1. Sales Management Previous Session…..
Overcapacity – Hypercompetion – Business
Failure…..
Selling Concept and Marketing Concept….
Trading Environment &
Conceptualizing Business…..
Channel Management
Distinction between Consumer Marketing and
Trade Marketing.
Distribution to the Outlet and Distribution in the
outlet…..
Core & Value Added Services….
Today’s Session Understanding Environment
Trading Environment Organisational Environment:
Consumer Environment
All elements existing outside the organization’s
boundaries that have the potential to affect the
Emerging Channels organization.
Internal Environment:
Role of Intermediaries
The environment within the organization’s boundaries.
Strategic Channel Decisions Task Environment:
Includes those sectors that have a direct working
Channel Conflicts & their Management
relationship with the organization among them
customers and competitors.
External Environment Dimensions of External Environment
World as we know is undergoing tremendous International Dimension:
and far-reaching change. Represents events originating in foreign countries as
well as opportunities.
Therefore we need to examine components of Technological Dimension:
external and internal environments. Scientific and technological advancements in the
Changing Components: In addition to industry and society at large.
customers and competition, we have Socio-cultural Dimension:
Technology & Economic conditions……. Demographic characteristics, Norms, Customs and
values of the population within which the company
operates.
1

2. Overview of The Marketing Key Message of Environment
Environment
The factors and forces that affect marketing
management’s ability to develop and maintain successful
Constantly changing
transactions with target customers.
Need for Managers to adapt to the changing
Microenvironment Macroenvironment environment.
The company Demographic
environment In trade marketing we need to lean the
The suppliers
Economic environment changing trade environment and customer
Marketing
intermediaries Natural forces environment.
The customers Technological forces
The competitors Political forces
Publics Cultural forces
If the only constant is change Environment Uncertainty
Where are we coming from ? If External environment creates change and
Premise 1: uncertainty for the organisation, what are the
Whatever got you where you are today is no longer strategies:
sufficient to keep you there.
Premise 2: Two Basic Strategies:
In the complex sale a good tactical plan is only as good
as the strategy that led upto it. Adapt the organisation to the changes in the
Premise 3: environment.
You can succeed in sales today only if you know what Influence the environment to make it more compatible
you are doing and why. with organization’s needs.
In the context of Trade Marketing Changes in the Trading Environment
Concentration in the trade with cross borders
As barriers are reduced, products will expand
into other markets
Changes Affect Two Key Areas Internationalism will accelerate
National products spill into other country’s
markets
Trading Environment Companies will concentrate their purchasing
where it is most advantageous
Consumer Environment International brands will grow in importance.
The trade will develop international strategies
for categories.
Manufacturers will become much closer to their
customers.
2

3. Changes in Consumer Environment General Industry Trends impact
trading and consumer environment
Reduced rate of growth in population Trade Concentration
An ageing population due to improvements in A reduction in the number of outlets and the emergence of large
strategic accounts.
health services
Internationalism
More households with fewer people per Retailers are now opening operations in many different countries.
household Major buying groups have emerged on an international basis with
complex networks significantly impacting on manufacturer
Consumer are more critical marketing plans.
Steady increase in disposable income Specialisation
Consumer loyalty has been established by new and varied
Increased people mobility retailing formats targeted at different consumer needs.
Emerging Outlets Types Impact of Technology
Hypermarkets and Superstores Better informed trade
Convenience Outlets Better management of the administrative details of the
Discounters business.
Supermarkets Total Inventory control
Petrol Stations Enhanced consumer activity allows trade to target
Leisure Outlets customers specifically.
Hotels, Restaurants, Cafes, Bars, Clubs, Discos
Vending…………..
Marketing channels are behind every product Marketing channels change with changes in
environment
Institutions specializing in manufacturing, wholesaling, retailing
join forces to reach the end consumer. Personal Computers:
IBM sold its first PC in the early 1980s through its employee sales force –
direct to the end user.
These institutions deliver everything Questions on merit the high cost of direct distribution
Books to Mutual Funds Channel quickly changed to VARs (Value-added retailers)
Medical equipments to telephony Dell (founded in 1984) changed the rules of the game – first through
Office Suppliers to Toiletries telephone ordering and now over the Internet.
Milk to Newspapers By 1999, Dell surpassed Compaq in the US with over 30 % MS.
The list can go on and on…….. Books:
Publishers, Book Wholesalers, Book Retailers
Today it is necessary to operate on-line bookstores
Amazon.com / Books.com / BestBookBuys.com
These developments threaten traditional book shops but provide new
opportunities for shippers like UPS and Fedex
3

