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    Sales and Distribution Management

    Загружено:

    coolpravat
    class ppt

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    Sales and Distribution Management Class 1 Course Overview Student Groups / Assignments ete Handouts, Cases, Study material Distribution Sales Management Module 1 & 2 (slide 3-244) Distribution Management Module 3 & 4 Slide 245- 448 11/26/2009 11/26/2009 Personal Selling, Sales Management, Sales Persons & Organizations Class 2 - PS Kar The broad Picture ae) What the sales people do? + Creates new customers + Sells more to present customers * Builds long-term relationships + Provides solutions to customer’s problems * Provides service to customers *+ Helps customers resell products to their customers + Helps customers use products after purchase *+ Builds goodwill with customers * Provides company with market information PRAVAT SURYA KAR, RIMS Contributions of Personal Selling: Salespeople and Society + Salespeople help stimulate the economy + Salespeople help with the diffusion of innovation 11/26/2009 Contributions of Personal Selling: Salespeople and the Employing Firm + Salespeople generate revenue + Salespeople provide market research and customer feedback + Salespeople become future leaders in the organization Contributions of Personal Selling: Salespeople and the Customer Salespeople provide solu problems + Salespeople provide expertise and serve as information resources, + Salespeople serve as advocates for the ‘customer when dealing with the selling organization ns to 11/26/2009 Steps in Professional Selling Process (tewecne er ff atte ay +__ 6 Determine objections - aloe > ce 9 Che =} 10. Follow-up PRAVAT SURYA KAR, RIMS Steps in the Selling Process [step1. Prospecting and lgentivingand sereeningor ‘cusitving uated Potential Catone amine Mc as Possible Preapproach About Prospective customer ‘Before Making ies ca |, nowingHow o Meet he Buyer [step 3. Approach To.ettheRelatonsip Of 103 Goodtar. fsepa Presentation? Teling the Produ story” ster. Present tothe Buyer andshowing the Ce ProductBenfits. 11/26/2009 Steps in the Selling Process Seeking Out Clarifying and Step S. Handling Objections ‘Overcoming customer Objectionsto Buying. Step 6. Closing sting the Cstamer Step 7. Follow-Up Fotowing pater he Seto a Ensure customer Satistaction ad Repeat Business. What is Sales Management? + One definition: “The management of the personal selling part of a company’s marketing function.” * Another definition: “The process of planning, directing, and controlling of personal selling, including recruiting, selecting, equipping, assigning, supervising, paying, and motivating the personal sales force. 11/26/2009 Importance of Personal Selling and Sales Management The only function / department in a company that generates revenue / income The financial results of a firm depend on the performance of the sales department / management Many salespeople are among the best paid people in business Itis one of the fastest and surest routes to the top management PRAVAT SURYA KAR, RIMS Sales Management Function L *| eae | 11/26/2009 11/26/2009 Sales Management setting Organizing objectives fanning Organizing |» activities Recruit, selec, train, Motivate, evaluate, develop, & control manage, & Directing Controlling motivate PRAVAT SURYA KAR, RIMS Sales Management Model Implementing Control ene 1 orem cecelve [fe esas toe techn "oie [[romntton | seas [| saetarce a veton | eon Sales career Graph == asm == PRAVAT SURYA KAR, RIMS Sales Organizational Structure PRAVAT SURYA KAR, RIMS 11/26/2009 Sales Management Trends From To Transactions Relationships Individuals Teams [_ Sales Volume _} Sales Productivity | Management _} Leadership Local Global PRAVAT SURYA KAR, RIMS Changing Teamwork Approaches Old Selling Team ‘New Selling Team Membership Membershipvery relatively stable id Characteristics of team depend Characteristics team depend on concharactristicso buying characteristics of sales ‘organiation ‘opportunity Mision strategie with respect, Mision tacit tothe ying organization Tespeettothe sales ‘opportunity 11/26/2009 10 Changing Teamwork Approaches Old Selling Team New Selling Team Relatively ermanent,customer- Relatively temporary, transaction- focused group focused group Memiership determined Membership determined byjob assignmentto a byimvolvementin particular sales spectiebuying organization transaction nesting center (one team per buying unit ves persales opportunity PRAVAT SURYA KAR, RIMS Leadership Trends estedy Tooay Natural resources defined power. Knowledge is power. Leaders commanded and controlled. Leaders empower and coach, Leaders were warriors. Leaders are facttators. Managers directed Manegers delegate ‘Treat everyone the same ‘Adapt individual salespeople Control & evaluate salespeople Help salespeople perform better 11/26/2009 a Effective Sales Managers: 1. UI Customers e a Strategic Perspective Focused on 2. Attract, Keep, and Develop Sales Talent 3. Leverage Technology PRAVAT SURYA KAR, RIMS Sale Management skills Top Sales tenders Fstine Sales Leaders Noamanagcral Salespeople CConcepratand People Skils Technic Skits 11/26/2009 12 Skills of a Successful Sales Manager + People skills include abilities to motivate, lead, communicate, coordinate, team-oriented relationship, and mentoring + Managing skills consist of _ planning, organizing, controlling and decision making + Technical skills