Lecture notes on Sales Management

what is sales management process. what is sales management and its objectives lecture notes on sales and distribution management free pdf download
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Published Date:18-07-2017
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Bachelor of Business Administration (B.B.A.) BBA - 305 SALES MANAGEMENT Directorate of Distance Education Guru Jambheshwar University HISAR-125001CONTENTS Lesson No. Lesson Name Page No. 1. Introduction to Sales Management, Defination 3 Concepts, Objectives, Functions 2. Personal Selling, Sales, Sales Activities & Tasks 25 3. Planning for Selling Effort : Demand Measurement, 43 Sales Forecasting, Measuring Market and Sales Potential and Market Share 4. Sales Territories 65 5. The Sales Organisation 83 6. Recruitment and Selection of Sales-Force 95 7. Sales Training Programmes : Aim, Methods 110 and Evaluations of Sales Training Programmes 8. Motivating and Compensating Sales Personnel 128 9. Sales Budgets and Quotas 151 10. Controlling Sales Efforts 174LESSON : 1 INTRODUCTION TO SALES MANAGEMENT, DEFINATION, CONCEPTS, OBJECTIVES, FUNCTIONS The initial days of industrial revolution saw dramatic changes taking place in the overall functioning of business organisations. The task of selling the goods was no longer a simple exercise as meeting of the buyer, and seller at a marketplace and carrying out the exchange. The businesses grew big and the goods were manufactured at a large scale and were not sold out in small areas where the manufacturer could personally sell them. At this stage the marketing department evolved, which served as a link between the buyer and the seller. In the process of marketing, the people who carried out the activity of making the product available to the customers had to function in a different set of circumstances that could not be managed in the way the other departments of the company were managed. So, the business organisations evolved a separate department that came to be known as sales department and the process of managing this department as sales management. The definitions and concepts are further elaborated herein. Sales Management Originally, sales management refers to the direction of sales force i.e. the people associated with the activities of selling. With time, the term acquired (3)a broader meaning. In addition to management of personal selling, sales management meant management of all marketing related activities such as advertisement, sales promotion, marketing research, physical distribution, pricing and product merchandising. However, it was pointed out these activities are primarily carried out by the marketing department of a company and there was a need to clearly define the purview of sales management. Finally, American Marketing Academy agreed that sales management means the planning, direction and control of personal selling, including recruitment, selection, equipping, assigning, routing, supervising, paying and motivating as these tasks apply to personal task force. The above definition defines the purview of sales management as activities related to the management of sales force. However, in actual practice, the activities of sales managers are much wider. So, some academicians are of the view that the activities of sales managers can be classified as sales management and management of sales force. The activities concerned with personal selling are sales management, while the activities of managing those carrying out the activity of personal selling may be called as sales force management. The sales managers organise the sales activity both within the organization and outside the organization. In the company, the sales managers build both formal and informa1 organisations to ensure effective communication in the sales department as well as other departments of the company. Outside the company, the sales managers build key contacts with the customers and publics to ensure a smooth personal selling. (4)Salesmanship The term salesmanship has been defined in various ways. Some of the definitions of salesmanship are : a. Salesmanship is the art of persuading persons to buy goods or services, which will give them lasting satisfaction. b. Salesmanship is the art of helping prospects and customers achieve their goals in life. c. Selling is a buying process wherein the salesman ascertains the customers’ needs and indicates convincingly how the needs can be satisfied through the purchase of goods and services. d. Salesmanship is the art of solving the customers’ problems through the benefits offered by the products or services being sold by the salesman. The work of a salesman can best be described in one single word as service i.e. helping the customer to get most from the he pays to acquire a product or service. A skilled salesman is the one who devotes time to solve-the customers’ problems because more often the customer is looking for a solution to his problem when he buys a product. He might not be even aware of his needs. It is here that a good salesman helps a customer in purchasing what will solve his problem. The salesman persuades feelings to action or evidence that convinces reason and judgement. Objectives The most important functions of sales management are : (5)a. Sales volume b. Contribution to profit c. Continuing growth The prime responsibility of the sales department is to build up higher volume of sales. This higher volume of sales leads to greater production in the factory and the company achieves the economies of scale. This helps in reducing the costs and making the products of the company more competitive in the market. This leads to the automatic