1

2

Chapter 1

Introduction to Sales Management

1. Willingness to go to bat for the buyer within the supplier firm2. Thoroughness and follow through3. Knowledge of the sales person’s product line4. Market knowledge and keeping the buyer posted5. Applying his product and services to buyer’s needs6. Knowledge of the buyer’s product line7. Preparation for sales calls8. Regularity of Sales calls9. Diplomacy in dealing with operating departments10. Technical education

3

Personal selling strategies

4

Persuasion

Consultative Selling

Partnership

StrategiesBusiness

ManagementNegotiation

Evolution of personal selling

Marketing concepts

1) Production concept 2) Product concept 3) Selling concept 4) Marketing concept 5) Societal concept

5

6

Customer Needs

Sales Customers

Emphasis on Seller’s Needs

Production

Production

Sales

Emphasis on Customer Needs

Societal marketing concept

(Sales Orientation)

(Marketing Orientation)

7

Nature and role of sales management

The determination of sales force objective and goals

Sales force organization, size, territory, and quota finalization

Sales forecasting and budgeting Sales force selection, recruitment, and training Motivating and leading the sales force Designing compensation plan and control systems Designing career growth plans and building

relationship strategies with key customers

8

Types of personal selling

• Industrial selling

• Retail selling

• Services selling

9

Types of selling

• Order taker sales people

• Order creators

• Order getters

10

SellingFunction

OrderTakers

Order Getters

Order Creators

Outside Order Takers

Inside Order Taker

Merchandisers

Delivery Sales People

Missionary Sales People

New Business Sales People

OrganizationalSales People

ConsumerSales People

Technical Support sales People

Front LineSales People

Sales Support

Sales people

Types of Selling

11

Factory FactorySelling and

promotingProfits though

sales volume

Selling concept

Market concept

Market Customer needs

Coordinated marketing

Starting point

Focus Means Ends

Profits through customer satisfaction

Difference between sales and marketing

12

Marketing management process

MARKET ANTICIPATION

Exchange offer of value

Producer

MarketerConsumer

Marketing mix

• Product

• Price

• Place

• Promotion

13

Formulation of a strategic sales programme

Implementation of the sales programme

Evaluation and control of sales force performance

Sales management process

14

Technology

Relationship sellingCustomer orientation

Global and ethicalIssues

New selling methods

Diversity

Emerging trends in sales

management

Emerging trends in sales management

Technology

Chapter 2Selling Skills and Strategies

15

Selling and buying styles

16

99

88

77

66

55

44

33

22

11 22 33 44 55 66 77 88 99

Con

cern

for

th

e cu

stom

ers

(1,9) People Oriented

I am customer’s friend,

I want to understand him and respond to his feelings and interests so that he will like me. It is the personal bond that leads him to purchase from me.(5,5) Sales technique Oriented

I have tried an effective routine for getting a customer to buy. It motivates through a blended personality and product emphasis

(1,1) Take it or Leave it

I place the product before the customer and it sells itself as and when it comes.

(9,1) Push the product Oriented

I take challenge of the customer and hard sell him, polling on all the pressure it takes to make him buy

(9,9) Problem Solving Oriented

I consult with the customer so as to inform myself of all the needs in his situation that my products can satisfy. We work towards a sound purchase decision on his part, which yield him the benefits he expects from it.

Selling situations

Sales task and function

Maintenance selling

Developmental selling

17

Selling skills

18

Selling Skills

Listening Skills

Conflict management and resolution skills

Negotiation and

bargaining skills

Problem solving skills

Effective communication

skills

Communication process

19

Noise

Channel

FeedbackIntended

Message

Sent Message

Encoding

Perceived Message

Received Message

Decoding

Sender Receiver

Communication process contd.

Managing body language: Personal Appearance Posture Gestures Facial Expressions Eye Contact Space Distancing

20

21

Process of listening

Attendance

Interpretation

Evaluations

Remembrance

Response Action

22

Levels of listening

Feedback

Paraphrasing

Emphatic listening

Clarifications

Active Listening

Barriers to Listening !

Conflict management skills Models of conflict Components of conflict The conflict resolution process:

- lumping- avoidance- coercion - meditation- conciliation- arbitration- adjudication- negotiation

23

24

Stage I

Potential opposition or Incompatibil

ity

Stage II

Cognition &

Personalization

Stage III

Intentions

Stage IV

Behaviour

Stage V

Outcomes

Antecedent Conditions

Communication

Personal Variables

Structure

Perceived Conflict

Felt Conflict

Conflict handling Intentions

Competing

Collaboration

Compromising

Avoiding

Accommodating

Overt Conflict

Party’s behaviour Others reaction

Increased group

performance

Decreased group

performance

Conflict management process

Negotiation skills• Situation and timing for negotiations• Formulation for a bargaining strategy• The theory and strategy of principle negotiations- separate the people from the problem- focus on interests, not on positions- invent options for mutual gains- insist on objective criteria

25

Problem solving skills• Habit I: be proactive• Habit 2: begin with an end in mind• Habit 3: put first things first• Habit 4: think win–win• Habit 5: seek first to understand, then to

be understood• Habit 6: synergize• Habit 7: renewal

26

27

Define the problem

Generate alternative solutions

Decide the solution

Implement the solution

Evaluate the solution

Problem solving processProblem solving process

Problem definition techniques

28

Problem Definition Techniques

Find out origin of the problem

Explore the problem

Present desired

state analysis

Evaluate problem

statement

Statement and

Restatement

Dunker’s diagram

1

2

35

4

6

29

Dunker’s diagramDunker’s diagram

Achieve the desired state

Possible path to the desired state

Path 1 Path 2 Path 3

Solutions to implement & paths to desired solutions

Solution 1Solution 2 Solution 3

General Solution

Functional Solution

Specific Solution

30

Fuzzy Mess

Perceived problems

Re Statement

Re Statement

Final problem Statement

Relax Constraints

Make an Opposite Statement

Generalize

Statement restatement techniqueStatement restatement technique

31

Components of a decision on the future course of action

Components of a decision on the future course of action

Situation analysis

Problem analysisPastWhat is the fault

Decision analysis

Potential problem AnalysisFuture

How to prevent futurefaults?

