Sales & Distribution Strategies

Sales & Distribution

Prepared by
B.V. Manjunath Rao
02/01/14

1

Sales Management Defined
It is the attainment of an organization's sales goals in an effective
& efficient manner through planning, staffing, training, leading &
controlling organizational resources.
 Revenue, sales, and sources of funds fuel organizations and the
management of that process is the most important function...

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Evolution of Sales Management
Start of Industrial Revolution in UK &USA brought in
the concept of Sales Management in a very focussed and
scientific manner.
As the production volumes increased substantially, the
focus shifted from Manufacturing to Sales Management,
customer service , Distribution channel, ware housing etc,
leading to customer satisfaction.
Separate functions like Sales, Marketing, Production,
Quality, Service , Finance, Accounts etc got established in
many organizations to improve Revenue and profitability.

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Characteristics of Sales Management
Sales Management is always a function of Marketing
Management and both are closely integrated with each other.
It is a very important function of every organization.
It is the only function which earns the revenue while all
other functions spend money
Builds Relationship or Bond between the buyer and the
seller
Takes various responsibilities like generating sales
(Money), Collection (Money),understanding consumer
behaviour, reccommending changes , new product
introduction, customer satisfaction, building relationship.
Generally has a larger team than any other function in any
organization.
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Typical Marketing Org. Structure
Head Marketing

Manager
Sales

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Manager
Manager
Manager
Sales Promotion Mkt Research Logistics

Manager
Cust.Service

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Assignment-1

Write a short note Differentiating between Sales
and Marketing Functions

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Relationship Selling
Sales creates Relationship (Bonding) between the Buyer
and the Seller
Relationship creates Loyalty between the two parties
Loyalty generates long term business to the company
Range of Relationship –
1.Transactional Relationship – Associated with low price,
low margin and high turnover products with very low
servicebility and low repeat order chances.
Here sales persons attention to customer needs are Low
2.Value Added Relationship - Associated with high price,
high margin and high turnover products with very high
serviceability and high repeat order chances
Here sales persons attention to customer needs are High
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3.Collaborative Relationship
Here the buyer and the seller collaborate with each other to a
very great extent to understand each others requirements and
expectations and create a product and service tailor made for that
customer or a set of such customers.
Here sales persons ( and in fact entire organisation’s )attention to
customer needs are very High.
Very high value addition and long term customer loyalty is
generated

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Assignment - 2

List 5 products in each of the 3 types of
relationship selling

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MANAGEMENT POSITIONS

CEO

TOP LEVEL MANGERS
(Strategic Function )

VP Sales
National Sales Manager
Regional/Div./Zonal Sales Manager
Branch/Area/Sales Manager

MIDDLE LEVEL MANAGERS

(Tactical Function )
FIRST LEVEL
MANAGERS
(Operational Function )

Sales Representatives/ Trainees

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(Tactical Function

10

)

SALES MANAGEMENT
Specific Responsibilities and Accountabilities
*Direct all sales activities for the achievement of short and long term
business objectives, increased profit, and market control.
*Establish and co‑ordinate the sales objectives, policies and programme
within the context of the overall corporate plan and, where appropriate,
recommend standards and set targets and quotas.
*Prepare or arrange for preparation of the budgets, reports and
forecasts and ensure they are presented in a timely
manner to the Chief Executive.
*Appraise the activities of the sales staff according to overall
sales strategies. Monitor and evaluate the performance, and the
efficiency of staff and procedures.
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SALES MANAGEMENT
* Direct the development of initiatives such as new products,
incentive bonus schemes and the dropping of unprofitable products.
* Maintain necessary contact and negotiations with major suppliers,
key customers, industry associations and government representatives
to achieve the objectives of the division.
* May assist in the direction of merchandising methods and
distribution policy.
* Select, or approve the selection and training of staff. Establish
lines of control and delegate responsibilities to Junior staff
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SALES MANAGEMENT
* Co‑ordinate subordinate staff to optimise the use of human and
material resources to achieve goals. Consult with subordinate staff and
review recommendations and reports.
*Direct the preparation of operational matters including volume and
profit objectives, promotion distribution, pricing and selling.

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SALES MANAGEMENT
*Direct sales activities by setting product mix, geographical sales areas
and customer service standards.
*Control and monitor sales methods, key customer strategies and
arrangements by recommending prices, discount policies, credit
arrangements, and conditions of sale.
*Monitor customer service, invoicing, expenditure, payments and
administration costs.

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Skills of a Sales Manager
People Skills :Ability to
Lead
Motivate
Communicate
Coordinate with all concerned
Team Approach V/s Individual Approach
Mentor the team mates
To coach and work towards improving the performances of others
Managerial Skills
Planning
Organising
Execution
Decision Making
 Meeting the deadlines
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Skills of a Sales Manager
Technical Skills :Ability to
Understand the technicalities
Negotiate with Customers
Train others
Solve complex business problems
Take correct decisions

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What are the goals of sales manager?
Sales
Revenues
Profits
Market Share
Controlling Internal Costs…

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How do they obtain their goals?
Knowledge of the sales environment
Planning for sales
Recruiting the sales force
Training the sales force
Motivating the sales force
Supervising the sales force….
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Sales Planning
* It is to answer the question: “Where will all the sales come
from?” The sales plan isn’t a guesstimate.
* It takes its direction from the marketing strategy and is
based on through research and a considered positioning of the
company within the market place.
* Sales planning involves predicting demand for the product
and demand on the sales assets (machines, people, or a
combination of both).
* Failure to plan always means lost sales. …
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Sales Planning Contd..
* It should allow for meeting increasing customer demand for
more products, services and/or customization as the business is
growing, but also react quickly when demand decreases.
* Sales planning improves efficiency and decreases unfocused
and uncoordinated activity within the sales process.
* Planning ensures that when a consumer wishes to purchase the
product, the product is available, but it also means opportunities
for additional sales are presented and the sales assets are
available to exploit these opportunities. …..

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DUTIES OF THE SALES MANAGER
* Holds a unique position in the sales organisation.
* Plans, organises, directs, staffs & coordinates whole sales
organisation.
* He is the person who steers the wheels of sales organisation.
* His status and power depends on the size of the organisation in his
charge.
* In small firms the general manager or managing director performs
this duty.
* But in big manufacturing firms there’s usually a sales manger.
In giant sized companies for some territories and/or products sales
managers are appointed.
* Whatever the position of the sales manager, he is the guiding and
driving force of the sales organisation.
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FUNDAMENTALS OF SUCCESSFUL SELLING
* Proper Knowledge of products
It is important to completely understand your products, its advantages
and disadvantages, competitive positioning of your products, its price
and profitability , product mix and its importance to your organisation
etc
* Customers buying Pattern OR What customers like most?
Product quality, reliability, product credibility , service requirement,
etc
* Follow business ethics.
* Avoidance of Unpleasant Mannerisms of social traits
* Developing sales professionalism

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Industrial Marketing Vs. Consumer Marketing

Description Industrial Marketing

Consumer
Marketing

Buyer
Few buyer,Close
Large buyer, non
characteristi customer relationship, personal ship, less
cs
technical expertise
Technical expertise
Market
structure

Geographic
concentric

Geographic
dispersed

Channel
Price
Product &
service

Direct &indirect
List price on standard
Technical complex
Prompt service

Indirect & multiple
List price
Standard, service
secondary

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Distribution Management and its link with Sales
Management
* Distribution management serves the primary function of making the
products or Services available to Customer with in an arms length
* Distribution management takes care of Availability and Visibility
* It provides Time, Place and possession utility to the customer
* SM & DM are always interlinked with each other and Sales
Manager is the Responsible person.
* SM plans the strategy, operational details to achieve the desired
sales objectives, profitability market share etc. DM is all about
execution of the desired plans of Sales manager.
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Management
Sales Management Task

Distribution Management Role

1.Achieve Sales Volumes and Market Share

Physical Availability of products,
Movement, storage ,close to customers,
ensure shelf life etc

2.Area coverage of Markets and Outlets

Follow the Sales Call Plan , Milk Run
Principles. Make each call a productive call,
extend credit, collect the money etc.
Push all products in each outlets, ensure high
visibility, sell more than compatition

3.Manage Institutional Business and Key
Accounts

Get orders and Execute . Keep adequate
stock, ensure product safety etc

4. Manage Distribution network- recruit
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,develop, evaluate and promote the network,

Each distribution channel has to manage its
25
down stream channel, evaluate their

Management
Sales Management Task

Distribution Management Role

5. Handling Customer Complaints

First level interface with customer- Utmost
care to be taken & immediately bring it to
the notice of sales management
Quickly resole the complaint.
Quickly remove the defective products from
the market.

6.Implement Marketing Plan , new product
launches, product promotions etc

Ensure wide distribution
Ensure high visibility
Ensure success of new product launches,
promos etc.

