Sales and Distribution Management Unit-1
Content
BY: Mrs. Gurpreet K Chhabra
Introduction to Sales Management
Willingness to go to bat for the buyer within the supplier firm 2. Thoroughness and follow through 3. Knowledge of the sales person’s product line 4. Market knowledge and keeping the buyer posted 5. Applying his product and services to buyer’s needs 6. Knowledge of the buyer’s product line 7. Preparation for sales calls 8. Regularity of Sales calls 9. Diplomacy in dealing with operating departments 10. Technical education
1.
Evolution of personal selling
Negotiation Persuasion
Consultative Selling
Business Management
Partnership Strategies
Marketing concepts
Production concept Product concept Selling concept Marketing concept Societal concept
Societal marketing concept
Production
Sales
Customers
(Sales Orientation)
Customer Needs
Production
Sales
Emphasis on Seller’s Needs
(Marketing Orientation)
Emphasis on Customer Needs
Nature and role of sales management
The determination of sales force objective and goals Sales force organization, size, territory, and quota finalization Sales forecasting and budgeting Sales force selection, recruitment, and training Motivating and leading the sales force Designing compensation plan and control systems Designing career growth plans and building relationship strategies with key customers
Types of personal selling
• Industrial selling • Retail selling • Services selling
Types of selling
• Order taker sales people • Order creators • Order getters
Types of Selling
Inside Order Taker Order Takers Delivery Sales People
Outside Order Takers
Selling Function Order Creators Missionary Sales People New Business Sales People Front Line Sales People Order Getters Organizational Sales People Consumer Sales People Sales Support Sales people Technical Support sales People Merchandisers
Difference between sales and marketing
Starting point
Factory
Focus
Factory
Means
Selling and promoting
Ends
Profits though sales volume
Selling concept
Market Customer needs Coordinated marketing Profits through customer satisfaction
Market concept
Marketing management process
MARKET ANTICIPATION Marketing mix
Producer
Marketer
•Product •Price •Place •Promotion
Consumer
Exchange offer of value
Sales management process
Formulation of a strategic sales programme Implementation of the sales programme
Evaluation and control of sales force performance
Emerging trends in sales management
Technology
Customer orientation
Emerging trends in sales management
Technology
Relationship selling
Global and ethical Issues
Diversity
New selling methods
Selling and buying styles 9
Concern for the customers
(1,9) People Oriented
(9,9) Problem Solving Oriented I consult with the customer so as to inform myself of all the needs in his situation that my products can satisfy. We work towards a sound purchase decision on his part, which yield him the benefits he expects from it.
I am customer’s friend,
8
7 6 5 4 3 2
I want to understand him and respond to his feelings and interests so that he will like me. It is the personal bond that leads him to purchase from me. (5,5) Sales technique Oriented
I have tried an effective routine for getting a customer to buy. It motivates through a blended personality and product emphasis
(9,1) Push the product Oriented I take challenge of the customer and hard sell him, polling on all the pressure it takes to make him buy
(1,1) Take it or Leave it
I place the product before the customer and it sells itself as and when it comes.
1
2
3
4
5
6
7
8
9
Selling situations
Sales task and function Maintenance selling Developmental selling
Selling skills
Problem solving skills
Effective communication skills
Selling Skills
Listening Skills Negotiation and bargaining skills
Conflict management and resolution skills
Communication process
Feedback Intended Message Perceived Message
Encoding
Noise
Decoding
Sent Message
Received Message
Sender
Channel
Receiver
Communication process (cont…)
Managing body language:
Personal Appearance Posture Gestures Facial Expressions Eye Contact Space Distancing
Process of listening
Attendance Interpretation
Remembrance
Evaluations Response Action
Levels of listening
Feedback
Paraphrasing
Clarifications
Emphatic listening
Active Listening
Barriers to Listening !