32

Decision on the best solution

Approval

Planning

Carry through

Follow up

Evaluation

IMPLEMENTATION

Solution implementation process Solution implementation process

33

Chapter 3

The Selling Process

Chapter 3

The Selling Process

34

Stages in the selling process

Pre-sale preparation

Sales Presentatio

n

Handling Customer Objections

Closing the Sale

Follow up action

Approach to the

customer

Pre- approach

before the interview

Prospecting

35

Prospecting

Successful prospecting

50 potential prospects

15 Qualified prospects

6 Interviews

1 sale

50 potential prospects

25 Qualified prospects

17 Interviews

7 sales

Successful prospecting

No Yes

36

Process of prospecting

Identify and define prospects

Search for sources of potential accounts

Qualify the prospects from the suspects

37

Methods of prospecting

Cold canvassing Endless chain customer referral Prospect pool Centers of influence Non competing sales force Observation Friends and acquaintances Lists and directories Direct mail Telemarketing Trade shows and demonstrations

38

Selling process

• Pre approach to selling• Approach to the customer• Sales presentation

- approach to sales presentation- attracting customer attention- creating interest- arousing desire and building conviction

• Methods of sales presentation- canned presentation- organized presentation- tailored presentation

39

Handling customer objections

• Start with your highest expectations

• Avoid conceding first

• BE sure the customer understands the value of a

concession

• Make concessions in small amounts

• Admit mistakes and make corrections willingly

• BE prepared to withdraw a concession

• Avoid ‘split the difference’ strategy

• Do not advertise willingness to concede

Suggested by SMITH

40

Methods of handling customer objections Superior feature method Yes…But method Reverse English method Indirect denial method Pass out method Comparison method Direct denial method Another angle method Narrative method Testimonial method Question or WHY method

41

Closing the sale

• Methods of closing the sale

• Follow-up action

• B2B selling

42

Chapter 4

Managing Sales Information

43

Forecasting market demandIt is the estimated rupee or unit sales for a specific future timePeriod based on the company’s marketing plan and an assumedmarketing environment.

Price/ Unit

Price / Unit

Price/ Unit

Price/ Unit

Price/ Unit

Price / Unit

Qty per Unit (E)Qty per Unit (f)

Qty per Unit ©

Qty per Unit

(B)

Qty per Uni

t (A)

Qty per Unit (D)

Total Market deman

d

P1

P2

Q1Q2

D D1

D D2

D D1

D D2

Market demand curve

44

Market demand function

QD = F (P, I, P0, T) P- Price of the productI- Consumer IncomeT- Consumer preferenceP0 Price of other goods and

servicesQD = B + aP P + a1I + a0P0 + aTT

aP,, a I, a0, aT represents the one unit change in quantity associated with the variables.

QD = B + aP PLinear form of the demand

equation

B represents the combined influenceof all the other determinants of the

demand

45

• marketing decision support system

- an MDSS is an ongoing future-oriented information structure designed to collect, collate, categorize, edit, store, and retrieve information on demand to aid decision making in an organization’s sales and marketing programme

Market demand forecasting

46

MDSS

TRANSACTIONAL SYSTEMS USERS

Marketing decision support system

47

Forecasting process

The forecasting process is defined as the series of decisions and actions taken by a business organization in:

identifying the forecasting objectives determining the independent and dependent variables developing a forecasting procedure using the available data in the selected method to estimate the sales in future

48

Develop forecasting procedure

Forecasting process contd.

Select forecasting analysis method

Comprehend total forecasting procedure

Collect, collate, gather and

analyze data

Determine independent and dependent

variables

Present all the assumptions about data

Forecast objectives

Evaluate performance results against the

forecasts

Make and finalize the forecast

49

Qualitative methods

Expert opinion Survey of buyer’s expectation

Sales force composite

Delphi technique

History analogy

Quantitative methods

Test marketing Naïve method Trend method

Moving average Regression methodExponential

smoothening

Popular methods in forecasting

50

Observed sales Forecasted sales

Trend lin

e

Time

Sales

Trend forecast of Sales

51

Naïve methodSales (at the period t) = Sales T+1

The following formula shows how to adjust the naïve method to account for a

change in rate of sales levels. The formula is stated this way: Next Year’s Sales = This Year’s Sales X This Year’s Sales Last Year’s Sales

Free Hand Graphic Method

0

5

10

15

20

25

30

1 2 3 4 5 6 7 8 9 10

Years

Sale

s

Series1

Freehand Method

52

Method of semi-averages In this method available data are divided into two parts, usually with

equal number of years on both the parts

YearYear SalesSales

19931993 102102

19941994 105105

19951995 114114

19961996 110110

19971997 108108

19981998 116116

19991999 112112

The average of the first three years will be: 102+105+114 321

----------- = -------- = 107 3                    3

 Similarly, for the last three years,108 + 116 + 112 336

---------------------- = --------- = 112 3                            3

53

The 3-yearly moving average can be computed with the following formula:

a+b+c b+c+d c+d+e d+e+f--------- , ----------- , ---------- , --------- , …………. 3 3 3 3

Method of moving averages

Method of Least SquareThe least squares method is a formalization of the eyeball-

fitting or graphical technique. It is used to mathematically project the trend line to the forecasting period with the time as the independent variable that influences the dependent variable i.e sales.

It is a time series method in which seasonality is taken in to account while doing demand forecasting. This method consists of three essential steps which are illustrated below.

Decomposition method

54

Exponential smoothing method (contd.)

• It is similar to the moving- average forecasting method • The forecaster is allowed to vary the weights assigned to past data points • It allows consideration of all past data, but less weight is placed on data as it ages• Exponential smoothing is basically a weighted moving average of all past data • The method is used to forecast only one period in the future • Exponential smoothing techniques vary in terms of how they address trend, seasonality, cyclical and irregular influences

55

Exponential smoothing method contd.