include training, selling, negotiating, problem-solving, and use of computers PRAVAT SURYA KAR, RIMS Sales Positions / Jobs Taka Raion Tommie Daler aleperion Mi newspaper wisehle rt drinks. bea eal Foo, hing proucts il imtoace new peut [instr Techn normathn, Ste, Chemical nduties (reat Problem | and me coms ivarance pts Prema sca ns. 11/26/2009 3 11/26/2009 Complexity and difficulty increases from left to right (ke Ties —____________ ove-6ass Sales Jobs Retail Direct ‘Wholesaler Manufacturer (FHAVAT SURYA KAR, RIMS: Classification Of Personal Selling Jobs * Sales Support * Existing Business Personnel = Order-takers ~ Missionary Salespeople + Insider Sales (non- + Detailer i ~ Technical Support fetal) Salespeople * Direct-to-Consumer + New Business Sales (retail) = Pioneers + Combination Sales ~ Order-getters Jobs PRAVRTSURYA KAR RIMS 4 Sales Organization Concepts Salesforce Specialization Continuum gg ——_—— GENERAUISTS SPECIALISTS All selling activities Certain selling activities and all products to for certain products all customers {or certain customers ‘Some specialization of selling activities, products, and/or customers. PRAVAT SURYA KAR, RIMS Sales Organization Concepts Centralization Degree to which important decisions and tasks are performed at higher levels in the management hierarchy 11/26/2009 18 Span of Control vs Management Levels Fax Sales Oranization ———_—___—, ounce ou | oust et Tallsales Organization “oe settee sip Line vs Staff Positions National Sales Manager E= Regional Sales Manager Sales Training Manager 4 Sales Training Manager Salespeople 11/26/2009 16 Selling Situation Contingencies ‘Customer and Product Determinants of Salesforce Specialization Customer Needs Different Market Product/Market- Driven Driven simple Specialization | Specialization complex Product Range of Offering Geotraphy Product- Products Driven Driven Specialization | Specialization ‘Customer Needs Similar Organizing Sales Activities Sales Organizations: + Geographic divisions * Customer / Market types * Product lines * Selling task / Functional 11/26/2009 7 Geographic Sales Organization ational aie Manager pcan astm Reloal Stes Manager Western Repoml Sales Manager I I Zone Sales Manage one aes Mage) I Distt Sales Manages (0) |_| Ds aes Manager 20) | 1 Saespeopie (10) _Satespeple 10) Product Sales Organiza’ ——"— Office Equipment Sales Manag ‘tice Supplies Manager District Sales Manager(10) istic Sales Manager (10) Salespeople (100) Salespeople 100) 11/26/2009 18 Market Sales Organization tet Se age 28 I + Broad Market Specialization ~ Consumers anor Industri + Spectc industry Specialization ~ Government agencies, educational institutions, distributors, and retailers, PRAVAT SURYA KAR, RIMS Functional Sales Organization Natio Manager —£_ —_ Field Sales Manas marketing Sales Manager Regional ales Managers (4) District Sales Managers (2) District Sales Managers (16) Salespeople (40) Salespeople (160) 11/26/2009 19 Comparison of Sales Organization Structures ruta ‘Aavantages Dissdvantagee No cergapne tet [att irapnet Ga Owe Product ncn Hybrid Sales Organization Structure Wajor Accounts Regular Accounts |OFice Equipment Ofice Supp Sais anoger_ “Ses Manager” oles Mananer” Seles Manager 11/26/2009 20 Personal Selling cl PS Kar & Presentation 1 Evolution of Personal Selling Peddlers seling door todoor... served as intermediaries Selling function ‘became more ‘structured 18008 19008 20008 Tmuustrial Postindusti wet and Moder Revolution Revolution Depression Era Business ‘Selling funetion organizations became more 1 salespeople professional 11/26/2009 a Definition Personal selling refers to personal communication with a an audience through paid personnel of an organization or its agents in such a way that the audience perceives the communicator’s organization as being the source of the message. PRAVAT SURYA KAR, RIMS Transaction-Focused vs. Relationship Focused Transaction-Focused Relationship-Focused > Short term thinking * Long term thinking + Making the sale has + Developing the priority over most ‘elationshiptakes ther considerations: prionty over getting + Imeraction between the sale buyer and seller is + Interaction between competitive buyer and selleris + Salespersons set- collaborative. Imerest oriented + Salespersonis customer-oriented 11/26/2009 2 Characteristics of Sales Professionalism + Customer Orientation *+ Use of Truthful and Non-manipulative Tactics * Focus on Long-Term Satisfaction of Customer and Selling Firm PRAVAT SURYA KAR, RIMS The Sales Process Developing Enhance Initiating Developing LH Inkancing customer rsiotonships ——Y| Relationships |} Relationships \ :Pre-approach : \ * Adding Value through Follow-up, Selteadership, and Teamwork 11/26/2009 23 The Sales Process ‘As a part of selling activities, if salespeople follow the steps or phases shown below, their chances of success are far better. rospecting® | [ reapproseh? | [ay Lf resematona ‘uativine [7] Precatpanning eres Bemonrraton rotowapa || wratcee7 |{ Overcoming sence cling tne sale []_Objetore * The sequence of above steps may change to meet the sales situation in hand. + Some of the above steps may not be applicable for selling to the trade + We now discuss application of above steps to industrial selling PRAVAT SURYA KAR, RIMS Prospecting “It is identifying or finding prospects i.e. prospective or potential customers. ‘Methods of prospecting or sales lead generation are: (1) referrals from existing customers, (2) company