Conflict management skills
Models of conflict Components of conflict The conflict resolution process:
- avoidance - coercion - meditation - conciliation - arbitration - adjudication - negotiation
Negotiation skills
Situation and timing for negotiations Formulation for a bargaining strategy The theory and strategy of principle -
negotiations separate the people from the problem focus on interests, not on positions invent options for mutual gains insist on objective criteria
Problem solving skills
Habit I: be proactive Habit 2: begin with an end in mind Habit 3: put first things first Habit 4: think win–win Habit 5: seek first to understand, then to be understood Habit 6: synergize Habit 7: renewal
Problem solving process
Define the problem
Generate alternative solutions
Decide the solution Implement the solution
Evaluate the solution
Solution implementation process
Decision on the best solution
Approval
Planning
Carry through Follow up Evaluation
I M P L E M E N T A T I O N
Stages in the selling process
Pre-sale preparation
Prospecting
Pre- approach before the interview
Approach to the customer
Follow up action
Closing the Sale
Handling Customer Objections
Sales Presentation
Prospecting
Successful prospecting
50 potential prospects 15 Qualified prospects 6 Interviews 1 sale 50 potential prospects 25 Qualified prospects
17 Interviews
7 sales
No
Yes
Successful prospecting
Process of prospecting
Identify and define prospects
Search for sources of potential accounts
Qualify the prospects from the suspects
Methods of prospecting
Cold canvassing Endless chain customer referral Prospect pool Centers of influence Non competing sales force Observation Friends and acquaintances Lists and directories Direct mail Telemarketing Trade shows and demonstrations
Selling process
• Pre approach to selling • Approach to the customer • Sales presentation - approach to sales presentation - attracting customer attention - creating interest - arousing desire and building conviction • Methods of sales presentation - canned presentation - organized presentation - tailored presentation
Handling customer objections
Suggested by SMITH
• Start with your highest expectations
• Avoid conceding first • BE sure the customer understands the value of a concession • Make concessions in small amounts • Admit mistakes and make corrections willingly • BE prepared to withdraw a concession • Avoid ‘split the difference’ strategy • Do not advertise willingness to concede • Use TRACT formula to buy time
Closing the sale
• Methods of closing the sale
• Follow-up action
• B2B selling
Forecasting process
The forecasting process is defined as the series of decisions and actions taken by a business organization in: identifying the forecasting objectives determining the independent and dependent variables developing a forecasting procedure using the available data in the selected method to estimate the sales in future
Forecasting process contd.
Develop forecasting procedure
Determine independent and dependent variables
Forecast objectives
Select forecasting analysis method
Evaluate performance results against the forecasts
Comprehend total forecasting procedure Present all the assumptions about data Make and finalize the forecast
Collect, collate, gather and analyze data
Market demand forecasting
• marketing decision support system - an MDSS is an ongoing future-oriented information structure designed to collect, collate, categorize, edit, store, and retrieve information on demand to aid decision making in an organization’s sales and marketing programme
Popular methods in forecasting
Qualitative methods
Expert opinion
Survey of buyer’s expectation
Sales force composite
Delphi technique
History analogy
Quantitative methods
Test marketing
Naïve method Regression method
Trend method Exponential smoothening
Moving average
Trend forecast of Sales
Observed sales
Forecasted sales
Sales
Time
Naïve Method
Sales (at the period t) = Sales T+1 The following formula shows how to adjust the naïve method to account for a change in rate of sales levels. The formula is stated this way: Next Year’s Sales = This Year’s Sales X This Year’s Sales Last Year’s Sales Freehand Method
Method of semi-averages
In this method available data are divided into two parts, usually with equal number of years on both the parts
Year
1993 1994 1995 1996 1997 1998 1999
Sales
102 105 114 110 108 116 112
The average of the first three years will be: 102+105+114 321 ----------- = -------- = 107 3 3 Similarly, for the last three years, 108 + 116 + 112 336 ---------------------- = --------- = 112 3 3
Method of moving averages
The 3-yearly moving average can be computed with the following formula: a+b+c b+c+d c+d+e d+e+f --------- , ----------- , ---------- , --------- , …………. 3 3 3 3
Method of Least Square
The least squares method is a formalization of the eyeball-fitting or graphical technique. It is used to mathematically project the trend line to the forecasting period with the time as the independent variable that influences the dependent variable i.e sales.
Decomposition method
It is a time series method in which seasonality is taken in to account while doing demand forecasting. This method consists of three essential steps which are illustrated below.
Exponential smoothing method
• It is similar to the moving- average forecasting method
• The forecaster is allowed to vary the weights assigned to past data points
• It allows consideration of all past data, but less weight is placed on data as it ages • Exponential smoothing is basically a weighted moving average of all past data • The method is used to forecast only one period in the future • Exponential smoothing techniques vary in terms of how they address trend, seasonality, cyclical and irregular influences
Forecasting market demand
It is the estimated rupee or unit sales for a specific future time Period based on the company’s marketing plan and an assumed marketing environment.
