Sales &

Distribution
Management-
MR412
Semester IV, KIMDS
 Sales Management- An
Introduction
• Sales- Evolution of sales Department
• Sales management- The Planning, Direction and Control of
Personal Selling including Recruiting, Selecting, Equipping, Assigning, Routing,
Supervising, Paying and Motivating as these tasks apply to the personal sales
force.

• What factors are prompting marketers

to shift attention to Sales Management
– Globalisation
– Customer service
– Leadership
– Lower margin
– Longer and harder working hours and environment

• Sales Management Objectives

 Sales management Objectives

• Co.’s viewpoint
– Sales volume
– Contribution to profit
– Continuing growth
• Top management Marketing Management
Sales Management
• Objectives translated into Specific goals
Make sure Goals of Corporate conform to Sales & Marketing
initiative

• Goals- are deliverables, expectations

and the desired results
• Increase Sales activity
• Close more accounts
• Offer better proposals
• See more prospects
• Goal setting process
– Growth in sales
• New Business
• New Product
• All Goals should be SMART
 Goals Should be SMART
• Specific
• Measurable
• Attainable
• Relevant
• Trackable
 Sales Force
• What are Sales Force Objectives
• Is the Sales force large enough to accomplish the company
objectives
• Is it organized along proper principles of specialization (
Territory, Market, product)
• Are there enough sales managers
• Does sales compensation level & structure provides
adequate incentive and Reward
• Does the sales force show high morale, ability and effort
• Are the procedures adequate for setting quotas and
evaluating performance

• Does co.'s sales force compare to competitor’s

 McKinsey 7S
• Strategy, structure and Systems- H/W of
success
• Style, skills, Staff, Shared Values- S/W for
Success
• Sales Planning- Sales Managers come up with
marketing plan for individual Product lines,
brands, channels, or customer groups
Sales Management- Introduction
• Sales Management and Financial results
• Sales- cost of sales= gross margin- expenses=
Net Profits
• Sales exe as Coordinator
– Organizing and Coordination
– Planning and coordination
– Coordinating with other elements in marketing
program
– Coordination with distributive network
– Coordination and implementation of overall
marketing strategy
 Sales management and Control
• Where are we now
• How did we get here
• Where are we going
• How do we get there

• Sales Control- Informal & Formal

• Sales Control and Organisation
 Learning Objectives
• To understand evolution, nature and importance
of sales management
• To know role and skills of modern sales managers
• To understand types of sales managers
• To learn objectives, strategies and tactics of sales
management
• To know emerging trends in sales management
• To understand linkage between sales and
distribution management
 Evolution, Nature and Importance of Sales
Management
Evolution of Sales Management
• Situation before industrial revolution in U.K.
(1760AD)
• Situation after industrial revolutions in U.K., and
U.S.A.
• Marketing function splits into sales and other
functions like market research, advertising, physical
distribution
 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.
 Nature of Sales Management
• Its integration with marketing management
Head-
Marketing

Manager- Manager – Manager – Manager – Manager –

Promotion Market Sales Market Customer
Research Logistics Service

• Relationship Selling

Transactional Value – added Collaborative /

Relationship / Relationship / Partnering
Selling Selling Relationship /
Selling
 • Varying Sales Responsibilities / Positions / Jobs
Sales Position Brief Description Examples
• Delivery salesperson • Delivery of products to business • Milk, newspapers to households
customers or households.
• Also takes orders. • Soft drinks, bread to retail stores.

• Order taker (Response selling)
• Inside order taker • Behind counter in a garment
shop
• Telemarketing salesperson takes • Pharma products’ orders from
orders over telephone nursing homes
• Outside order taker. Also • Food, clothing products’ orders
performs other tasks from retailers

• Sales support • Provide information, build • Medical reps. in pharma industry

• Missionary selling goodwill, introduce new products
• Technical selling • Technical information, assistance • Steel, Chemical industries

• Order-getter (Creative, Problem- • Getting orders from existing and • Automobiles, refrigerators,
solving, Consultative selling) new household consumers insurance policies
• Getting orders from business • Software and business solutions
customers, by solving their
business and technology problems
 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
• It is one of the fastest and surest routes to the top
management
 Roles and Skills of a Modern Sales Manager

Some of the important roles of the modern sales manager

are:
• A member of the strategic management team
• A member of the corporate team to achieve objectives
• A team leader, working with salespeople
• Managing multiple sales / marketing channels
• Using latest technologies (like CRM) to build superior
buyer-seller relationships
• Continually updating information on changes in marketing
environment
 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
 Types of Sales Managers / Levels of Sales
Management Positions
CEO /
President