7.Local advertising – Hoardings, Shop
Boards, Paper advertisements, e mails,
melas, fairs and exhibitions etc

Ensure success of these events

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8. Proper interface with concerned

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Ensure task assigned by sales management is

Distribution Channels
Own Sales force : Recruited by the company to manage Key
Accounts and Distribution Channels
C&F Agents - Carrying and Forwarding agents with own fleet of
transportations
Depots – to break the bulk. – Mostly company owned .They break
the bulks and send the required order qty to Distributors/Dealers
/Agents and Stockists.
Distributors – They buy the goods from the company and sell it to
Dealers/Agents/Stockists – They are mostly company specific.
Dealers / Agents/ Stockists – Are at the fag end of the distribution
channels. They may be company specific or may sell other company
goods as well depending upon the products.
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Distribution Channels
Ware house operators – They ensure physical movement and safe
keeping of Goods. They are managed by logistics Department. Mostly
they are on contract basis only.
There are a number of companies who specialize in ware house
operations which includes collecting the goods from the company,
reaching it to all its customers and even collecting the payment on
behalf of the company.
 Independent wholesalers – This is more relevant to consumer
goods and Pharmaceutical products.
Most of these distribution channels work on mark up basis
Distribution channels are either be in house or out sourced
Eureka Forbes , Bata , Raymonds etc have their own distribition
channels
M&M, LG, P&G have out sourced distribution channels.
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Customer Service
Sales Management and Distribution Function works together to
take care of customer service
Demand Management – Sales forecasting, Getting business to meet
the sales targets etc is the function of Sales Management with the
involvement of Distribution function.
Supply management – Primary responsibility of Distribution
management (under the guidance of Sales Management) with the help
of the entire distribution channel as explained above.
Customer Complaint Handling – ????????
All the above activities are always carried out strictly under the
guidance and knowledge of Sales Managers ( who are in tern
governed by the Marketing Function and its objectives)

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Importance of Sales Function to any organization.
Why choose a sales career? What’s so special about a
career in Sales and Distribution?
Sales is the only function which generates revenue for the organization
while all other functions spend money.
Sales function develops relationship (bondage) between the buyer
(customer) and the seller (Company)
Sales function directly contributes to the growth of Top line and
Bottom line of any organization.
Sales function drive the organization in terms of current and future
business plans, new product development, new market development etc.
The health of any organization can be gauged by the effectiveness of
the sales force in meeting the various business objectives
By and large sales function has the largest manpower strength in most
of the organization.
Sales function is very challenging , demanding and also rewarding
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Many companies offer incentives to sales staff over and above the
salary – better compensation than many other functions.
There is never a dull moment in the life of a sales person – Everyday
offers more chances of interactions with new clients, new challenges in
all functions of sales.
Sales function requires one to develop many skills like Technical
skills, communication skills, negotiation skill, organization skill, time
management, people management, knowledge of products and processes,
commercial skills – costing, pricing, discounting, local laws, ethical
behaviors etc etc.
Best performing Sales persons are often offered many goodies like
additional training in India and abroad, white goods as gifts , trips to hill
stations with family etc etc over and above the salary and incentives.

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In many companies the Top positions like CEOs ,COOs, Presidents
are chosen from the sales functions with many years of experience as
they bring the over all and the best perspective of Customers, Market,
service requirements, product requirements etc, etc.
All the above is true for a sales person who puts in years of hard work
in various sales functions of any organization.

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UNIT 2
Personal Selling :
The psychology in selling,
 Preparation and Proess
Types of Purchases
Effective Communication
Sales Related Policies
Sales forecasting and
Budgeting in detail

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Concept of Selling
When the Consumers and Factories, if left alone , will not buy enough
of the organization's products. The organizations must, therefore ,
take an aggressive selling and promotional efforts.

The selling concept as expressed by Coca Cola company : The
purpose of selling is to sell more goods/services to more people ,more
often for more money in order to make more profit.

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Psychology in Selling
Buyer Behavior Model

Stimulus
(Sales Presentation)

Buyer’s Decision
Making Process

Response
(Buy OR Sell)

It is important to understand the buyer’s decision making process.

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Consumer’s Decision Making Process

Need/Want
Recognition

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Information
Collection

Evaluate
Purchase
Alternatives Decision

Post Purchase
Behavior

36

1.Need / Want/ Problem
Internal Need
Internal Stimulus could be due to
a)Necessity
b)Hunger/Thirst
c)Prestige
d)Social Status / Official Status
External Need
a)Advertisements in many channels –Hoardings/Paper TV ads on a
new products, new innovation etc, etc
b)Product display
Irrespective of external or internal needs of the consumer, the sales
person must identify the consumer needs and be prepared with the
information ( The features and Benefits of the product) that should be
discussed with the consumer to sell the product.
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2.Information Collection
a)Visiting Retail stores / sites etc
b) Attending exhibitions
c)Discussing with friends, Family members etc
d)Discussing with the sales reps/ Sales Managers etc on features,
benefits, advantages, disadvantages, price, discounts if any, quality,
warranty, payment terms, credits etc etc…
e)Net Search

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3.Evaluation of Alternatives:
a)Done to satisfy the needs fully
b)Done to seek better features, Advantages leading to many benefits
c)Done to get the best value for money

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3.1 Brand / Supplier Evaluation Method:
Ex: Buying a 1000 sft Flat in Bangalore – Brigade Builders – 12 km
to city center at Rs 3750/- sft
Attributes

Weightage %

Consumer Belief

Supplier Score

Price

25

0.80

20

Location

20

0.65

13

Quality

20

0.75

15

Legal Compliances

15

1.0

15

Bilders Reputation

10

0.75

7.5

Loan Eligibility

10

1.0

10

Total

100

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80.50

40

3.1 Brand / Supplier Evaluation Method:
Ex: Buying a 1000 sft Flat in Bangalore – DS Max Builders – 9 km
from city center @ Rs 3500/-

Attributes

Weightage %

Consumer Belief
(Satisfaction level)

Supplier Score

Price

25

0.65

16.25

Location

20

0.25

5.0

Quality

20

0.55

11

Legal Compliances

15

1.0

15

Bilders Reputation

10

0.22

2.2

Loan Eligibility

10

1.0

10

Total

100

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59.45

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4.Purchase Decision :
a)Decision taken to buy or to not to buy based on the evaluation
technique
b)Timing of purchase
c)How much to buy
d)Payment mode (method)

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5. Post Purchase Decision :
a)Any purchase leads to certain levels of satisfaction levels.
b)If the product performance is more than the customers expectations
he gets High Satisfaction levels ( Customer is delighted)…….
What does it lead to?
c) If the product performance is as per than the customers
expectations he gets Satisfied…….
d) If the product performance is below the customers expectations he
gets un satisfied……
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Types of Purchases
1.For Individuals and House hold Purchases
a.Routine Purchase Decision
Low price, low risk, routine purchases…. Consumer does not give
much attention to all 5 decision making steps…. Except when a
competitive product is offered in the market at an attractive price
with more features.
Ex:………..
b.Limited Purchase Decisions
Medium price, High utility value to consumer …. Here consumer
does evaluation of many brands on its merits and demerits…….
Ex:
c. Extensive Purchase Decisions
High investment in time to select, high price , Very high Utility value
…. All 5 steps of decision making is adopted by the consumer.
Ex: ….
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Types of Purchases
2. For Industries and Factories
a.New Purchase
Ex:…..
b.Change in supplier
Ex:………..
c.Repeat Purchase ( Re buy)
Ex:……….
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Sales Preparation
1.Effective Communication
Effective communication is defined as Transmission of verbal and
non verbal Information and Understanding between a sales person
and the consumer/ customer in an un ambiguous manner.
Tools used are : Words, visual aids, gestures, body languages etc
For proper and effective communication, cultural differences ,
outside interferences etc should be avoided
Non verbal communications: Physical space between buyer and
seller, hand shake, body movements, appearance, good mannerism,
eye contact, be in tune with current trend etc
Ask relevant inquisitive questions to know what customer is
seeking
Empathize with buyers feeling, ideas, feedback etc
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Sales Preparation…..
Develop trust with customer by being truthful, do not over commit
and give wrong information juts to attract the customer
Be a good listener to understand what customer is looking for.
Use proof statement like a letter from satisfied customers – this
adds credibility
Collect an appreciation letter from all your satisfied customers and
use it as a tool to develop loyalty with new customers.

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Sales Preperation
2.Sales Knowledge
About your company
About your products and services offered
About price, taxes and duties, discount , payment policies etc
About your competitive products, their prices, advantages,
FEATURES ADVANTAGES AND BENEFITS (FAB)
About your company’s distribution network, service network,
promptness in attending to customer requirements, etc
When a Sales Person ( at any level ) is enthusiastic, energetic and
exhibits all the above qualities during a sales meeting, the customer
develops confidence in the sales person which results in Positively
closing the sale.
This leads to INCREASED sales to your company.
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3. Product knowledge..
4. Sales related Policies of your company.
Guidelines on price, discount, delivery, Warranty, Guarantee,
Certain objectives like product mix
5. Pricing Policy/ Credit policy/Discount policy/Service Policy etc
6.Promotional Policies Like
Advertisement – Image building exercise..Hoardings, through
print, electronic media , use if IT
 Sales promotion – For short term benefits free samples, product
displays, trade shows, seminars, Contests for sales peoples etc
 Publicity – Sponsoring events like a music concert, Cricket Match
Personal selling and Direct Marketing.
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7.New Product development Ideas… based on the interactions with
customers, customer’s feedback , knowledge of the competitors
products etc.
8. GROWTH Policies OF YOUR COMPANY.