sources (website, ads., tradeshow, teleprospecting}, (3) external sources (suppliers, intermediaries, trade associations) (4) salespersons’ networking, (6) industrial directories, (6) cold canvassing Qualifying + Companies qualify sales leads by contacting them by mail or Phone to find their interests (or needs) and financial capacity, * Leads are categorized as: Hot, Warm, and Cool 11/26/2009 24 Preapproach ‘+ Information gathering about the prospect. Sources of information: the Internet, industrial directories, government publications, intermediaries, etc. + Precall planning * Setting call objectives Tentative planning of sales strategy: which products, features and benefits may meet the customer needs PRAVAT SURYA KAR, RIMS ‘Approach ‘+ Make an appointment to meet the prospect + Make favourable first impression + Select an approach technique: * Introductory + Customer benefit, + Product * Question + Praise + The approach takes a few minutes of a call, but it can make or break a sale 11/26/2009 25 Presentation and Demonstration ‘There are four components: *+ Understanding the buyer's needs + Knowing sales presentation methods / strategies + Developing an effective presentation + Using demonstration as a tool for selling ‘We will examine each of the above points PRAVAT SURYA KAR, RIMS Understanding the buyer’s needs *Firms and consumers buy products / services to satisfy needs * To understand buyer’s needs, ask questions and listen ‘In business situations, problem identification and impact questions are important EG * Have you experienced any problems on quality and delivery from the existing supplies? + What impact the quality and delivery problems will have on your costs and customer satisfaction? 11/26/2009 26 Knowing Sales Presentation Methods/Strategies Firms nave developed different methods / styles / strategies of sales presentation + Stimulus response method / canned approach. + Itls.amemorsed sales talk or a prepared sales presentation, +The sales person talks without knowing the prospect's needs. E.6. Used by telemarketing people + Formula method / formulated approach. itis also based on stimulus response thinking thet al prospects are similar “+ The salesperson uses a standard formula ~ AIDA attention, interest, desire, and action) It is used iftime is short and prospects are similar “+ Shortcomings are: prospects’ needs are not uncovered and uses ‘same standard formula for diferent prospects. PRAVAT SURYA KAR, RIMS Sales Presentation Methods (Continued) + Need ~ satisfaction method * Interactive sales presentation * fst find prospect's needs, by asking questions and istening * Use FAB approach: Features, Advantages, Benefits * Effective method, as it focuses on customers * Consultative selling method / Problem-solving approach * Salespeople use cross-functional expertise + Firms adopt team selling approach * Itis used by software / consulting firms 11/26/2009 27 11/26/2009 Developing an Effective Presentation Some of the guidelines are: + Plan the sales call + Adopt presentation to the situation and person + Communicate the benefits of the purchase + Present relevant and limited information at a time + Use the prospect's language Make the presentation convincing - give evidence + Use technology like multi-media presentation PRAVAT SURYA KAR, RIMS Using Demonstration + Sales presentation can be improved by demonstration + Demonstration is one of the important selling tools Gs: Test drive of cars; demonstration of industrial products in use + Benefits of using demonstration for selling are: + Buyers! objections are cleared + Improves the buyer’s purchasing interest + Helps to find specific benefits ofthe prospect + The prospect can experience the benefit 28 Overcoming Sales Objections / Resistances + Objections take place during presentations / when the order is asked + Two types of sales objections: ‘= Psychological / hidden * Logical (real or practical] + Methods for handling and overcoming objections: (a) ask questions, (b) turn an objection into a benefit, (c) deny objections tactfully, (d) third-party certificate, (e) compensation PRAVAT SURYA KAR, RIMS Trial close and Closing the sale close checks the attitude or opinion of the prospect, before closing the sale (or asking for the order) + If the response to trial close question is favourable, then the salesperson should close the sale + Some of the techniques used for closing the sale are: (a) alternative-choice, (b) minor points, _(c) assumptive, (d) summary-of-benefits, (e) T-account, (f) special-offer, (g) probability, and (h) negotiation 11/26/2009 29 Follow-up and Service + Necessary for customer satisfaction * Successful salespeople follow-up in different ways: For example, * Check order details + Follow through delivery schedule * Visit when the product is delivered * Build long-term relationship + Arrange warranty service PRAVAT SURYA KAR, RIMS Negotiation ‘+ Salespeople, particularly in business to business selling, need negotiating skills + When to negotiate? (a) When the buyer puts certain concitions for buying to the seller, (b) When agreement between the buyer and the seller Is needed on several factors, (€) When the product Is customised, (d) When the final price isto be decided + How to prepare for negotiation? (2) planning, (b) building relationship, (c) purpose + Styles of negotiation (2) I win, you ose, (b) Both of us win (or win-win styl), (e) You ‘win, lose, and (d) Both of us lose 11/26/2009 