Sales and

Distribution
Managemen
t
 Objective of sales
management
• Marketing function splits into sales and
other functions like market research,
advertising, physical distribution
• Sales Management: “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 – addedCollaborative /

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
• Pharma products’ orders from
• Telemarketing salesperson takesnursing homes
orders over telephone • Food, clothing products’ orders
• Outside order taker. Also performsfrom retailers
other tasks

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

• Penetrate • Review and improve salesforce• Add channels and members

existing training, motivation and• Train salespeople in deficient
domestic compensation 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
• Distribution management serves the
primary function of ensuring the product
available to the consumer within an arm’s
length. Distribution management takes
care of the availability and the visibility. It
provides ‘time',' place’ and ‘possession’
utility to the consumer.
• Distribution is an integral part of Sales
Management. It is the heartbeat of Sales
Management
 Role of Distribution Management for
some of the Sales Management
Actions / Tasks
Sales Management Actions / Tasks Distribution Management Role

• 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
Distribution Sales
• Own Sales force
• C&F or Depots
• Distributors, Dealers, Agents, Stockiest
• Transporters, Warehouse operators
• Independent whole sellers in the market
• Independent retailers in the market
Sales Operations Planning
• List of markets to be covered in schedule
• Market Share objective to be achieved
• Tracking competition
• Ensuring highest call productivity
• Market working methods and tool
• Sales Promotion efforts
• New Product launches
• Shelf space maximization
• Reports and records
 Personal selling objectives
Stimulus Buyer’s decision Response
(Sales Presentation) making process (buy or no buy)

Psychology in
Selling
• 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
 Personal Selling Process
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
 Theories of 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
 Preapproa
ch
• 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
 Approac
h
• 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
 Negotiati
on
• 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
 Size of Sales Force
• Needed to increase effectiveness of sales force
• Done by expanding basic sales organization
• Basis of specialization
• Geography
• Type of product
• Market
• Combination of above
• Criteria for selection – (1) nature of product, (2) sales
force abilities, (3) demands of selling job, (4)
customer and market facts
 Geographic
Specialisation
Head-Marketing

Marketing Research General Sales Customer Service

Manager Manager Promotion Manager
Manager

Branch Sales Branch Sales Branch Sales Branch Sales

Manager-1 Manager-2 Manager-3 Manager-4

Salespeople Salespeople Salespeople Salespeople

Characteristics: salespeople, assigned geographic areas, are responsible for

all selling activities to all customers within assigned areas. Branch sales
managers adjust marketing plan to local needs
Advantages: Better market coverage and customer service, more control over
salesforce, quick response to local conditions & competition
Disadvantages: Limited specialisation of marketing tasks. Hence, it is
combined with product / market sales organisation
 Product
Specialisation
• Used when the company has many products and / or brands
• Two types of product specialisation
(x). Sales organisation with product specialised salesforce
(y). Sales organisation with product managers as staff specialists

Head-Marketing

Marketing Research General Promotion Sales Training

Manager Sales Manager Manager Manager

Area Sales Managers – Area Sales Managers –

Product Group ‘A’ Product Group ‘B’

Salespeople – Salespeople –
Product Gr. ‘A’ Product Gr. ‘B’

Fig. ‘x’ Sales Organisation with product specialised salesforce

 Product Specialisation (Continued)
Head-Marketing

Marketing Research Promotion General Product Manager Product Manager

Manager Manager Sales Manager Product Gr. ‘A’ Product Gr. ‘B’

Area Sales
Managers

Salespeople
Fig. ‘y’ Sales Organisation with Product Managers as Staff
Specialists
In fig. ‘x’: Characteristics: Salespeople in each product group sell only the
products in that group
Advantage: Each product gets specialised attention from the salesforce
Disadvantage: Sometimes, more salespeople contact the same customer,
resulting in customer dissatisfaction and higher cost
In fig. ‘y’: Characteristics: Each product manager plans and implements
marketing plan, for a product group
Advantage: Corrects the problem of duplication calls on a customer by
salespeople
Disadvantage: Lack of product specialisation by salespeople
 Market
Specialisation
General Sales
Manager