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Sales Process

1.Prospecting and Qualifying
2.Pre call Planning
3.Approach
4.Presentation & Demonstration
5.Overcoming Objections
6.Closing the Sale
7.Follow up & Service

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Prospecting and Qualifying
What’s a Prospect?
A Prospect is an individual, a family or an organization who needs the
product or the services that a sales person is selling and has the
financial capability to buy the same.
What’s a Sales Lead?
A Lead is an information about an individual or an organization that is
a probable prospect.
Once the Sales Lead wants the product and has the ability to buy, it has
all the potential to become Valued Customer.
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Why prospecting is an important
activity?
 To increase the customer base
To increase the sales volome
For Growth
When the existing customer becomes stagnant , its important to add
more customers to keep in tune with the Growth objectives
When sales are declining, its important to add more customers and
hence the activity of prospecting.
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What are the prospecting methods?
 Referrals from Exisisting Customers
Referrals from functions with in the organisations
Referrals from External sources – suppliers, vendors, Banks, trade
associates etc
Networking from sales personals – friends, meeting members at
clubs or at similar social meetings
Industrial or trade directories
Cold Canvassing
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Qualifying
 Assessing or qualifying the probable prospect to find out if they
have
1.Need for the product or service
2.Whether the prospect has the capability to buy the Product or Service
Qualifying them as
1.Hot prospect
2.Warm Prospect
3.Cool prospect
Constant follow up of prospects till they are converted into potential
customers.
Prospecting and Qualifying is done by the sales persons of the
company.
Of late this activity is outsourced to external agency so that sales
persons can concentrate on actual sales.
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Pre Call Planning & Approach
This is a process of collecting more in depth information on the
prospect & Planning the sales call on the prospect

Information Collection :
Information on Prospect’s business, its products and services, what
do they require, how much they require, who is the current supplier,
is there any problems with the current supllier, what is their quality
requirement, who are the key people to take decision etc , etc

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Planning the sales call :
Set the objectives of the sales call
Plan the sales strategy
When to meet, whom to meet, what to talk (FAB) and get a
judgment of which of your products is most likely to suit the
prospects requirements.
Approach
Actual meeting with the prospect (for the first time): Takes a few
minutes but can make or break a sale.
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Approach contd…..
Create favorable impact in the very first meeting
Develop soft skills ( firm hand shake, pleasant smile, opening
conversation……. Just to create a favorable beginning
Commonly used approach methods
1.Self Introduction – Exchange of business cards, Self introduction
starting with yr name, designation etc ,about yr company, brief
history , products you manufacture etc
2.FAB method
3.New product approach – present the samples (FOC)
4.Ask Questions like what is his key take away from the product?
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Presentation & Demonstration
The sales person has to first understand A) Buyer’s needs
B)Develop a strategy for presentation C)Develop an effective
presentation.
To understand the buyers needs, ask the following questions
1)Situational questions – who is the key decision maker? What is
your daily / weekly requirements? Are u buying this product for the
first time? Are u replacing the existing product?
2) Problem identification question - What are your difficulties in
the existing product like quality, service, delivery problems etc
3)Impact questions -Which of QCDS will have maximum impact?
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Presentation & Demonstration
4) Solution Value Questions – Questions related to value of
solutions …. If the quality of our product / service is very high due
to very low rejection rate, how would it impact on your company’s
products… lower rejection ppm, proven software like CRM etc

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Presentation Methods
1. Stimulas Response Method or Canned Approach
Here a standard ( prepared) presentation method is used.
Sales person does most of the talking with out knowing the needs of
the customer.
Sales person gives the FAB of the product and expects the
customer to take a decision on buying.
Mostly used for consumer goods, pharma products, low value
product, tele marketing, door to door selling etc
The main dis advantages of this method is that the FAB may not be
important to buyer
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Presentation Methods
2. Formula Method - It uses a well known formula AIDA
(Attention, Interest, Desire& Action)
Attention – Here the sales person gets the attention of the buyer by
creating very good first impression with his dress, style, smile, soft
skills thro which he arouses the customers interest.
Interest – The sales person finds which aspects of the products/
Service ( QCDS) attracts the customer most.
 Desire –The objective of this stage is to arouse a strong feeling in
the minds of the customer for your product or service. Customer may
raise some objections which need to be answered convincingly
Action – Buying action or closing the sale.
If the buyer is convinced you can close the sale. Otherwise keep
clarifying all his doubts till he is ready to close the sale.
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Presentation Method
3) Need Satisfaction Method
Most Challenging and creative method
The seller first understands the buyer’s needs by asking several
questions ( ref slide 59, 60) and records them.
Only after understanding the buyers needs he goes on to explain the
FAB of his products which meets customers requirements
This is the most commonly used method for all engineering
products.
This method focuses on the requirements every customer and
solutions are tailor made for that customer.

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Presentation Method
3) Team Selling Approach
Used for very high value, complex products / services, integrating
many functions
CFT is involved at buyers end and sellers end
Typical CFT consists of people from sales, accounts, logistics,
technical support ( D&D), IT from selling team on one side and
People from Purchase team, accounts, Supply Chain dept.,
Production / Design from the buyers side are present for discussions.
As it involves many CFT members, its an expensive process.
Here emphasis is on building a long term relationship

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Strategic Planning! What’s this?
Strategic Planning is a very important process where in the top
executives of the company derive the Long term Objectives and
Strategies to achieve them.
Normally the strategic planning is done for 3 OR 5 years (on a
rolling basis)
What is the Purpose of Strategic Plan?
To derive the Company’s Mission & Objectives
To derive the SBU’s Mission & Objectives
Allocation of Resources – (4 Ms) Men, Materials, Machines &
Money
Derive a Broad plan to convert the strategies into an Achievable
Plan
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Presentation Method
4)Group Presentation
When a sales person makes the sales presentation to a group of
decision makers from the customers side. Some guidelines are
Analyze the need, understand their problems, concerns after
talking to all the persons concerned
Introduction- introduce self, company and state the purpose
FAB
Convincing : Attend to all objections, concerns, use testimonials,
TP certifications, quality systems in the organization etc

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Presentation Method
5)Consultative Selling Method (problem –solution method)

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Strategic Planning
Sales Forecasting & Budgeting

Prepared by
B.V. Manjunath Rao
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Strategic Planning
Who is responsible?
Senior management team is responsible for Strategic Planning
Strategic Planning is done at 3 levels
i)Corporate Level - Corporate Strategic Plan
(ii)Strategic Business Unit Level
(iii) Product Functional Level

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Strategic Planning……
Typical Org. Structure

Corp. Stg.Planning
(Long Term Plan)

CORPORATE
OFFICE

SBU
A

PROD
1

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PROD
2

PROD
3

SBU
B

PROD
4

PROD
5

SBU
C

PROD
6

SBU Stg.Planning
(Long Term Plan)

PROD
7

PROD
8

PROD
9

Prod. Level
Stg.Planning
71
(ShortTerm Plan)

Corporate Strategic Planning……
Company level mission is developed as a guideline for the entire
company.
Mission statement derived based on the company’s
1.Turn over / Growth policy ( Strategies on Domestic/ Export, Growth
YOY, Emphasis on certain Business Units, etc )
2.Quality Policy/ Innovation Policy ( Comprehensive quality policy for
all business units)
3.Investments (on 4 m)

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The Toyota Motor Corporation mission statement
"Toyota will lead the way to the future of mobility, enriching lives
around the world with the safest and most responsible ways of moving
people.
Through our commitment to quality,constant innovation and respect for
the planet,we aim to exceed expectations and be rewarded with a smile.
We will meet our challenging goals by engaging the talent and passion
of people, who believe there is always a better way."

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Samsung mission statement 2013
“At Samsung, we follow a simple business philosophy: to devote our
talent and technology to creating superior products and services that
contribute to a better global society.”

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Mission Statement of Hindustan Unilever Limited
Hindustan Unilever's mission is to add Vitality to life. We meet everyday
needs for nutrition, hygiene, and personal care with brands that help
people feel good, look good and get more out of life.

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Role of Marketing at Corporate Level
1.To communicate long term customer strategy as a policy of the
company so as to achieve the strategic goals of the company.
2.To provide information on competition and customers
3, Strategic Marketing Team develops long term strategic plan
4. It gives directions to achieve the long term plan.

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Business Unit Strategic Planning……
( Long Term…….)
1.Defiuning the SBUs Mission
2.Analysis of impact of Global and National Econamic Scenario
3.Analysis of SWOT
4.Development of Long term and Short term Business Goals
5.Formulating Strategies for achieving Short Term and Long Term Goals
6.Formulating Action Plan for achieving Short Term and Long Term
Goals
7.Monitoring results and taking course corrections

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Functional Level Strategic
Planning……
( Short Term – Current year – 1 year)
Applicable to all the functions like Sales, Marketing, Production,
Materials, Accounts, HR,Finance, Maintenance etc.
1.Develoment of operational plan for each product line, Function line
2.Develop specific System &Procedure to achieve the Plan
3.Focus is on achieving the Business Plan,Product Mix, Customer
development, retention, price, etc etc for Sales Function

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Role of Sale & Marketing at
Functional Level
1.To evolve a plan to achieve the product mix, price mix, distribution
mix … to achieve the short term plan
2.To co ordinate marketing activities to achieve the goal
3.Allocating the resources and lend all support to Sales Team
4.Classification of accounts
5. Relationship strategy
6.Selling approaches , developing sales channel, and achieving the sales
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Functional Level
Integrated Marketing Communications (IMC)
It’s the strategic integration of various communication tools such as
Advertising, sales promotion, personal selling, public relations
publicity, direct marketing etc to have maximum impact of sales and
price and with minimum cost to company.
Advertising
Getting sales lead
Telemarketing to qualify the customers
Classification of customers – ABCD analysis
Clasiification of customers on the relation ship strategy- Transactional,
Value Added and collaborative relationship
A & B Class customers are contacted by Company reps.
C&D 02/01/14 customers are contacted by Channels
Class
80