4. Where do you look for influence Basic Definition
It depends on how much impact the channel can have on your end
consumer.
You may decide on any of the Distributors / Wholesalers / “A marketing channel is a set of interdependent organizations involved in the
process of making a product or service available for use or consumption.”
Retailers / Value-added Retailers combination.
But no two situations can be exactly alike. It is not just one firm doing its best in the market – many entities are involved –
The operative word therefore is “May” each entity dependent on the other.
It is a process and not an event.
In any sales opportunity, the task is to identify roles individuals
play. Purpose of the process:
There cannot be a universal pattern.
It is impractical to generalize about decision-making as you swim Satisfy the end users in the market.
the channel. The goal is the use or consumption of the product or service being sold
It is critical that all channel members focus their attention on the end consumer –
“Happy Customers”
Definitions Channel viewed as a key strategic asset
“Channel of distribution is a path traced in the direct or indirect transfer of
the title to a product as it moves from a producer to ultimate consumers or $ 70 billion merger in 1998 – Citicorp and Travelers Group – “Citigroup”
industrial users”
EW Cundiff & RS Still
Citicorp Travelers
“The course taken in the transfer of the title to a commodity constitutes its World’s biggest bank Focused on insurance, mutual
channel of distribution. It is the route taken by the title to a product in its
passage from its owner, an agricultural producer, or a manufacturer, as funds and investment banking.
the case may be, to the last owner, the ultimate consumer or the business World-wide distribution 10300 Brokers
user”.
network of branch banks 80000 financial services
Beckman and Others
insurance agents.
“A channel of distribution or marketing channel is a structure of intra- 10000 travelers insurance
company organisation, units and intra-company agents and dealers, agents.
wholesalers and retailers through which a commodity product or service
is marketed”
American Marketing Association
Channel decisions are strategic What do marketing channels do ?
Demand Side Factors:
What does the example show: Searching – End-users are uncertain about where to find the products
and sellers are uncertain about how to reach the target end users.
Marketing channel decisions play a role of strategic importance.
Intermediaries facilitate ……..
“Financial products “manufactured” in various parts of our company will
be distributed through a broad range of methods, from the Internet and If intermediaries are not there how would sellers reach customers with an
other technology–based methods to branch office locations in one unknown brand name.
hundred countries around the world to fully individualized, in-home
service.”
They are trusted by the end-consumers…..being the first point of contact.
Marketing channels and structures have changed over time. Intermediaries facilitate on both ends of the channel.
Example: Laserjet printer manufacturers have to go to office supply retailers
4

5. What do marketing channels do ? What do marketing channels do on the
Supply Side
Demand Side Factors:
Sorting Out: breaking down heterogeneous supplies Supply Side Factors:
For example a fruit-seller sorting out oranges by size and grade.
Routinization of Transactions: Ordering, Valuating, Paying for goods and
Accumulation: Similar stocks from a number of sources. Wholesalers services.
accumulate for retailers and retailers accumulate for end-consumers.
Electronic Data Interchange (EDI): Standardizing the management of
Allocation: Breaking the bulk. Lorry-loads to case lots etc. business documents.
Assorting: Assortment of products for resale in association with each Continuous Replenishment: Neither understocked / Nor overstocked.
other. Shippers would typically increase frequency but decrease in size per
shipment.
Marketing channels impact number of Number of Contacts
contacts
Reduction in Number of contacts: Manufacturer Manufacturer Manufacturer Manufacturer
Imagine a small village of 20 families……
Their number of transactions.
They draw all their supplies from one Shop:
Grocery
Hardware
Milk Ret.1 Ret.2 Ret.3 Ret.4 Ret.5 Ret.6 Ret.7 Ret.8 Ret.9 Ret.10
Vegetables
Medicine
Telephony
Number of contacts involve cost. And in this example the next-door neighbour
store is the most cost-effective.
Why marketing channels are there ? Number of Contacts
Reduction in Number of contacts:
Manufacturer Manufacturer Manufacturer Manufacturer Contact costs may vary by the structure you choose with or without
intermediaries.
Four Manufacturers 40 Contact
W/S 1 W/S 2 reaching ten retailers lines
directly.
Four manufacturers 14 Contact
Ret.1 Ret.2 Ret.3 Ret.4 Ret.5 Ret.6 Ret.7 Ret.8 Ret.9 Ret.10
reaching ten retailers lines
through one
wholesalers
Four manufacturers 28 Contact
reaching ten retailers lines
through two
wholesalers
5

6. Value Network view Objectives of Channels of Distribution
Kotler: 1. To ensure availability of products at the point of sale.
Establish channels for different target markets and aim for efficiency,
control and adaptability.
2. To build channel member’s loyalty
Companies are increasingly taking a value network view – Supply Chan
Management. 3. To stimulate channel member to put greater selling efforts
But even Supply Chain is a “make-and-sell view”. 4. To develop managerial efficiency in channel organisation
Because it starts from raw materials and suppliers’ suppliers and so
on…..
5. To have an efficient and effective distribution system.
A better term for distribution would be demand chain and therefore a
“sense-and-respond”.
Even this view is challenged with the impact of technology.
Role of Channels Who are marketing intermediaries
Middlemen:
Major Focus of channel of distribution is DELIVERY. Just about anybody acting as an intermediary between the producer and
customer
Agents or Broker:
Issues of Availability Intermediaries with legal authority to market goods and services
How much available ? Agents generally work in continuity
Brokers may be engaged for a particular deal
Role of Intermediaries Sometimes agents and brokers tend to work for buyer rather than seller –
should you allow it ? Real Estate brokers have to satisfy both.
For efficiency of the process Wholesaler
Organisations that buy from producers and sell to retailers.
Arrangement of routes of transactions
Bulk Buyers
Searching the customer Put in effort and investment and expect a return on their investment.
Sorting the customer base
Marketing Intermediaries Wholesaler as a marketing intermediary
Retailer:
Last link to the consumer Establishments that sell to retailers or other merchants but do not sell
Sell directly to the final consumer insignificant amounts.
Either purchase from wholesaler or from the direct channel
Merchant Wholesalers
Distributor: Independently owned and separate from suppliers.
General term used for various intermediaries Take ownership and associated risks.
Perform several functions – inventory management, personal selling,
financing. Agent Wholesalers
Sometimes wholesalers act as distributors. Tied up with main wholesaler-distributor of the Company.
Brokers / Commission Merchants / Selling Agents / Commercial auction
Dealer: companies.
Another general term that can apply to just about any intermediary.
Sometime the same type of intermediary acts as a distributor Manufacturers sales branches and offices – Stockists, Stock-Carrying
Legal restrictions in the past – MRTP. Points.
6