Next Year’s Sales = a (This Year’s Sales) + (1 – a) (This Year’s Forecast)

Autoregressive moving averages

It uses a different procedure than the other models explained above in identifying the proper number of past observations to be included in the analysis and the weights that should be attached those observations

56

Correlation analysis

• a correlation is basically the degree of linear association between two variables where one variable is treated as independent variable and sales as the dependent variable

• sales managers look for variables that correlate with or relate to sales

• correlation analysis involves the determination of whether a

relation exists, and if it does, then measuring it, testing whether it is significant, and establishing the cause and effect relation

• the degree of relationships between the variables is called co-efficient of correlation

57

Regression analysis

• regression analysis is another form of correlational technique

• reveals average relationship between two variables and

this makes possible estimation or prediction

• a statistical method used to incorporate independent factors that are thought to influence sales into forecasting procedures

Population

Sales

Population

Sales

(Liner Relationship) (Curvilinear Relationship)

58

•the most commonly used market factor index method is Buying Power Index Method (BPI)•BPI is used to predict sales for specific geographic regions for retailer and FMCG sector such as clothing, food, auto, and other consumer items•BPI is also used to determine sales quota by many multinational organizations•applications are limited in Indian organizations as we do not have data bases to support this method at different levels of the market

Market factor indices methods

59

Econometric techniques

Econometric techniques uses multiple independent variables

where the assumption is that of a liner equation between the

dependent variable (sales) and independent variables

Market factor indices methodscontd.

60

Factors affecting selection of a forecasting technique

• data availability • cost• variability • consistency of the data• the degree of detail necessary• time horizon• technical sophistication• ability of the method to capture the level of risk and variability• the level of accuracy of the forecast • fundamental change indicators

Market factor indices methodscontd.

61

• level of accuracy is an explanation of the gap between

the actual and predicted sales

• techniques with lower level of gap are more accurate

• statistic used to calculate the level of accuracy of a forecast is called MAPE (Mean Absolute Percentage Error)

MAPE (Mean Absolute Percentage Error)

• MAPE is the average percentage forecast error and is a

popular way to measure accuracy

62

Chapter 5

Sales Organization

63

Sales organization

• an organization of individuals either working together for the marketing of products and services manufactured by an enterprise or for products that are procured by the firm for the purpose of reselling

• a sales organization defines duties, roles, rights, and responsibilities of sales people engaged in selling activities meant for the effective execution of the sales function

64

Sales organizationcontd.

• a structural body through which the functions of sales management are carried out

• sales organization always makes efforts to increase sales, thereby achieving the principle of profit maximization, which contributes to the overall growth of enterprise

65

Factors influencing structure

• product and service related factors

• organization related factors

• marketing mix related factors

• external factors:

- the speed of market change- reduction in the number of vendors per buyer- closer to customer relationships- changes in regulations and international practices

66

Organizational principles

span of control

unity of command

hierarchy of authority

stability and continuity

coordination and integration

homogeneity

objectivity

specialization

67

Organizational design- formal and coordinated task- assigning territories - establishing flows of communication and responsibilities

of sales groups and individuals to customers effectively

Line organization Mr. Ratnakar ShettyPresident / Owner

Mr. ChandrakantVP (Sales)

Five sales people

68

Consumer market

Institutional market

Corporate market

National Distributo

rsDirect to

Home

Direct marketin

gDistributors Bundling Gifting

ConsumerRegionalDistributors

Retailers

Consumers

Typical structure of a line organization

69

Design by territoryVP Marketing

National Sales Manager

Divisional Manager(East)

Divisional Manager(North)

Divisional Manager(West)

Regional Sales Manager

District Sales Manager

Sales Staff(City wise)

Regional Sales Manager

District Sales Manager

Sales Staff(City wise)

Regional Sales Manager

District Sales Manager

Sales Staff(City wise)

70

Design by management functionMr. Dara singh,

VP(Marketing)

Mrs. Chitra Mohanty(Advt / Sales Promotion Mgr)

Staff Function Line Function

Mr. Dibya Behera(Sales Manager)

Mr. Chandra DeManager

(MR)

20 Sales People

71

Design by product

President,Marketing

Product Manager (A)

Product Manager (B)

Manager(Sales)

Manager(Training)

Manager(Promotion)

Manager(Sales)

Manager(Training)

Manager(Promotion)

72

Design by customer

President(Marketing)

Sales ManagerWholesalers

Sales ManagerRetail Sales

Sales People

Sales ManagerIndustrial Relations

Vice President(Marketing)

Sales People Sales People

73

Functional

Geographic

Customer

Combined Sales Org. Design

President

Marketing ManagerInternational

G.MInternational Sales

Marketing ManagerIndia

Vice President(Marketing)

G.MConsumer care

G.MInternational Sales

Vice President(HRD)

Vice President(Production)

Divisional ManagerSoaps

Divisional ManagerFood

Divisional ManagerPaper

Eastern Sales DivisionWestern Sales

DivisionNorthern Sales

Division

Europe Division America Division Gulf Division

Product

74

Key account sales

Sales process automation

- focus on CRM- customer profitability and value analysis- the few accounts give incremental returns- national accounts

- EDI – Electronic Data Exchange

Sales Organization

75

Emerging organizational design• agency and distribution

selling

• shared sales force

• telemarketing

• TQM and team-based selling

Customer

Sales MarketingTechnical Support

Manufacturing

Supplier selling team

76

Number of sales people• determined by:

- territories vary in their demand structure for prospecting

- product mix demands

- levels and types of prospecting

- nature of the customer segments

Affordability method (based on sales budget)

Incremental method

Workload method

Number of sales people =(Number of

existing customers

)

(Number of

Potential

customers)

(Ideal frequenc

y of calls)

(Length of a call)XXX

Ideal selling time available for a salesperson

77

Chapter 6

Management of Sales Territory

78

Sales territory

• a group of present and potential customers assigned to

an individual

• sales person, a group of sales person, a branch, a

dealer,

a distributor or a marketing organization at a given

period of time

79

Sales territory (contd.)