30 Classification of Personal Selling Approaches re + Stimulus Response Sell + Mental States Selling + Need Satisfaction Selling + Problem Solving Selling \ PRAVAT SURYA KAR, RIMS Stimulus Response Selling Salesperion uy cent Sima Soueht urhase we Decion 11/26/2009 31 Mental States Selling PRAVAT SURYA KAR, RIMS Need Satisfaction Selling won |_| smn aemes | -\) tet |) sta ver ) | satistyBuyer Purchase wm GQ an || Son 11/26/2009 32 Problem Solving Selling cxtne |—\, Senerte |) state | —\) “Stine soriee |) scene |) aterane [| “ant 7 settons —/ "Stems | —/ we Consultative Selling L business Consultant / The process of helping customers each their strategie gal by Using, | ep orneswatar \ ‘the products, service, Strategic Orehes - \“Sndeeperiseottne 7 aie organization. —/ —~ — 11/26/2009 33 Selling Skill and related concepts Class 5—P S Kar & Quiz 1 Do we need Professional selling skills ? Systematic approach to selling, leacing to = Better success rate - increased turnover for the company. Lesser time taken - more productive field force, Satisfied customer - assuring future business, Selling - not as salesperson but as consultant 11/26/2009 34 Sales Science and Arts Selling takes practice, just like golf or tennis Love for sling, personal characteristics, honing of the sil Defense against abuses bythe prospects et. a science because a growing body of knowledge and describe seling + Ifyou have goals and you know your success ratios, you need to set specific activity goals. then folow the process) = Prospecting calls ~ Sales calls to existing customers ~ Presentations of specific products/servces ‘+ You musthave 2 calendar / planner / spreadsheet to keep tract of and guide your action / initvative/ fellow ups ete PRAVAT SURYA KAR, RIMS The Sales Process: Selling Foundations In order to be successful in today’s global business. environment, salespeople must have a solid relationship foundation. They must: Be Trustworthy Behave Ethically Understand Buyer Behavior Possess Excellent Communication Sills 11/26/2009 35 As - Energy for long hours, Enthusiasm for ob, product, Empathy for customer, go Wietory desire tow pRAVAT SURYA KAR, RIMS Personal Characteristics for Building Long-term Relationships Faitfuita your word 11/26/2009 Golden Role ‘The Golden Rule of Personal Selling ~ Unselfishly treating others as you would like to be treated without expecting something in return Others Include Competitors ~ The Golden Rule of Selling especially applies to your relationship with competitors. Sales is your “Calling” to Serve = Donot think of your occupation as work = Only through service can you find fulfilment in your job and life PRAVAT SURYA KAR, RIMS Golden Role To Serve, You Need Knowledge ~ Being knowledgeable on products and selling kil allows you to provide a high level of customer service Customers Notice Integrity — Your customer's should be able to trust that you are ‘ooking out for their best interes. Personal Gain is not Your Goal — Donot be concerned about sales goals — just your customer's Others Come First 11/26/2009 37 Golden Role + How you treat others will often determine how you will be treated, + The Golden Rule Paradox — You actually receive more than you give by following the Golden Rule, (One kernel of corn produces hundreds of kernels. You the salesperson, like the farmer, must wait to see the fruits of your labor. PRAVAT SURYA KAR, RIMS Think of your Grand Mother © Would you treat her in a selfish manner? © Would you sell her something just to make a sale? © Refers to the sales philosophy of unselfishly treating others as you would like to be treated © Reciprocity is not expected © Example - children whose cat had recently delivered a litter of kittens © Girl “They love each other so much that they‘ trying ta keep tach other warm © Mother "Actually they trying to keep themselves warm 11/26/2009 38 When does a customer Buy? + When there is need and when the product or service offered by the seller satisfies the need of the customer, the best (at least to an acceptable level). + Need~ May or may not be very clear in the mind of the customer at least it should exist. ‘+ The best ~ In a lot of situations the buyer takes the best alternative ( as per the evaluation criteria and the choices available ) and is actually not the exact product or service looked for. PRAVAT SURYA KAR, RIMS Psychology in Selling (snes Presemtation] making process (ayer by) + If a sales person makes a presentation, the prospect may or may not buy + The above “buyer behaviour model” does not tell us the reasons of buying or not buying * To understand the psychological aspects of selling or buying, salespeople should study consumer or buyer behaviour, including buying process and situations | 11/26/2009 39 Buying Process of Consumers and Business Buyers Five sage model For household ght —stage model for Danie ers 1, Problem ace em 1, Problem aco esopniion 2. Characteristics and quantity determination 5. Spasfication development [2 Taformatonsearch collection [Supplier search and qualification 5. Obtain at anase supple ropsals ratte ahiemarives i Evalationand lection soir a Parcs desson ‘Selection of purchase oer oi 5 Post = purchase beh Performance fsdback ane pos purchase elton Buying Situations Faced By Household customers Business Buyers Routine decision-making New task New purchase | Liited decision-making Moaiiedrebuy change in suppl Extensive decisionmaking = Straight ebuy / Repeat purchase * Buying