V. P. Sales / Top-Level Sales Managers /

V. P. Marketing Leaders

National Sales Manager

Regional / Zonal / Divisional

Middle-Level Sales Managers
Sales Managers

District / Branch / Area Sales Managers First / Lower Level Sales Managers

Sales Trainee / Sales Person / Sales Representative

 Sales Objectives, Strategies and Tactics
The main components of planning in a company are
objectives, strategies and tactics. Their relationship is
shown below

Decide / Set Evolve Tactics /

Develop Strategies Action Plans
Objectives

E.G. A company wants to increase sales of

electric motors by 15 percent, as one of the
sales objectives. (see next slide)
 To illustrate the relationship between sales objectives,
strategies and tactics, consider:
Sales Goals / Marketing Sales and Distribution Strategy Tactics /
Objectives Strategy Action plans

 Increase  Enter export  Identify the countries  Marketing / sales head to get
sales volume markets relevant information
by 15  Decide distribution channels  Negotiate and sign
percent agreements in 3-5 months
with intermediaries

 Penetrate  Review and improve  Add channels and members

existing salesforce training, motivation  Train salespeople in
domestic and compensation deficient areas
markets  Use effective and efficient  Train field salesmanagers in
channels effective supervision
 Link sales volume quotas to
the incentive scheme of the
compensation plan
 Emerging Trends in Sales Management

• Global perspective
• Revolution in technology
• Customer relationship management (CRM)
• Salesforce diversity
• Team selling approach
• Managing multi-channels
• Ethical and social issues
• Sales professionalism
 Linking Sales and Distribution Management
• Either sales management or distribution management
cannot exist, operate or perform without each other
• To achieve the sales goals of sales revenue and growth,
the sales management plans the strategy and action
plans (tactics), and the distribution management has
the role to execute these plans
• This will be illustrated by considering some sales
management actions and corresponding role of
distribution management (in the next slide), as well as
by discussing a few integrated cases given at the end of
the book
 Role of Distribution Management for some of the
Sales Management Actions / Tasks
Sales Management Actions / Distribution Management Role
Tasks

 Strategy for effective coverage  Follow call plan / beat plan

of markets and outlets  Make customer call productive
 Use multi-channel approach

 Strategy for handling customer  Prompt action at the customer interface level
complaints  If the problem persists, involve senior sales and
service people

 Planning of local advertising  Co-ordination with distribution channels

and sales promotion  Responsibility of execution with distribution
channels
 Expenses are shared between the company and
intermediaries
 Key Learnings
• Sales management is defined as the management of the
personal selling part of a company’s marketing function
• Selling includes varying sales jobs like delivery salesperson,
order taker, sales support person, and order getter
• Sales is the only function or department in an organization
that generates revenue / income
• Skills of a successful sales manager include managing,
technical and people
• Main components of sales planning are objectives, strategies,
and tactics (or action plan)
• Either sales management or distribution management can not
exist, operate or perform without each other
 Personal Selling:
Preparation and Process
 Learning Objectives

• To understand psychology in selling, buying decision

process and buying situations
• To learn communication skills, sales knowledge, and
sales related marketing policies
• To understand personal selling process
• To learn about negotiation
 Psychology in Selling

Stimulus Buyer’s decision Response

(Sales Presentation) making process (buy or no buy)

• 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
 Buying Process of Consumers and Business Buyers
Five – stage model for household
customers
1. Problem / need recognition
2. Information search / collection
3. Evaluate alternatives
4. Purchase decision
5. Post – purchase behaviour
Eight – stage model for business
buyers
1. Problem / need recognition
2. Characteristics and quantity
determination
3. Specification development
4. Supplier search and qualification
5. Obtain and analyse supplier
proposals
6. Evaluation and selection of
suppliers
7. Selection of purchase order routine
8. Performance feedback and post-
purchase evaluation
Buying Situations Faced By

Household customers Business Buyers

• Routine decision-making • New task / New purchase

• Limited decision-making • Modified rebuy / change in

supplier
• Extensive decision-making • Straight rebuy / 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
Knowledge of Sales and Sales-related Marketing
Policies

Sales Knowledge Marketing Policies

• Company knowledge • Pricing and Payment policies
• Product knowledge • Product policies
• Customer knowledge • Distribution policies
• 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
As a part of selling activities, if salespeople follow the steps or
phases shown below, their chances of success are far better.