Price/ Unit
Qty per Unit (A)
P1
Price/ Unit Qty per Unit (B)
D D1
Price/ Unit
Total Market demand
Qty per Unit ©
D D1
P2
Price / Unit
Price / Unit
D
Q1 Q2
D2
Price/ Unit
D
D2
Qty per Unit (D)
Qty per Unit (E)
Qty per Unit (f)
Market demand curve
Market demand function
P- Price of the product I- Consumer Income T- Consumer preference P0 Price of other goods and services
QD = F (P, I, P0, T)
QD = B + aP P + a1I + a0P0 + aTT aP,, a I, a0, aT represents the one unit change in quantity associated with the variables. Linear form of the demand equation Q D = B + aP P B represents the combined influence of all the other determinants of the demand
Marketing decision support system
TRANSACTIONAL SYSTEMS
USERS
MDSS
Correlation analysis
• a correlation is basically the degree of linear association between two variables where one variable is treated as independent variable and sales as the dependent variable
• sales managers look for variables that correlate with or relate to sales
• correlation analysis involves the determination of whether a relation exists, and if it does, then measuring it, testing whether it is significant, and establishing the cause and effect relation • the degree of relationships between the variables is called co-efficient of correlation
Regression analysis
• regression analysis is another form of correlational technique
• reveals average relationship between two variables and this makes possible estimation or prediction
• a statistical method used to incorporate independent factors that are thought to influence sales into forecasting procedures
Sales Sales
Population (Liner Relationship)
Population (Curvilinear Relationship)
Market factor indices methods
• the most commonly used market factor index method is Buying Power Index Method (BPI) BPI is used to predict sales for specific geographic regions for retailer and FMCG sector such as clothing, food, auto, and other consumer items BPI is also used to determine sales quota by many multinational organizations applications are limited in Indian organizations as we do not have data bases to support this method at different levels of the market
•
•
•
Market factor indices methods contd.
Econometric techniques Econometric techniques uses multiple independent variables where the assumption is that of a liner equation between the dependent
variable (sales) and independent variables
Market factor indices methods contd.
Factors affecting selection of a forecasting technique
• data availability • cost • variability • consistency of the data • the degree of detail necessary • time horizon • technical sophistication • ability of the method to capture the level of risk and variability • the level of accuracy of the forecast • fundamental change indicators
MAPE (Mean Absolute Percentage Error)
• level of accuracy is an explanation of the gap between the actual and predicted sales
• techniques with lower level of gap are more accurate
• statistic used to calculate the level of accuracy of a forecast is called MAPE (Mean Absolute Percentage Error)
• MAPE is the average percentage forecast error and is a popular way to measure accuracy
Sales organization
• an organization of individuals either working together for the marketing of products and services manufactured by an enterprise or for products that are procured by the firm for the purpose of reselling • a sales organization defines duties, roles, rights, and responsibilities of sales people engaged in selling activities meant for the effective execution of the sales function
Sales organization (cont….)
• a structural body through which the functions of sales management are carried out
• sales organization always makes efforts to increase sales, thereby achieving the principle of profit maximization, which contributes to the overall growth of enterprise
Factors influencing structure
• product and service related factors • organization related factors • marketing mix related factors • external factors: - the speed of market change - reduction in the number of vendors per buyer - closer to customer relationships - changes in regulations and international practices
Organizational principles
span of control
unity of command
hierarchy of authority stability and continuity coordination and integration homogeneity objectivity specialization
Organizational design
- formal and coordinated task - assigning territories - establishing flows of communication and responsibilities of sales groups and individuals to customers effectively
Line organization
Mr. Ratnakar Shetty President / Owner Mr. Chandrakant VP (Sales) Five sales people
Typical structure of a line organization
Consumer market National Distributors
Institutional market
Corporate market
Direct to Home
Direct marketing
Distributors
Bundling
Gifting
Regional Distributors
Consumer
Retailers
Consumers
Design by territory
VP Marketing National Sales Manager
Divisional Manager (East) Regional Sales Manager District Sales Manager
Divisional Manager (North) Regional Sales Manager District Sales Manager