Functional Level
A.Selling Methods/Selling Approaches
Stimulus Response Method /Canned Approach or Formula Approach
Need Satisfaction Approach /Team selling Approach
B.Distribution Channel Strategy
Company Sales Force / Distributors or Dealers / Independent Reps /
Telemarketing / through iternets

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Sales Forecast
Forecasting means predicting the future.
Sales forecasting is an estimated sales value for specific time frame
based on certain assumed market environment and spaecific market
plan
Sales Forecasting is done on 3 levels
a)Total sales - Industry sale/ Domestic sale/ User wise sale/ Variants
wise sale/Product wise / spares / service
b) Time Period - Short term , Medium Term & Long Term
c) On Geographic level – Area wise, district wise, state wise, export or
domestic
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Sales Forecast Approach
Commonly used terminologies
Market Potential ( Industry sales forecast) (Ex.10, 00 , 000)
Market Forecast/ Market Size – (250,000)
Sales Potential – ( 100,000)
Sales Forecast ( SOB 55% - 55,000)
Sales Budget ( N- 15000, S-15,000, E- 5000, W-20000)
Sales Quota (N – 15000 – A, B C D …)
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Several Approaches are followed
Top - Down Approach
Executive Opinion Approach
Delphi Approach
Advantages / Disadvantages
Bottom– Up Approach / Market Build Up Approach
Forecast is collected from grass roots level , combined into branch / area
sales forecast , combined into Regional /Zonal sales forecast , combined
into national sales forecast.
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1.Moving Averages Method ( 3 years or 6 years )
2.Exponential Smoothing Factor
Salesforecast next year = Actual Sales This year + (1-L) Actual Forecast
this year
Where L is the smoothing factor
3.Decomposition Method Or Break down method
This method involves breaking down of the previous years data in to 4
major components such as
Trend – Growth in sales due to ……….
Cycle – Business cycle like recession
Effect of Season on the business
Effect02/01/14
of erratic events like cyclone, terrorist attacks, etc
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4.Sales Regression method
This is a more complex statistical method used to determine the sales
forecast considering the effect of sales on price, sales calls, expenditure
etc.
Many companies use more than one method to arrive at the accurate
sales forecast.
What are the effects of correct and in correct sales forecast?

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Sales Budgeting
1.Sales budget consists of estimated Sales Volumes and selling
expenditure
2. Sales Budget is arrived after the sales forecasting .
3.Sales budget consists of revenue and expenditure
4. Sales Revenue consists of very fine details of sales area wise, product
wise, territory, dealer wise etc .
5. Sales expenditure consists of all the expenses involved in promoting
the sales in a given area.

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Sales Budgeting
Purpose of Sales Budget
Planning the expenses to meet the Forecast

S , T, P –Control Expenses
Co ordination at the Corporate level to drive the teams once the budget
is finalized
Co ordination at Marketing and Sales Managers level to control expenses
Control – Budgeted v/ s Actual of all key parameters
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Sales Budgeting
Methods used in deciding the sales expenditure Budget
1. Percentage of sales Budget
Actual expenses incurred (as % of sale) ia the current year is taken as a
base for arriving at the figure for the next year.
Genarally accepted norm :
Travel expenses budget : 0.30%
Advertisement: 1.0 to 1.25%
Sales promotion expenses : 0.60 to 0.80 %
2. Executive judgement method
Sales managers & their superiors exercise their judgment based on their
experience

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Sales Budgeting
3.Objective and Task method.
a)Sales forecast is prepared
b)Based on the startegies and tactics used to achieve the Goal, the
tasks,objectives of every sales person and their distributors are tracked
c)Cost of executing such tasks and objectives are then calculated.The
cost of all such activities are added up to get the total cost.
d)then the cost as % of sale is calculated

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Sales Budgeting
4.Sales Budget Process
1. Sales Review Past data ( 3-5 years), current years data, trends- past and present, market
situation, macro and micro economic conditions,govt. policies affecting
the business , product mix, prfitability etc are all reviewed before arrving
at sales budget
2.Communication
Sales Managers send a clear comminication to ASM, RM,DM, ETC to
get all the relevant data in a pre fixed format . They also ask for the
individuals to come out with their exp budget in a pre fixed formats
3.Subordinate Budget
Sales and exp. budget of all subordinates is prepared for all the above
manner
4.Approval of Sales Budget 5.Budgeting of other departments 91
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Distribution Management
Marketing Mix consists of 4 Ps
Product
Price
Place
Promotion
Distribution management deals with the “Place” part of 4 p.
Definition of DM
Distribution channel is a set of independent organizations involved in
making a product or services available to customers as and when it is
required in what ever qty the customer requires.
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Distribution management & Marketing
Mix
Role of Distributor/ Dealer etc
Place Utility

Pocessions Utility

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Time Utility

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Role of Distribution Management
1.To carry out activities which facilitates movement of goods and
co ordination of demand and supply in the Time and Space Utility.
2.To carry out activities of getting the requirements, Stocking them ,
maintaining them in good condition and distributing them
3.All activities of Carrying and forwarding of Finished Goods from
Factory to end users.
4.Collect and pass on information on customers, competitors, price etc
5. Carry out sales promotions activities etc..

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Evolution of Distribution Management since 1990 in India after the
liberalization of Economy.

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How DM typically Functions?
Manufacturers
C & F Agents

I
N
T
E
R
M
E
D
I
R
I
E
S

(Bulk Transporters)

Distribution centers (Bulk Breakers)
Distributers
Retailers

( Smaller lots)

Consumers
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( Small Lots)

( Any qty)
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Role of Intermediaries
1.To create infrastructure for transportation, storage, handling, bulk
breaking of one or more produts.
2.To develop infrastructure for buying and re selling – such as invoicing
maintain the inventory, etc
3.To provide information to both the seller and buyer to help them
manage their business better
4.To reduce the “Touch points “ to company so that the whole logistics
can be managed better
5. To Make the products available where ever and when ever required
6.To reduce the cost to company

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Role of Intermediary
Company 1

Company 2

Company 3

Company 4

INTERMEDIARY

LARGE NUMBERS OF CUSTOMERS
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Are Intermediaries necessary?
Depends on company to company.
Exceptions are like
Dell computers & Amezon in US
Bata Shoe
Eureka Forbes
Some Engineering Products
Technically complicated products like medical diagnostic products
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How Distribution add value to Selling Function?
1.Reduce cost of products
2. Efficient management of logistics, storage and inventory
3. In some cases they also handle installations etc.TVS, IT HARD
WARE
4.Collect market informations on price, comp., products…..
Some companies use a combination of Direct selling and selling through
intermediaries …
It depends on
Nature of the products and services
Nature and dispersal of company customers
Business Goals of the company
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Distribution Channel Strategy
1.DM is a part of top management strategy, where the DM Objectives
and service objectives are very clearly defined.
2.DM policy is set at corporate level and not frequently changes or
altered
3. Detailing of DM activity is done at middle level and the at the
operational level
4. All the activities are well documented to avoid any sort of confusion
5.Performance Indicators of DM is very clearly defined
6.These days the Distribution is handled by independent companies or it
is an outsourced activity
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Setting DM Objectives
Objectives
1.Service levels expected by Company is defined
2.Service level expected by customers are also captured in setting the
objectives
3.Monthly sales forecast is estimated ( jointly with SM)
4.Inventory levels are determined
5.Developing the beat plan of market coverage
6.Market visits to sell products (Joint exercise)
7.To carry out promotional activities
8.To collect payment
9.Concentration of A Class and Major accounts
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Distribution Channel Strategy
1.Defining customer Service Levels – What customer wants in terms of
Time, Space and Pocession Utility
Depending on the nature of the company and its products..
ABC Classification in terms of the criticality of the customers for the
company
Companys strategy to get better product mix and price mix
2.Defining distribution objectives to achieve the service levels
To clearly spell out what is expected of the Channel network in meeting
the customers expectations ..
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3.Outlining the activities to achieve distribution channel objective
These activities are performed jointly by the company personnel and the
Channel partners
Monthly sales forecast
Arranging the despatch of products from factory
Developing the beat plan for market coverage by distibutors
Developing visit plan for service engineers
Developing Market visit plan by company personnel and Channel
partners
Carrying out promotional activities
Special focus on A Class customers
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4.Deciding the structure of the network – C&FA, DISTRIBUTORS
DEALERS, DISTRIBUTORS ETC. OR DIRECT COMPANY REPS
OR A COMBINATION
How much stock to keep?
What kind of storing arrangement
Credit ?
5. Define the policy and procedure
To clearly define what is expected of the Channel network and Sales
personnel and define some of the policies like
Operating Policy , Credit, Grievence policy, Policy on Settlement of
Disputes, Policy on Quality complaints reprisal etc.
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6.Defining the KPIs or KEY PERFORMANCE INDICATORS
For the channel partnmers & Company sales personnel on
a)Detailed sales targets region wise, product wise
b)Share of Business
c)Zero complaints from customers
d)Stock returns
e)Customer returns
f)Market coverage
g)Receivables
h)Sales loss on account of stock out situation
i)Damage of products
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7.Define KEY SUSSESS FACTORS for effectiveness of Channel
Factors influencing the success of Channel Partners
a)Clear cut policy and procedure
b)Evoke serious commitments from the channel partners
c)Fair dealings with all channel partners
d)Clearly make the channel partners understand the customer service
levels in terms of QCDS
e)Effective and timely disbursement of compensation to channel partners