Prospecting & Preapproach / Presentation &

Qualifying Approach
Precall planning Demonstration

Follow-up & Trail close / Overcoming

Service Closing the sale Objections

• 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
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,
(5) 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
 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
 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
 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
 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
E.G.
• 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?
 Knowing Sales Presentation Methods/Strategies
Firms have developed different methods / styles / strategies of sales
presentation
• Stimulus response method / canned approach.
• It is a memorised sales talk or a prepared sales presentation.
• The sales person talks without knowing the prospect’s needs. E.G.
Used by tele-marketing people
• Formula method / formulated approach.
• It is also based on stimulus response thinking that all prospects are
similar.
• The salesperson uses a standard formula – AIDA (attention,
interest, desire, and action).
• It is used if time is short and prospects are similar.
• Shortcomings are: prospects’ needs are not uncovered and uses
same standard formula for different prospects.
 Sales Presentation Methods (Continued)

• Need – satisfaction method

• Interactive sales presentation
• First find prospect’s needs, by asking questions and
listening
• 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
• It is used by software / consulting firms
 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
 Using Demonstration

• Sales presentation can be improved by

demonstration
• Demonstration is one of the important selling tools
EGs: 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 of the prospect
• The prospect can experience the benefit
 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
 Trial close and Closing the sale
• Trial 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
 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
 Negotiation
• Salespeople, particularly in business to business selling, need
negotiating skills
• When to negotiate?
(a) When the buyer puts certain conditions for buying to the
seller, (b) When agreement between the buyer and the seller
is needed on several factors, (c) When the product is
customised, (d) When the final price is to be decided
• How to prepare for negotiation?
(a) planning, (b) building relationship, (c) purpose
• Styles of negotiation
(a) I win, you lose, (b) Both of us win (or win-win style), (c) You
win, I lose, and (d) Both of us lose
 Key Learnings
• For understanding psychology in selling, study consumer or
buyer behaviour, buying process and situations
• Salespeople are given knowledge of sales and relevant
marketing policies in order to increase their self-confidence
and sales, and meet customers’ expectations
• Typical steps in the sales process include prospecting and
qualifying, preapproach, approach, presentation and
demonstration, overcoming objections, trial close / closing
the sale, follow-up and service
• Salespeople should know when to negotiate, how to prepare
for negotiation and which style of negotiation to use
 Sales Organisation
• Sales Organisation is a department of the
Organisation which is established for the
purpose of directing, coordinating and
controlling the sales Organisation. Includes
• Centralisation
• Specialisation
• Staff position
• Marketing orientation
• Coordination
• Control
5 steps in setting sales organisation
• Defining the objective
» Sales, Profit, Growth

• Delineating the necessary activities

» Qualitative and Quantitative

• Grouping activities into jobs or positions

» Job description

• Assigning personal to positions

• Providing coordination and control
» Formal(Job description) and Informal (force of personality)
» Organisation Chart and Organisation Manual
Factors determining structure of S.O
• Price of product
• Nature of Product
• Nature of Market
• Size of the enterprise
• Ability of executives
• Sales policy of the enterprise
• Distribution system
• Finance
• Number of products
 Types of Sales org Structure
• Line Sales Organisation
• Line and Staff Sales Organisation
• Functional Sales Organisation
• Committee Sales Organisation
 Field Organisation of Sales
Department
• To facilitate the selling Task
• To improve chances of goal achievement by
sales people
 Centralization Versus
decentralization in Sales Force
• Advantages of decentralized SF
» Higher sales volume absorbs higher fixed costs
» Reduction of geographical separation of sales executives
» Improved customer service
» Reduced need for and costs of territorial break in time
» Improved sales force morale
» Lower travel expenses
 Scheme for dividing line authority
in Sales Organisation
• By geographic area
• By products
• By customers or marketing channels
 Geographic division of line authority
General Sales Manager

Director Central Western

Sales Eastern Director of Director of
of Division Division
Personnel Division Sales Sales
Sales Sales Sales
Director SM promotion Analysis
Training Manager Manager

Branch Sales Branch Sales Branch Sales

Managers Managers Managers

Sales Personnel Sales Personnel Sales Personnel

 Product division of line authority
General Sales Manager

Director
Sales Sales Director of Director of Sales
of
Manager personnel Sales Sales Manager
Sales
Product 1 Director promotion Analysis Product II
Training

Sales Sales
Personnel Personnel
Product I Product II
 Product division of line authority
General Sales Manager

Sales Manager Sales Manager

Product 1 Product II

Training Director of Director Personnel

Training Director of Director
Personnel Director Sales of Sales
Director Sales of Sales Director
promotion
Director Analysis
promotion Analysis

Sales Personnel Sales Personnel

Product I Product II
 Customer division of line authority
General Sales Manager

Manager Manager
Sales Manager Sales Director of
Manager Lumber Construction Mining Director of Sales
personnel Sales Promotion and
Product Industry Industry Industry
Director Sales
promotion Advertising
1 Sales Sales