Sales Manager- Sales Manager- Sales Manager-

Sales Manager-
International- Government Consumer Markets
Commercial
Markets

Area Sales Mgrs Area Sales Manager- Area Sales Manager- Area Sales Mgrs-
International Commercial Government Consumer Markets

Sales Executives Salespeople Salespeople Salespeople

• Characteristics: Desirable when customers are classified by type,

user industry, or channel. Salespeople carry out all activities for all
products only for specific customer groups
• Advantages: Meets needs of specific customer groups, implements
customer-centred philosophy of the company
• Disadvantages: Geographic duplication, high cost
 Combination Sales
Organisation
Director – Sales
& Marketing

General Manager General Manager General Manager General Manager

Sales - North Sales - East Sales - West Sales - South

Regional Sales Regional Sales Regional Sales

Mgr. – Govt. Mgr. - Commercial Mgr. - Dealers

Salespeople Salespeople Salespeople

• Characteristics: Many firms use some combination of

specialisation organisations, called hybrid or combination
sales organisation, with a view to minimise disadvantages
and maximise advantages of specialisation organisations
• Figure above shows combination of geographic and market
specialisations
 Alternatives for Major
Accounts
• Major accounts / customers are called by
various names like key accounts, corporate
accounts, house accounts
• They make up a large share of a firm’s sales
volume and profits
• Firms use the following alternative
approaches to deal effectively with them
• Create a position of major / national
account manager
• Use existing territory sales managers
• Create a separate division
• Create a separate salesforce
 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
total of salespeople
market workload (3) needed
=
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 & sales force
turnover
Sales Potential / Breakdown Method
In this method, the Sales Manager assumes the productivity of the
average sales person. N=Number of salespeople needed, or
sales force size
S
N = (1 +T)
P

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 sales force 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
 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
 Intervie
ws
• 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
 Testin
g
• 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
 Compensation and Motivation of
Motivational
Sales Force
Theories
• Motivational theories or behavioural concepts that are
relevant to motivation of salespeople are:
• Maslow’s hierarchy of needs
• Hertzberg’s dual-factor
• Vroom’s expectancy
• Churchill, Ford, and Walker model of salesforce
motivation, shown hereunder:

Motivation Effort Performance Reward Satisfaction

 Selecting a Mix of
Motivational Tools
• Sales manager should know each salesperson and
understand his / her specific needs
• For designing or selecting a mix of motivational
tools, a compromise between differing needs of
customers, salespeople, and the company
management becomes necessary
• Motivational tools are divided into (1) financial,
and (2) non-financial. These are shown in the next
slide
 Motivational Tools in a
Motivational Mix
Financial Non Financial
• Financial compensation plan • Promotion
• Salary • Sense of accomplishment
• Commission/Incentive • Personal growth opportunities
• Bonus • Recognition
• Fringe benefits • Job security
• Combination • Sales meetings
• Sales contests • Sales training programmes
• Job enrichment
• Supervision

• Financial compensation is the most widely used tool of

motivation, as salespeople give highest value to it
 Compensating the
Salesforce
• A good compensation plan should consider objectives from
the company’s and salespeople’s viewpoint
• Objectives of compensation plan from the company’s
viewpoint
• To attract, retain, and motivate competent salespeople
• To control salespeople’s activities
• To be competitive, yet economical: It is difficult to balance
these two objectives
• To be flexible to adapt to new products, changing
markets, and differing territory sales potentials
 Objectives of Compensation Plan from
Salesperson’s Viewpoint

• To have both regular and incentive income

• Regular income by fixed salary to take care of living
expenses
• Incentive income for above average performance
• To have a simple plan, for easy understanding
• This is in conflict with the objective of flexibility
• To have a fair payment plan
• Fair or just payment to all salespeople is ensured by
selecting measurable and controllable factors
 Designing an Effective Sales
Compensation Plan
• Designing a new compensation plan or revising
an existing plan consists of the following steps:
• Examine job descriptions
• Set up specific objectives for salespeople
• Decide levels of pay / compensation
• Develop the compensation mix
• Decide indirect payment plan or fringe benefits
• Pretest, administer, and evaluate the plan
• We shall examine these steps briefly
 Examine Job Descriptions
• Separate job descriptions are required for different
sales positions or jobs – E.G. missionary salesperson,
senior salesperson, key account executive
• Each job description should include responsibilities and
key performance standards, to decide how much to pay