7. Different roles of a wholesaler Role of a retailer
Full Function Service Wholesalers: The final connection with the customer / consumer -
Distributor End-user contact.
Jobber Adds value through time, space which also forms part of the price
They perform all the functions in a given territory for the interest of that the end-user is paying for.
the principal. Collect products and assort as per consumer preferences.
Provides information
Limited Function Wholesalers: Marks prices and pay for gods
Cash and carry Concludes transaction with the final consumer
Drop Shippers
Truck Wholesalers – Mobile for convenience of the retailer. Direct coverage relates to reaching the retailers and create a trade-
partnership with them to promote your business.
Other marketing intermediaries Types of Channels
Value-added resellers (VARs)
Intermediaries who buy the basic product, add value and then sell
it 1. Direct-marketing channel (or Zero Level)
Some do their own labels.
2. Indirect Marketing Channel:
Merchants: One Level: Producer…..Retailer……Consumer
Assume ownership and may speculate. (White goods)
Two Level: Producer….Distributor….Retailer….Consumer
Facilitating Agents (C&F)
Transportation and storage Three Level:
Covering the risk (insurance) Producer…Distributor…Wholesaler…Retailer…Consumer.
Financial services / Invoicing etc.
Ownership change through the process Channel Selection Criteria
Producer Since the controls change, it is a complicated process.
Physical Possession / Ownership
The following elements are examined:
Promotion Market Factors:
Negotiation W/S Customer Preference (Where do they buy ?)
Financing Organizational Customers (Institutional Buyers)
Risking Geography (Where is he located ?)
Ret. Competitive Pressures (Replacing your product with theirs)
Ordering
Payment Product Factors:
Consumer Life Cycle
Complexity
Value
Outsourcing: Services – After Sales Size & Weight etc.
Finance by Cars and Real Estate
Personal Factors:
Financial stability – future requirements
Succession
Managerial capabilities.
7

8. Manufacturing Strategies Changing channel dynamics
Maufacturing strategies are to be integrated with distribution channels
Growth of Vertical Marketing Systems:
1. Flexible
Responsiveness of production to consumer demands A producer, distributor and retailer acting as a unified system.
Build capabilities to reduce or increase production Franchising
Customization Purpose being to have greater controls
2. Focused Disallow channel partners to use their own standards
Lowest possible per unit cost
Fail-safe quality and leading edge technology Major forms of VMS:
Each of the strategies may be differently suitable for varying products. Corporate VMS – Successive stages of production and distribution under
single ownership – Toyota wanting stakes in key suppliers
Customer today is looking for ‘quality’ and ‘speed’ Administered VMS – Control on successive stages of production and
Critical for manufacturers to have their manufacturing policy marry with distribution but using power of one of the parties. Idea is to seek
the channel selection distributors who can seek strong support from their retailers.
Growth of Multichannel Marketing Systems Conflicts can occur anywhere
A product development team having strong-willed people may make little
progress.
A shift from single-market and single-channel
Salespeople promise delivery dates that production cannot match.
Proliferation of customer segments and channel possibilities
Multi-channel helps in Brand Managers trying to push their respective brands through
Increased market coverage relationships with trade marketing and shipping departments.
Lower cost
More customized selling People dislike each other.
Companies also add channels where existing channels cannot
reach – e.g. selling by phone (impact of technology) Career-centered people lobby politically against each other and try to hurt
each other’s achievements.
Companies may also add a channel whose features fit with the
customer requirements e.g. retail malls and watch show-rooms,
banking and insurance counters.
Multichannel gives rise to “Conflict”.
What is a conflict ? Causes of Channel Conflict
Conflict refers to antagonistic interaction in which one party attempts to
thwart the intentions or goals of another.
Inherent vices of Buyer and Seller
Causes:
Scarce resources – Support need of channel partners. Goal Incompatibility: Manufacturer may want lower pricing and
higher market-share. On the other hand the dealer may prefer
high margins for short-run profitability
Jurisdictional Ambiguities – Territories and boundaries.
Communication Breakdown – Poor communication leads to Unclear roles and rights: IBM selling to institutional buyers, large
misunderstanding and mistrust. customers, bulk off-take discounts.
Personality Clashes – Do not see eye-to-eye. Differences in perception: Optimistic vs. Pessimistic view of the
economy and social developments
Power and Status Differences – Low prestige individuals.
8

9. Causes of Channel Conflict at IBM Types of Conflict & Competition
Vertical Channel Conflict:
1. Conflict between the national account manager and field sales
force. – National account customers located in salesperson’s Conflict of General Motors with dealers on policies of service, pricing and
territory. advertising.
2. Conflict between field sales force and telemarketers – Conflict of Coca Cola with its bottlers who may wish to bottle other
products.
Telemarketers engaged in expanding the market through smaller
customers.
Horizontal Channel Conflict:
3. Conflict between field sales force and the dealers – Dealers Aggressive pricing of one dealer and its impact on adjoining territories –
adding value with additional customized requirements which Wholesale markets in Sadar Bazaar, Khari Boali and Naya Baans thrive
salespersons could not do. by exploiting company dealers.
One Pizza-Hut franchisee complaining about the other on “ingredient
quality and therefore overall image.
Types of Conflict & Competition Challenge for Sales Managers
Multi Channel Conflict:
When clothing manufacturers open their own stores. Intermediaries + Online.
When Goodyear decided to sell its tyres through Wal-Mart Three Possible Strategies:
Brick and mortar companies adding on-line e-commerce channel. 1. Offer different brands or products on the internet.
If you do not do it, someone else will do it – online business may 2. Offer the off-line partners higher commission to cushion impact on
run to competitors. their sales.
Look at the size of Amazon, E*Trade, Dell & Direct Line. 3. Take orders on the website but have them delivered through
retailers.
Styles to Handle Conflict Managing Channel Conflict
Certain channel conflict can be constructive but too much conflict can be
You can be either assertive or cooperative. dysfunctional.
However effective team members vary their style of handling
conflict to fit a specific situation. Goals Incompatibility – Differences in goals….
1. The Competing Style: Assertiveness to get one’s own way; this - Come to an agreement on the fundamental goal
can be used when quick and decisive action is vital. - Often it happens when there is an outside threat (develop a
common goal, especially when a new channel emerges and eats into
2. The Avoiding Style: Neither assertive nor cooperative. This can traditional channels
be resorted to when the issue is trivial. Situation:
3. The Compromising Style: Moderate amount of both Levis selling through specialized stores decides to add their range
assertiveness and cooperativeness. When goals on both sides through other departmental stores
are equally important. Time pressures lead to compromises.
Information sharing at a very early stage…..
4. The Accommodating Style: When maintaining harmony is Prepare specialized stores well in advance….
important. Convince them that the initiative is to gain market share from competition
5. The Collaborating Style: Bargaining and Negotiation to reach a Convince them that it is in their overall interest.
win-win situation.
9

