each salesperson
Sales Meetings and Contests
Sales meetings are important both for communication and motivational purposes.
When sales personal are on the road without the day to day opportunity for employer communication and supervision, periodic group meetings are valuable
They also provide occasions for motivating individual sales personnel through group pressures
Planning Sales Meetings
Planning a sales meeting requires five major decisions – A-C-M-E-E Approach
Defining the specific training aims
In planning any sales meeting it is important to have clearly defined objectives.
A new product may be about ready for introduction or research may have uncovered new insights on customer attitudes and behavior
In setting a meeting’s specific aims, the effective executive answers three important questions
Are these aims clear and attainable?
Are they realistic in terms of time, audience, and other conditions?
Will the probable results justify the estimated costs
Determining a meeting’s content is a matter of planning its agenda
An agenda, by definition, is a list or an outline of things to be considered or done during a meeting
The methods(M) used in conducting a sales meeting, of course, depend upon the aim and content as well as upon the time available and meeting place
Execution decisions, outwardly trivial, contribute significantly to a meeting’s success or failure
Among these seemingly trivial decisions is room management
Seminar or the “British Square”
It is important , especially if management desires to improve meeting effectiveness
The basis for evaluation should be whether the meeting accomplished its aims
To determine this, participant feedback is necessary
National Sales Meetings
The cost of bringing the entire sales force to a central site are substantial, but national sales meetings are sometimes appropriate
Regional Sales Meetings
The trend is away from national and toward regional sales meetings
Reduce total travel costs and lowering lost selling time
Headquarter executives brought into direct contact with field personnel, learn about current problems at firsthand.
May have a program designed to emphasize unique problems of that region
Increase participation time per person attending
Local sales meetings
Local sales meetings are conducted weekly or biweekly by district sales managers and last from fifteen minutes to several hours
Remote – Control and Travelling Sales Meetings
Certain forms of sales meetings retain the national sales meeting’s advantages while reducing its cost and time expenditure disadvantages.
Among these forms are meetings conducted by
Closed – Circuit Television
The program is live at one meeting site and is telecast to others, thus retaining much of the inspirational value of the live show without incurring costs and inordinate losses of selling time
Sales meetings by telephone
Telephone conference calls are used for small group meetings and discussions
Users say the group should be no larger than twenty
Sales meetings at home
Seeking to reduce the time and costs of sales meetings, some companies mail recordings or printed materials to sales personnel at their homes.
A sales contest is a special selling campaign offering incentives in the form of prizes or awards beyond those in the compensation plan
The underlying purpose of all sales contests is to provide extra incentives to increase sales volume, to bring in more profitable sales volume, or to do both
Sales contests develop team spirit, boost morale and make personal selling efforts more productive
Sales contests are aimed to accomplish specific objectives, generally one per contest, within limited periods of time.
Most sales contests aim to motivate sales personnel:
To obtain new customers
To secure larger orders per sales call
To push slow moving items, high margin goods, or new products
4) To overcome a seasonal sales slump
5) To sell a more profitable mix of products
6) To get reorders
7) To obtain more product displays by dealers
Contest formats are classified as direct or novelty
A direct format has a contest theme describing the specific objective
A novelty format uses a theme which focuses upon a current event, sport, or the like
There are four kinds of contest prizes
Special honors or privileges
Contest duration is important in maintaining the interest of sales personnel
Contests run for periods as short as a week and as long as a year, but most run from one to four months
There are no set guides
Contest duration should be decided after considering the length of time interest and enthusiasm can be maintained
A sales territory consists of existing and potential customers assigned to a salesperson.
The territory may or may not have geographic boundaries. However, generally a salesperson is assigned to a geographic area.
The basic concept of a sale territory is that a territory or a market is made up of present and potential customers
Reasons for Setting up Sales Territories
The reasons for setting up and subsequently reviewing sales territories are as follows
1) Increase market or customer coverage
A well designed sales territory allows salespeople to spend sufficient time with present and potential customers, which improves the market coverage
2) Control selling expenses
By setting up well designed sales territories salespeople spend less time on the road, fewer nights away from home, resulting in less cost of traveling and less expenses on lodging and food.
3) Better evaluation of sales force performance
The sales manager can evaluate the performance of each salesperson in a better way, when the salesperson is assigned to a specific sales territory
4) Improve customer relations
When the salesperson spends adequate time with present and potential customers, to understand their problems and to find solutions , their relationship improve.
