SALES AND DISTRIBUTION MANAGEMENT

Unit I: Definition, Objectives and Scope, Role of Sales Management in Marketing Management,
Recent trends in Sales Management

Unit I: INTRODUCTION
Evolution of Sales Management
• Situation before industrial revolution in U.K. (1760AD)
• Situation after industrial revolutions in U.K., and U.S.A.
• Marketing function splits into sales and other functions like market research,
advertising, physical distribution

What is Sales Management?

• One definition: “The management of the personal selling part of a company’s
marketing function.”
• Another definition: “The process of planning, directing, and controlling of
personal selling, including recruiting, selecting, equipping, assigning,
supervising, paying, and motivating the personal sales force.

Nature of Sales Management

• Its integration with marketing management
•

• Relationship Selling

Transactional Value – added Relationship /Collaborative / Partnering

Relationship / Selling Selling Relationship / Selling
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 /
V. P. Marketing

National Sales Manager

Regional / Zonal / Divisional

Sales Managers

District / Branch / Area 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

E.G. A company wants to increase sales of electric motors by 15 percent, as one of the
sales objectives. (see next slide)

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

Unit II: Sales Organization, Type of sales Organizational Structures, Analysis of Market and
Sales Potential, Sales Quotas, Sales Territories and Sales Budgets.
 Unit II: Sales Organization
Concepts of Sales Organisation
• A sales organisation assists the sales manager to carry out needed
tasks efficiently and effectively to achieve results
• The basic concepts of the sales organisation are:
• Degree of centralisation
• Degree of specialisation
• Line or staff positions
• Market orientation
• Effective co-ordination

Basic Types of Sales Organisations

Sales organisations are generally classified into four basic types:
• Line Organisation
• Line and staff organisation
• Functional organisation
• Horizontal organisation
We shall discuss main characteristics, advantages, and disadvantages of
each type of sales organisation

Line Organisation

Characteristics: Specialist staff managers are available for senior marketing

/ sales managers. Staff managers’ role is to assist / advise line managers.
Used in medium and large size organisations
Advantages: Better marketing decisions, superior sales performance
Disadvantages: High cost and coordination, slower decision making,
conflict may arise if staff managers’ role is not clear
Head-Marketing

Marketing Research Promotional Customer Service

Sales Manager Manager
Manager Manager

Area Sales Area Sales Area Sales

Manager-1 Manager-1 Manager-1

Salespeople Salespeople Salespeople

Line and Staff Organisation
Characteristics: Specialist staff managers are available for senior
marketing / sales managers. Staff managers’ role is to assist / advise line
managers. Used in medium and large size organisations
Advantages: Better marketing decisions, superior sales performance
Disadvantages: High cost and coordination, slower decision making,
conflict may arise if staff managers’ role is not clear
Head-Marketing

Marketing Research Promotional Customer Service

Sales Manager Manager
Manager Manager

Area Sales Area Sales Area Sales

Manager-1 Head-Marketing
Manager-1 Manager-1

Marketing
Salespeople Salespeople Salespeople Customer
Promotional
Research Sales Manager Service
Manager
ManagerOrganisation Manager
Functional
Characteristics: Each functional specialist has line responsibility over
salespeople. Used by a large firm with many products / market segments,
Area Sales
minimising line authority to Manager #4 managers
functional

Salespeople
Advantages: Qualified specialists guide salesforce, simple to administer
Disadvantage: confusion due to more managers giving orders to salesforce

Horizontal Organisation
Characteristics: Removes management levels & departmental boundaries.
Except planning team, all others are members of cross-functional teams.
Used by firms having partnering relationships with customers.
Advantages: Reduction in supervision, unnecessary tasks, & cost;
Improved efficiency and customer responses.
Analysis of Market and Sales Potential
Sales Quotas
• What are Sales Quotas?
• Sales quotas are sales goals or targets set by a company for its
marketing / sales units for a time period
• Marketing / sales units are regions, branches, territories,
salespeople, and intermediaries
• Generally, company sales budget is broken down to sales
quotas for various marketing units
• Objectives of Sales Quotas
• To use quotas as performance standards or performance goals
• To control performance
• To motivate people by linking quotas to compensation plans
• To identify strengths and weaknesses of the company
Types of Quotas
• Organisations set many types of sales quotas: (1) sales volume, (2)
financial, (3) activity, (4) combination
• Sales volume quotas
• For effective control, sales volume quota should be set for the
smallest marketing units, such as salesperson, districts /
branches, product items / brands
• Sales volume quotas can be stated in (a) rupees / dollars, (b)
units, or (c) points
• Rupees / dollars sales volume quotas are appropriate when
salespeople are required to sell many products
• 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 5,00,000 4,50,000 90 3 270
(Rs)
Receivables 45 50 89 2 178
(days)
New 04 05 125 1 125
Customers
(Nos)
Total 6 573