10. Managing Channel Conflict Managing Channel Conflict
There can be a conflict between Maruti Sales Executive and There can be channel conflicts among competitors.
Competent Motors Sales Executive.
In terms of dispatch of requisite models On practices in the market.
Accessories The war-fare in the market place.
Zero mileage Bribing customers on displays can be endless.
You increase the incentive, the competitor increases and the
How do you resolve this ? game goes on.
Exchange Programme is one of the ways….. How do you resolve this ?
The Maruti executive may be deputed at Competent Motors for Cooptation: This can be achieved at business chamber level and
three months to appreciate the customer issues from the industry association levels. CII, FICCI, ASCI etc.
perspective of the Competent Motor executive.
Managing Channel Conflict Motivational Tools
Sometimes, the conflict can become chronic. 1. Reward:
Where all your efforts with regard to cooptation and dialogue fail. If A possesses some resource which B wishes to obtain. Then B
can conform to A’s wishes. Specific rewards to channel members
What is the next step: could include wider margins, granting of exclusive territories and
various promotional allowances.
1. Diplomacy:
Where each side can send one representative to meet and discuss issues 2. Coercion:
across the table.
There can be a series of meeting and common ground established.
Coercion amounts to negative sanctions or punishment including
2. Arbitration: reductions in margins, withdrawal of reward and slowing down of
Neutral Third party shipments.
Concept of Ombudsman
Two nominated arbitrators and one neutral industry expert.
Motivational Tools Key Learnings
3. Expertise:
If A has expert knowledge, it tends to share some and keep vital
information to be used as a level to achieve cooperation. Trading Environment
Ability to acquire information by a powerful partner can be used Consumer Environment
and your pound of flesh extracted by sharing such information.
Emerging Channels
4. Identification:
Role of Intermediaries
Given equal returns, players decide to identify one party for
dealership and leave the other by minimising effort and Strategic Channel Decisions
supplies.
Channel Conflicts & their Management
10

11. In the previous session…..
Trading Environment
Sales Management Consumer Environment
Emerging Channels
Role of Intermediaries
Strategic Channel Decisions
Channel Conflicts & their Management
Territory
Management
In this session….. Why establish Sales Territories ?
We shall move on to Sales Territories.
SWOT Analysis for Designing Territories.
Factors affecting Territory Design. Matching Sales effort with sales opportunities
Criteria for Territory Planning.
Specific Techniques for Territory Planning. Lend direction to the planning and control of sales
operation.
Benefits of Territory Planning
Meaning of Trade Marketing Managing the Sales Effort
A more professional approach to Sales & Distribution. Managing Sales effort involves analysis:
Trade Marketing is…..
Analysis
Adapting Products
Logistics
Brand Marketing Planning Implementing
Develop Carry
Controlling
Sales Out the Measure Results
Plans Plans Corrective Action
To the needs of Trade Channels and
Strategic Customers
11

12. SWOT Analysis for Designing Territory Making SWOT Productive for Territory
Utilizes internal and external information Management
Internal (Strengths and Weaknesses) Examine Issues from the Customers’
Financial performance & resources, human resources,
production facilities and capacity, market share, Perspective
customer perceptions, product quality, product Customer focus is critical, and really helps to
availability, and organizational communication
identify key issues
External (Opportunities and Threats)
Market (customers and competition), economic
Avoid “talking to ourselves”
conditions, social trends, technology, political/legal What are our customer perceptions and what is
important to them?
The S.W.O.T. Matrix:
Matching Strengths with Identifying Actions to Take
Opportunities
Strengths Opportunities
Basis of the Working Plan:
Identify strengths compatible with opportunities
Convert
Convert
Part of the Working Plan:
Convert Weaknesses to Strengths
Convert Threats to Opportunities Weaknesses Threats
Minimize/ Avoid Minimize/ Avoid
The S.W.O.T. Matrix:
Identifying Actions to Take Designing a Territory- Competitor
Questions
Strengths Opportunities
1. Who are our competitors?
Match 2. What is their strategy?
Convert
Convert
3. Should we compete?
4. If so, in what markets?
5. How?
Weaknesses Threats
Minimize/ Avoid Minimize/ Avoid
12