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A distribution channel is a group of people and firms involved in the
transfer of title or ownership as the product moves from manufacturer to
end user.
DC (Distribution Channel) is there as the manufacturer cannot reach out
to all the end users.
DC Multiply the reach and improve the marketing efficiency
DC Creates time, space and pocession utilities
DC in the hands of independent operators having core competency and
reach which company may not have .
DC is more cost effective
DC can be further classified into a)Sales Channel b) Delivery Channel&
c)Service Channel
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Distribution Channel Members :
C&FAs :
1. Basically the transporters who act as intermediaries between the
manufacturers and the distributors.
2.They collect the material from the company and store it in Bulk to be
distributed to distributors.
3.They are bulk breakers
4.They do not pay for the Goods.
CSAs (CONSIGNMENT SELLING AGENTS ) : They act as C&Fas
doing all the above functions in addition to selling the goods.They pay
for the goods.
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Distributors, Dealers, Stockists,
They are intermediaries.
They pay for the products and they get a fixed commission , margin or
mark up for the service rendered.
( Margin = Profit /Selling Price & Mark up = Profit / Cost )
They may or may not get credit from the company.
They may have to give credit to customers depending on product to
product
Many times they also do other value added activities like servicing ,
commissioning etc.
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Wholesalers :
They operate in the main markets in the city
They may deal with the products of many companies , often non
competing products
They are not on contract with any company
They normally deal with other retailers and institutions
They normally take credit from the companies and extend xredit to
distributors

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Retailers :
They are at the fag end of the DC.
They cater to the needs of end users
They make highest % profit in DC.
They get other profitable terms like credit, promotions, display material
free of cost, merchandises, gifts etc .
They often arrange home delivery of products
They also arrange for servicing, commissioning etc

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Direct from producers to End Users : Used in the
following situations
Where small qty is produced
Where there is limited number of buyers
For markets and products where channels are difficult to find
Where customers are located in clusters like SEZ, INDUSTRIAL
BELTS
For perishable products
Where products require demos, intense negotiations etc
Where the channel cost is more and un affordable
Where service requirements are intense
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Manufacturers to DC to End Customers : This system is used when
Huge quantities are produced to reach the masses
Products require intense distribution
Where retailers can give good promotional support
Where its cost effective to reach the mass consumers
Market coverage is also financed by the intermediaries.

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Distribution networks for Industrial products:
Producer

Producer
Producer

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Customer

Agent

Agent

Customer

Ind.Dist.

Customer

115

Distribution networks for Consumer products - All FMCG

Producer

Distributor

Wholesaler

Retailer

Customer

C & FA

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Distribution networks for Consumer Durable Products - All House hold
products requiring servicing, installation etc .
C & FA

Producer

Distributor

Wholesaler

Retailer

Customer

Service back up
Service back up/ Installation etc can be thro the company directly or
through a franchisee .
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Distribution networks for Pharma Products
C & FA

Producer

Distributor

Wholesaler

Retailer

Customer

Doctors
Companys sales reps influence / promote the products thro Doctors
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Distribution networks for Textile Products :
C & FA

Producer

Distributor

Wholesaler

Retailer

Customer

Guarantor
Companies take some gurantors to ensure prompt payments
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119

Distribution networks for Engineering Products :
C & FA

Producer

Agents

Authorised Dealers

Customer

Service
Service may be thro company reps or Franchisees.
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120

Distribution networks for Cellular products :
Producer

Hardware

software

Services( own & Franchisee)

Auth. Dealer

Own sales team

Customer
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Marketing Channel
Definition:
Marketing Channels are defined as “The internal or External contractual
organizations that management operates to achieve its distribution
objectives”.
Different Marketing Formats :
1.Producer Driven
2. Seller Driven
3.Service Driven
4. Other formats

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Marketing Channel
1.Producer Driven Format:
a) Manufacturers produce and directly try to reach to customers through
their own out lets
Ex: Petrol and diesel by oil companies
Bata shoe company
Watches – Titan, Rolex etc
Branded Garments like Reymonds / Bombay Dyeing etc
b)Licensed outlets : Bata, Petrol Pumps, KMF-Nandini milk
c)Consignment Selling Agents – Here the company passes on the
physical stock to Agents to sell the products. Company receives the
money only after the consignment is sold. This arrangement is mostly
prevailing in areas difficult to access like NE states.
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Marketing Channel
d)Franchisess :
A franchise is a small company to whom the seller has granted the
permission to sell the company's goods or services within a certain
territory or location.
They get exclusive rights to market the company’s products in a given
area or location. They will buy the goods from the company and sell at
the rate decided by the company. They get a commission on the sale.
Ex: Pizza Parlours, Mobile Services, couriers etc
e)Brokers:
He is an intermediary adopted by the company to sell their products on
behalf of the company with out taking the physical pocession of the
goods. He gets commission on sale.
Ex: Textile, Paper , Share transactions.
f)Vending Machines : Beverages, coins vending etc
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Marketing Channel
2) Seller Driven Format
Here the company uses Wholesalers and Retailers in the final stage to
reach their customers
This format is widely used by FMCG Products and Pharma products.
a)Departmental Stores
b)Supermarkets, Malls,
c)Wholesalers
d)Retailers
e)Discount stores
f)Door to Door sales persons

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Marketing Channel
3) Service Driven Format
These marketing channels facilitate the distribution.
a)All kind of transporters.
b)Ware houses
c)C&Fas
d)Courier services

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126

Marketing Channel
4.Other Formats
a)Multi level marketing : A sales agent sells the products and earns the
commission on his sales. He is also authorized to appoint more agents
under him. He gets commission on this sale as well.
Tupperware, Amway,Herbalife etc
b)Co operative societies: Specially in rural areas. They are formed by
the farmers to promote their produce with out the involvement of
middlemen.
This is becoming very popular
c)Computer Kiosk: Railway ticket booking, Bus reservation etc
d) TV Home shopping
e)Internet buying:

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Marketing Channel
Marketing Channel Levels
1.Zero Level Channel
Manufacturer

End User

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Zero Level Channel

128

Marketing Channel
1.One Level Channel
Manufacturer

Retailer

End User

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One Level Channel

129

Marketing Channel
1.Two Level Channel
Manufacturer
C&FAs
Whole Saler/ Distributor
Retailers
End User

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Two Level Channel

130

Marketing Channel
What does customer expects out of the Marketing Channel?
a)Variety of products to suit their needs made available at one place.
b)Marketing Channel to be located closer to him.
c) Speedy delivery
d)To make the product available in the lot size that suits him

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Marketing Channel
While these marketing channels give services to customers, the interest
of marketing channels and customers are protected by certain policies
like:
a)Pricing policy : MRP
b)Clear Sales terms : Payment terms : Cash on delivery / Credit of 15, 30
days etc
c)Delivery frequency
d) MOQ
e)Area coverage
f) Margins and other facilities etc

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Marketing Channel
Marketing Channel Systems :
1)Vertical Marketing Systems (VMS)
In this Vertical Channel Marketing System, the Manufacturer,
Wholesaler, distributor, retailer etc work as one team with out any
conflict to provide service to end user. Here all the members co operate
and work together as one team.
This co ordinate working improves efficiency, reduces un necessary cost
and duplication of work.
There are 2 types of
A)Corporate VMS (B)Administered VMS
A)Corporate VMS
Here production and distribution is handled by one entity . It gives high
degree of operational control and cost advantage to the company.
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Marketing Channel
Ex: Medical Diagnostic equipment maker , Airline services,
B)Administered VMS
Here the distribution channel is with many entities. But there will be one
distributor who will be a major force and he will be given the authority
to control other distributors.
One large distributor co ordinates the distribution activity and gains
market power by dominating the channel.
Ex: Pepsi, Coca Cola, Gillet, HUL, ETC

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Marketing Channel
2) Horizontal Marketing Systems (HMS)
In this marketing system,2 or more companies tie up to work together
with same distribution system .. This system can be for short term or
long term. In this arrangement both the companies get maximum cost
advantage and the distribution system also gets the benefit .
Ex: ATMs
HUL & P&G have similar arrangements for their non competive
products
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Marketing Channel
3)Multi –Channel Marketing System ( MCMS) re
In MCMS, the companies use more than one marketing channels to reach
different customer segments. Many FMCG companies have different
channels to service Retail trade and Institutional CUSTOMERS.
MCMS is used in situations like
a)Same products are sold to different market segments
b)Different products are sold in same market:
c)Reach is difficult in certain geographical locations like NE region

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Marketing Channel
Cost & Margins in Distribution Systems
Cost incurred in distribution system
1.Capital Investment –
Ware house, infrastructure, facilities, delivery vans, trucks, fork lifts etc
2.Working Capital : Creditors, debtors, inventory,
3.Operating Expenses : Salaries to staff, Wages to workers, promotional
expenses , etc
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Marketing Channel
Companies pay the following
For C&FAs - 2% OF TOTAL VALUE OF GOODS HANDLE
Whole salers – 1-2% of TOTAL VALUE OF GOODS
Distributors of FMCG – 5% MARK UP
Retailers : 5 – 10% Mark Up
Industrial Products - 10% Mark up
ROI –
End of Unit III
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138

Unit IV – Retailing
Definition : Any business entity selling products and services is called
Retailing.
What are the characteristics of Retailing ?
1.Order size is small but many in numbers
2.Retailers caters to wide variety of customers and hence has to keep
many products in stock.
3.Display of goods is crucial due to impulsive nature of customer.
4.Managing inventory is crucial
5.Retailers strength should be to ensure Availability and Visibility
6.Customer mix decides the marketing mix which the Retailer has to
decide.
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How does the customer selects a Retailer?
1)Based on location – proximity, convenience, parking facility,safety..
2)Based on Price – Value offered, credit, special discount
3)Product selection – Brands, quality of products and service offered
4)Special service –home delivery, gift wrap, valet parking
5)Effect of sales people – courteous, knowledgeable ….
6)Fair dealing – honesty, privilage of return/exhange

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How does Retailer retain customers?
1)Performing a kind of marketing that enables the retailer to keep a wide
variety of products
2)Helping create time, space and possession utility
3)Retailer’s service also helps to retain the customers
4)Services they add such as credit, delivery,extended store hours etc…
5)Stores location ….. ?