Branch Sales Branch Sales Branch Sales

Managers Managers Managers

Sales Sales Sales

Personnel Personnel Personnel
 Marketing Channel division of line authority
General Sales Manager

Sales Director of
Sales Advertising
personnel Director Sales
Promotion Customer
Planning manager Relations
Director Manager

Sales Sales Sales

Manager Manager Manager Export Sales
Chain Store Wholesale Institutional Manager
Sales Sale Sales

Sales Sales Sales Sales

Personnel Personnel Personnel Personnel
 Functions of Sales Organizations
• Planning function
– Sales forecasting
– Sales budgeting
– Selling policy
• Administrative function
– Selecting salesmen
– Training salesmen
– Control of salesmen
– Remuneration of salesmen
• Executive function
– Sales promotion
– Selling routine-execution of customer orders
 Developing a sales Organisation
• Formal and informal organisations
• Horizontal and Vertical Organisations
• Centralised and Decentralised organisations
• Line and Staff components of organisations
• Size of the company
 Field Sales Organisations
• Geographic Sales specialisation organisations
• Product based sales specialisation
organisations
• Activity/Function based specialisation
• Hybrid sales organiastion
• Team based organisation
 Effective Selling
• Nature of Sales Management Positions
• Sales manager
• District Sales manager
• Sales Executive
 Functions of Sales Executive
• Operating
• Sales Force management
• Handling Relationship within department and trade
• Communicating and coordinating
• Reporting to senior
• Planning
• Sales Program ,Sales organization and control
 Qualities of Effective Sales
Executives
• Ability to define the position’s exact functions
• Ability to select and train subordinates
• Ability to utilize time efficiently
• Ability to allocate sufficient time for planning
• Ability to exercise skilled leadership
 Relations with Top Management
• Relation with managers of Other Marketing
activities
– With product department
– With promotion management
– With pricing management
– With distribution management
• Compensation pattern for Sales Executives
Planning, Sales Forecasting, and
Budgeting
 Learning Objectives

• To understand strategic planning, its linkage to

strategic marketing and marketing management
• To know how sales strategy is developed from
marketing strategy
• To learn basic terms used in forecasting, forecasting
approaches, and methods of sales forecasting
• To understand purposes and the process of sales
budget
 Strategic Planning

• Planning is deciding now what, how, and when we

are going to do
• Strategic planning is deciding about the
organisation’s long-term objectives and strategies
• In a large organisation, planning is done at three or
four organisational levels, as shown in the figure (in
the next slide)
 Planning In A Large Organisation
Organisational Organisation Structure Type of
Levels Planning

Corporate Corporate Office Corporate

Strategic
Planning

SBU SBU SBU

Division / Divisional /
‘A’ ‘B’ ‘C’
Business Unit / SBU Strategic
SBU Planning
Product /
Product Product Product
Product Operational
‘x’ ‘y’ ‘z’
Planning

• For effective planning, operations, and control, a large multi-

product / multi-business firm divides its major products /
services into divisions / strategic business units ( SBUs)
• Each SBU has a separate business, a set of competitors and
customers, and a manager responsible for strategic planning,
performance, and control
 Role of Marketing in Organisational Planning
Type of Role of Marketing – Key Tasks Formal
Planning Name

• Corporate • Provide customer and competition • Corporate

strategic information marketing
planning • Support customer orientation

• Divisional / • Provide customer and competition • Strategic

SBU analysis marketing
Strategic • Develop competitive advantage, target
planning markets, value proposition, positioning

• Product / • Evolve and implement marketing plan • Marketing

functional or including marketing-mix strategy, and sales management
Operational strategy
planning
 Marketing and Sales Strategies
• Figure below shows how sales strategy is developed from marketing
strategy Sales
promotion
strategy
Product /
service
strategy
Target
Advertising
market
strategy
strategy
(Long- Promotion /
term) IMC* strategy

Marketing
Personal selling /
Strategy
sales strategy
Price
Marketing strategy
mix
strategy
(Short- Public relations &
term) Publicity strategy

Distribution
strategy
Direct marketing
strategy

* IMC: Integrated Marketing Communication

 Components of Sales Strategy
• Classifying market segments and individual customers
within a target segment
• Each firm should first decide on target market segments
and if possible, to classify customers into high, medium,
low sales & profit potentials
• Sales strategy is developed accordingly
• Relationship strategy
• Whether a selling firm should use transactional, value-
added, or collaborative relationship depends on both
the seller and the customer
• Each selling firm to decide which segments and
individual customers respond profitably to collaborative
relationship
 Components of Sales Strategy (Continued)
• Selling Methods
• These are: (1) Stimulus response, (2) formula, (3) need-
satisfaction, (4) team selling, (5) consultative
• Selection of appropriate selling method depends on
relationship strategy
• Channel Strategy
• There are many sales / marketing channels. For example:
company salesforce, distributors, franchisees, agents, the
internet, brokers, discount stores
• Selection of a suitable channel depends on both the
buyer and the seller, products / services, and markets
 Basic 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
 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)
in a specific time period
Fig. Market Demand Functions
Market demand