Set up Specific Objectives for Salespeople

• These are derived from company’s sales and marketing
objectives
• Salespeople should have some control on the objectives
– E.G. number of sales calls made
• Objectives should be measurable. E.G. sales volume,
selling expenses
 Decide Levels of Pay /
Compensation
• It means the average pay or money earned per year (or month)
• It is important to decide levels of pay for all sales positions
• It is decided based on the following factors:
• Levels of pay for similar positions in the industry
• Levels of pay for comparable jobs in the company
• Education, experience, and skills required to do sales job
• Cost of living in different metros and cities
• Annual average pay levels vary between industries, within the same
industry, and sometimes within the company
• Firms decide a range of average pay, instead of a specific pay
• Salespeople earn pay depending on their and company performance
 Develop the
Compensation Mix
• Widely used elements of compensation mix are: (1)
salaries, (2) commissions, (3) bonuses, (4) fringe benefits
(or perquisites)
• Expense allowances or reimbursements like travel,
lodging, etc are not included
• Basic types of compensation plans are:
• Straight salary
• Straight commission
• Combination of salary, commission, and / or bonus
• 68 percent companies use combination plan and balance
32 percent firms use straight salary or straight
commission
• We shall briefly examine above compensation plans
 Straight – Salary
• Characteristics: Plan
• 100 percent compensation is salary, which is a fixed
component
• No concern for sales performance or salesperson’s efforts
• This plan is suitable for sales trainees, missionary salespeople,
and when a company wants to introduce a new product or
enter a new territory
• Advantages:
• Salespeople get secured income to cover living expenses
• Salespeople willing to perform non-selling activities like
payment collection, report writing
• Simple to administer
• Disadvantages:
• No financial incentive to salespeople for more efforts and
better performance. Hence, superior performance may not be
achieved
• May be a burden for new and loss-making firms
 Straight – Commission (or Commission
Only) Plan
• Characteristics:
• It is opposite of straight-salary plan
• Most popular commission base is sales volume or profitability
• Commission rate is a percentage of sales or gross profit
• This plan is generally used by real estate, insurance, and
direct-sales (or network marketing) industries
• Advantages:
• Strong financial incentive attracts high performance, removes
ineffective salespeople and improves results
• Controls selling costs and requires less supervision
• Disadvantages:
• Focus is on sales and not on customer relationship
• Salespeople may pay less attention to non-selling activities
 Combination
Plan
• Characteristics:
• Combines straight salary & straight commission plan
• Four types of combination plans used by companies:
1) Salary plus commission: suitable for getting
improved sales and customer service
2) Salary plus bonus: a bonus is a lumpsum, single
payment, for achieving short-term objectives. This
plan is used for rewarding team performance
3) Salary plus commission plus bonus: suitable for
increasing sales, controlling salesforce activities,
and achieving short-term goals. Also suitable for
selling seasonal products like fans
4) Commission plus bonus: Not popular. Used for team
selling activities for selling to major customers
 Combination Plan
(Continued)
• Advantages:
• Flexible to reward and control salesforce activities
• Security for living costs and incentives for superior
performance for salespeople
• Rewards specific sales performance
• Different plans for different sales positions / jobs
• Disadvantages:
• Complex and difficult to administer
• May not achieve objectives if not properly planned,
implemented and understood
• Indirect payment plan, also called fringe benefits or
perquisites, help in attracting and retaining people,
but have now come under government tax in India
 Pretest, Administer, and Evaluate
Compensation Plan
• Pretesting the new / proposed Compensation Plan:
• Companies pretest a new (or proposed) plan, before
adoption
• Either it is simulated on a computer, or pretested at
one / more branches for 6-12 months
• It should involve all concerned people
• Administering the new compensation plan
• Announce the plan in advance
• Explain the new plan and reasons for changing the
previous plan
• Outsource administration if plans are changed
frequently
• Evaluating the new compensation plan
• Find if objectives of the plan are achieved
• Some companies audit compensation plans
 Leading the Salesforce
• Leadership is the ability to influence people to achievement of objectives
• Leadership is necessary for a sales manager’s effectiveness
Leadership Styles
• Transactional leadership equates to supervision – relating to day-to-day
operations & control, and task-orientation
• Transformational leadership changes values and attitudes of followers, who
perform beyond expectations
• Situational leadership uses a style that fits the situation
Leadership skills
• Leadership skills required by an effective sales manager are:
communication, problem-solving, and interpersonal
 Supervising
Salespeople
• Supervising is directing and controlling day-to-day activities of
salespeople
• It is a part of leadership
• Sales managers use a combination of methods to supervise
salespeople
• Methods of supervision are classified into two categories – direct
and indirect