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

• Typically use ‘points’ as a common measure to resolve the problem
of different measures used by various types of quotas

Methods for Setting Sales Quotas

• Several methods are used for establishing sales quotas
• In practice, companies use more than one of the following
methods to increase their confidence in sales quotas
• Total market estimates
• Territory potential
• Past sales experience
• Executive judgement
• Salespeople’s estimates
• Compensation plan
We shall briefly discuss each of the above methods

Total Market Estimates Method

• The Process followed by established companies is as under:
 1) Estimate next year’s total market demand, or industry sales
forecast, using sales forecasting methods
2) Decide the company’s estimated market share for next year
3) Company’s next year sales forecast= (1) x (2)
4) Find each territory’s percentage share out of the total company
sales in the previous year
5) Territory sales quota = (3) x (4)
Territory Potential Method
• The procedure followed by new companies is as under:
1) Estimate next year’s industry sales forecast or market potential, using
sales forecasting methods
2) Estimate multiple factor index (MFI) for each territory, based on
factors that influence sales of the product. These factors are given
weights corresponding to the degree of sales opportunity.
3) Industry sales forecast in a territory (or territory market
potential=(1)x(2)
4) Territory sales quota = (3) x estimated market share of the company
in the territory
Past Sales Experience Method
• The process consists of taking past one year’s sales (or an average of
previous 3 to 5 year’s sales), adding an arbitrary percentage (or a
percentage by which the market is expected to grow), and thus
setting each territory sales quota
• The assumption that future sales are related to past sales may not be
always correct
• This method should not be the only method used
• Past sales should be one of the factors used for deciding sales quotas
Executive Judgement Method
• Senior executives use their judgement when the product,
territories, and the company are new or very little market
information is available
• Executives predict company sales budgets and also territory
sales quotas
• This method should generally be used along with other
methods

Salespeople’s Estimate Method

• Some firms ask their salespeople to set their own quotas
• Many salespersons either set very high or too low sales quotas
Salespeople’s Estimate Method (Continued)
• For setting proper quotas, many sales managers use 2 or 3 of
above methods, discuss with salespersons to get their inputs,
and decide sales quotas
Compensation Plan Method
• Some organizations set quotas to fit with their sales
compensation plan
• E.G. A company wants to pay a monthly salary of Rs 5000, and
a commission of 3% on monthly sales above Rs 1,00,000. The
quota of Rs 1,00,000 is set in such a way that salesperson would
find it very difficult to cross total compensation of Rs 8000 per
month (5000+3000)
• Sales quotas should not be based only on this method, because
it would “put the cart before the horse”
Insight into Setting & Administration of Sales Quotas
• Set realistic quotas
• Understand problems in setting quotas
• Ensure salespeople understand quotas
• By allowing salespeople to participate in the process
• By continuous feedback to salespeople on their performance
compared to quotas
• Have flexibility in administering quotas
• Change quotas in cases of major changes in market demand or
company strategies
• Use monthly or quarterly quotas for incentives and annual quotas for
performance evaluation
• Select a few quotas that have relationships with marketing
environment and sales situations