achievement of the other two objectives that is increase profits and continued growth of the company. The top management, delegates the responsibility of achieving the sales objectives to the marketing department that ultimately directs the sales department to carry out activities in order to achieve them. The sales managers thus play a key role in the company because the entire growth of the company depends on their ability to achieve the stated objectives. The sales managers also carry out the important task of the appraisal of market opportunities and convey the same to the company. This helps in designing the products which customers would like to posses. This helps the company in achieving greater customer satisfaction and hence greater growth in sales. The forecasts made by the sales department serve as the basic outline for carrying out the entire planning of the company. Various roles of sales force In a company, the sales force has to cover a broad range of position. The actual nature of the role and the position may vary with the company; still (6)some of the roles played by sales force are as under : 1. Deliverer In many cases, the role of sales persons is mainly to deliver the products to the customers. This type of role is often played in companies selling milk, bread etc where the product is of generic nature and it is the availability of the product that decides the selling of the same. Even in soft drinks, the available product sells and the sales personnel have the main task of delivering the product. In the present age of Internet, most companies are offering the facility of placing orders by the Internet. In such companies, delivery of product is of prime importance and the sales personnel have to undertake them. 2. Order taker In some cases, the sales persons may be the order takers and the delivery of the product may be made by the dealers or through courier. In such cases, the salesmen visit the customers, show their products, and persuade the customer to purchase them. They book the orders and convey it to their distribution department or their dealers. This practice is common in companies selling consumer goods. The salesmen visit the shops and book orders and convey them to the dealer who delivers them to the customers. This bifurcation of delivery and order collection activity is done so that the sales person can devote more time in understanding the customers and the market activity. Also, the sales person might be working in a wide territory and the delivery is done the distributor’s representative. (7)3. Missionary In certain cases, the salesmen are not directed to book the orders or deliver them. Their main task is just to build goodwill and create a favourable attitude in the minds of the customers. They might also be directed to educate the potential customer. In such cases, they act as missionary i.e. making market calls with a broader mission and not merely booking orders. Medical representative visiting doctors and informing about their products plays such a role. They do not book orders but educate the doctors about their products and the benefits they offer. This practice allows sales person to visit and service customers in a large territory. 4. Technician In certain cases where the product is technical in nature, the sales personnel may have to act as a technical consultant and not merely focus on booking orders. This activity is witnessed in the companies making plants and equipment that involve high technical knowledge on the part of the seller as well as the purchaser. 5. Demand creator Often, the sales personnel have to stimulate the demand by product demonstration or customer education. E.g. the demand of vacuum cleaners was actually created by the salesmen by visiting the customers. Similarly, the role-played by insurance agents by educating the customers helps them in selling the insurance policies. Tasks performed by sales force The nature of tasks performed by the sales personals vary from company to (8)company depending upon the objectives laid down for them. For example the sales representatives of IBM are responsible for not only selling the computer but also for its installation and upgradation. Similarly the sales representatives of AT&T are responsible for developing, selling and protecting accounts. In addition to the difference in company objective, other factors such as state of economy, market orientation of a company etc. also determine the nature of tasks performed by sales force. In general the sales personal perform the following tasks : 1. Prospecting The sales force has to be on the look out for new customers always. The customers have the prospect of purchasing must be identified and persuaded to purchase the products of the company. The new customers serve as a base of growth of sales volumes and so they need to be-identified and converted from a prospect to a customer. 2. Communicating The sales force has to skillfully communicate the information about the companies’ products and services. In fact communication is one of the single most important function which is performed. The communication is both within the organistion as well as out side the organization. Within the organization, the sales representatives have to take instructions from marketing and sales managers. They convey order collected form the customers to the distribution department so that it can make the delivery. The sales representatives also communicate with the accounts department of the company in order to ensure that the timely collection of payments is made. In case a complaint (9)is received from the customers, the sales representatives have to communicate the same to the technical personnel in production and quality control department. Outside the department, the sales representatives have to meet the customers, distributors, retailers and all those who affect the selling activity directly or indirectly. They collect orders and payment. In addition to this, one of the important tasks of sales representatives is to communicate market intelligence i.e. the activities of the competitors so that the senior managers can formulate strategies to face the competition. Thus, communication is one of the single most task performed. The successful sales representatives have to master the art of communication. 