Direct Supervisory Methods Indirect Supervisory Methods

• Telecommunications • Sales reports
• Sales meetings • Compensation plan
• Personal contacts • Sales analysis
• Coaching / Mentoring • Expense accounts
 Key
Learnings
• Sales training process consists of need assessment,
designing, executing, evaluating, and reinforcing
• Methods used for need assessment include observation,
survey, performance testing, job description, and audit
of salesforce
• Designing sales training programme require five
decisions, called “ACMEE”: Aims, Content, Methods,
Execution, Evaluation
• Execution of training programme includes preparing
time-table, arranging trainers, travel booking,
conference hall, teaching aids, etc.
• Evaluation of training is done to improve design &
implementation, and find if expenditure was worthwhile
• Methods used for reinforcement include refresher
training, web-based, and coaching salespeople
 Key Learnings
(Continued)
• Motivation is the effort salesperson makes to perform various
activities of sales job
• Out of the various financial and non-financial tools of
motivation, financial compensation is most widely used
• 68 percent companies use combination compensation plan,
and 32 percent use straight salary / commission plans
• Leadership is necessary for a sales manager’s effectiveness
• Leadership styles are transactional, transformational, and
situational
• Leadership skills include communication, problem-solving,
and interpersonal
• Supervising, a part of leadership, is directing & controlling
day-to-day activities of salespeople
 Sales Meetings
• Companies use sales meetings and conventions as an additional
motivating tool to stimulate sales force effort.
• Regularly held sales meeting provide:
– A break from routine
– A chance to meet senior managers and other sales people
– It is important tool for motivation
– Important tool for communication and education
• Meeting can be in form of National or Regional Convention
• Local meetings are held weekly or monthly at the district or at
branch offices.
• Many companies are realizing the benefits of videoconferencing
and are using them to inform and motivate the entire sales force
of the company at one time.
• Sales Training Program
– Job enrichment
– Supervision
 Sales Contests
• Sales contests are short term Incentive programmes that can be effective
motivational tool.
• A sales contest should have a specific purpose, such as:
– Increase in Sales
– Sales of slow-moving products
– Getting new customers
• The design of the sales contest should consider the following points
– Each Sales person has an equal opportunity to win
– Use of Sales Quotas
– Prizes should be attractive, consisting of cash prizes, merchandize and travel
– At least 10% of the contest budget should be spent on promotion
– Care should be taken to ensure that salespersons do not use undesirable methods.
• Non Financial Rewards
– Promotion
– Sense of accomplishment
– Personal Growth opportunities
– Recognition
– Job Security
 Sales
• What are Sales Quotas?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
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
 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
 Routin
g
• 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 Circular Clover Leaf