13. Designing a territory - Customer Understanding Territory -What is a
Questions Territory
Represents a group of customers
1. Who are our actual and potential customers?
Accountability units across hierarchy
2. Why do they buy our product? Idea is to have a code / a name / a number to identify
3. Why do non-customers not buy our products? the group of customers together
4. Where do our customers buy our products? Essentially defining a territory based on
5. How do they buy it? Geography Channel of distribution
6. When do they buy it? Industry Sales potential
7. What do they do with our product? Product Use Work Load of personnel
Buying practices Arbitrarily / Rationally
Central theme of defining territory remains better
coverage and more productive coverage.
How do you determine a unit Developing Territories
Territorial Planning
States, Areas,Towns, Villages, Tehsils etc. Territories can be formed according to:
Geographical Units are preferred because you can access
statistical data from credible agencies. 1. Geographic Location
Easier to monitor and modify if required 2. Industry
A More Holistic Approach 3. Product Use
However a more holistic approach can be more productive – it 4. Method of Buying
requires an effort and in-depth planning 5. Channels of Distribution
Sales Potential 6. Sales Potential
Buying practices 7. Work-load Method
Sales Personnel skills 8. Arbitrarily
Frequency of Calls 9. Rational Basis
Work-load and a combination of factors can be considered.
Factors of sales volume of a terittory Factors effecting size of the territory
1. Size
2. Market Potential
3. Number of customers’ accounts
4. Firm’s experience
5. Market share in the territory 1. Number of customers and prospects in an area
2. Call frequency on existing customers
3. Number of calls that the sales person makes in a day
13

14. Basic control Unit for Territory Objectives and Criteria for Territory
Planning
Village / Tehsils / Cities / Trading areas etc. It affects sales force morale and performance
Essentially, you are looking at productivity Need to work optimum number of territories
Sales potential of each control unit Equalization of territory potential and geographic
Focus to maximize return on effort and investments alignment / realignment
Combining Territories / Double-Hatter arrangements Route Planning of sales force – Straight-Line or Hub
and Spoke, Circle, Triangle and so on…..
Territory Management
Retail Census
Trade Coverage – “Fish where the fish is”
Classification of Outlets – Types, “Strategic”,
Monitoring A specific tool to plan execution for both coverage and
Classification of Markets – Strategic, Important and visibility
Development
Gives direction by establishing strategic customers and
Categorization of Markets – MS v SOV
key accounts
Population Data base approach
Coverage Norms & Frequency Norms Enables merchandising to stimulate sell-out
Span of Control Focus on resource allocation.
Distribution Guidelines Distribution Guidelines
A structured framework for infrastructure and visibility planning
process. Classification of Markets
Strategic markets (SM) -Markets contributing 80% of our
Clearly define objective of distribution i.e. coverage numbers and
in market visibility volume in a given Cluster/circle
Important Markets(IM) - Markets contributing remaining
20% volume
Development Markets(DM)- New Geographies
14

15. Clarity of Task Territory Planning – Pop-strata
Strategic 80 % of Business Be the Preferred Regroup Markets - Basis Population
Markets Supplier
Category I Population above 10 Lacs
Category II Population 5 to 10 Lacs
Important 20 % of Business Grow Business
Category III Population 1 to 5 Lacs
Markets to shift it to
“Strategic Category IV Population 0.50 to 1 Lac
Market” status Category V Population 0.10 to 0.50 Lac
Development New Business Switches from Category VI Population less than 0.10 Lac
Markets Competition
Two definitions of Markets Direct Coverage Norms
Strategic Important Devlpment
1. Classification : Strategic / Important / Markets Markets Markets
Development
2. Categorisation: Population Database Town 80 % 65 % 50 %
Based on these definitions, you can provide
Coverage Norms and Frequency Norms Village 60 % 45 % 40 %
Frequency of Visit - Norms
Resource Allocation – to meet norms
Strategic Import. Devlpm.
Markets Markets Markets Dlr SCP STK 2W 3W Van
Pop Above 10 Lacs Daily Daily Alternat Pop Above 10 Y Y Y Y
Lacs
Pop 5 – 10 L Daily Daily Alternat 5 – 10 L Y Y Y Y
1 to 5 L Y Y Y Y Y
Pop 1 to 5 L Daily Daily Alternat
0.50 to 1 L Y Y Y Y
Pop 0.50 to 1 L Thrice/wk Twice/wk Thrice
0.10 to 0.50 L Y Y Y
Pop 0.10 to 0.50 L Thrice Twice Thrice Less than 0.10L Y Y
Pop Less than 0.10L Once Once Once
15

16. Resource Allocation Benefits of Territory Coverage
1. Better Planning
Strategic Imp. Devlpmnt. 2. Proper coverage of potential markets
Markets Markets Markets 3. Efficient call patterns
4. Better customer service
5. Choosing appropriate salesmen for specific accounts
6. Some systems which are based on purely relationship
Outlets/ 70 100-120 140 may follow planning selectively – LIC, Mutual Funds
Salesman and stocks
Salesmen/S 6 9 12
upervisor
Sales Management In the last session…..
Understanding of Sales Territories.
SWOT Analysis for Designing Territories.
Minimizing Sales Costs Factors affecting Territory Design.
Criteria for Territory Planning.
Specific Techniques for Territory Planning.
Benefits of Territory Planning
In this session….. Key Decisions in Sales Management &
Costs
Managing sales is managing costs. Competencies of Sales People
Key responsibility of sales managers involve costs. Optimal size of sales force – workload / costs
How costs determine distribution models. Territory Management
Distinguish selling and distribution costs. Recruitment & Training
Analysis of distribution costs. Resource Allocation
Productivity checks. Performance Appraisal / Measurables
Feedback – ‘Speed of response’
Managing Channel relationships
Internal Customers
16