Advantages of designing a sales territory :

it ensures better market coverage effective utilization of the sales force efficient distribution of workload among sales people it is convenient to evaluate the performance of sales people to control over the direct and indirect costs of the sales function optimum utilization of sales time by sales people

80

Designing sales territories

Select the basic geographic control units

Decide on the criteria for allocation

Decide on the starting point

Combine control units adjacent to starting point

Compare territories on allocation criteria and conduct workload analysis

Assign sales force to new territories

Factors influencing

the modifications of a territory:

• mergers• market consolidation• split in division• sales force turnover• customer relocations• product life cycle change• product line change

Modify territorial boundarie

s to balance

workload and

potential

81

Territory shapes

circlewedge

Clover leaf

82

Strategic Planning Matrix

Opportunity

Strategy

Opportunity

Strategy

Strategy

StrategyAllocate a moderate level of resources to

maintain current advantage.Either commit a minimal level of

resources to the account or consider

abandoning the account altogether.

The account offers stable opportunity since the sale organization has differential advantages to serving them.

Opportunity

Opportunity

The account offers little opportunity. Its potential is small and the sales organization is at a competitive disadvantage in serving it.

The account offers a good opportunity. It has high potential and the sales organization has a differential advantage in serving it.

Commit high levels of sales resources to take advantage of the opportunity.

The account may represent a good opportunity. The sales organization needs to overcome its competitive disadvantages and strengthen its position to capitalize on the opportunity.

Either direct a high level of sales resources to improve the position and to take advantage of the opportunity or shift resources to other accounts.

Strong Weak

High

Low

83

New Territories..?

Use of Information Technology

IT enabled services computer programmes simulation techniques

Sales territories

84

Management of Sales Quota

Chapter 7

85

Sales quota

• a quota is an expected performance objective

• a quota is a sales assignments or goal to be achieved in a specific period of time

• it is routinely assigned to the sales units (e.g. departments, divisions, and individuals) • sales units proceed to reach quotas in their respective domains“A sales quota is the sales goal set for a product line,

company division, or sales representative. It is primarily a managerial device for defining and stimulating the sales effort.”. … Kotler

86

Principles of quota settingPrinciples of quota setting

• setting of sales quotas is a challenge to the sales manager and should be handled with precision and adequate skill

• it must be simple to understand both to the

manager and the sales people

• objectivity to be observed while fixing quotas and should be based on facts and figures drawn

from the market

• quotas set above the achievable limit often demotivate and result in high turnover in the organization

87

• flexible to the prevailing and emerging market conditions

• there should be a level of definiteness in the quota set for a salesperson• it should be fixed either in terms of geographic territory, on money value, or on the basis of units of product(s)

• a participatory quota setting procedure followed jointly by the sales manager and sales people together serves as a tool of motivation and leads to the realization of the organizational sales goals

Principles.. Principles.. contd.contd.

88

S M A R TPECIFIC

EASURABLE

TTAINABLE

REALISTIC

IMESPECIFIC

SBO… MBO in the Sales

domain?

89

Organization of the sales job

Defining annual objectives

Procedure for setting sales quota

Conferencing with each sales personInd

ivid

ual

Goa

l set

tin

g fo

rm OutputName

YearYour territoryResults expectedPessimistic Realistic Optimistic Results

1. Volume per month2. Expenses per month

3. Gross margin per month4. Market share per month5. Key account coverage per

month

90

Types of sales quota

• sale volume quota• sales budget quota

• sale activity quota• combination quota

91

Methods of setting sales quota

Quotas are based on…

• sales forecasts and potentials

• forecast

• past sales and experience

• executive judgment

• sales people judgment

• compensation

92

Problems in setting sales quota

1. There is a high level of individual difference in every organization

2. A perfect quota is a combination of selling and non- selling activities

3. Often sales people do not give proper attention to the non-selling activities (e.g. searching for prospects, handling customer objections, and creating market for probable entry of new products)

93

Chapter 8

Recruitment and selection of the sales force

94

• performs sales management +HR management !

• recruits, selects, trains, motivates, leads,

controls, and compensates sales teams• selection and recruitment of efficient sales people is always a process of building competitive advantage for an organization

The sales manager

95

Strategic position analysis

Decide on the number of people to hire

Identify best sources of recruitment: internal and external sources

Generate database of candidates

Evaluate candidates

Select and induce candidates to accept

positions

Socialize

Turnover

Establish hiring

objectives

Job qualification

Job description

Organizational characteristic

s,company image

and climate,styles of supervision, compensatio

n, and motivation of the company

Selection

Socialization

Recruitment

Planning

The hiring process

96

Challenges in sales force selection

• personality types matching to job profiles

• one of the measures that the organization

looks in an employee is:

- the ability to perform by an employee

= ability x motivation

• level of motivation

97

Planning for recruitment

1. Strategic position analysis

2. Turnover

3. Job analysis• gathering and organization of

information• concerning the tasks, duties and responsibilities of a specific job

3. Task inventory analysis and KSA matrix

• job qualification

• job description

98

Sales force recruitment

• recruitment is an act of inducing qualified and appropriate people to get interested in and apply for a salesperson’s position within a sales organization• internal sources- existing employees- lateral and upward moves- interns and cooperative students- employee referral programmes• external sources- industry sources- educational institutions and campus recruitments- employment exchanges- placement consultants- walk in interviews

99

- networking referrals- web consultants- responses to direct open advertisements

External sources contd...

Selection procedure- inviting application forms- personal interviews- reference checks- physical examinations- psychological tests- intelligence- personality- aptitude and skills- determination of terms of service- appointment- initial orientation

100

Socialization process

• process of orienting a new salesperson to the sales organization, territory, or division in which he or she will be working

• three stages

Anticipatory stage

Encounter stage

Settling stage

Chapter 9

Training the Sales Force

101

Challenges in sales training

Will the training programme be effective in solving a problem?