3. Selling This is the core function of the sales representatives because all the activities must ultimately culminate into sales. The sales representatives have to very skillfully master this art of approaching the customers, presenting their product, convincing them about the benefits of the products over the competing products, answer the guarries and objections of the customers. The sales representatives have to learn the art of negotiations and closing the deal. The order thus collected must be conveyed to the company. The responsibility of selling does not end here. The sales persons have to ensure product delivery and customer education. 4. Servicing The task of sales force does not end after taking the order. The customers have to be visited again in order to resolve their difficulties or complaints. In case the product is not performing well, the sales representatives have (10)to get the same repaired. It is also possible that the customer will have to be educated about using the product. The sales people find it easier to sell their products, to the existing customers. So, once a relationship is established between the sales person and the customer, it has to be strengthened with the help of services. 5. Information gathering The sales personnel have to gather the information about the customers and the market conditions and report the same to the company. The market information helps the company in fighting competition. The information about the customers helps the company in identifying customer needs and designs the products, which the customers want. This helps the company is getting an edge over the competitors. 6. Allocating The sales representatives have the first hand information of the market conditions. So, their opinion is significant in distributing or allocating the products to the customers at the times when the product is in short supply. Sales Management functions The functions of sales managers are much wider than the tasks of sales force as mention above. The diagram 1 explains some of these functions. Sales programming The sales programming functions refer to the functions associated with planning in order to develop sales programme. This starts from understanding the top management’s strategies and policies that form the blueprint for the (11)functioning of the entire organization and sales is no exception. On the basis of these, the sales plans are formulated and the blueprint of the activities is prepared in order to execute these plans and policies. During the process of formulation of plans, a mechanism is built in to facilitate evaluation and control of the plans. This is a continuos process that keeps on providing inputs by way of feedback for innovations in the system for improvement. Sales organization The sales organization function consists of four sub functions : personnel direction, sales direction, sales control and cooperation. Personnel direction functions are essentially personnel management functions of recruitment, selection and training of sales force. The compensation packages are designed so as to continuously motivates sales force to achieve higher and higher sales volumes. Designing right employment conditions, which facilitate functioning of sales team, are covered under this category of functions. It must be noted that although these are essentially personnel functions, but they are performed by the sales managers because of the unique requirements of sales department. The traditional principles of compensation and governance of sales force do not give fruitful results. So, they are not within the purview of the personnel department. Sales direction functions are the activities facilitating maximum output from the sales force. The sales force once recruited has to be allocated territories wherein they have to function. The routing of their territories is done to reduce costs and exercise maximum control on the sales team. The sales team is informed about the products, the expected sales targets that they are to achieve and the nature of reporting desired out of them. Providing office (12)support to the sales team is also an important function of sales direction. The sales force is also given exposure of training through seminars etc. Finally, a periodic review of performance is done at the conferences and meetings. The experiences of various sales force members are exchanged so that there is a mutual sharing of knowledge. Sales control is one of the important functions because the sales team operates in the field, far away from the direct supervision. So, adequate sales control has to be exercised so that the employees do their work sincerely. The control is exercised through review of sales performance; reports and other indicators lay down by the sales managers. These can be sales budgets, sales expenses etc. Finally, sales team has to achieve synergies through cooperation and coordination with other departments and general management. The coordination as a function of sales team will be described in detail subsequently. The product functions