 Scheduli
ng
• 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
 Evaluating
and
Controlling
the
Sales Personnel
 Salesforce Expense
Plans
• Salesforce expenses include travel, meals, lodging,
telephone, and customer entertainment
• Firms have salesforce expense plans to ensure
proper spending
• Objectives / Criteria of effective expense plans are:
It should be
• Fair to the salesperson and company
• Simple and economical to administer
• Clear to prevent misunderstanding
• Reimbursed without much delay
• Allowing differences in expenses among
different territories
 Salesforce Expense Plans
(Continued)
Four types of salesforce expense plans
• Salespeople pay all expenses
Merits: Simple, less cost for company, salespeople
get income tax advantage
Demerits: Less control on salespeople’s activities;
non-selling activities not done properly
• Company pays all expenses / Unlimited payment
plan
Merits: Good control on salespersons activities; no
anxiety for sales people on spending money
Demerits: Salespeople spend more and may make
money unethically
 Salesforce Expense Plans
(Continured)
• Company partially pays expenses / Limited payment plan
Merits: Useful in budget planning; less disputes; better control on
salesperson’s activities
Demerits: Needs more time to set expense limits and administer;
Inflexible plan, not liked by good salespeople
• Combination plan / Expense-quota plan
• Combines limited and unlimited plans
• Advantages of both plans
• Company has control on selling expenses; salespeople have
flexibility within total expense budget
 Salesforce
Audit
• Salesforce or sales management audit is a part of marketing audit
• A marketing or salesforce audit is a comprehensive, systematic,
diagnostic, and prescriptive tool, to be used periodically
• Purpose. To assess adequacy of process, improve performance,
recommend changes
• Evaluation process of salesforce audit. It has 3 stages. Company
management should find out:
• What happened by comparing actual performance with goals
• Why it happened by identifying factors contributing to negative
variance. Difficult and time consuming task
• What to do about it by taking corrective actions
 Evaluating & Controlling Performance of
Salespeople
• Purposes / objectives / importance of performance
evaluation of salespeople are:
• Mainly to find how salespeople have performed
• This information is used for other purposes, such as:
• Improving salespersons’ performance, by identifying
causes of unsatisfactory performance
• Deciding salary increments and incentive payments
• Identifying salespeople for promotion
• Determining training needs
• Motivating salespeople through recognition and reward
• Understanding strengths and weaknesses of salespeople
 Procedure for Evaluating and
Controlling
Salesforce Performance
The steps involved in the procedure are:
• Set policies on performance evaluation and control
• Decide bases of salespersons’ performance evaluation
• Establish performance standards
• Compare actual performance with the standards
• Review performance evaluation with salespeople
• Decide sales management actions and control
We shall describe above steps briefly
Set Policies on Performance Evaluation &
Control
Most companies establish basic policies. Examples are:
• Frequency of evaluation. Mostly once a year.
• Who conducts evaluation? Mainly immediate
supervisor
• Assessment techniques to be used. E.G.
Management by objectives (MBO), 360-degree
feedback
• Sources of information. Sales analysis, new
business reports, lost business reports, call plans,
etc
• Bases of salesforce evaluation. (next slide)
• Conducting performance review sessions with
salespeople
 Decide Bases for Salespersons’ Performance
Evaluation
• A firm should decide which of the following bases / criteria it would
use: (1) result / outcome based, (2) efforts / behavioural based, or
(3) both results & efforts based
• A company selects performance bases or criteria from a list of
alternatives, some of them shown below:

Quantitative results / Quantitative efforts / Qualitative efforts /

outcome bases / criteria behavioural bases / criteria behavioural bases / criteria
• Sales volume • Customer calls • Personal skills
• In value / units  No. of calls per day  Selling skills
•Percentage of quota  No. of calls per  Planning ability
• by products & customer  Team player
segments • Non-selling activities • Personality & Attitudes
• Accounts / customers  overdue payments  Cooperation
 New accounts nos. collected  Enthusiasm
 Lost accounts nos.  No. of reports sent
 Establish Performance
Standards
• Performance standards are also called sales goals,
targets, sales quotas, sales objectives
• Performance standards for quantitative results are
related to the company’s sales volume or market
share goals
• Performance standards for efforts / behavioural
criteria are difficult to set
• For this, companies do “time and duty analysis”
or use executive judgement
• Performance standards should not be too high or
too low
• After establishing standards, salespeople must be
informed
 Compare Actual Performance with
Standards
• Salesperson’s actual performance is measured and
compared with the performance standards
• For this, sales managers use different methods or
forms:
• Graphic rating scales
• Ranking
• Behaviourally anchored rating scale (BARS)
• Management by Objectives (MBO)
• Descriptive statements
• Companies combine some of the above methods for
an effective evaluation system
 Review Performance Evaluation with
Salespeople
• Performance review / appraisal session is conducted,
after evaluation of the salesperson’s performance
• Sales manager should first review high / good ratings,
and then review other ratings
• Both should decide objectives / goals and action plan
for future period
• After the review, sales manager should write about
performance evaluation & objectives for the future
• Guidelines for reviewing performance of salespersons
• First discuss performance standards / criteria / bases
• Ask the salesperson to review his performance
• Sales manager presents his views
• Establish mutual agreement on the performance
 Decide Sales Management Actions and
Control
• Many companies combine this step with the previous
step – i.e. performance review
• During performance review meeting with
salesperson, sales manager does the following:
• Identifies the problem areas. E.G. Sales quotas not
achieved
• Finds causes. E.G. less sales calls, poor market
coverage, or superior performance of competitors
• Decides sales management actions E.G. train
salesperson, redesign territories, or review
company’s sales / marketing strategies
• If a salesperson’s performance is good, he / she
should be rewarded and recognised
 Business Ethics and Sales
Management
• Sales managers and salespeople have ethical
responsibilities
• Some of the ethical situations are:
• Relations with the company. EGs. Expense
statements, credit for damaged merchandise
• Relations with customers. EGs. Gifts, false
information to get business, customer entertainment
• Ethical guidelines
• A code of ethics developed by the company would be
effective if it is enforced by top management
 Analysis
of
Sales Costs
and
Profitability
 Evaluation of Effectiveness of Sales
Organisation
• To know “what happened”, companies analyse their sales,
costs, profits, and productivity
• Effectiveness model of a sales organisation

Sales Analysis

Effectiveness Cost Analysis

of a
Sales
Organisation Profitability Analysis

Productivity Analysis

• We shall examine each of the above factors

 Sales
Analysis
• Sales analysis of a company can be done in different ways:
• Different alternatives are shown in a framework below:

National and/or international levels sales organisation

Regional level
All levels
In Sales Branch /district level
Organisation Territory level
Individual level

Total sales of the company

By type of products
Different
By type of distribution channels
Type of
Sales By type of customer classifications
By size of orders
si syl a n A sel a S

Comparisons with sales quotas / targets

Comparisons with previous periods
Different
Comparisons with industry / competitors
Type of Comparisons within sales organisations
Analysis
Comparisons with sales forecasts
 Sales Analysis
(Continued)
• Sales analysis is done at all levels of the sales organisation
• Reasons
(1) For evaluation and control: sales analysis needed at different
organisation levels like regional, district, territory
(2) For identifying problems:
Use hierarchical sales analysis. E.G.
• Sales performance at national level below sales volume budget
• Find which regions have problems in achieving sales quotas
• Focus sales analysis of branches reporting to problematic regions
• Do sales analysis of territories under problematic branches
• Further analysis of problematic territories to be done by talking
to salespeople, customers, branch managers
• Corrective actions can then be taken to improve sales
• Extend hierarchical sales analysis to different type of sales
• Out of different type of analysis, comparisons with sales quotas are
widely used
 Marketing Cost and Profitability
Analysis
• Purpose: To measure profitability of company’s
marketing units such as territories, market segments,
products, channels, & customers
• This information helps to decide which marketing units
to be expanded, reduced, or eliminated in future.
• Procedure
• State purpose of the analysis
• Identity major functional (or activity) expenses
• Convert natural accounting expenses into functional
expenses
• Allocate functional expenses to marketing units
• Prepare profitability of marketing units, by using “full-
cost approach”, or “contribution approach”
 Purpose of the Analysis
• Before starting cost and profitability analysis, it is necessary to
know for which marketing units the analysis would be done
• This helps to classify costs into direct and indirect. E.G.
Salesperson’s salary is direct cost for territory analysis, but
indirect cost for analysis of products or segments
Identify Major Functional Expenses
• The company should prepare a list of major functions or
activities with respect to marketing expenses
• E.G. Personal selling expenses, order processing expenses,
packing and delivery expenses, warehousing and inventory
expenses, administration expenses
 Convert Natural Accounting
Expenses into
Functional Expenses
• Natural or traditional expenses are to be converted to
functional expenses, for doing marketing cost analysis
• An example will make this point clear
Natural / Total Functional Expenses
Traditional
Personal Adv. and Warehousing & Administration
Expenses
Selling Sales Inventory
Promotion
Salaries 20,000,000 10,000,000 4,000,000 2,000,000 4,000,000
Rent 10,000,000 2,500,000 1,000,000 5,000,000 1,500,000
Travel 5,000,000 5,000,000 __ __ __
Adv. and 15,000,000 __ 15,000,000 __ __
Sales
Promotion
Total 50,000,000 17,500,000 20,000,000 7,000,000 5,500,000