Market Potential

Market Forecast
Market Minimum

Industry marketing expenditure

 Basic Terms (Continued)
• Company sales potential is the maximum estimated company
sales of a 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
 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
 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)
 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
 Sales Forecasting Methods

Qualitative Methods Quantitative Methods

• Executive opinion • Moving averages

• Delphi method • Exponential smoothing
• Salesforce composite • Decomposition
• Survey of buyers’ • Naïve / Ratio method
intentions
• Test marketing • Regression analysis
• Econometric analysis
 How to Improve Forecasting Accuracy?
• Sales forecasting is an important & difficult task
• Following guidelines may help in improving its
accuracy
• Use multiple (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
What is a Sales Budget?
• It includes 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
 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 first-line sales
managers
• Get approval of sales budget from top management
• Prepare budgets of other departments
 Key Learnings

• Strategic planning is deciding about the organization’s long-

term objectives and strategies
• Strategic marketing has a role at divisional or strategic
business unit (SBU) level of strategic planning by providing
market information and developing competitive advantage,
target markets, value proposition
• Sales strategy is developed from marketing strategy through
marketing-mix and promotional strategies
• Components of sales strategy includes classification of market
segments / customers, relationship strategy, selling methods,
& channel strategy
 Key Learnings (Continued)
• Two basic approaches of forecasting are: top-down (or
breakdown), and bottom-up (or build-up)
• Sales forecasting methods are broadly classified as: qualitative
and quantitative
• Qualitative methods include executive opinion, delphi
method, salesforce composite, survey of buyers’ intentions,
test marketing
• Quantitative methods consist of moving averages, exponential
smoothing, decomposition, naïve/ratio, regression analysis,
econometric analysis
• Sales budget gives a detailed estimates of sales volume and
selling expenses. Its purposes are planning, coordination, and
control
Management of Sales
Territories and Quotas
 Learning Objectives
• To understand the concept of and reasons for sales
territories
• To learn designing sales territories and assigning
salespeople
• To know territory coverage, including routing,
scheduling, and time management
• To understand objectives and types of sales quotas
• To learn the methods of setting sales quotas
• To get insight into setting and administration of sales
quotas
 Sales Territories
• A sales territory consists of existing and potential customers,
assigned to a salesperson
• Most companies allot salespeople to geographic territories,
consisting of current & prospective customers

Major Reasons / Benefits of Sales Territories

• Increase market / customer coverage
• Control selling expenses and time
• Enable better evaluation of salesforce performance
• Improve customer relationships
• Increase salesforce effectiveness
• Improve sales and profit performance
 Procedure for Designing 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
 Procedure in Build-up Method

• Decide customer call frequencies

• Calculate total customer calls in each control unit
• Estimate workload capacity of a salesperson
• Make tentative territories
• Develop final territories
Objective is to equalise the workload of salespeople
 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 territories
Objective is to equalise sales potential of territories
 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
(B) 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
 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
 Routing

• Routing is a travel plan used by a salesperson for making

customer calls in a 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 FMCG
• Type of jobs of salespeople – Important for driver-
cum-salesperson job, but creative selling job needs a
flexible route plan
 Procedure for Setting up a Routing Plan
• Identify current and prospective customers on a territory map
• Classify each customer into high, medium, or low sales
potential
• Decide call frequency for each class of customers
• Build route plan around locations of high potential customers
• Computerised mathematical models are developed
• Commonly used routing patterns are:

Base C
(B) 1 B
B
C C C C
5 4 3 2

Straight line / Hopscotch Clover Leaf

Circular
 Scheduling

• Scheduling is planning a salesperson’s visit time to customers.