process and situations differ for household consumers ‘and business buyers * Consumers / Buyers may skip or reverse some stages in buying process. E.G. A consumer buying toothpaste 11/26/2009 Knowledge of Sales and Sales-related Marketing Policies Sales Knowiedge Marketing Policies = Company knowledge Pricing and Payment polices Product knowledge Product poles: Customer knowledge Distribution polices [Competitor knowledge = Promotional policies “Major reasons for giving above information / knowledge through training programmes to salespeople are: ‘increase their self-confidence + Meet customers’ expectations + Increase sales + Overcome competition The Sales Process: Selling Strategy In order to be successful in today’s global business environment, salespeople must also think and act, strategically. The must develop strategies Each Sales Call tach customer A, Ciheiesaes Tetris > = Each strategy al = isrelatedto the 11/26/2009 41 Size of the Sales Force, Sales Territories, Routing and Scheduling Class 6 — PS Kar Interrelatedness of Salesforce Allocation of Selling Effort —l Salesforce size Territory Design Deployment Decisions ‘ndprospacts adeguntelyo that sslesandproteebjetves wile aeheved? ow many slespeopiearereauredto provide the How should tertoriarbe desined and sslersople | Saorcstatartresto mm woper corre? essorable opportunity for sues? In short - Salesforce deployment s about Sales management decisions invol sales force site, ved in allocating selling effort, determining and designing territories 11/26/2009 42 Allocation of Selling Effort Analytical Approaches to Allocation of Selling Effort =] 7S Dit to Develop and se natal "too ositeal Teor Allocation of Selling Effort Single Factor Models Easy to develop and use/low analytical rigor Accounts classified into categories based on one factor, such as market potential All accounts in the same category are assigned the same number of sales calls Effort allocation decisions are based on the analysis of only one factor and differences ‘among accounts in the same category are not considered in assigning sales call coverage 11/26/2009 43 Single Factor Model Example MarketPotentis! _AverageSales Calisto AverageSles Casto Categories ‘anAccountlastYear __anAecount Next Year PRAVAT SURYA KAR, RIMS Allocation of Selling Effort Portfolio Models + Account Opportunity - Competitive Position an account's need for Strong Weak and ability to purchase 2 the firm’s products BB eit | nei + Competitive Position- 2 the strength of the 5 relationship between &| segments | segment the firm and an account 11/26/2009 Allocation of Selling Effort Decision Models + Simple Basic Concept - to allocate sales calls to accounts that promise the highest sales return from the sales calls = Optimal number of calls in terms of sales or profit maximization PRAVAT SURYA KAR, RIMS Size of the Salesforce + How many salespeople needed (or salesforce size) to achieve a firm’s sales and profit objectives is a key decision + Methods available to decide optimum salesforce size are as follows: * Workload * Sales potential (or breakdown) * Incremental * Sales Productivity 11/26/2009 45 Sales Force Size Analytical Tools - workload Approach ‘The Workload Approach determines how much selling effort is needed to adequately cover the firm's market. Then the number Of salespeople required to provide this amount of selling effort Is alculated.. This approach relatively simple to develop and Is sound conceptually. + Integrates the salesforce size with account effort allocation sratepes + Total seling efort ned aris depending upon whether single {actor porto or Sesion mods were used to alee the Silocatfon of effort + Advantages Ca terion Total Selling Effort Needed ‘Average Selling Effort per Salesperson PRAVAT SURYA KAR, RIMS ‘tof Salespeople = Sales Force Size Analytical Tools - Breakdown Approach ‘The Breakdown Approach is used to determine the number of salespeople needed to generate a forecasted level of sales. This approach is easy to develop. However, itis weak conceptually. The concept underlying the calculations is that sales determine the number of salespeople needed—putting “the cart before the horse” + Assumes an Accurate Sales Forecast + Advantage = Easy to use + Disadvantages Forecasted Sales ~ Conceptually weak: sales determine sales Forecasted Sales ‘Average Sales per Salesperson Sales Force Siz 11/26/2009 Sales Force Size Analytical Tools Incremental Approach ‘The Incremental Approach is the most rigorous for calculating saesforce size, Its compares the marginal profits and marginal costs associated ‘with each Incremental salesperson. The major advantage i that it ‘uantifies the important relationships between salesforee size, sales, ‘nd costs, However, this method is difficult to develop, and it cannot bbe used for new sales forces where historical date’ and accurate judgments are not possible advantage + uanties important elationships between slesforce sie, sales and costs Disadvantages + iffeutto develop / Developmentrequires historical data Optimal # of Salespeople is where: Marginal Profit rom Added Salesperson = Marginal Cost of That Salesperson of Slespeop ~ Margnalanttion ———‘Margnalxt >) PRAVAT SURYA KAR, RIMS Sales Force Size Key Considerations + Sales Productivity - the ratio of sales generated to selling effort employed = Increase # of Salespeople = Increased Sales, but not in a direct linear relationship i.e. in early stages, the addition of