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Retailers in Rural Market
Retailer as a Salesman.
Retailer is an influential agent ( or a salesman ) in the most crucial point
of purchase.
Most customers, typically , get confused by a variety of products and
ultimately go by the opinion of the retailer.
Hence retailer actually acts as a great sales man.
Influence of Retailer in Rural market in India is even more due to ill
literacy. Most Rural customers get easily influenced by the opinion of
the Retailer.
Retailer normally stocks a limited number of products and expects high
return .
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Many customers in Rural area has an account with their trusted retailer.
Due to this credit facility they tend to buy the goods only thro this
retailer. The retailer takes full advantage of this situation and he
influences the customer to buy the brand where he gets maximum
margin.

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Theories in Retailing.
I )The Malcomb Menair Theory :
1.A retail outlet starts with low prices, margin and simplicity.With time
in order to improve the customer loyalty , the retailer adds additional
services … This will add cost to his business…
2.In the second stage, this out let works on slightly higher prices ,better
margins and better image.
3.In the third stage, the outlet builds a “Premium Image”
4. This creates a gap in the market, which gets filled up by an entirely
new outlet which starts at stage 1
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II ) Retail Accordion Theory Or Hollander Theory:
An outlet that starts as a general retailer “Grows” into a specialized
retailer and in course of time becomes an even bigger General Retailer

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III) Theory of Natural Selection : The evolution of Retail Store is
influenced by the environmental factors like economic, legal, and
political factors . The retailers who successfully adapt to these factors are
more successful.

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Retail Scene In India :
1. There are more than 15 million retail stores in India of various sizes.
2. Most of them are in the un organized sectors in both urban market and
rural market.
3.The small retail shops contribute to 96% of the retail population in
India
4.The organized retail sector contributes to only 4-5% and are mostly
located in the cities.
5.It is estimated that Retail sector in India is the second largest employer
after agriculture .
6.Retail provides employment to 8% of adults in the country.
7.About 10 lacs more jobs are likely to be created in this sector
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Retail Scene In India :
8.The contribution of the Organized sector is still very low but is
catching up very fast in the A& B class cities in the country
9.With the opening of FDI in retail the Global leaders in Retail like
Walmart, Tesco are setting up big retail stores in the country.
10.In the last 10-12 years, in the organized sector many of Indian big
business houses like Tatas, Birlas, Reliance Pantaloon, Big Bazar , etc
have entered into the Indian retail segment and they are fast expanding in
many cities.
11.Apart from convenience, the customers looks the organized sectors to
provide lower prices , good ambience, and feel of the products… ex
Pantaloons, Big Bazar etc
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Retail in Organized sector
1.Fastest growing sector. It has already caught the attention of Indian
Heavy weight Industrialists like Tata, Birla, Reliance, Brarti Airtel
Futures Group etc .
2.Large Format Stores like Super markets,Hyper Markets etc have come
in large numbers in many A&B Class cities.
3.Many of them use higher technology like SAP- Supply management
tools, Bar code systems etc.
4.They generate large employment
5.They are able to effectively manage their operations cost.
6.They are able to dictate terms to many manufacturers like HUL, P&G
etc and get better terms.
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Private label Brands of Organized Retail
Companies like Big Bazar, Pantaloon , D Mart , Relaince etc have
developed their own brands . They directly get in touch with the
producers with out the involvement of middle men and get their own
packaging done and sell in their own brand. This way they increase
their margins and yet are able to sell their products more competitively.
Some of the formats in Organized sector are:
-Departmental stores
-Super markets / Hyper markets
-Discount stores
-Specialty stores like Venfield, pantaloon etc
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Retailing In Unorganized sector
-Still dominates the retail sector by over 94% and will continue due to
growth in Rural population.
-- The Rural retail out lets are individually owned or family owned
--Formats like kirana store, stationary store, pan beeda store etc exist
-- Major generator of employment to youth in the country
--Provide personalized service
--Ofter give credit and dictate their terms , influence certain brands for
their own gain.
--Many of them open for long hours like 12 hrs
--No technology is used…

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Factors supporting Growth of Retail sector In India
-Income levels have risen .More disposable money in the hands of the
average middle class mass
-India has the world’s 2nd largest consumer after China.
-Consumers demand what they want and are no longer getting influenced
by the retailer
-Increased litreracy has created increased consciousness on bargaining
-Better infrastructure like roads, comminication, technology etc
--Relaxation of FDI by Govt. allowing foreign Big retail stores to set
shops in India
--Entrepreneurs willing to invest in samll and medium retail stores
--Inflence of Successful trends in Foreign countries on Indian Market
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Factors supporting Growth of organized Retail
sector In India
-The real estate prices have shot up across the country. It is becoming
Difficult for the small timers to create new stores. Where as the big
players can afford the prices due to their size and money power they
have
- Big players are creating their stores in A class cities and now moving to
B & C class cities also .

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Emerging Trends in Retailing:
-ATMs in Buses stations, Railway station, Airports, departmental stores
in Petrol filling stations,
-Beverage vending machines everywhere – cold drinks, water bottles,
chocolates etc
-Professional management using latest technologies like SAP, CRM
-Participation of foreign brands like Walmart, Tesco, Metro etc
-Modern retail stores are not only for buying but also for socialising
-Retailers developing their own brands –
Relainace has aquired 10,000 acres of agri land in punjab to grow fresh
vegetables, imported cattles for dairy farming and dairy food like ghee,
butter etc, is planning to grow roses and export to Holland, USA ETC
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-Evolution of Retail Sector in India
Till the year 1960, the retail sector was typically an un organized
sector.
The emergence of an organized retail was seen in year 1960 with the
emergence of Janata Bazar in Karnataka, Super Bazar in Delhi, Apna
Bazar in Mumbai and some cities in Gujarat, Chintamani in Coimbatore
etc. Many of these supported by respective governments.
Then the private sector followed . Shoppers stop, Big Bazar, Subhiksha,
and specialised outlets like Bombay Dyeing, Reymonds – Park Avenue
etc started.
After the liberalization of economy in year 1990, the organized retailing
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started in a big way .

-Evolution of Retail Sector in India
Infrastructure like roads , bridges, Railways got a big boost in the last 15
years. With that the services sector got a bog boost which has actually
helped the emergence of Organised Retail format.
In the last 10 years big companies like Tatas, Birlas , Ambanis , Futures
Group , Metro, etc have given a big boost to Organized Retailing.
The future looks very very bright for the Organized Retail.

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Merchandising.
Definition: Merchandising is a set of activities involved in acquiring
goods and services & making them available at the places , times and
quantities that enable a retailer to achieve his goals
The definition completely covers all aspects of Retailing of making a
product available to customer at his choice of place, as and when he
requires and the quantity he requires.

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Merchandising is any practice which contributes to the sale of products
to a retail consumer. At a Retail Store level, merchandising refers to the
variety of products available for sale and the display of those products in
such a way that it stimulates interest and entices customers to make a
purchase.

Factors influencing Merchandising
-Aims and objective of Retailer.
-Demographic characteristics of customers in which the Retail store is
located
--The service level the Retailer is willing to provide
--Level of competition in the location
--Width and Depth of assortment ( like brand, style, model, color, size)
the retailer was willing to provide.
--Any other services that the retailer want to provide- like credit, home
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delivery etc.

Merchandise Planning:
It relates to planning of merchandise variety
( different kind of goods ) and merchandise
assortment (relates to brand, colour, style, model etc ).
THE CRUCIAL FACTORS AFFECTING MERCHANDISING
PLANNING IS “STOCK TURNOVER RATIO”
Stock Turn Over Ratio

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Cost of Merchandise Sold
Value of Inventory
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Merchandising Strategy :
Wide Merchandising Strategy :
A retailer stocking wide variety of goods like grocery, stationary,
Books, electrinic items, utensils etc. it will be positioned as a one stop
shop for the customer .
In this case the retailer attract high loyalty of customers, as it would
reduce the customers trouble of moving to many shops for all of his
requirements.
Best example is Big Bazar Outlets
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Merchandising Strategy :
Deep Assortment policy:
Retail outlets keeping wide variety of products
pertaining to one specific grooup.
Like Bata ( only foot ware), Titan (only watches)
Here you will have wide variety of products suiting
all price paints in specific product group only.
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Factors influencing / impacting the width and depth of
Merchandising:
-Strategic objective of the company
-customers expectations
-Space availability
-Relationship with suppliers
-Availability of trained people

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Functions operating in a Retailer:
Purchase function
Stores & Storage
Display
Sales
Finance & Accounts
Maintenance
HR
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Functions Of Merchandise Manager:
-Making products available in variety and width
-Taking right decisions on introduction of new
products
-Procuring products at low prices to improve margins
-Planning the display design
-Inventory control
-Training and managing the team
-Maintain Stock turn ratio
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-Maintain Gross Margin Return.