It deals with time allocation issue
• How to allocate salesperson’s time?
• Sales manager communicates to salesperson major
activities and time allocation for each activity
• Salesperson records 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
 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
 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 budget is 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
• To identify strengths and weaknesses of the company
 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, sales 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 /
dollars, (b) units, or (c) points
• Rupees / dollars sales volume quotas are appropriate
when salespeople are required to sell many products
 Sales Volume Quotas (Continued)

• Unit sales volume quotas are suitable when

• Salespeople are selling a few products
• Prices of the product fluctuate rapidly
• Price of each product / service is high
• Point sales volume quotas are appropriate when the
company wants salespeople to sell products that
contribute more to profits
 Financial Quotas
• Financial quotas control (a) gross margin or net profits, and (b)
expenses of marketing units
• Gross-margin / Net-profit quotas
• Calculate gross margin by subtracting ‘cost of goods sold’ (i.e. cost
of manufacturing) from sales volume. Sales managers are not
responsible for cost of manufacturing
• Net profit quotas are generally accepted by sales mangers as it is
calculated by subtracting direct selling expenses from the gross
margin
• Expense quotas
• In many companies, expense quotas are stated as a percentage of
sales
• Expense quotas to be administered with flexibility, to make
salespeople cost conscious, allowing reasonable expenses
 Activity Quotas
• These are set when salespeople perform both
selling and non-selling activities
• Objective is to direct salespeople to carry out
important activities
• For effective implementation, activity quotas
are combined with sales volume and financial
quotas
• E.G. Calling on high potential customers,
payment collection from defaulting customers
 Combination Quotas
• Used when companies want to control salesforce performance on
key selling and non-selling activities
• Focus on a few types of quotas, to avoid confusing salespeople. An
example:

Type of Quota Quota Actual Percent Weight Percent

Quota (Importance) Quota x
Weight
Sales Volume (Rs) 5,00,000 4,50,000 90 3 270
Receivables (days) 45 50 89 2 178
New Customers 04 05 125 1 125
(Nos)
Total 6 573

• Total point score=573/6=95.5 for a salesperson

• Typically use ‘points’ as a common measure to resolve the
problem of different measures used by various types of
quotas
 Methods for Setting Sales Quotas
• Several methods are used for establishing sales quotas
• In practice, companies use more than one of the
following methods to increase their confidence in sales
quotas
• Total market estimates
• Territory potential
• Past sales experience
• Executive judgement
• Salespeople’s estimates
• Compensation plan
We shall briefly discuss each of the above methods
 Total Market Estimates Method

• The Process followed by established companies is

as under:
1) Estimate next year’s total market demand, or
industry sales forecast, using sales forecasting
methods
2) Decide the company’s estimated market share for
next year
3) Company’s next year sales forecast= (1) x (2)
4) Find each territory’s percentage share out of the
total company sales in the previous year
5) Territory sales quota = (3) x (4)
 Territory Potential Method

• The procedure followed by new companies is as under:

1) Estimate next year’s industry sales forecast or market
potential, using sales forecasting methods
2) Estimate multiple factor index (MFI) for each territory, based
on factors that influence sales of the product. These factors
are given weights corresponding to the degree of sales
opportunity.
3) Industry sales forecast in a territory (or territory market
potential=(1)x(2)
4) Territory sales quota = (3) x estimated market share of the
company in the territory
 Past Sales Experience Method
• The process consists of taking past one year’s sales
(or an average of previous 3 to 5 year’s sales), adding
an arbitrary percentage (or a percentage by which
the market is expected to grow), and thus setting
each territory sales quota
• The assumption that future sales are related to past
sales may not be always correct
• This method should not be the only method used
• Past sales should be one of the factors used for
deciding sales quotas
 Executive Judgement Method
• Senior executives use their judgement when the
product, territories, and the company are new or very
little market information is available
• Executives predict company sales budgets and also
territory sales quotas
• This method should generally be used along with
other methods
Salespeople’s Estimate Method
• Some firms ask their salespeople to set their own
quotas
• Many salespersons either set very high or too low
sales quotas
 Salespeople’s Estimate Method (Continued)
• For setting proper quotas, many sales managers use 2 or 3 of
above methods, discuss with salespersons to get their inputs,
and decide sales quotas
Compensation Plan Method
• Some organizations set quotas to fit with their sales
compensation plan
• E.G. A company wants to pay a monthly salary of Rs 5000, and
a commission of 3% on monthly sales above Rs 1,00,000. The
quota of Rs 1,00,000 is set in such a way that salesperson
would find it very difficult to cross total compensation of Rs
8000 per month (5000+3000)
• Sales quotas should not be based only on this method,
because it would “put the cart before the horse”
Insight into Setting & Administration of Sales Quotas
• Set realistic quotas
• Understand problems in setting quotas
• Ensure salespeople understand quotas
• By allowing salespeople to participate in the process
• By continuous feedback to salespeople on their
performance compared to quotas
• Have flexibility in administering quotas
• Change quotas in cases of major changes in market
demand or company strategies
• Use monthly or quarterly quotas for incentives and annual
quotas for performance evaluation
• Select a few quotas that have relationships with marketing
environment and sales situations
 Key Learnings
• A sales territory consists of existing and prospective
customers, assigned to a salesperson
• While assigning salespeople to territories, sales manager
should consider relative ability of salespeople and
salesperson’s effectiveness in the territory
• Management of territorial coverage includes routing,
scheduling, and time-management tools.
• Routing is a travel plan used by a salesperson for making
customer calls in a territory
• Scheduling is planning a salesperson’s visit time to customers,
based on sales and profit potentials of customers
 Key Learnings (Continued)
• Time management tools available to outside salespeople are
high-tech equipment and inside salespeople
• Sales quotas are sales goals or targets set by a company for its
marketing units like regions, territories, salespeople
• Firms set many types of quotas like sales volume, financial,
activity, and combination of above
• Companies use more than one of the several methods used
for setting sales quotas. These are: total market estimates,
territory potential, past sales experience, executive
judgement, salespeople’s estimates, and compensation plan
• Companies should select a few quotas, which should be
realistic and should be administered with flexibility
 Staffing the sales force
• Recruiting the sales force
• Selecting the sales force
 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
• We shall discuss these methods briefly:
 Workload Method