Will the investment in it be justified?Will it produce the desired or intended results?

102

Role of the trainer

• The success of the training programme depends on the ability, skill, and motivation of the sales trainer

103

104

The training process

Training need assessment

Design and conduct of a training programme

Evaluation of a training programme

105

Training need assessment phase

Organizational level analysis

Task level analysis

Individual level analysis

Training needsIdentification of specific problemsAnticipating impending and future problemsManagement requestsInterviewing and observing the personnel on the

jobPerformance appraisalQuestionnaire surveyChecklistAttitude surveyInterpersonal skill test

106

Designing and conduct phase

Location

Job Instruction Training (JIT)

Presentation options

107

Types of training

Cross-functional training

Team training

Creativity training

Literacy training

108

Training methods

Didactic method- structure the lecture- reinforce the Message- aid concentration- material used for the lecture- make it memorable for the participants- deliver with dynamism- use questions

Visual supportParticipativeConferences

109

Training methods contd..

SeminarsDiscussionsRole playCase studyFishbowlWorkshopsSensitivity trainingTransaction analysisIn-tray exercisesTranscendental meditation

110

Deciding a sales training programme

AimContentContentsKnowledgeProficienciesLocationEvaluation

111

Process of socialization

• Anticipatory socialization

• Accommodation stage

• Outcome stage

112

Chapter 10

Sales Force Motivation

113

114

Motive

Behaviour

Goal

Tensionreduction

Process of motivationProcess of motivation

Motives

Primary General Secondary

115

Motivational drives

Principles Security Achievement Approval Loyalty Advancement Leadership Human behaviour

116

Theories of motivation

• Content• Process• Reinforcement

117

Content theories

• Need hierarchy theory

• Hertzberg’s two factor theory

• Alderfer’s ERG theory

• McGregor Theory X and Y

• Z theory of William Ouchy

118

119

Physiological need

Security need

Social need

Esteem need

Self actualisation need

Maslow’s hierarchy of needs

Process theories

• Equity theories

• Expectancy theories

120

Reinforcement theories

• Hull’s drive theory

• Skinner’s reinforcement theory

121

Factors influencing the motivation of the salesperson

• Personal characteristics

• Environmental conditions

• Organizational policies

122

Designing a motivational programme

• Programme objective

• Motivational tools

• Individual methods

• Group methods

• Communication

• Auxiliary environment

• Feedback123

Chapter 11

Sales Force Compensation

124

Factors influencing the design of a compensation plan

• Financial stability

• Size of the market

• Nature of the product

125

Types of compensation plans

• Financial compensation

• Non-financial compensation

126

Financial compensation

• Straight salary plan

• Straight commission plan

• Bonus and incentive

• Salary plus incentive (combination plan)

• Drawing account and commission plan

• Allied methods

127

Non-financial compensation

• Promotions

• Recognitions programmes

• Fringe benefits

• Expense accounts

• Perks

• Sales contests

128

Steps in designing a compensation plan

• Determine sales force and compensation objectives• Determine major compensation issues• Implement long-term and short-term compensation

plans• Relate rewards to performance• Measurement of performance• Appraise the compensation plan

129

130

Chapter 12

Evaluation of the Sales Force

131

Deciding on the criteria for measuring performance

Deciding in the conduct of the performance appraisal

Deciding on the evaluation of individuals and teams

Comparison of actual performance with standards

Deciding on the frequency of the performance appraisal

The external variables and their influences

Sales force performance appraisal process

132

• Appraisal criteria• Relative and absolute judgments• Trait-based• Outcome-based• Behaviour-based• Performance rating• Force choice scales• Behavioural observation scales• Call reports• Silent call monitoring scores• Activity reports• Combinational methods

Sales force performance appraisal process

133

Conduct of performance and individual vs team appraisal

Example of a Role result Matrix Position Developing a new businessServicing existing customers

Key account manager

Regional sales manager

Application engineer

Customer service staff

Technical support staff

Installation and quality engineer

Financial staff

Chapter 13

Distribution channel management - an introduction

Chapter 13

Distribution channel management - an introduction

134

Role of distribution channels• To adjust the discrepancy of assortment through the process

of sorting, accumulation, allocation, and assorting

• To minimize the distribution costs through reutilizing and standardizing transactions to make exchange more efficient and effective

• To facilitate the searching process of both buyers and sellers by structuring the information essential to both the parties

• To provide a place for both parties to meet each other and

reducing uncertainty

135

How do distribution channels contribute

• Intermediaries can improve the efficiency of the exchange process

• Channel intermediaries adjust the discrepancy of assortment through the performance of the sorting process

• Marketing intermediaries hang together in channel arrangements to provide for the reutilization of transactions

• Channels facilitate the searching process

136

Discrepancies in the process of exchange

• Spatial discrepancy

• Temporal discrepancy

• Need to break the bulk

• Need to provide assortment

137

The cost and control aspects of intermediation

138

Direct Distribution Indirect distribution

Control

Cost efficiency

Distribution channel strategy• Setting distribution objectives in terms of the

customer requirements

• Finalizing the set of activities that are required to be performed to achieve the channel objectives

• Organizing the activities so that the responsibility of performing the activities is shared among the entities who are meant to perform these activities

• Developing policy guidelines for the smooth functioning of the channel on a day to day basis

139

Distribution channel management (contd.)

• Distribution channel management encompasses all activities dealing with the distribution function of the firm

• The distribution strategy provides guidelines for decision making

• The distribution management function can be viewed as happening in two phases: the ex ante phase and the ex poste phase

140

Distribution channel management (contd.)

• The ex ante phase involves all the activities that are associated with the design and establishment of the distribution channel. These activities actually take place before the distribution channel actually starts functioning.