Customer Service by Retailer:
As broad as the Retailer chooses to be .,
Retailer decides his own service level
Factors affecting service levels are : location, width
and depth of goods , price , help and assistance
retailer is willing to offer to customers.
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Communication to Customer
-Facilities available like , washroom, first aid,
emergency exits, parking lot, availability of parking
space , kids playing area etc
-Discounts, MRP, ATMs availability,
-Products promotions
-Discounts aanouncements
-Special offers during festival season
-Stock clearance offers
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Retail Strategy :
Some of the factors to be considered are
Retails select their strategy based on the following
factors.
-Markets and customers he is targetting
-location of the store
-Store image to be created
-store design
-mechandise to be offered
-type of people to manage the store
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-promotions to be undertaken to increase the footfalls

Retail Strategy :
-supplier handling systems including credit and other
terms
-Terms offered to customers and prospects

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Key Drivers for success of Retail Strategy :
-Number of foot falls
-Conversion ratio
-Increase the depth of purchase of every customer
-Customer retention / Regular and repeat customers
-Price points to suit all customers
-Operational efficiency
-building long term relationship with customers

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Key Drivers for success of Retail Strategy :
-Conversion ratio
-Increase the depth of purchase of every customer
-Customer retention / Regular and repeat customers
-Price points to suit all customers
-Operational efficiency
-Building long term relationship with customers
-Background and experience of promoter
-Profile of potential customers
-Profitability expectations
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Strategies for Success of Retail :
-Positioning strategy
-Product differentiation strategy
-Operational Strategy
-Store location

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1)Positioning strategy
The store develops its identity in terms of what it has to offer to
customers.
Life style Brand of store
Tanisq Jewellary store
Food world outlet
BIBA for ladies wera
Manyata for mens salwar and kurtas
Western union services India ltd for money transfer

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2)Product differentiation strategy
The entire strategy is around the products the store deals in ..These could
be national brads, only international brands, or the own brands of the
store.
Examples : Tanisq jewellery, Rado brand of watchesore location
3)Operational Superiority
In this strategy the store thrives on offering unmatched and valuable
service to its customers.
Ex: Pizza corners who offer 30 minutes home delivery ..
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Ex: ‘’Thyocare’’pathology service – they have 25,000 centers across the
country and have central laboratory in Mumbai.
All investigative samples are collected , BAR CODED , and sent by air
cargo to Mumbai. Where they are processed and the results are sent
through the web the same day.
This is an exceptional service at very affordable rates to common man.
4) Store Location :
Store location can be used as an effective strategy to get competitive
advantage.
Stores at transit locations ex. Mc Donads, Coffeee café, pizza huts ,
Nirulas in Delhi
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Factors in developing retail strategy
-Background and experience of the promoter
-Products and merchandises to be sold in stores
-Profiles of the customers to be sold
-Location
-Availability of good suppliers specially for a private branded stores
-Profitability expectations

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Retail Performance Evaluations
The real estate prices are ever increasing. Retailers also have to keep
Inventory of their goods. Retailers should get adequate returns on their
investments in order to become viable in business. Some of the measures
to evaluate their performance are

-Gross margin Return on Inventory
Ex : Sales is Rs 50 lacs pm.
Inventory : Rs 10 lacs
Sales to Inventory Ratio = Rs. 50 lacs / Rs 10 lacs = 5
Gross Margin is 20 % ( Rs. 10 lacs )
Goss margin Return on Inventory
= Inventory turn x GM
= 5x20=100 %
Higher the better
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Gross Margin Per Employee Equivalent
Gross Margin ( in rupee terms ) / No. of employees
Gross Margin – Rs 10 lacs
No. of employees – 20

Ex: Rs 10 lacs / 20 =Rs 50,000 per employee.
Higher the better

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Gross Margin per Square foot
Gross Margin – Rs 10 lacs
Area of the store – 100 sft
Groo Margin per square foot = Rs 10 lacs / 100 = Rs 10,000/sft
Higher the number better

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-Return on Equity
-Return on Sale
-Hourly customer traffic
-Sale per foot fall

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-Store Design
-Two important considerations in store design which forms the
CHARACTER OF THE STORE are:

-Functional Considerations
This relates to the convenience to shopper ( consumer ) which include
-Location ,
-Protection , security, free from thefts etc
-Easy access, easy exis
-Convenience , wash room, toilets, playing area for children, parking
area
-Information and proper display of merchandise
-Ex: Mc Donalds, Café Coffee Shop
-Ex: Big Bazar , Super Markets etc
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-Store Design
-Inside the store
-Display of goods – Best example is Big BAZAR, where products are
grouped separately like ……..
-Fast moving items are always displayed at an eye level of the customers
-Slow moving items are normally kept on the lower shelves

Social Considerations
Ambience
Image
Attractiveness
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Foreign Direct Investment in India
-GOI was not allowing the participation of Foreign Giants like Wal
Mart, TEesco etc to have their operations directly in India.
Why?
Resistance from the organised Indian Retail Industry
Resistance from unorganised sector ( 90%) small retailers like kirana
stores etc – Threat
Threat of loosing many jobs
Advantages?
Huge foreign investments in India
Big reveneu to Govt.
Employment opportunity in cities
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-Exposure to world class retailing in India
Govt is giving clearences in a phased manner
1)Govt allowed some foreign brands to be sold in India thro an Indian
Partner / franchisee – KFC, Mc Donalds,Rado, Tag Heuer,Swatch etc
2)Govt Allowed foreign wholesalers to operate in Retail market In india
– Metro AG of Germany
3)Govt is now allowing the Big Giants like Walmart, Tesco etc to
operate as JV with 51% FDI
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Arguments in favour of FDI
These foreign companies will build food supply chains through out the
country by setting up
-Cold storage plants to handle fish, meat, fresh vegetables etc
-Cold storage transportation facilities
-Modern supply chain management
-World class packaging – will give boost to packaging industry
-World class marketing net work
-Export possibilities to their chain of stores across the world
-As the middle class income has really gone up, govt wants to encourage
spending ……… why?
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Unit V – WHOLESALING
Definition:
The wholesaler is a trader who purchases goods in bulk or large
quantities from manufacturer and sells it to the retailers , industrial
consumers, commercial consumers or institutions in small quantities but
do not sell in large quantities to end consumers.
Wholesalers operate on the principles of optimum results for their
efforts .
They have minimum operational cost, work on high turnover with thin
margins.
They buy the goods for resale , keep inventory, take risk of price
changes , negotiate terms with the companies , procure orders , and
deliver them and at times extend credit.
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-Wholesalers are of two kinds

1)Freelance Wholesaler :
-They are not under contract with any one company
-They operate from a very convenient place and mostly are old timers
-They deal with competing products also.
-They deal with an assortment of similar products in a particular group
ex: An electrical wholesaler dealing in switches, MCB, WIRES, BULBS
ETC deals in many brands.
-Ex: Cigarette whole saler
-They are often powerful distributers who negotiate better margins
-New entry products really fall for them to get a foothold in the market
and the wholesaler makes the most of it.
-They create entry barriers to new distributors – why & how?
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2)Contracted Wholesalers

-They are under contract with a particular manufacturer
-They do not deal with competing products
-They develop loyalty with their principles
-They also dominate the principles over many years
-They are bound by the companies rules strictly
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How are Wholesalers different from Retailers?
-They are less bothered about their locations
-They deal with distributors and retailers or other businessmen and
not with consumers
-they deal with specific group of products only
-Their catchment area is much larger than that of Retailers
-Their value per transaction is much higher than that of the retailers
-Their margins are lower but turnover is very high.
-They are more bothered about their returns on Rupee terms than
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Wholesalers Deliver Value
-They keep goods on hand that customers need and deliver them
instantly
-Customers can rely on their inventory
-They operate on low margins and high volumes
-Their profitability lies on how fast they turn over their inventory
-Often they bargain hard for some extra margins
-Some times they pass on their benefits to customers for a big
volume

How are they different from Retailers?
-They are less bothered about their locations
-They deal with distributors and retailers or other businessmen and
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not with consumers

Functions of Wholesalers
-They promote the products of the company of their choice
-They break the bulk to customers requirements
-They store and protect the goods till they are sold out
-They take risk on the googs which often they cover it with an
insurence
-They undertake transportation of goods to their customersi
-They finance the buying of their goods and at times give credit to
their customers
-They collect market information and pass it on to their customers
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How Wholesalers help Manufacturers?
-Wholesalers collect orders from many distributors / Retailers ,
consolidate and send a large orders to manufacturer. Then after supply is
made, he breaks the bulk and supplies to retailers in smaller lots.
-Manufacturers are able to produce in large qty and send a truck load to
wholesalers.
-Wholesalers place the orders in advance so that the producers are better
equipped to keep inventory of RM and plan their production better
-As wholesaler is in touch with the market, and understands the pulse of
the market very well. This kind of information really helps as market
research information
-They act as an extension of the sales force of the company
-Due to wholesalers, the companies need not keep huge inventory
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How Wholesalers help Retailers .
-Wholesalers acts as a resrvoir for the retailer so that retailer need not
keep huge stock