17. Responsibility of Sales Manager & Costs Cost – a strategic question in any
Distribution System
Key Task:
How do you reach your end consumers ?
Profit Centre Heads
Strategic Questions:
Execution Process to achieve targets and profits
Customer relationships for long-term growth 1. Given the value proposition, who are the end consumers and
therefore what are the distribution objectives ?
2. What channel structure will achieve these distribution objectives ?
3. Optimal use of network – Lowest cost.
4. What processes and organisational structure will sustain
performance.
Following the HLL Model Outcome of following HLL Model:
Distribution-led demand creation. While HLL survived on size and variety of products / brands, others
Old Economy paradigm – ‘Reach & Availability’. realized:
1 Million retail points.
Traditional Distribution system operates on the lines of a command
7500 distributors. economy i.e.
Basket of products at every price-point.
Every income and geographical segment. 1. Determine supply target – Number of retailers
2. Push stocks whichever way to reach consumers.
Other companies followed the leader.
This carried on for some time.
But what it meant for other FMCGs (essentially MNCs) ?
Revamp:
No more support from deep-pockets of MNCs for thin-margin operations.
A Hit on the bottomline ! Pressure to shore up bottomlines rather than working on topline alone.
Remove excess flab – birth of ‘Power Brands’
P&G’s Golden Eye P&G’s Golden Eye
1. Company focuses on Class A & B towns. 1. Company focuses on Class A & B towns.
2. Gets out of smaller population clusters. 2. Gets out of smaller population clusters.
3. Except Vicks Action 500 or certain detergent sachets, P&G would not 3. Except Vicks Action 500 or certain detergent sachets, P&G would not have much
of distribution presence in rural areas.
have much of distribution presence in rural areas.
4. Reduces number of price points and pack sizes.
4. Reduces number of price points and pack sizes. 5. Reduced manpower.
5. Reduced manpower. 6. Automation.
6. Automation. 7. Use of wholesale as a channel in territories that are not directly covered.
7. Use of wholesale as a channel in territories that are not directly covered. 8. P&G touts ECR (Efficient Consumer Response Model)
8. P&G touts ECR (Efficient Consumer Response Model) 9. ECR – Maximize consumer satisfaction by optimising the supply chain.
9. ECR – Maximize consumer satisfaction by optimising the supply chain.
What is happening here ?
What is happening here ?
You fish where the fish is ? An outcome of
Maximization……Optimality Sales analysis
You fish where the fish is ?
Maximization……Optimality
17

18. Sales Analysis Basic Sales Report Format
Why do sales analysis S.No Name of Retailer / Brand A Brand B Brand C Brand D Value
A detailed study of sales volumes performance to detect strengths Customer Qty Qty Qty Qty (Rs.)
and weaknesses.
It has to be an in-depth study – summaries do not reveal.
Study of sales volume performance by towns and by villages
Sales volumes by dealers and stock-carrying points.
Sales performance by sales personnel
Sales performance by product lines
Objective
Strong and weak territories.
High volume and low volume products.
Type of customers providing satisfactory results
Imperative Total
Allocate resources – sales effort.
Quarterly Sales Analysis – Oct./Dec. Period Sales Analysis – Oct./Dec. Period
Region / Circle / Branch / All India By Channels
Brand Sales/MS Sales/MS Oct. Nov. Dec. Avg Brand Sales Sales Oct. Nov. Dec. Avg.
LY SPLY Sales / Sales / Sales / Sales / LY SPLY
O/D MS MS MS MS O/D
A 100 110 120 100 90 103 W/S 100 110 90 90 90 90
Ret. 200 260 270 280 290 280
B 120 123 100 120 120 113 Counter 50 60 40 40 40 40
C 90 80 100 110 120 110 Total
350 430 400 410 420 410
D 50 40 50 50 50 50
Sales Analysis by Regions Sales Analysis by Sales Person
Region Target Actual Variance % of ASM Target Actual Variance % of
+/- Target +/- Target
North 25 28 + 12 112 Ravi 75 79 +5 105
West 50 55 + 10 110 Avinash 25 20 - 20 80
East 120 118 -2 98 Ankur 85 95 + 12 112
South 80 75 -6 93 Abhijit 40 44 + 10 110
Total 275 276 + 100 Region 225 238 +6 106
Average
18

19. Analysis – Setting Distribution Objectives Anderson Consulting Group
Distribution
Objective
Distribution Objectives are normally spelt out by the number of
outlets to be covered. Channel Network
Strategy Design Design
Understandably distribution objectives are directly related to end
consumer requirements. Intermediate Warehouse Materials
Structure Management & Transport Management
1. How many and what kind of outlets do I need ?
2. Am I catering to a given target audience and their buyer behaviour Policies & Facilities & Channel IT
Process Procedures Equipment Management
3. Do my distribution objectives match the overall marketing
objectives.
Achieving objectives at the lowest cost An optimal channel design
Distribution Setting / Achieving Controlling
Processes Distribution Objectives Distribution Costs 1. What activities and functions need to be performed –
redistribution, stocking, collections etc..
•Inventory •Setting alternatives. •Consistently lower
Management inventories with 2. Which channel intermediaries can perform these functions – C&F,
•Supply
Chain changing demand. Distributors, Wholesales or a combination.
•Demand •Setting objectives in •Lower inventories
Forecasting line with demand 3. What are the service level requirements that channel
•Lower trade intermediaries require from an organisation – credits, inventory
based on trend potential. spends. levels, infrastructure, lead times, receipt of goods etc.
•Monitoringof •Rightmix of direct •Controlling trade
trade spends coverage and reach. spends & 4. What are the service levels that an organisation will require –
number of outlets covered, frequency of coverage etc.
distribution
expenses.
Developing physical network strategy Logistic Needs
1. How many facilities – manufacturing units / depots / CFAs are Logistics is related to all the activities related to distribution of
needed goods.
2. Which customer regions and which product lines should be served What will be required to move goods ?
from each facility
Land – for smooth conduct of operations.
3. How much inventory should be maintained in each facility Water, Energy, Storage spaces, stocking systems.
Transport equipments – trucks, trolleys etc.
Contemporary terminology: “Supply Chain Management” Communications – Telephones, Telexes, Computers etc.
Manpower – Managerial, Supervisory, Workmen.
It involves ongoing review of Strategy, Structure, Processes in line Pollution Control, Temperature controls, Humidity controls.
with the distribution objectives.
A Company needs to review logistics and spend considerable time
in planning and coordinating of this activity.
19