salespeople increases sales considerably ‘more than the selling costs. AAs salespeople continue to be added, sales increases tend to decline until a point is reached when the costs to add a salesperson ‘re more than the revenues that salesperson can generate. + Salesforce Turnover = Isvery costly = Should be anticipated 11/26/2009 47 Sales territory intro sales territory comprises a group of customers or a ‘geographical area assigned to a salesperson Guided by The Golden Rule: = View your territory asa business — Treat customers differently depending on their needs = Value the customer's time ~ Realize that how you spend your time determines your life ~ Use your life to serve others and enjoy a wonderful, fulfilling fe — Seek, knock, ask, serve, and see that ethical service build ‘rue relationships PRAVAT SURYA KAR, RIMS Reasons Companies Develop and Use Sales Territories ‘© To obtain thorough coverage of the market. © To establish each salesperson’s responsibilities. ‘5 To evaluate performance. {© To improve customer relations. © To reduce sales expense, = To allow better matching of salesperson to customer's needs. '© To benefit both salespeople and the company. 11/26/2009 Designing Territories + Territory - consists of whatever specific accounts are assigned to a specific salesperson Work unit for a salesperson + Territory Considerations = Trading areas — Present effort Recommended effort PRAVAT SURYA KAR, RIMS Territory Design Procedure “Anais Sele. || stamingand| | form | | asess || latte Planningand | | ControtUnit || intial |_| Tertory | | enitory ContralUnit “| Opportunity "| tenses ("| Workload +) Design Gest ESS 11/26/2009 49 Sales Territories [A sales tertitory consists of existing and potential customers, assigned toa salesperson Most companies allot salespeople to geographic territories, consisting of current & prospective customers ‘Major Reasons / Benefits of Sales Territories Increase market / customer coverase Control sling expenses and time Enable beter evaluation of salesfrce performance Improve customer relationships Increase salestorce effectiveness Improve sales and profit performance PRAVAT SURYA KAR, RIMS ing Sales Territories + Select a control unit® + Find location and potential of present and prospective customers within control units** *+ Decide basic territories by using + Build-up method, or ‘+ Break-down method *A.control unit is a geographical territorial base "Unnecessary & expensive for consumer products 11/26/2009 50 Procedure in Build-up Method + Decide customer call frequencies + Calculate total customer calls in each control unit +e iate workload capacity of a salesperson + Make tentative territories + Develop final territories Objective is to equalise the workload of salespeople PRAVAT SURYA KAR, RIMS Procedure in Breakdown Method + Estimate company sales potential for total market + Forecast sales potential for each control unit. + Estimate sales volume expected from each salesperson + Make tentative territories + Develop final territo Objective is to equalise sales potential of territories 11/26/2009 51 Assigning Salespeople to Territories Sales Manager should consider two criteria: (A)Relative ability of salespeople * Based on key evaluation factors: (1) Product knowledge, (2) market knowledge, (3) past sales performance, (4) communication, (5) selling skills (8) Salesperson’s Effectiveness in a Territory + Decided by comparing social, cultural, and physical characteristics of the salesperson with those of the territory + Objective is to match salesperson to the territory PRAVAT SURYA KAR, RIMS Management of Territorial Coverage + It means: How salesperson should cover the assigned sales territory ‘+ It includes three tasks for a sales manager: * Planning efficient routes for salespeople * Scheduling salespeople's time * Using time-management tools 11/26/2009 52 Routing + Routing is a travel plan used by a salesperson for making customer calls in territory + Benefits of or Reasons for routing: + Reduction in travel time and cost + Improvement in territory coverage + Importance of routing depends on the application: * Nature of the product ~ Important for FMICG * Type of jobs of salespeople - Important for driver- cum-salesperson job, but creative selling job needs a flexible route plan PRAVAT SURYA KAR, RIMS Procedure for Setting up a Routing Plan + ldentiy current and prospective customers ona territory map + Cassfyeach customer nto high, medium, or low sales potential + Decide cal frequency foreach class of customers + Build route plan around locations af high potential customers + Computerised mathematical models are developed + Commonly used routing pattern are: PRAVAT SURYA KAR, RIMS 11/26/2009 53 ‘Scheduling ‘+ Scheduling is planning a salesperson’s visit time to customers. {deals with time allocation issue + How toallocate salesperson's time? ‘Sales manager communicates to salesperson major activities and time allocation for each aetvity + Salesperson recards actual time spent on various activities for 2 weeks + Sales manager and salesperson discuss and decide how to increase time spent on major activities + Companies specify call norms for current customers, based on sales and profit potentials, and also for prospective customers PRAVAT SURYA KAR, RIMS ‘Time Management Tools To help outside salespeople* to manage their time efficiently and productively, the tools available are: ‘High-tech equipment like laptop computers and cellular phones * Inside salespeople to provide clerical support, technical support, and for prospecting, and qualifying, as they remain within the company * Outside salespeople can then spend more time getting more orders & building relationships with major customers “Outside salespeople travel outside the organisation. 