Divisional Manager (West) Regional Sales Manager District Sales Manager
Sales Staff (City wise)
Sales Staff (City wise)
Sales Staff (City wise)
Design by management function
Mr. Dara singh, VP (Marketing)
Staff Function
Line Function
Mrs. Chitra Mohanty (Advt / Sales Promotion Mgr)
Mr. Dibya Behera (Sales Manager)
Mr. Chandra De Manager (MR)
20 Sales People
Design by product
President, Marketing
Product Manager (A)
Manager (Sales) Product Manager (B)
Manager (Training)
Manager (Promotion)
Manager (Sales)
Manager (Training)
Manager (Promotion)
Design by customer
President (Marketing)
Vice President (Marketing)
Sales Manager Industrial Relations
Sales Manager Wholesalers
Sales Manager Retail Sales
Sales People
Sales People
Sales People
President
Functional
Vice President (Production)
Vice President (Marketing) Combined Sales Org. Design
Vice President (HRD)
GeographicMarketing Manager India
G.M Consumer care Customer Divisional Manager Soaps
Marketing Manager International
G.M International Sales
G.M International Sales Divisional Manager Paper
Divisional Manager Food
Product
Eastern Sales Division
Western Sales Division
Northern Sales Division
Europe Division
America Division
Gulf Division
Sales Organization
Key account sales
- focus on CRM - customer profitability and value analysis - the few accounts give incremental returns - national accounts
Sales process automation - EDI – Electronic Data Exchange
Emerging organizational design
• agency and distribution selling • shared sales force • telemarketing • TQM and team-based selling
Customer
Sales
Marketing
Technical Support
Manufacturing
Supplier selling team
Number of sales people
• determined by: - territories vary in their demand structure for prospecting - product mix demands - levels and types of prospecting - nature of the customer segments
Affordability method (based on sales budget) Incremental method Workload method Number of sales people = (Number of (Number of (Ideal (Length of X Potential existing X frequency of X a call) customers) customers) calls)
Ideal selling time available for a salesperson
Sales territory
• a group of present and potential customers assigned to an individual • sales person, a group of sales person, a branch, a dealer, a distributor or a marketing organization at a given period of time
Sales territory (contd.)
Advantages of designing a sales territory :
it ensures better market coverage effective utilization of the sales force efficient distribution of workload among sales people it is convenient to evaluate the performance of sales people to control over the direct and indirect costs of the sales function optimum utilization of sales time by sales people
Designing sales territories
Factors influencing the modifications of a territory: • mergers • market consolidation • split in division • sales force turnover • customer relocations • product life cycle change • product line change
Select the basic geographic control units Decide on the criteria for allocation Decide on the starting point Combine control units adjacent to starting point Compare territories on allocation criteria and conduct workload analysis Assign sales force to new territories Modify territorial boundaries to balance workload and potential
Territory shapes
circle
wedge
Clover leaf
Strategic Planning Matrix
Opportunity
H i g h
The account offers a good opportunity. It has high potential and the sales organization has a differential advantage in serving it.
Opportunity
The account may represent a good opportunity. The sales organization needs to overcome its competitive disadvantages and strengthen its position to capitalize on the opportunity.
Strategy
Commit high levels of sales resources to take advantage of the opportunity.
Strategy
Either direct a high level of sales resources to improve the position and to take advantage of the opportunity or shift resources to other accounts.
L o w
Opportunity
The account offers stable opportunity since the sale organization has differential advantages to serving them.
Opportunity
The account offers little opportunity. Its potential is small and the sales organization is at a competitive disadvantage in serving it.
Strategy
Strong
Strategy
Allocate a moderate level of resources to maintain current advantage.
Either commit a minimal level of resources to the account or consider abandoning the account altogether.
Weak
Sales Territories
New Territories..?
Use of Information Technology
IT enabled services computer programmes simulation techniques
Introduction to Sales Management
Willingness to go to bat for the buyer within the supplier firm 2. Thoroughness and follow through 3. Knowledge of the sales person’s product line 4. Market knowledge and keeping the buyer posted 5. Applying his product and services to buyer’s needs 6. Knowledge of the buyer’s product line 7. Preparation for sales calls 8. Regularity of Sales calls 9. Diplomacy in dealing with operating departments 10. Technical education
1.