The product functions include development, setting price and other sales terms and physical handling of products. The sales team contributes a lot to product development by way or providing the feedback to the R&D department. They inform them about the needs and wants of the customers so that the products can be designed accordingly. The sales team suggests standardization of features. Once a product is developed, it is tested in the market by the sales team before it if finally launched into the market. This saves the costs and significantly reduces the chances of product failure in the market. The sales team is in direct touch with the market and the customers. So, it (13)is best informed about the price that the customers would be willing to pay. Also, the sales force can apprise of the prevailing market conditions and suggest the price, which will make the product, compete in the market. The sales force also advises the company about launching the gift schemes, sales promotion offers etc. The innovative finance schemes such as hire purchase or consumer finance schemes are suggested to the top management so that a greater sales volume is achieved. The sales team invariably cannot escape physical handling of the products. They are the interface between the customers and distribution department. So, they have an important role in planning and allocation of the inventories. While the logistics other departments, sales team’s directions. are used to control them, handle functions. The market functions The market functions include the activities performed in the marketplace and include marketing research, feedback about competition, distribution and relationship building with customers and all those engaged in influencing sales functioning. In many companies, marketing research may not be a separate department. So, the sales team has to perform this function. Even if there exists a marketing research department in a company, sales department has to do the basic job of providing information of the customers’ needs so that the R&D team can develop products as demanded by the customers. The sales team finds out the market potential and trends etc. and provides the required feedback. For routine flow of information, sales team is an important linkage in the management information system (MIS). It must be noted that (14)marketing research seeks information for specific problems while routine information flows in the normal MIS. The sales department also provides the information regarding competitor activity so that the sales department can formulate strategies to face the competition. Business development functions The sales team has to contribute to the activities leading. to business development. Such activities include advertisement, promotion, publicity etc. They provide the basic information on the basis of which the strategies pertaining to branding, advertisement budgeting, product campaigns etc. are designed. Salesmanship : an art or science Often, the suffix “ship” is added to denoting persons and signifies skill or art, e.g., craftsmanship, horsemanship etc. These persons have the fundamental knowledge of the skill or the craft and salesmanship is no exception to this. He invariable has a thorough knowledge of his profession and uses innovative ways and means to achieve his objectives. The art of approaching a customer, opening, negotiating and closing a deal has no standard format. The salesman masters this skill through his knowledge, experience and ingenuity. The skillful use of communication that is both verbal and non-verbal contributes a lot to the success of a salesman. He is an artist who paints a mental picture with a verba1 brush. Art is the way of making knowledge more efficient by exercising the skill. Science is a systemized knowledge arranged under general principles of truth. Over a period of time, the techniques of salesmanship have evolved. The generalisations for facing specific situations have been documented and (15)practiced so that those engaged in the profession of sales can face the situations. This support of systematic body of knowledge makes salesmanship a science. In practice, salesmanship can neither be called as a pure science, nor can be it termed as a pure art. Infact it is a combination of the two which imparts the skills for successful salesmanship. Approaches to build customer contact The sales representatives can approach a customer in various ways as described below : 1. Sales representative to buyer In this method, the sales representative approaches the customer individually. The customer is usually contacted in person for the first time and subsequently the communication over phone/fax or email may be used. In this case, there is one to one contact of the sales representative and the customer. Such an approach is used in departmental stores and the companies engaged in direct marketing. It is the most preferred approach in case of industrial or institutional selling wherein one to one contact is essential I order to negotiate a dea1. 