11/26/2009 54 Sales Budget and Budgeting, Quota setting Class 8- PS Kar Bas Terms Used in Sales Forecasting + Market demand for a product or service is the estimated total sales volume in a market (or industry) for a specific time period in a defined marketing environment, under a defined marketing program or expenditure. Market demand is a function associated with varying levels of industry marketing expenditure. + Market (or industry) forecast (or market size) is the expected market (or industry) demand at one level of industry marketing expenditure 11/26/2009 55 Basic Terms (Continued) + Market potential is the maximum market (or industry) demand, resulting from a very high level of industry marketing expenditure, ‘where further increases. in expenditure would have little effect-on increase in demand + Company demand is the company's estimated share of market demand for a product or service at alternative levels of the company marketing efforts (or expenditures) ina specific time period Fie Market Demend Fnctions Basic Terms (Continued) + Company sales potential is the maximum estimated company sales of product or service, based on maximum share (or percentage) of market potential expected by the company + Company sales forecast is the estimated company sales of a product or service, based on a chosen (or proposed) ‘marketing expenditure plan, for a specific time period, in a assumed marketing environment + Sales budget is the estimate of expected sales volume in units or revenues from the company’s products and services, and ‘the selling expenses. It is set slightly lower than the company sales forecast, to avoid excessive risks PRAVAT SURYA KAR, RIMS 11/26/2009 56 Forecasting Approaches + Two basic approaches: ‘+ Top-down or Break-down approach + Bottom-up or Build-up approach + Some companies use both approaches to increase their confidence in the forecast PRAVAT SURYA KAR, RIMS Steps followed in Top-down / Break-down Approach + Forecast relevant external environmental factors + Estimate industry sales or market potential + Calculate company sales potential = market potential x company share + Decide company sales forecast (lower than company sales potential because sales potential is maximum estimated sales, without any constraints) 11/26/2009 5? Steps followed in Bottom-up / Build-up Approach + Salespersons estimate sales expected from their customers + Area / Branch managers combine sales forecasts received from salespersons + Regional / Zonal managers combine sales forecasts received from area / branch managers + Sales / marketing head combines sales forecasts received from regional / zonal managers into company sales forecast, which is presented to CEO for discussion and approval PRAVAT SURYA KAR, RIMS Sales Forecasting Methods [Qualitative Methods [Quantitative Methods + Executive opinion + Moving averages + Delphi method + Exponential smoothing + Salesforce composite + Decomposition + Survey of buyers’ intentions, + Naive / Ratio method + Test marketing + Regression analysis + Econometric analysis 11/26/2009 58 Executive opinion method + Most widely used * Procedure includes discussions and / or average of all executives’ individual opinion + Advantages: quick forecast, ess expensive * Disadvantages: subjective, no breakdown into subunits + Accuracy: fir; time required: short to medium (1-4 weeks) Delphi method + Process includes a coordinator getting forecasts separately from experts, summarizing the forecasts, giving the summary report to experts, who are asked to make another prediction; the process is repeated tll some consensus is reached + Experts are company managers, consultants, intermediaries, and trade associations PRAVAT SURYA KAR, RIMS Delphi Method (Continued) + Advantages: objective, good accuracy + Disadvantages: getting experts, no breakdown into subunits, time required: medium (3/4 weeks) to long (2/3 months) Salesforce composite method + An example of bottom-up or grass-roots approach + Procedure consists of each salesperson estimating sales. Company sales forecast is made up of all salespersons’ sales estimates + Advantages: Salespeople are involved, breakdown into subunits possible + Disadvantages: Optimistic or pessimistic forecasts, medium to long time required + Accuracy: fair to good (i trained) 11/26/2009 59 Survey of Buyers’ Intentions Method + Process includes asking customers about their intentions to buy the company’s products and services + Questionnaire may contain other relevant questions + Advantages: gives more market information, can forecast new and existing products, good accuracy + Disadvantages: some buyers’ unwiling to respond, time required is long (3-6 months), medium to high cost Test Marketing Method + Methods used for consumer market testing: full blown, controlled, and simulated test marketing + Methods used for business market testing: alpha and beta testing PRAVAT SURYA KAR, RIMS ‘Test Marketing Method (Continued) + Advantages: used for new or modified praducts, good accuracy, ‘minimizes risk of national launch + Disadvantages: Competitors may disturb if some methods are Used, medium to high cost, medium to long time