Evolution of personal selling
Negotiation Persuasion
Consultative Selling
Business Management
Partnership Strategies
Marketing concepts
Production concept Product concept Selling concept Marketing concept Societal concept
Societal marketing concept
Production
Sales
Customers
(Sales Orientation)
Customer Needs
Production
Sales
Emphasis on Seller’s Needs
(Marketing Orientation)
Emphasis on Customer Needs
Nature and role of sales management
The determination of sales force objective and goals Sales force organization, size, territory, and quota finalization Sales forecasting and budgeting Sales force selection, recruitment, and training Motivating and leading the sales force Designing compensation plan and control systems Designing career growth plans and building relationship strategies with key customers
Types of personal selling
• Industrial selling • Retail selling • Services selling
Types of selling
• Order taker sales people • Order creators • Order getters
Types of Selling
Inside Order Taker Order Takers Delivery Sales People
Outside Order Takers
Selling Function Order Creators Missionary Sales People New Business Sales People Front Line Sales People Order Getters Organizational Sales People Consumer Sales People Sales Support Sales people Technical Support sales People Merchandisers
Difference between sales and marketing
Starting point
Factory
Focus
Factory
Means
Selling and promoting
Ends
Profits though sales volume
Selling concept
Market Customer needs Coordinated marketing Profits through customer satisfaction
Market concept
Marketing management process
MARKET ANTICIPATION Marketing mix
Producer
Marketer
•Product •Price •Place •Promotion
Consumer
Exchange offer of value
Sales management process
Formulation of a strategic sales programme Implementation of the sales programme
Evaluation and control of sales force performance
Emerging trends in sales management
Technology
Customer orientation
Emerging trends in sales management
Technology
Relationship selling
Global and ethical Issues
Diversity
New selling methods
Selling and buying styles 9
Concern for the customers
(1,9) People Oriented
(9,9) Problem Solving Oriented I consult with the customer so as to inform myself of all the needs in his situation that my products can satisfy. We work towards a sound purchase decision on his part, which yield him the benefits he expects from it.
I am customer’s friend,
8
7 6 5 4 3 2
I want to understand him and respond to his feelings and interests so that he will like me. It is the personal bond that leads him to purchase from me. (5,5) Sales technique Oriented
I have tried an effective routine for getting a customer to buy. It motivates through a blended personality and product emphasis
(9,1) Push the product Oriented I take challenge of the customer and hard sell him, polling on all the pressure it takes to make him buy
(1,1) Take it or Leave it
I place the product before the customer and it sells itself as and when it comes.
1
2
3
4
5
6
7
8
9
Selling situations
Sales task and function Maintenance selling Developmental selling
Selling skills
Problem solving skills
Effective communication skills
Selling Skills
Listening Skills Negotiation and bargaining skills
Conflict management and resolution skills
Communication process
Feedback Intended Message Perceived Message
Encoding
Noise
Decoding
Sent Message
Received Message
Sender
Channel
Receiver
Communication process (cont…)
Managing body language:
Personal Appearance Posture Gestures Facial Expressions Eye Contact Space Distancing
Process of listening
Attendance Interpretation
Remembrance
Evaluations Response Action
Levels of listening
Feedback
Paraphrasing
Clarifications
Emphatic listening
Active Listening
Barriers to Listening !
Conflict management skills
Models of conflict Components of conflict The conflict resolution process:
- avoidance - coercion - meditation - conciliation - arbitration - adjudication - negotiation
Negotiation skills
Situation and timing for negotiations Formulation for a bargaining strategy The theory and strategy of principle -
negotiations separate the people from the problem focus on interests, not on positions invent options for mutual gains insist on objective criteria
Problem solving skills
Habit I: be proactive Habit 2: begin with an end in mind Habit 3: put first things first Habit 4: think win–win Habit 5: seek first to understand, then to be understood Habit 6: synergize Habit 7: renewal
Problem solving process
Define the problem
Generate alternative solutions
Decide the solution Implement the solution
Evaluate the solution
Solution implementation process
Decision on the best solution
Approval
Planning
Carry through Follow up Evaluation
I M P L E M E N T A T I O N
Stages in the selling process
Pre-sale preparation
Prospecting
Pre- approach before the interview
Approach to the customer
Follow up action
Closing the Sale
Handling Customer Objections
Sales Presentation
Prospecting
Successful prospecting
50 potential prospects 15 Qualified prospects 6 Interviews 1 sale 50 potential prospects 25 Qualified prospects
17 Interviews
7 sales
No
Yes
Successful prospecting
Process of prospecting
Identify and define prospects
Search for sources of potential accounts
Qualify the prospects from the suspects
Methods of prospecting
Cold canvassing Endless chain customer referral Prospect pool Centers of influence Non competing sales force Observation Friends and acquaintances Lists and directories Direct mail Telemarketing Trade shows and demonstrations
Selling process
• Pre approach to selling • Approach to the customer • Sales presentation - approach to sales presentation - attracting customer attention - creating interest - arousing desire and building conviction • Methods of sales presentation - canned presentation - organized presentation - tailored presentation
Handling customer objections
Suggested by SMITH
• Start with your highest expectations
• Avoid conceding first • BE sure the customer understands the value of a concession • Make concessions in small amounts • Admit mistakes and make corrections willingly • BE prepared to withdraw a concession • Avoid ‘split the difference’ strategy • Do not advertise willingness to concede • Use TRACT formula to buy time
Closing the sale
• Methods of closing the sale
• Follow-up action
• B2B selling
Forecasting process
The forecasting process is defined as the series of decisions and actions taken by a business organization in: identifying the forecasting objectives determining the independent and dependent variables developing a forecasting procedure using the available data in the selected method to estimate the sales in future
Forecasting process contd.