Sales Territories
• A sales territory consists of existing and potential customers,
assigned to a salesperson
 • Most companies allot salespeople to geographic territories, consisting
of current & prospective customers
Major Reasons / Benefits of Sales Territories
• Increase market / customer coverage
• Control selling expenses and time
• Enable better evaluation of salesforce performance
• Improve customer relationships
• Increase salesforce effectiveness
• Improve sales and profit performance
Procedure for Designing Sales Territories
• Select a control unit*
• Find location and potential of present and prospective customers
within control units**
• Decide basic territories by using
• Build-up method,
Or
• Break-down method
*A control unit is a geographical territorial base
**Unnecessary & expensive for consumer products
Procedure in Build-up Method
• Decide customer call frequencies
• Calculate total customer calls in each control unit
• Estimate workload capacity of a salesperson
• Make tentative territories
• Develop final territories
Objective is to equalise the workload of salespeople
Procedure in Breakdown Method
• Estimate company sales potential for total market
• Forecast sales potential for each control unit
• Estimate sales volume expected from each salesperson
• Make tentative territories
• Develop final territories
Objective is to equalise sales potential of territories

Assigning Salespeople to Territories

Sales Manager should consider two criteria:
(A) Relative ability of salespeople
• Based on key evaluation factors:
 (1) Product knowledge, (2) market knowledge, (3) past sales
performance, (4) communication, (5) selling skills
(B) Salesperson’s Effectiveness in a Territory
• Decided by comparing social, cultural, and physical characteristics of
the salesperson with those of the territory
• Objective is to match salesperson to the territory
Management of Territorial Coverage
• It means: How salesperson should cover the assigned sales territory
• It includes three tasks for a sales manager:
• Planning efficient routes for salespeople
• Scheduling salespeople’s time
• Using time-management tools
Routing
• Routing is a travel plan used by a salesperson for making customer
calls in a territory
• Benefits of or Reasons for routing:
• Reduction in travel time and cost
• Improvement in territory coverage
• Importance of routing depends on the application:
• Nature of the product – Important for FMCG
• Type of jobs of salespeople – Important for driver-cum-
salesperson job, but creative selling job needs a flexible route
plan
Procedure for Setting up a Routing Plan
• Identify current and prospective customers on a territory map
• Classify each customer into high, medium, or low sales potential
• Decide call frequency for each class of customers
• Build route plan around locations of high potential customers
• Computerised mathematical models are developed
• Commonly used routing patterns are:

Scheduling
 • Scheduling is planning a salesperson’s visit time to customers. It
deals with time allocation issue
• How to allocate salesperson’s time?
• Sales manager communicates to salesperson major activities
and time allocation for each activity
• Salesperson records actual time spent on various activities for 2
weeks
• Sales manager and salesperson discuss and decide how to
increase time spent on major activities
• Companies specify call norms for current customers, based on sales
and profit potentials, and also for prospective customers
Time Management Tools
To help outside salespeople* to manage their time efficiently and
productively, the tools available are:
• High-tech equipment like laptop computers and cellular
phones
• Inside salespeople to provide clerical support, technical
support, and for prospecting, and qualifying, as they remain
within the company
• Outside salespeople can then spend more time getting more
orders & building relationships with major customers
*Outside salespeople travel outside the organisation

What is a Sales Budget?

• It includes estimates of sales volume and selling expenses
• Sales volume budget is derived from the company sales forecast –
generally slightly lower than the company sales forecast, to avoid
excessive risks
• Selling expenses budget consists of personal selling expenses budget
and sales administration expenses budget
• Sales budget gives a detailed break-down of estimates of sales
revenue and selling expenditure
Purposes of the Sales Budget
• Planning
• Coordination
• Control

Sales Budget Process

• Many firms follow a process for preparation of annual sales and
company budgets. It generally includes:
• Review past, current, and future situations
• Communicate information to all managers on budget
preparation – guidelines, formats, timetable
• Use build-up approach, starting with first-line sales managers
• Get approval of sales budget from top management
• Prepare budgets of other departments

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.
 •

The sequence of above steps may change to meet the sales situation
in hand.
• Some of the above steps may not be applicable for selling to the trade
• We now discuss application of above steps to industrial selling
Prospecting
• It is identifying or finding prospects i.e. prospective or potential
customers.
• Methods of prospecting or sales lead generation are: (1) referrals
from existing customers, (2) company sources (website, ads.,
tradeshow, teleprospecting), (3) external sources (suppliers,
intermediaries, trade associations), (4) salespersons’ networking, (5)
industrial directories, (6) cold canvassing
Qualifying
• Companies qualify sales leads by contacting them by mail or phone
to find their interests (or needs) and financial capacity.
• Leads are categorized as: Hot, Warm, and Cool
Preapproach
• Information gathering about the prospect.
Sources of information: the Internet, industrial directories,
government publications, intermediaries, etc.
• Precall planning
• Setting call objectives
• Tentative planning of sales strategy: which products, features
and benefits may meet the customer needs