• The exposte phase involves managing the day to day activities of the channel wherein the behavior of the individual channel members are coordinated

141

Channel Management tasks

142

Distribution Channel Strategy Channel Objective

Activity Finalization Organizing the activities Developing Policy Guidelines

Design of the channel structure

Establishing the channel

Motivating Channel Members

Resolving Conflicts among channel members

Ex ante Phase

Ex Poste Phase

Chapter 14

Designing customer-oriented marketing channels

143

144

Channel Design• The channel design is normally meant to give a clear

idea about:• The number of channel entities in the channel

network, • The way in which they are linked,• The roles and responsibilities of the entities in the

network• The rewards for participating in the activities and also • Clear cut guidelines for the major activities to be

performed during the normal functioning of the channel.

What are the service outputs

• Waiting time

• Breaking the bulk

• Spatial convenience

• Assortment

145

Distribution channel design

146

To consume a product

Service outputs have to be delivered

Channels

Participates in channel flows

Activities have to be performed

Thus performs activities

Example of a service output delivered template

S.NoS.No..

Service Service dimensiondimension

Service output deliveredService output delivered

1.1. Bulk-BreakingBulk-Breaking Units are delivered in ones Units are delivered in ones

2.2. Spatial convenienceSpatial convenience There is at least one outlet for There is at least one outlet for almost every 3 km radius almost every 3 km radius excluding of course thinly excluding of course thinly populated areas populated areas

3.3. Waiting timeWaiting time Not more than 2 days for any modelNot more than 2 days for any model

4.4. AssortmentAssortment Other consumer goods items Other consumer goods items including that of other including that of other competitors are available at all competitors are available at all the outlets where the products the outlets where the products are otherwise Availableare otherwise Available

5.5. Installation supportInstallation support AvailableAvailable

6.6. After sales supportAfter sales support Free for first two years, but Free for first two years, but available on available on

payment afterwards. Also available payment afterwards. Also available at every city from where the at every city from where the product was bought.product was bought.

7.7. Consumer financingConsumer financing AvailableAvailable

147

148

FlowFlow Direct Direct contributioncontribution

Indirect Indirect contributioncontribution

Other Other contributiocontributionn

Physical Physical PossessionPossession

Spatial Spatial convenience, convenience, bulk breaking, bulk breaking, waiting timewaiting time

AssortmentAssortment

OwnershipOwnership Spatial Spatial convenience convenience

PromotionPromotion Spatial Spatial convenienceconvenience

Is a service Is a service output in itselfoutput in itself

NegotiationNegotiation Spatial Spatial convenience, convenience, bulk breakingbulk breaking

AssortmentAssortment

Risk takingRisk taking Waiting time, Waiting time, bulk breaking, bulk breaking, spatial spatial convenienceconvenience

FinancingFinancing Spatial Spatial convenience, convenience, waiting time, waiting time, bulk breakingbulk breaking

AssortmentAssortment

OrderingOrdering Bulk breaking, Bulk breaking, spatial spatial convenience, convenience, waiting timewaiting time

PaymentPayment Bulk breaking, Bulk breaking, spatial spatial convenience, convenience, waiting timewaiting time

Channel flows and contribution to service outputs

Channel flows and contribution to service outputs

Channel design effort decisions

• The service output levels• The flows or activities that are associated

with the achievement of the service output levels

• The type of entity who would be entrusted with the performance of each of these flows

149

Parameters for comparing channel designs

• Efficiency• Effectiveness• Equity• Scalability• Flexibility

150

The channel establishment plan (contd.)

• The main purpose of the channel to be set-up• The profile of the customers who are the target market

for the channel

• The needs and requirements of the target market with regard to the identified service outputs provided by the proposed/ existing channel:

• Analysis of the operations of the existing channels that deal in similar product/service lines

• Detailed activity chart for achieving the service output

objectives

151

Plan….. Contd.

• Details about the various channel constituents who will be performing these tasks

• The cost of performing the activities• The designated roles and responsibilities of the channel

constituents• The proposed remuneration for performing these roles

and responsibilities• Standards for measuring the performance• Procedures for reporting and information sharing• Monitoring mechanisms• Criteria for appointing the channel members

152

153

Chapter 15Chapter 15

Customer-orientedCustomer-orientedlogistics managementlogistics management

Logistics strategy

• Cost reduction

• Capital reduction

• Service improvement

154

155

Location decisions• Number, size and location of facilities• Assignments of stocking points to sourcing points• Assignment of demand to stocking points

Inventory Management• Inventory levels• Deployment of inventories• Control methods

Transportation decisions• Modes of transport• Carrier routing/scheduling• Shipment size

/consolidation

Customer Servicegoals

Logistics Planning

• Direct shipment

• Warehousing

• Cross-docking

156

Generic types of outbound logistics strategies

• Movement

• Storage

• Information transfer

157

Functions of warehousing operations

•ReceivingReceiving•TransferringTransferring

•Order picking/selectionOrder picking/selection•ShippingShipping

•Stock keeping locationsStock keeping locations•Inbound and outboundInbound and outbound

shipmentsshipments•Facility space utilizationFacility space utilization•Order fulfillment dataOrder fulfillment data

158

Total cost

Inventory cost

Transportationcost

Warehousing cost

Number of warehouses

Totalcost

Relationship between logistics, cost, and number of warehouses

Why Inventories?

