Sales and Distribution Management
Sales and Distribution Management
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
• Relationship Selling
V. P. Sales /
V. P. Marketing
Line Organisation
Marketing Customer
Promotional
Research Sales Manager Service
Manager
Manager Manager
Salespeople
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 Actual Percent Weight Percent
Quota Quota (Importance) Quota x
Weight
Sales 5,00,000 4,50,000 90 3 270
Volume (Rs)
Receivables 45 50 89 2 178
(days)
New 04 05 125 1 125
Customers
(Nos)
Total 6 573
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
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
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