Note: All figures are in Rupees

• A better method for allocating costs is activity-based costing (ABC),
which allocates costs based on cause of expenses
 Allocate Functional Expenses to
Marketing Units
• Functional expenses are allocated to the marketing unit under
study, depending on several bases shown below, as examples
Function Bases of allocation of expenses
• Personal selling • Directly to sales territories
• Selling time given to each product and market
segment
• Sales calls x average time per call to customers &
channels
• Advertising and • Circulation of media to sales territories
sales promotion • Media space for each product & market segment
• Equal charges to customers & channels
• Administration • Equal charges for all marketing units

• Above allocations are done to find marketing costs and profitability of

marketing units
 Prepare Profitability of
Marketing Units
• This is done by preparing profit & loss statements for
the marketing units under study
• Two approaches are available in allocating marketing
costs for profitability analysis: (1) Full-cost, (2)
Contribution
• Full-cost approach: All marketing costs, both direct &
indirect, are allocated to the marketing unit
• Useful for long-term profitability studies of products
and market segments
• Contribution approach: Only direct marketing costs
are allocated to the marketing unit
• Useful for short-term decisions like profitability of
branches / regions
 Productivity
Analysis
• Productivity is generally measured by ratio between output & input
• Some of the productivity ratios in sales management are:
• Sales per salesperson (used by many companies)
• Selling expenses per salesperson
• Sales calls per salesperson
• Improvement in productivity leads to increase in profitability
• Some of the methods used by firms to improve productivity
• Reducing salesforce size
• Hiring manufacturer’s reps. or agents on commission basis
• Using the internet, telemarketing, direct mail to reach customers
• Increasing sales volume substantially
 Social
and
Ethical Responsibilities
in
Sales Management
 Social
Responsibilities
• Corporate social responsibility means distinguishing right from
wrong and doing the right
• Social responsibility is the management’s responsibility to take
decisions and actions for welfare and interests of society and
the company
• A company has following four responsibilities to its eight
stakeholders: Customers, Community, Creditors, Government,
Owners, Managers, Employees, and Suppliers, acronym:
CCCGOMES
• Ethical responsibilities. Deal with fairness, equity,
impartiality
• Legal responsibilities. Follow laws and regulations
• Economic responsibilities. Produce and market goods /
services that society wants, and make reasonable profits
• Voluntary responsibilities. Make social (EG philanthropic)
contributions
 Legal Responsibilities and Sales
Management
• Laws and regulations by local, state, or central
governments have impact on sales management
• Price discrimination. As per MRTP act, 1969, seller
should not discriminate prices among similar buyers
(e.g. retailers)
• Price fixing. Under MRTP act, it is unlawful for suppliers
to fix prices
• Consumer protection. As per Consumer Protection Act,
1986, it is illegal to make false or misleading claims
about products / services
• Bribes. Payment of money or giving gifts to gain a
customer is illegal under Indian Contracts Act 1872 and
Sale of Goods act, 1930. Sales managers must take
responsibility that laws are not violated