required Moving Average Method + Procedure is to calculate the average company sales for previous vears + Moving averages name is due to dropping sales in the oldest Period and replacing it by sales in the newest period + Advantages: simple and easy to calculate, low cos, less time, ‘B00d accuracy for short term and stable conditions + Disadvantages: can not predict downturn / upturn, not used for Unstable market conditions and long-term forecasts 11/26/2009 Exponential Smoothing Method ‘+ The forecaster allows sales in certain periods to influence the sales forecast more than sales in other periods + Equation used: Sales forecast for next period=(L)(actual sales ofthis year)4{1- Lfthis year’s sales forecast), where (\) is a smoothing constant, ranging greater than zero and less than 1 + Advantages: simple method, forecaster’s knowledge used, low cost, less time, good accuracy for short term forecast + Disadvantages: smoothing constant is arbitrary, not used for long-term and new product forecast PRAVAT SURYA KAR, RIMS Decomposition Method + Proves nla breaking down the company’s previous pris sales dat into components ike tend, le, seasonal and erratic events These components fare recombined to produce sales forecast + Advantages: Conceptually sound fit good accuracy, low cost, es tine + Disadsantages:complen stats method historia data needed, used for Naive / Ratio Method + Assumes: what happened athe immediate past wilhapeenininmedite sure + Simpeformula used Atal ser of is oo + Advantages: simple to calculate, low cos ss time, accraty good for sho term recasting Sales cast for mat sour dt sae of hie yur + Disadvantages: less acurateif past sales fluctuate PRAVAT SURYA KAR, RIMS 11/26/2009 61 Regression Analysis Method + [tis a statistical forecasting method Process consists of identifying causal relationship between company sales (dependent variable, y) and independent variable (6), which influences sales + Ifone independent variable is used, it s called linear (or simple) regression, using formula; ‘b'is the slope of the trend line In practice, company sales ate influenced by several independent variables, ike price, population, promotional expenditure. The ‘method Used is multiple regression analysis ‘Advantages: Objective, good accuracy, predicts upturn / downturn, short to medium time, low ta medium cost Disadvantages: technically complex, large historical data needed, software packages essential bx, where ‘ais the intercept and PRAVAT SURYA KAR, RIMS Econometric Analysis Method + Procedure includes developing many regression equations representing (i) relationships between sales and independent variables which influence sales, and (ii) interrelationships between variables. Forecast is prepared by solving these equations + Computers and software packages are used + Advantages: Good accuracy of forecasts of economic conditions and industry sales + Disadvantages: need expertise & large historical data, medium to long time, medium to high cost 11/26/2009 62 How to Improve Forecasting Accuracy? + Sales forecasting is an important & difficult task + Following guidelines may help in improving its accuracy ‘+ Use muitile (2/3) forecasting methods + Select suitable forecasting methods, based on application, cost, and available time + Use few independent variables / factors, based on discussions with salespeople & customers Establish a range of sales forecasts — minimum, intermediate, and maximum + Use computer software forecasting packages PRAVAT SURYA KAR, RIMS What is a Sales Budget? + Itincludes estimates of sales volume and selling expenses + Sales volume budget is derived from the company sales forecast — ‘generally slightly lower than the company sales forecast, to avoid excessive risks + Selling expenses budget consists of personal selling expenses budget and sales administration expenses budget + Sales budget gives a detailed break-down of estimates of sales revenue and selling expenditure Purposes of the Sales Budget + Planning + Coordination + Control 11/26/2009 63 Sales Budget Process + Many firms follow a process for preparation of annual sales and company budgets. It generally includes: * Review past, current, and future situations + Communicate information to all managers on budget preparation — guidelines, formats, timetable * Use build-up approach, starting with firstline sales managers * Get approval of sales budget from top management + Prepare budgets of other departments PRAVAT SURYA KAR, RIMS Sales Quotas + What are Sales Quotas? + Sales quotas are sales goals or targets set by a company for its marketing / sales units for a time period + Marketing / sales units are regions, branches, territories, salespeople, and intermediaries * Generally, company sales budgetis broken down to sales quotas for various marketing units + Objectives of Sales Quotas + To use quotas as performance standards or performance goals * To control performance + To motivate people by linking quotas to compensation plans + Toidentify strengths and weaknesses of the company 11/26/2009 Types of Quotas * Organisations set many types of sales quotas: (1) sales volume, (2) financial, (3) activity, (4) combination + Sales volume quotas + For effective control, sles volume quota should be set for the smallest marketing units, such as salesperson, districts / branches, product items / brands + Sales volume quotas can be stated in (a) rupees /

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