5) Increase sales force effectiveness
When the sales territory is properly designed, the salespersons workload is reasonable and the conflicts are minimum as specific customers are assigned to them
6) Improve co-ordination
The company sales performance improves substantially if the salesperson is involved in coordinating various elements of marketing communication.
7) Benefits salespeople and the company
Proper territory design and allocation of salespeople to territories will result in improved sales force performance, which in turn benefits the company
Procedure for Designing Sales Territories
The ideal objective in territory design is to have equal opportunity and equal sales force workload for all sales territories
Steps Involved in Designing the Sales Territories
1) Select a control unit
The first step in territory design is to select a geographical territorial base, called control unit that will be used in the territory analysis
In general the sales manager should select the smallest control unit
Control units can be States, Metros, Cities, Towns
2) Find location and potential of customers
The next step is to find the location and sales potential of present and prospective customers in each control unit.
Information of present customers
Information on potential customers
Classify the customers based on their sales and or profits potential
3) Decide basic territories
The third step in designing sales territories is to decide basic or fundamental territories
This can be done by using either build up method or breakdown method
Build – up Method
The basic territories are set up by building up from the control units. The objective to be achieved is to equalize the workload of salespeople.
The procedure is as follows
Decide call frequencies
It means how many times a customer should be visited by the company’s salesperson per year
Various factors influence call frequency
2) Calculate the total number of calls in each control unit
This is done by multiplying call frequencies per month by number of customers and 12 months
3) Estimate workload capacity of a salesperson
A salesperson’s normal workload capacity is estimated by multiplying average number of calls a salesperson can make in a working day by number of working days in a year.
4) Make tentative territories
In this step, the company should group adjoining control units (which share their borders) until yearly number of calls needed in those control units equals the total number of calls a salesperson can make.
This is another method of territory design that is used by companies who have decided to have intensive distribution strategy, mostly for selling consumer products
The objective is to equalize the sales potential of territories
The procedure is as follows
1) Estimate the company sales potential for total market
Estimate the company sales potential or company sales forecast for its total market by using the sales forecasting methods
2) Forecast sales potential of each control unit
For estimate the sales potential of each control unit, the sales manager multiplies the total sales potential of the company by a multiple factor buying index of each control unit.
3) Estimate the sales volume expected from each salesperson
Here the sales manager must estimate how much each salesperson must sell, in order to ensure profitable operation
For this, the sales manager studies the past sales as well as the cost and profitability analysis
4) Make tentative sales territories
The sales manager makes tentative territories by combining adjoining control units until the sales potential of each territory is equal to or greater than the expected sales volume from each salesperson
5) Develop Final Territories
The tentative territories need to be adjusted due to special considerations such as geographical locations of customers, or unequal sales potential of some territories
Assigning Salespeople to Territories
Once the sales territories are designed, the sales manager is ready to assign or allocate individual salespeople to each territory.
In any given sales force, salesperson differ in selling abilities and effectiveness. A sales person may succeed in one territory and fail in another territory, even though sales potential and workload are the same in the two territories
While assigning salespeople to territories, the sales manager should consider two criteria:
Relative ability of salespeople
Salesperson’s effectiveness in a territory
Relative Ability of Salespeople
A sales manager should evaluate the relative abilities of a salesperson based on key factors
It should be understood that the weightage of evaluation factors may vary from company to company and evaluation factors may also differ
Continued---- Evaluation Factors Weightage Evaluation Salesperson Score = A *B Product knowledge .15 .9 .135 Market Knowledge .10 .8 .080 Past Sales Performance .40 1 .400 Communication .15 .8 .120 Selling Skills .20 .9 .180 Total 1.00 .915
Salesperson’s Effectiveness in a Territory
The sales manager should judge the effectiveness of a salesperson by comparing the salesperson’s social, cultural, and physical characteristics with those of the territory
Sales quotas are sales goals (or quantitative objectives) set by a company for its marketing units for a certain period of time
A marketing unit includes a region, a territory, a branch, a salesperson, a distributor, or a dealer
Sales quotas can be set on sales volume, expense, profit margin, customer satisfaction, and combination
Annual sales quotas for each marketing unit are broken down to quarterly and monthly quotas
Sales quotas are developed from the annual marketing plan of the company
After preparing the sales forecast, the company decides its sales budget, which includes the company’s sales volume and selling expenses.