• Assumption: All salespeople have equal workload

• Steps involved to calculate salesforce size are:
1) Classify customers as per their sales potential
2) Decide time per sales call and call frequencies for each class
of customers
3) Calculate total market workload = (1) x (2) in hours
4) Decide total work time available per salesperson
5) Divide total work time available by different activities per
salesperson in hours
6) Calculate total number of salespeople needed
total market workload (3)

total selling time available per salesperson (5)
 Workload Method (Continued)
• Advantages: simple method, conceptually sound, used for all types of
selling situations
• Disadvantages: Neglects sales productivity & salesforce turnover
Sales Potential / Breakdown Method
• The formula used is: N  PS
(1  T ,) where

N=Number of salespeople needed, or salesforce size

S=Annual sales forecast for the company in value (Rs. Million)
P=Estimated productivity of the average salesperson in sales (Rs.
Million)
T=Estimated percentage of annual salesforce turnover
• Advantages: Simple and straight forward
• Disadvantages: Conceptually weak; lead time needed for a new
salesperson to reach average productivity
 Incremental Method

• It is based on marginal analysis theory of economics

• Basic concept: Net profits will increase when additional
salespeople are added, if the incremental sales revenues
exceed the incremental costs
• Merit: Conceptually accurate, as it quantifies
relationships between salesforce size, sales, costs, profits
• Demerit: Can not be used if historical data on sales and
costs are not available
 Salesforce Staffing
• It is one of the most challenging and important
responsibilities / activities of sales management
• Salesforce Staffing Process includes following stages:
• Planning
• Recruiting
• Selecting
• Hiring
• Socialisation
• We shall briefly discuss each of the above stages
 Planning Stage
• It consists of three steps:
• Establish responsibility for staffing process
• Decide number of salespeople needed
• Outline the type of salespeople needed
• Establish responsibility for staffing process
• Company management decides responsibilities for various
stages / activities of staffing process
• Generally in a medium / large size company, middle and
senior levels H.R. and sales managers are responsible
• Proper coordination needed between sales, marketing,
and HR executives
 Planning Stage (Continued)
Decide the number of salespeople needed
• Steps followed by each territory sales manager to plan
requirement of sales people:
1) Decide optimum salesforce size (using methods discussed
earlier)
2) Add number of promotions, retirements, transfers out,
terminations, resignations expected from existing salespeople
3) Subtract expected transfers into the territory and existing
salesforce
4) Make a total of new salespersons needed
• Territory sales managers submit their requirements to national /
general sales manager, who calculates the total number of new
salespersons to be hired
 Outline Type of Salespeople Needed
The steps involved in the process are:
• Conducting a job analysis
• Preparing a job description
• Developing job qualifications / specifications
Conducting a Job Analysis
• It is done by a person from sales / H. R. department, or a
consultant. It consists of two tasks:
(1) Analyse environment in which the salesperson would
work – E.G. nature of customers, competitors, products.
(2) Determine duties and responsibilities of the
salesperson. Obtain information from sales managers,
customers, etc.
 Preparing a Job Description