• To improve customer service• To smoothen the operations of the logistics

system• To reduces costs• Inventory procurement costs • Inventory carrying costs• Stock out costs • Cost associated with inventory

159

160

Components of inventory carrying cost

Inventory carrying cost

Capital cost

Inventory service costs

Storage space costs

Inventory carrying

cost

Inventory Investments

Insurance and Taxes

Warehouse rent, maintenance

charges

ObsolescenceDamage&

Pilferage

ShrinkageRelocation

costs

161

RetailerRetailer

StockistStockist

SupplierSupplier

RetailerRetailer RetailerRetailer RetailerRetailer RetailerRetailer

Stockist echelon lead time

Stockist Stockist echelon echelon

InventoryInventory

Echelon inventoryEchelon inventory

Product related factors The density of the product Stow ability Difficult in handling Liability

Market related factors Intramode competition Location of markets Balance or imbalance of in freight traffic in and out of the market Seasonability of the product movements

162

Factors affecting transportation costFactors affecting transportation cost

Chapter 16

Managing Channel Member Behaviour

163

Channel relationships

• Perceptions of organisational power• Dependence• Control• Trust• Commitment• Co-operation

164

Discrete relational exchange continuum

165

Arm’s length relationship

Relational exchange relationship

Channel control

166

Pay–OffPay–Off

FunctionFunction

Tolerance Tolerance FunctionFunction

Supplier authoritySupplier authority

Distributor’sDistributor’s

profit earnedprofit earned

Zone of acceptanceZone of acceptance

Role of persuasion, authority, and coercion in channel control

167Authority Authority persuasionpersuasion

Coercion

Pay –off Pay –off functionfunction

AA BCC

Channel members Channel members profitprofit

Tolerance Tolerance functionfunction

controlcontrol

Components of channel offering

168

Financial returns

Quality products

Competitive priceReliable delivery

National reputation

Promotional support

Training

Market research

Company policies

Technical assistance

Responsiveness systems

Manufacturer sales force incentives

Distributor sales force incentives

Distributor firm incentives

Capability building programmes

Channel core elements

Incentive programme

Influence strategy types (contd.)

InfluenInfluencece

StrategStrategyy

groupgroup

Types of Types of Influence Influence strategystrategy

ExplanationExplanation

Indirect Indirect influeninfluence ce strategistrategieses

Information Information exchangeexchange

Information Information control control

ModelingModeling

Where information on Where information on general business general business

issues and the channel issues and the channel program isprogram is

merely exchanged with merely exchanged with channel channel

member personnel. member personnel.

DirectDirect

UnmediaUnmediated ted

StrategiStrategieses

RecommendationRecommendation WarningWarning Positive normativePositive normative Negative normative.Negative normative.

In this type of strategy the In this type of strategy the consequences of the consequences of the

acceptance or acceptance or rejection of the channel rejection of the channel

programme orprogramme orits implementation are its implementation are

stressed, but stressed, but these consequences are these consequences are

based on a based on a response from the market response from the market

environment, environment, not on the mediation of the not on the mediation of the

channel channel Principal. Principal.

169

(contd.) Influence strategy types

Reward Reward andand

PunishmePunishment nt

StrategiesStrategies

Economic reward Economic reward Non-economic rewardNon-economic reward Economic punishment Economic punishment Non-economic Non-economic

punishmentpunishment

In this type of strategy In this type of strategy rewards and rewards and punishments are punishments are directly given to directly given to channel members channel members

DirectDirectunweighteunweighte

d d strategystrategy

Direct requestDirect request This strategy involves This strategy involves making a direct request making a direct request to the channel member to the channel member where the Principal where the Principal mainly communicates mainly communicates desires or wishes desires or wishes concerning the channel concerning the channel membermember’’s acceptance of s acceptance of the channel program. the channel program.

Direct Direct MediatedMediated strategiesstrategies

Personal plea Personal plea Promise Promise Threat and Threat and Legalistic reference.Legalistic reference.

In this type of strategy In this type of strategy specific action is specific action is requested; requested; consequences of consequences of acceptance or rejection acceptance or rejection are stressed and are are stressed and are based on the mediation based on the mediation of the channel principal. of the channel principal. 170

Influence situations in channel relationship

Reinforcement Reinforcement processprocess

Behavioural Behavioural reinforcementreinforcement

Moderate Moderate rationalizationrationalization

Attitude Attitude changechange

Radical Radical rationalizationrationalization

Attitude Attitude changechange

Inducement Inducement processprocess

Behavioural Behavioural changechange

Moderate Moderate confrontationconfrontation

Behavioural Behavioural and and attitudinal attitudinal changechange

Radical Radical confrontationconfrontation

Behavioural Behavioural and attitudinal and attitudinal changechange

171

PositivePositive NegativeNegativeNeutralNeutral

+ ve+ ve

- ve- ve

Attitude towards the channel progranmmeAttitude towards the channel progranmme

Behaviour

towards the channel programme

Stages in channel conflict

172

AttitudinalAttitudinal sources sources

of conflictof conflict

Structural Structural sources ofsources of conflictconflict

ConflictConflictresolutionresolution

Cognitive/Cognitive/AffectiveAffective conflictconflict

Manifest Manifest conflictconflict

ConflictConflict outcomesoutcomes

CAUSES OF CONFLICTSCAUSES OF CONFLICTS

Attitudinal CausesAttitudinal Causes

Structural causesStructural causes

Conflict management methods at different stages of conflict

173

Latent conflictLatent conflict

Felt conflictFelt conflict

Manifest conflictManifest conflict

Institutional approachesInstitutional approachesJoint membership of associationsJoint membership of associations

Exchange of executivesExchange of executivesCooptationCooptation

Dealer councilsDealer councils

Third party mechanismsThird party mechanismsMediationMediationarbitrationarbitration

NegotiationNegotiation

Negotiation strategies

174

AccommodativeAccommodative Collaborative/problem Collaborative/problem solvingsolving

CompromiseCompromise

AvoidanceAvoidance Competitive /aggressiveCompetitive /aggressive

Concern Concern for the for the others others interestinterest

HIGHHIGH

LOWLOW

LOWLOW HIGHHIGHConcern for Concern for own interestown interest

175

Chapter 17

Retail ManagementRetail Management

• Merchandise characteristic

• Customer service characteristic

• Trading format

• Customer communication

176

Retail marketing mix Retail marketing mix

How merchandising functions affects profitability?

177

Retail marketing mix Retail marketing mix (contd.)(contd.)