The company sales budget is then broken down to sales quotas for regions and sales territories.
Each territory manager divides the territory’s quota among the sales persons, distributors, and dealers, who are attached to the territory.
Objectives of Quotas
Making available performance standards
A sales quota makes available to the sales manager a tool to measure the performance of the salesperson.
A quota also provides a goal to the salesperson
Hence, a quota is a performance standard, against which the actual performance is compared
By setting quotas for salesperson’s activities, sales volume, and selling expenses, the sales manager is controlling the performance of salespeople.
Similarly, to check wasteful expenditure on customer entertainment, lodging, and meals, expenses quotas are set as a percentage of sales
Sales force compensation is often tied to the extent or degree of achievement of sales quotas
Sales manager should not set sales quotas that are too high and non attainable.
Identifying strengths and weakness
When actual sales performance is compared with respective quotas of different territories and salespersons, the sales manager can identify successful and unsuccessful performers
Types of Quotas
Companies set many types of quotas
The most common types of quotas are
Sales volume quotas
Most companies have sales volume quotas for individual salespersons, distributors, retailers, geographical areas, or products, for a specific period of time.
For effective control, it is proper to set sales volume quotas for the smallest marketing unit
Companies set sales volume quotas in Rupees or Dollars sales volume, unit sales volume and or point sales volume
Rupees/Dollars sales volume
When salespeople are required to sell many products, it is easier to manage if quotas are set in rupees or dollars
Unit sales volume
Companies set sales volume quotas in units of products in three situations
When salespeople are selling a few products
When prices of the product fluctuate rapidly
When the price of each product or service is very high
Point sales volume
It is used in a situation when the company wants to improve its profitability, by asking salespeople to sell more those products that relatively contribute more to the profits
Financial quotas are the goals set to control gross margin or profit contribution, and expenses of various marketing or sales units
Can be of two types
Gross margin or profit contribution quotas
Gross margin quota is decided by subtracting cost of goods sold from sales volume.
The objective of setting expenses quotas is to control the costs of marketing or sales units, such as sales territories and salespeople.
Often expense quotas are used along with sales volume quotas, so that selling expenses are kept in line with sales volume
Many companies set activity quotas so as to direct salespeople to carry out important job related activities.
These activities are useful for achieving performance targets of salespeople.
Companies set combination quotas or goals when they want to control sales force performance on both key selling and non selling activities
Sales Budgeting and Control
A sales budget is a programme designed for a stipulated time frame that highlights the selling expenses and anticipated sales, quantitatively and in value terms.
This helps in making an objective estimate of net profit on the selling operations.
Significance of a Sales Budget
The importance of sales budget cannot be overemphasized. Its significance can be gauged from the factors given below
It serves as a scale, or a yardstick
It helps identify the areas in which the company needs to strengthen
It serves as an indicator to control the expenses associated with the sales activity
It helps the planners to frame policies for actual market situations
The sales manager should take into consideration the following factors while preparing the sales budget:
Past sales figures and trends
General trade prospects
Orders on hand
Proposed expansion or discontinuance of products
Availability of material and supply
Control is a function of every management to ensure that operations are being carried out as per the plan to achieve the objectives
Sales control ensures the achievement of personal selling objectives
Types of Sales Control
1) Annual plan control
Prime responsibility – Top level managers
Purpose of control – To examine whether the planned results are being achieved
Approaches – sales analysis, market shares analysis, marketing expenses to sales ratio
2) Profitability control
Prime responsibility – sales controller
Purpose of control – To examine where the company is making or losing money
Approaches – customer attitude tracking profitability by product territory, market share, trade channel, order size, and sales audit
Steps in Designing a Sales Control System
Designing different control levels
Designing a reporting system and a feedback system
Deciding tools and techniques of control
Variance analysis and reasons thereof
International Sales Management
The multinationals and other companies with foreign production and marketing operations look to sales management to implement sales related marketing policies in each national market
International sales managers have to guide and coordinate the efforts of the sales organization in countries where the company does business
Challenges faced by International Sales Managers
A country’s economic sources includes sources of domestic livelihood and the allocation of resources
The cultural traits of a country have a profound effect on people’s lifestyle and behaviour patterns, and the same are reflected in the market place
An international marketer needs to examine carefully the political environment of a country before making major commitments in that country
International marketers must be aware of treaties and international conventions
Qualities of the International Sales Force
Decision Making Ability
Formulating Sales Strategies at the International Level