Approach
• Make an appointment to meet the prospect
• Make favourable first impression
 • Select an approach technique:
• Introductory
• Customer benefit
• Product
• Question
• Praise
• The approach takes a few minutes of a call, but it can make or
break a sale
Presentation and Demonstration
There are four components:
• Understanding the buyer’s needs
• Knowing sales presentation methods / strategies
• Developing an effective presentation
• Using demonstration as a tool for selling
We will examine each of the above points
Understanding the buyer’s needs
• Firms and consumers buy products / services to satisfy needs
• To understand buyer’s needs, ask questions and listen
• In business situations, problem identification and impact questions
are important
E.G.
• Have you experienced any problems on quality and delivery from
the existing supplies?
• What impact the quality and delivery problems will have on your
costs and customer satisfaction?
Knowing Sales Presentation Methods/Strategies
Firms have developed different methods / styles / strategies of sales
presentation
• Stimulus response method / canned approach.
• It is a memorised sales talk or a prepared sales presentation.
• The sales person talks without knowing the prospect’s needs.
E.G. Used by tele-marketing people

• Formula method / formulated approach.

• It is also based on stimulus response thinking that all prospects
are similar.
 • The salesperson uses a standard formula – AIDA (attention,
interest, desire, and action).
• It is used if time is short and prospects are similar.
• Shortcomings are: prospects’ needs are not uncovered and uses
same standard formula for different prospects.
• Need – satisfaction method
• Interactive sales presentation
• First find prospect’s needs, by asking questions and listening
• Use FAB approach: Features, Advantages, Benefits
• Effective method, as it focuses on customers
• Consultative selling method / Problem-solving approach
• Salespeople use cross-functional expertise
• Firms adopt team selling approach
• It is used by software / consulting firms
Developing an Effective Presentation
Some of the guidelines are:
• Plan the sales call
• Adopt presentation to the situation and person
• Communicate the benefits of the purchase
• Present relevant and limited information at a time
• Use the prospect’s language
• Make the presentation convincing – give evidence
• Use technology like multi-media presentation
Using Demonstration
• Sales presentation can be improved by demonstration
• Demonstration is one of the important selling tools EGs: Test drive of
cars; demonstration of industrial products in use
• Benefits of using demonstration for selling are:
• Buyers’ objections are cleared
• Improves the buyer’s purchasing interest
• Helps to find specific benefits of the prospect
• The prospect can experience the benefit

Overcoming Sales Objections / Resistances

• Objections take place during presentations / when the order is asked
• Two types of sales objections:
• Psychological / hidden
 • Logical (real or practical)
• Methods for handling and overcoming objections: (a) ask questions,
(b) turn an objection into a benefit, (c) deny objections tactfully, (d)
third-party certificate, (e) compensation
Trial close and Closing the sale
• Trial close checks the attitude or opinion of the prospect, before
closing the sale (or asking for the order)
• If the response to trial close question is favourable, then the
salesperson should close the sale
• Some of the techniques used for closing the sale are: (a) alternative-
choice, (b) minor points, (c) assumptive, (d) summary-of-benefits, (e)
T-account, (f) special-offer, (g) probability, and (h) negotiation
Follow-up and Service
• Necessary for customer satisfaction
• Successful salespeople follow-up in different ways: For example,
• Check order details
• Follow through delivery schedule
• Visit when the product is delivered
• Build long-term relationship
• Arrange warranty service
Negotiation
• Salespeople, particularly in business to business selling, need
negotiating skills
• When to negotiate?
(a) When the buyer puts certain conditions for buying to the seller,
(b) When agreement between the buyer and the seller is needed on several
factors, (c) When the product is customised, (d) When the final price is to
be decided
• How to prepare for negotiation?
(a) planning, (b) building relationship, (c) purpose
• Styles of negotiation
(a) I win, you lose, (b) Both of us win (or win-win style), (c) You win,
I lose, and (d) Both of us lose