20. Definitions of Physical Distribution The task of distribution
“The term Physical Distribution Management is employed in
manufacturing and commerce to describe the broad range of activities
concerned with the efficient movement of finished products from the end
of production line to the consumer and in some cases, includes the
movement of raw materials from the sources of supply to the beginning of
the production line.” The task of distribution is concerned with the exchange
process and gears itself to matching the demand and
Activities: supply within a given periphery.
1. Freight
2. Warehousing
3. Material Handling Challenge:
4. Protective Packing
5. Inventory Control “Demand-side customization and Supply-side
6. Selection of site for various activities
7. Marketing
Commoditization.”
8. Forecasting
Achieve this at an optimal cost.
Selling & Distribution Costs Why to analyse Distribution Costs
Selling & Distribution costs broadly represent marketing cost.
Selling Costs seek to create and stimulate demand….. To determine costs of sales of different products – review
Distribution costs are towards reaching the customer profitability by products or by brands.
In turn fix-up optimum sales level.
Selling Costs Distribution Costs To control costs of effort – 80:20 rule and “fish where the fish is”
Secure orders Transportation Help in guiding marketing policy / strategy both for long-term and
short-term
Retain Insurance, Operating
Customers Expenses.
Administrative costs
Allocation of Distribution Costs Allocation of Distribution Costs
Distribution Costs are substantial…. Distribution Costs are substantial….
Distribution Costs are common and difficult to apportion. Distribution Costs are common and difficult to apportion.
Should it be apportioned on the basis of share ? Should it be apportioned on the basis of share ?
Should it be equally split ? Should it be equally split ?
Sharing with other FMCG products: Sharing with other FMCG products:
What should be the basis – Negotiation. What should be the basis – Negotiation.
Win:Win to be worked out Win:Win to be worked out
20

21. Analysis of Distribution Costs Freight Rate Fixation
The basis of analysis of distribution costs: There are two types of transport costs
1. Standing Costs
Desires of Management – What is the priority ? What is the overall 2. Operating Costs
strategy ?
If profit is to be maximised – direct sales effort to most profitable
products. Standing Cost Operating Cost
Various ways of analysis: Cost of Vehicle Repairs and Maintenace
1. Product or product lines Capital cost of garage, Depreciation
2. Individual customers or groups of customers repair shops etc.
3. Channels of distribution Taxes
4. Salesmen Insurance
5. Geographical territories License Fee
Administrative costs
What influences freight rates Inventory Costs
Nature of commodity Three types of Inventory
Demand and supply
Competitive conditions in the transport industry 1. Ordering Costs – Cost of stationery, postage, telegrams etc in placing an
order.
State regulations
2. Cost of Materials – Purchase Price + Transport + Insurance + Taxes.
Organisations have to make a choice:
3. Carrying Costs – Space Cost + Storage Cost + Insurance + Theft /
1. Option of a negotiated yearly contract rate Pilferages + Wastages and Loss etc.
2. Operate on market prices on transaction to transaction basis.
One of the key responsibilities of Sales Managers is to control inventory costs.
Turnover 100 Crores
Like personal travel, return-trips have to be determined – certain Monthly TO 8 Crores
locations will require two-way transport costs.
Cost of 7 days stocks 2 Crores
Interest @ 12 % Rs. 24 Lacs
Opportunity Cost @ 25 % Rs. 50 Lacs Per day Cost
Rs 14000/-
Control System for Efficiency Output of logistic system
Logistics efficiencies are critical as huge costs can be saved.
Inputs Process Outputs
Therefore efficiency at every level to be improved 1. Physical 1. Management 1. Consumer
These are are interdependent and inter-related….. resources – Actions. satisfaction.
land, facilities 2. Planning, 2. Competitive
Operating Efficiency – e.g. Fuel consumptions. etc.
Financial Efficiency – operating profit to gross earnings Execution and advantage
Service Level Efficiency – number of direct service vs total service 2. Human control.
Marketing Efficiency – market share and rate of growth Resources 3. Inventory /
Personnel Efficiency – People performance 3. Financial Order
Organisational Efficiency – Adherence to schedule Resources processing/
4. Information Transportation
Resources / Packaging
etc.
21

22. Productivity Aspects Productivity Aspects
Right Delivery Ratio = No. of Deliveries on time Vehicle Utilisation Ratio = Vehicle Kilometers actually run/day
Total No. of deliveries/year Vehicle Kilometers planned per day
Breakage Ratio = No. of consignments damaged in traisit
Route Potential Ratio = Tons carried per route Total number of consignments
Tons capacity per route
Operating Expenses = Total Operating Expenses
Accidents Ratio = No. of accidents / year Ratio Total Earnings
No. of trips operated / year
Net Profit Ratio = Net Profit
Service Ratio = No. of consignments booked/year Total Earnings
No. of consignments planned/year
Promptness Ratio = No. of prompt deliveries/year
Total No. of deliveries/year
Summary Sales Management
Distribution costs need to be examined in each area of distribution:
Transportation
Warehousing
Personal Selling
Inventory Material Handling
Information Technology
Distribution is a source of cost – admittedly a necessary cost but a
cost nevertheless.
Personal Selling Knowing the customer
Difficult to generalise but….
The Positive Customer:
Personal selling is all about dealing with a customer. Constructive & Open
Reasonable and
The Customer is the crucial person in Trade Marketing. concerned about the outcome.
The Negative Customer:
Lacks Creativity
The more effectively you work with the customer the
greater will be your success. Does not like taking risks
Cannot see any advantage in a new idea.
22