• It is a written document developed from the job analysis

• The detailed job description is a useful tool for recruiting,
selecting, training, compensating, and evaluating
salespeople
• Some of the points it generally covers are:
• Job title, reporting relationship, types of products /
services sold, types of customers, duties and
responsibilities, location and geographic area to be
covered
 Developing Job Qualifications / Specifications
• These are generally based on job description
• Job specifications / qualifications include education, sales
experience, skills, and personality traits
• Many studies done, but no generally accepted job
qualifications for selecting salespeople, due to many types of
sales jobs
• Some methods used for developing job specifications are as
under:
• Study job description. Useful for a new company
• Analyse personal histories of salespersons
• Ask customers
 Recruiting Salesforce
• Recruiting include activities to get individuals who will apply
for the job
• The general purpose of recruitment is to get enough qualified
candidates, to enable company select the right persons
• H.R. and sales managers must update information on
government employment regulations
• Recruiting stage / process includes following activities:
• Finding the sources of sales recruits
• Evaluating and selecting recruiting sources
• Contacting candidates through the selected source
 Finding the Sources of Sales Recruits
• For identifying prospective candidates, firms use internal and
external sources. They include:

Internal Sources External Sources

• Employee referral
programmes
• Current employees
• Promotions and transfers
• Advertisements in
newspapers and journals /
magazines
• The Internet (job sites)
• Educational institutions
• Employment agencies
• Job fairs
• Other companies
 Evaluating and selecting Recruiting Sources
• Recruiting sources are evaluated based on the database built
over number of years
• Evaluating factors are:
• Performance rating of salespeople, after 2 years working
• Percentage of salespeople retained, after 2 years working
• Total cost of recruiting
• Selecting most effective source of recruiting at least cost
• For a new company, selection depends on cost
• Contacting candidates through the selected source is done by
H. R. department
 Selecting Salesforce

• Selection process consists of seven major selection steps /

tools
• Companies differ in using selection tools, depending on
expenditure budget and time available
• Major selection tools / steps are:
• Screening resumes
• Application blank
• Initial interview
• Intensive interview
• Testing
• Reference check
• Physical examination
 Screening Resumes
• It is done when the company receives many resumes
• This step / tool not required, if somebody else like
employment agency does initial screening
• Initial screening of resumes are done by comparing with job
specifications
Application Blank
• Widely used, it is a methodical way of collecting relevant
information from the applicant
• Advantages of using application blank (also called “formal
application form”) are:
(1) Easy comparison of many applicants
(2) Useful for asking question during interview sessions
 Interviews
• Widely used selection tool
• A good predictor of the candidate’s performance
• Initial interviews are used for screening candidates
• Intensive interviews are conducted to get indepth view of
candidates
• Interview structure / type of interviews:
• Structured / patterned / guided interviews
• Unstructured / non-directed / informal interviews
• Semi-structured interviews
• Behaviour and performance based interviews
• Stress interviews
• Purpose is to decide a candidate’s fitness for a job
 Testing
• Many firms use tests as a selection tool – EG P&G, IBM
• Purpose of testing: To find whether applicants have traits /
characteristics that lead to success in sales job
• Type of selection tests:
• Aptitude tests measure ability for selling and learning
• Intelligence tests find out mental intelligence or intelligence
quotient (IQ)
• Interest tests find out level of interest in a sales career
• Knowledge tests measure knowledge of products, markets, etc
• Personality tests find out attitude or traits like empathy, self-
confidence
• Tests must have reliability and validity
• Tests should be one of the selection tools and not the only tool
 Reference Checks
• They are important due to possibilities of resume frauds and false
personal information
• They are done by letters / e-mails, telephones, or personal visits
• Instead of candidate’s references, previous employers / customers
to be included for reference checks

Physical Examination
• Objective is to find a physical problem that may prevent job
performance of an applicant
• Most companies want their prospective employees to undergo
physical examination
• Increasing number of firms ask applicant to complete the health
information form without seeing a medical doctor
 Hiring Stage
• After completing selection process, a list of candidates to be hired is
made
• In hiring stage, two activities are performed:
(1) The company making the job offer
(2) Persuading the applicant to accept it

Socialisation Stage
• It is the process through which new salespeople learn values,
norms, attitudes, and behaviour of people working in the firm
• Socialisation process starts before the new salesperson accepts the
job offer and continues until the person is assimilated into the
company culture
• Assimilation is the second stage of socialisation process
• Companies have this process, in order to retain new salespeople
 Key Learnings
• Methods available for deciding optimum salesforce size are: workload, sales
potential, and incremental
• Salesforce staffing process includes five stages: planning, recruiting,
selecting, hiring, socialisation
• Planning stage includes (1) establishing responsibilities, (2) deciding
number of salespeople needed, (3) profiling the type of salespeople
needed
• Recruitment stage consists of (a) finding sources of sales recruit, (b)
evaluating and selecting recruitment sources, (c) contacting
candidates
• Selection process consists of seven steps / tools: (1) screening
resumes, (2) application blank, (3) initial interview, (4) intensive
interview, (5) testing, (6) reference check, (7) physical examination
• Hiring stage includes (a) making the job offer, (b) persuading
applicant to accept it
• Socialisation stage is required to retain new salespeople