Develop forecasting procedure
Determine independent and dependent variables
Forecast objectives
Select forecasting analysis method
Evaluate performance results against the forecasts
Comprehend total forecasting procedure Present all the assumptions about data Make and finalize the forecast
Collect, collate, gather and analyze data
Market demand forecasting
• marketing decision support system - an MDSS is an ongoing future-oriented information structure designed to collect, collate, categorize, edit, store, and retrieve information on demand to aid decision making in an organization’s sales and marketing programme
Popular methods in forecasting
Qualitative methods
Expert opinion
Survey of buyer’s expectation
Sales force composite
Delphi technique
History analogy
Quantitative methods
Test marketing
Naïve method Regression method
Trend method Exponential smoothening
Moving average
Trend forecast of Sales
Observed sales
Forecasted sales
Sales
Time
Naïve Method
Sales (at the period t) = Sales T+1 The following formula shows how to adjust the naïve method to account for a change in rate of sales levels. The formula is stated this way: Next Year’s Sales = This Year’s Sales X This Year’s Sales Last Year’s Sales Freehand Method
Method of semi-averages
In this method available data are divided into two parts, usually with equal number of years on both the parts
Year
1993 1994 1995 1996 1997 1998 1999
Sales
102 105 114 110 108 116 112
The average of the first three years will be: 102+105+114 321 ----------- = -------- = 107 3 3 Similarly, for the last three years, 108 + 116 + 112 336 ---------------------- = --------- = 112 3 3
Method of moving averages
The 3-yearly moving average can be computed with the following formula: a+b+c b+c+d c+d+e d+e+f --------- , ----------- , ---------- , --------- , …………. 3 3 3 3
Method of Least Square
The least squares method is a formalization of the eyeball-fitting or graphical technique. It is used to mathematically project the trend line to the forecasting period with the time as the independent variable that influences the dependent variable i.e sales.
Decomposition method
It is a time series method in which seasonality is taken in to account while doing demand forecasting. This method consists of three essential steps which are illustrated below.
Exponential smoothing method
• It is similar to the moving- average forecasting method
• The forecaster is allowed to vary the weights assigned to past data points
• It allows consideration of all past data, but less weight is placed on data as it ages • Exponential smoothing is basically a weighted moving average of all past data • The method is used to forecast only one period in the future • Exponential smoothing techniques vary in terms of how they address trend, seasonality, cyclical and irregular influences
Forecasting market demand
It is the estimated rupee or unit sales for a specific future time Period based on the company’s marketing plan and an assumed marketing environment.
Price/ Unit
Qty per Unit (A)
P1
Price/ Unit Qty per Unit (B)
D D1
Price/ Unit
Total Market demand
Qty per Unit ©
D D1
P2
Price / Unit
Price / Unit
D
Q1 Q2
D2
Price/ Unit
D
D2
Qty per Unit (D)
Qty per Unit (E)
Qty per Unit (f)
Market demand curve
Market demand function
P- Price of the product I- Consumer Income T- Consumer preference P0 Price of other goods and services
QD = F (P, I, P0, T)
QD = B + aP P + a1I + a0P0 + aTT aP,, a I, a0, aT represents the one unit change in quantity associated with the variables. Linear form of the demand equation Q D = B + aP P B represents the combined influence of all the other determinants of the demand
Marketing decision support system
TRANSACTIONAL SYSTEMS
USERS
MDSS
Correlation analysis
• a correlation is basically the degree of linear association between two variables where one variable is treated as independent variable and sales as the dependent variable
• sales managers look for variables that correlate with or relate to sales
• correlation analysis involves the determination of whether a relation exists, and if it does, then measuring it, testing whether it is significant, and establishing the cause and effect relation • the degree of relationships between the variables is called co-efficient of correlation
Regression analysis
• regression analysis is another form of correlational technique
• reveals average relationship between two variables and this makes possible estimation or prediction
• a statistical method used to incorporate independent factors that are thought to influence sales into forecasting procedures
Sales Sales
Population (Liner Relationship)
Population (Curvilinear Relationship)
Market factor indices methods
• the most commonly used market factor index method is Buying Power Index Method (BPI) BPI is used to predict sales for specific geographic regions for retailer and FMCG sector such as clothing, food, auto, and other consumer items BPI is also used to determine sales quota by many multinational organizations applications are limited in Indian organizations as we do not have data bases to support this method at different levels of the market
•
•
•
Market factor indices methods contd.