23. Knowing the customer Personal Selling
Know-Everything Customer: Personal Selling is all about Oral Presentation for the purpose of
making a sale.
Think they know everything about everything
Therefore we need to customize our presentation to the specific type
Opinionated of customer.
Bad Listeners “It is the art of successfully persuading prospects or customers to
buy products or services from which they can derive suitable benefit
Think they know more about your brands than you do. thereby increasing their total satisfaction, i.e. delight.
A part of the communication mix – Advertising, Sales Promotion,
Public Relations, Direct Mail, Exhibitions……….
Personal Selling involves communication How do you prepare yourself….
Communication is a way of exchanging – conveying Suspend judgment.
ideas,thoughts, feelings, messages by speech, writing or Write down as many ideas as you can.
sign.
The Process of Communication Build on ideas of your peers.
Clarify the message that you want to give.
Decide on the best method of saying it (Encode).
Incubate the Get Apply
Communicate the message to the other party (Transmit) Idea Illuminated The Idea
The other party listens to the message (Receive)
The other party interprets the message (Decode)
Sales person should be creative The need is to communicate effectively
Effective Communication
It is an inter-personal process involving individual identities. Increases our understanding of the customer’s needs
Therefore, there cannot be a standard solution. and wants.
Barriers to Creative Thinking: Increases the customer’s understanding of our product.
Routine: Comfort in routine… or “It is time for lunch”.
Provides a process for productive information about our
Educational System: “Chapterisation” or “The right products and merchandising.
answer”.
It is two-way communication – slower but more accurate.
Dismissive attitude: “I can’t climb this hill” – Evaluating
too quickly.
Rules: Big advantage is often linked to challenging the
rules.
Specialisation: “It is not my area”.
23

24. Ways to improve communication Difference between Salesmanship &
Personal Selling
Give an overview at the beginning. Salesmanship Seller-initiated
Simple Language. Providing information
Logical structure – Perspective of the customer.
Motivates for favourable
Encourage eye contact – establishes rapport. decisions
Encourage feedback – Show concern for feedback. Personal Selling Two-way communication
Seek clarification – Understand the feedback. Right Product to the Right
Check commitment and agreement – to proceed further. Customer
Summarise often. Stimulate interest
Do not talk too fast. Developing brand preference
Personal Selling Personal Selling
Personal Selling is about Inter-personal skills: Advantages Disadvantages
It involves personal confrontation – Therefore interactive Can close sales High costs
Impulsive…….. “Chemistry-match”. Feedback Chance of Negative rub-
Customized presentation offs on imagery
Opportunity to cultivate relationship. Lifetime value
Buyer has to respond – ‘reciprocity’.
Situations conducive to personal selling Strategies of sales person
Product
High unit value / Introductory stage / Precision Communication alone achieves little – only product
engineering products / No brand value – Bus vendors. information; So what ? “Walk the talk”
Marketing Persuasive – Understanding needs and finding solutions
Small number of buyers – Institutional Negotiation – Adjustments to commercial needs
Trading – Sadar bazar transactions Client Profit-planning – Working with the client to
Consumer Behaviour produce a specific product
High value decisions (Cars) / Answers to querries Business Management – Multi-level contact where the
frontline becomes an advisor.
Last 30-seconds prompt.
24

25. Changing Roles of a Salesman Changing Role of a Salesman
Delivery Sales Person Consultative / Technical
Behind the counter Capital goods where high-end knowledge is imperative.
Direct-selling to retailer Commercial
Missionary – Medical Representative Non-technical like office stationary, equipment where
Creative – Relate value that the product can add to price negotiation is the key to success
customer’s needs Direct Sales
New Business Selling – “Solutions” Customer / consumer
Door-to-Door
Personal Selling Process Some Negative Stereotypes of a Sales Person
What is a process:
It is a naturally occurring or designed sequence of
operations or events to produce an outcome Talks too much
Machine-like operation / Coordinated effort Lies or Manipulates
A sales process has to be People-dependent but not Doesn’t know about the product
individual dependent Doesn’t care about me (customer speak)
Process brings about a disciplined approach to Creates pressure
execution.
Wastes time
Process does not mean ‘auto’ mode
‘Eye-to-detail’ and grass-root level awareness is critical
Standards not a standard to carry out a selling process
Gains of best-practice sharing and experience
What does the customer expect Prospecting, Identifying & Qualifying
This is the planning part of the process – “I will take
Trusted Advisor seven days to sharpen my saw to cut a tree in one day”
Trust can be achieved through consistency Prospecting is all about eliminating non-buyers
Competence + Concern = Trust Identification involves establishing sources of
Therefore Industry knowledge – Be generally aware. information:
Consultative partner – Tele-marketing / Referrals / Influencers / Cold-calling /
On personal matters Directories / Mailing Lists / Trade shows
Theme of Partnership Qualifying the prospects
Your and your trade partner want the same “Exact right M Money – Ability to Pay
solution.
A Authority – Ability to take a decision
No guessing to know what the customer wants
Skillful questioning to uncover customer needs N Need – Needs the product or service
25