-Wholesaler helps the retailer manage his inventory well
-Wholesaler delivers the products promptly, no waiting time.
-He delivers best value for money for the retailrs
-Wholesaler gives information to retailers on the new
products,promotions etc and actually acts as an extension of the
companys marketing personnel
-A free lance wholesaler acts as a one – stop – shop ….
-Wholesaler gives credit to retailers
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-Classification of Wholesalers
1)Full Service Wholesalers
They stock goods, sell goods, they offer credit , they give
marketing information to retailers etc
2) Limited Service Wholesalers
They offer limited services … ex- Metro Cash and carry
3) Merchant Wholesalers – Independent businesses which
include distributors

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Key tasks of wholesalers
1.Collecting and aggregating the orders
-Wholesaler works for one company or many companies.He does the
market coverage as per the plan given to him by the company.
-Based on his knowledge of customers, buying pattern of the retailers, he
is able to release a near accurate orders on the company at regular
intervals as defined by the company

2.Warehousing of the Goods
-Storing the goods. - Insuring the goods against damage, theft etc
- Protecting the goods. – As per the nature of the goods, protection
varies.,
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3.Order Booking & Execution
-He acts as an extension of company sales force
-Books the order from dealers
-Gives the orders to company, receives materials
breaks the bulk & supplies to retailers
4.Transportation of Goods
5.He has to arrange finance for his business
6.Gives credit to his retailers
7.He takes risk on his stock
8.Collects market information and passes on to his
principles
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What are the Strategic issues in Wholesaling?
Mainly there are 2 issues
1.Whom to sell
Wholesalers have to take a strategic decision on whom to sell. Who
should be his target customers
( Retailrs)
Following factors are considered in deciding whom to sell
-Location the wholesalers – which is normally in the main market of the
city
-Size and composition of the customers (retailers)
-His catchment area
-Purchasing habits of his likely customers
-His competition – nature and composition of his competitors
-Once he has answers to these questions, he can decide on his strategy/.
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2.How to sell to them
The answer lies in Product Mix and on 4P ( Product,Price, Promotions
& Place )
This particularly applies to Freelance Wholesaler, why ????
(The contracted wholesalers need not worry about these issues as they
are all taken care by the company.)
Product decisions :He decides what product to deal with and
normally sticks to it for a long time. After deciding he also knows what
operating margins he gets in that product. His challenge here would be to
operate with minimum inventory to maximize his profitability.
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Pricing Decision :
Normally a wholesaler maintains bare minimum margin and keeps lower
operational cost. This determines his price.
He normally passes on all the other benefits to customers , keeps his
lowest margins and tries to maximize his turnover with lower inventory.
His challenge would be to cover all of his operational expenses like
Establishment cost, Inventory cost, transportation cost, cost of breaking
bulk etc and then maintain his predetermined price.
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Promotion Decision :
The simplest promotional decision that he takes is to keep the prices
lowest.
When companies run sales promotional activities, the wholesaler
bargains hard and buys maximum quantities. Often he buys in the
highest slabs so that his customers can get the benefits.

Place Decision:
Normally he chooses his place in the center of the market. Now due to
high cost of land many wholesalers are setting their shops outside the
city limits, where the prices are lower.
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Major decisions in Wholesaling
1.Which Market to Operate in?
The focus is on higher volumes. Why? Because with higher volumes
they can negotiate higher margins. This is particularly true with
freelance wholesalers.

2.Manpower
This is not a major issue with the wholesalers. Major activities of
buying, negotiating with companies , controlling inventories etc are all
done with the help of the owner himself. It is not difficult to get the
supporting staff to get the other work done. The front office employees
and back office clerical staff to manage inventory, keep records, submit
regular reports, file taxes and returns etc are generally available and does
not pose any problems ………
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3.Which Products to Sell ?
Its about the width and depth of the merchandize to be sold as a
wholesaler, its purchase policies, additional service offerings if any etc.
The width and depth of merchandize to be sold is influenced by the
customer profile in his catchment area and the amount of financing he
has to manage to do the business.
Similarly service offerings also play a major role in selecting the
products he decides to sell.
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4.Promotional Support
Most common promotional support is on the price offering as explained
earlier.

5.Credit & Collection
-Extending credit is a competitive necessity to retain customer and build
loyalty.
-In case of freelance wholesalers , they decide to what extent they have
to extend the credit.
-In case of contracted wholesalers, they are bound by the company
regulations. For retail, credit is linked to sales volumes.
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6.Warehouse location and design :
Wholesalers location is normally in the heart of the city and the
distributors location is decided by the company.
The freelance wholesalers are normally not worried about the design of
the warehouse.
The contracted wholesalers abide by the company rules.

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7.Inventory control:
This aspect plays a major role in the success of the Wholesaler.
As already explained INVENTORY IS A NECESSARY EVIL. One
cannot manage without inventory and at the same time, more inventory
is loss of money. The wholesalers have to learn to optimize the inventory
levels.
In the case of contracted wholesalers most companies decide what level
of inventory the wholesalers have to keep. This is mandatory.
Companies ensure that.
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Some Other Types of Wholesalers
-Cash and Carry wholesale : This is a very unique system of wholesaling
successfully practiced in US and Europe. This format was
conceptualized by Mr. Lawrence Batley in the US.
-Here the goods are sold from a wholesale warehouse to customers
either on a self service basis or on catalogue sale basis.
-Here the customers are Retailers, companies, institutions, hotels etc
-This is not a place for the “Aam Admi”. Here the customers have to be
registered with sales tax dept or they have to be sponsered by the
commercial institions .
-Sales are made on cash and carry basis or through credit card.

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Cash & Carry Wholesalers
-The customer collects the goods and makes his own transport
arrangements
-MOQ for every product
-They often promote on their brand name.
-They bargain hard with their suppliers to get better terms.
-They operate mostly below MRP
-Very organized format. Customers cannot avoid any taxes.
-FDI of 100% is permitted in India.
-Metro AG of Germany is operating in India.

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Distributors
Definition : A distributor is a kind of a wholesaler nominated by the
company to exclusively re distribute the company’s goods to all retailers
and institutions in a designated territory.
A distributors is not allowed to trade in competing products.

Dealer
Definition :A dealer has a similar role of a distributor but has two
differences – 1)He may not have clearly defined territory to operate
2)He may deal with competing products also in some cases
-Ex: Automobiles , petrol bunks – Exclusive
-Garments dealers, Edible oil - Non exclusive
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Distributor Management for FMCG
Definition : A distributor is a person appointed by the company who has
the responsibilities for:
-Buying adequate quantities of all the products in different pack sizes for
re – distribution.
-Ensuring full market coverage of all customers in the territory assigned
to him.
-To finance his operations. He also extends credit to his customers . He
either bears the cost of credit or charges it to his customers.
-Maintaining adequate inventory.
-Assisting the company in all of its sales promotional activities
-He has the capacity to maximize the sales in the market
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Why distributor is required?
-For entering new area or town
-For replacing the existing one
-For adding another one

What is expected of the distributor?
-Achieving sales targets in terms of volumes, value & brand packs
-Investments in infrastructure – storage space, vehicles for distribution
-Manpower - for selling, inventory, reports etc
-Distribution capabilities – market coverage with beat plan
-Merchandising and displaying.
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What is expected of the distributor?
-Effectively handling promotions and schemes initiated by the company
-Handling quality complaints
-Managing inventories
-Payments and remittances to the company

-How do you select the distributors?
-Based on company requirements , identifying 2/3 prospective
distributors by the sales force responsible in that area.
-Background checking in the market, bankers etc done discreetly
-Meeting the prospects , explaining them company’s rules and
regulations, and finding the interest levels of the prospect.Normally
companies will have checklist to follow.
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-How do you select the distributor?
-After getting all the details the sales person evaluates them before
recommending to higher ups.
-Final decision is taken on the basis of highest marks among all the
prospective distributors.
-Once selected , company gives letter of authorization for a period of one
year, renewable every year.

Security Deposit
-Most companies take security deposit before appointing. This is in the
form of A Demand Draft to protect the company’s interest in the event of
default of payment by the distributor. The deposit shall be to the extent
of one month’s average sale, with out bearing any interest.
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Payment by the distributors to company.
Company takes 10-20 signed blank cheques from the distributors. Every
time company dispatches the material through the C&FA , the value of
the goods is entered in the cheque and encashed.
Whenever the cheque bounces, the distributor is informed to deposit the
money immediately to the bank account or through a DD
The distributor has to make the next 2 transactions by cash to the
company.
Second time the distributor defaults in payments, he shall be
disqualified.
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213

Investment in Inventory
The distributor is required to maintain certain levels of inventory in
FMCG industry.
It ranges from 3 to 4 weeks of salable stock at all times.It is important for
the distributor to keep inventory of all brands and packs and not merely
the fast moving goods.
The sales personnel keeps on monitoring the inventory levels at all times
and keep replenishing the stocks

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214

Investment in Infrastructure
-Storage space with a capacity for at least one month of average sales.
This is the largest one time investment .
-Next investment is on the manpower, namely the sales people. It
depends upon the area coverage, beat plan. They also would require
support staff to take care of office, keeping records , filing returns etc.
-Investment in Inventory.

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215

Sales & Distribution Strategies

Sales & Distribution Strategies

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