2. Sales representative to buyer group In this method, the sales representative makes a presentation to a group of buyers. This method is particularly used in rural marketing wherein the sales force goes to a village and demonstrates the products to a group of persons collectively. This method is more cost effective, especially when the cost of approaching an individual customer is high. The limitation of this method is that it might be difficult in collecting the prospectina customers at one place. (16)3. Sales team to buyer group In this method, the team of sales persons makes the presentation to the customers or their group. The sales team usually consists of people from marketing department as well as technical people. This method-is particularly used by advertising agencies that visit the clients in a group and make presentations to give their ideas, about their advertisement campaign. This method is particularly useful when the product is technical in nature that needs the help of more than one person in convincing the customers. Also, in case of advertisement agencies, this approach is useful because the group of persons is usually more effective in highlighting the benefits of a campaign. Moreover, different members provide their specialized answer to the quarries of the client. 4. Conference selling In this method, the sales representatives often bring various resource persons, organize a conference, and discuss problems and mutual opportunities. The forum of conference is used to sell the products. 5. Seminar selling In this method, a seminar is organised, which is often educational in nature. The persons visiting that seminar are informed about the relative benefits of the products and are convinced to purchase the products. Designing the sales force The tasks and functions of sales representatives as well as sales managers to have been described at length earlier. The general principles of two core (17)functions of sales management i.e. designing and managing sales force can be defined in a sequence as shown in the diagram 2. Designing → → → → → sales force Managing → → → → → the sales Diagram 1 : Steps in designing and managing the sales force Sales force objectives The sales force objectives are based on the corporate objectives and the characteristics of company’s target markets. Based on the two, the sales managers decide the targets and plans to be achieved over a period of time. The planning is done keeping in view the available resources at the disposal of the company. The objectives of sales force are not in isolation, infact they are integrated with the objectives with production targets, marketing plans, advertising and sales promotion budgets etc. The objectives serve as the blue print of activities for the sales department for future course of action. Sales force strategy Based on the objectives, sales department formulates the strategies and plans (18)achieve these objectives. The sales managers decide the level of inputs to be provided by the field force through various options of selling such as direct sales, contractual sales etc. The companies also design the role of sales team, whether they have to act as missionary, order taker, deliverer or to provide customer support and service. Sales force structure Based on the above stated steps i.e. objectives and strategy, the sales managers design the basic structure of sales force. They anticipate the number of field personnel required to carry out he planned strategies. Various options can be exercised while designing the structure. The structures can be made on the basis of territory, product, markets or combinations of them. In territory based structures, the sales force is organised on the basis of territories. The sales representatives operate at field level and are supervised by area managers and regional mangers. The sales representatives have to sell all the products of the company in a given territory. They have to fulfil the sales quotas, which are assigned to them. The disadvantage is that sometimes products cannot be focussed because the sales team has to sell a large number of products. To take care of this problem, some of the companies design their sales force on the basis of products. There are separate teams for selling different products in the same or different territories. This method is effective but is expensive. In the market based structure, the sales force is trained to serve different markets. The complex structures use combinations of these to be used when a large number of products are to be marketing in diverse markets. (19)Sales force size Most companies use the workload approach to decide upon the size of sales force. The customers are grouped into size classes according to their annual sales volume and the desirable call frequencies are established for each class and the annual sales calls are determined by multiplying the number of calls with the number of accounts (customers). The average number of calls that a sales representative can make is estimated and on this basis the number of sales personnel required is estimated. In case companies employ other methods of sales force structure; the sales force size will vary. The sales force size also varies with the nature of territory. E.g. in far-flung areas, the number of field person required may be large as compared to that in a metro city. Sales force compensation Various options have to be tried for designing the salary structure of sales force so that the sales force is motivated to face the challenge of sales growth. Some of methods used are flat salary, flat salary with variable commission and salary with incentives. In the first method, the sales team is given a basic salary irrespective of their performance. However, this does not motivate the sales team to work more. So, often companies provide sales related incentives in addition to the basic salary. This motivates the field force to achieve higher and higher volumes of sales. In the third type of salary structure, the sales team is provided with performance linked incentives. Companies also have a system of straight commissions wherein no base salary is provided and the sales representatives earn commission on the sales they bring for the company. Perks form an important component of (20)

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