(i) the merchandise in the store affect the volume of (i) the merchandise in the store affect the volume of

sales as it is primarily the merchandise that attracts sales as it is primarily the merchandise that attracts

customerscustomers(ii) since profitability is based on the turnover rate of ii) since profitability is based on the turnover rate of

the inventory, the choice of merchandise and the the inventory, the choice of merchandise and the

quantity of merchandise of each category stocked quantity of merchandise of each category stocked

affects the overall profitability of the establishmentaffects the overall profitability of the establishment

Factors affecting choice of retail strategy

• Company’s strategic objectives in terms of the level of profitability desired

• Space availability

• Preferences of target customers

• Relationships with manufacturers

• Availability of trained salespeople etc.

178

Availability of stock and stock holding cost

179

Stock Stock holding holding costcost

Percentage of availabilityPercentage of availability 80% 90% 100%

+20%

Financial method of merchandising

• Cost method

• Retail method

180

Merchandise planning process

181

Plan reductionsPlan reductions

Develop a stock planDevelop a stock plan

Plan merchandise needsPlan merchandise needs

Calculated planned PurchaseCalculated planned Purchase

Plan mark –ups based on profitability targetsPlan mark –ups based on profitability targets

Develop a sales planDevelop a sales plan

Customer services

• Product services

• Service products

• Support activities

182

Customer performance measuring techniques

• Frequency or browsing visits

• Frequency of purchase visits

• Average transaction per visit

• Items purchased

• Range purchased

• Customer service facilities used183

Purchase process for service requirement identification

184

Pre-purchase phase

Purchase phase

Post purchase phase

Purchase processPurchase process

Service requirementsService requirementsSearchSearch

ComparisonComparison

Product relatedProduct related

Augmentation of the productAugmentation of the product

Transaction relatedTransaction related

DeliveryDeliveryInstallationInstallation

Use extensionUse extensionRepeat visitsRepeat visits

Attitude towards trading format and store environment

185

Pre-purchase Stage

During

Purchase

Post-purchase Stage

Task Oriented Pleasure Oriented

Shopping Attitudes

Convenient LocationsAmple Parking

Close to Other Task Oriented

StoresRelevant Merchandise Selection

Exclusive Store Merchandise

Wide Choice

Prestigious Image

High AvailabilityCompetitive PricingRapid Cash Handling

Ambience and ExcitementVisual MerchandisingIn-store FacilitiesProduct Services Centers

Product DisplaysCustomer Advice Areas

Theme DisplaysCustomer Advice Areas

Chapter 18

Managing the International Channels of Distribution

186

Factors affecting international trade

• Differences in customer expectations across countries

• Differences in channel structure and trade practices

• Differences in governmental policies and regulations

• Differences in the quality of physical infrastructure

187

Market entry strategy

188

Indirect exportingIndirect exporting

Direct exportingDirect exporting

LicensingLicensing

FranchisingFranchising

Contract manufacturingContract manufacturing

Strategic allianceStrategic alliance

Joint ventureJoint venture

Wholly owned subsidiaryWholly owned subsidiary

CONTROL

RISK

Success factors in manf. – overseas distributor relationships

Distribution Distribution inhibitorsinhibitors

OutcomesOutcomes RemediesRemedies

Separate Separate ownershipownership

Divided loyaltiesDivided loyaltiesSeller buyer Seller buyer atmosphereatmosphereUnclear future Unclear future intentionsintentions

Offering good Offering good incentives, incentives, helpful support helpful support schemes, frank schemes, frank discussions, and discussions, and high levels of high levels of interactionsinteractions

Geographic, Geographic, economic,economic,and cultural and cultural gapsgaps

Communication Communication blocksblocksNegative attitudesNegative attitudesProblems in Problems in physical physical distributiondistribution

Making judicious Making judicious ways of two way ways of two way visits, visits, establishing a establishing a well managed well managed communication communication programmeprogramme

Differences in Differences in the legal and the legal and regulatory regulatory structuresstructures

Vertical trading Vertical trading restrictions restrictions Dismissal Dismissal difficultiesdifficulties

Full compliance Full compliance with law,drafting with law,drafting a strong a strong distributor agent.distributor agent.

189

International logistics management

• International distribution system

• International suppliers

• Offshore manufacturing

• Fully integrated global supply chain

190

Export procedure

191

ExporterExporter ImporterImporter

Bank in exporter’sBank in exporter’scountrycountry

Importers bankImporters bank

ManufacturingManufacturing

Freight Freight forwarderforwarder

Transportation and Transportation and DocumentationDocumentation

formalities securedformalities secured

Import Import warehousewarehouse

CustomsCustoms brokerbroker

CustomsCustoms

ShipShip

1

2

3

4

5

6

5

8

7

9

9

Contd.

StatStatee

ProcessProcess

11 The SaleThe Sale•Importer makes enquiry from potential supplierImporter makes enquiry from potential supplier•Exporter sends catalogue and price listExporter sends catalogue and price list•Importer requests samplesImporter requests samples•Exporter sends Proforma invoiceExporter sends Proforma invoice•Importer sends purchase orderImporter sends purchase order

22 Importer arranges bank financing.Importer arranges bank financing.

33 Letter of credit send by importer’s bankLetter of credit send by importer’s bank

44 Exporters bank notifies that the LOC has been Exporters bank notifies that the LOC has been receivedreceived

55 Exporter produces or acquires goodsExporter produces or acquires goods

66 Exporter arranges transformation and Exporter arranges transformation and documentation and space reserved on ship or documentation and space reserved on ship or aircraftaircraft

77 Exporter ships goods to importerExporter ships goods to importer

88 Exporter presents documents to bank for Exporter presents documents to bank for paymentpayment

99 Importer has goods cleared through customs and Importer has goods cleared through customs and delivered to the ware housedelivered to the ware house

192

Contd.

International logistics intermediaries• Freight forwardera) To forward an export shipment from the point of

origin to the ultimate destination andb) To deal with transport carriers to get space for the

shipment.

• Customs broker

193

Exporting documents

• Letter of credit• Bill of lading• Commercial invoice• Commercial invoice• Consular invoice• Certificate of origin

194

Thank you

195