Econometric techniques Econometric techniques uses multiple independent variables where the assumption is that of a liner equation between the dependent
variable (sales) and independent variables
Market factor indices methods contd.
Factors affecting selection of a forecasting technique
• data availability • cost • variability • consistency of the data • the degree of detail necessary • time horizon • technical sophistication • ability of the method to capture the level of risk and variability • the level of accuracy of the forecast • fundamental change indicators
MAPE (Mean Absolute Percentage Error)
• level of accuracy is an explanation of the gap between the actual and predicted sales
• techniques with lower level of gap are more accurate
• statistic used to calculate the level of accuracy of a forecast is called MAPE (Mean Absolute Percentage Error)
• MAPE is the average percentage forecast error and is a popular way to measure accuracy
Sales organization
• an organization of individuals either working together for the marketing of products and services manufactured by an enterprise or for products that are procured by the firm for the purpose of reselling • a sales organization defines duties, roles, rights, and responsibilities of sales people engaged in selling activities meant for the effective execution of the sales function
Sales organization (cont….)
• a structural body through which the functions of sales management are carried out
• sales organization always makes efforts to increase sales, thereby achieving the principle of profit maximization, which contributes to the overall growth of enterprise
Factors influencing structure
• product and service related factors • organization related factors • marketing mix related factors • external factors: - the speed of market change - reduction in the number of vendors per buyer - closer to customer relationships - changes in regulations and international practices
Organizational principles
span of control
unity of command
hierarchy of authority stability and continuity coordination and integration homogeneity objectivity specialization
Organizational design
- formal and coordinated task - assigning territories - establishing flows of communication and responsibilities of sales groups and individuals to customers effectively
Line organization
Mr. Ratnakar Shetty President / Owner Mr. Chandrakant VP (Sales) Five sales people
Typical structure of a line organization
Consumer market National Distributors
Institutional market
Corporate market
Direct to Home
Direct marketing
Distributors
Bundling
Gifting
Regional Distributors
Consumer
Retailers
Consumers
Design by territory
VP Marketing National Sales Manager
Divisional Manager (East) Regional Sales Manager District Sales Manager
Divisional Manager (North) Regional Sales Manager District Sales Manager
Divisional Manager (West) Regional Sales Manager District Sales Manager
Sales Staff (City wise)
Sales Staff (City wise)
Sales Staff (City wise)
Design by management function
Mr. Dara singh, VP (Marketing)
Staff Function
Line Function
Mrs. Chitra Mohanty (Advt / Sales Promotion Mgr)
Mr. Dibya Behera (Sales Manager)
Mr. Chandra De Manager (MR)
20 Sales People
Design by product
President, Marketing
Product Manager (A)
Manager (Sales) Product Manager (B)
Manager (Training)
Manager (Promotion)
Manager (Sales)
Manager (Training)
Manager (Promotion)
Design by customer
President (Marketing)
Vice President (Marketing)
Sales Manager Industrial Relations
Sales Manager Wholesalers
Sales Manager Retail Sales
Sales People
Sales People
Sales People
President
Functional
Vice President (Production)
Vice President (Marketing) Combined Sales Org. Design
Vice President (HRD)
GeographicMarketing Manager India
G.M Consumer care Customer Divisional Manager Soaps
Marketing Manager International
G.M International Sales
G.M International Sales Divisional Manager Paper
Divisional Manager Food
Product
Eastern Sales Division
Western Sales Division
Northern Sales Division
Europe Division
America Division
Gulf Division
Sales Organization
Key account sales
- focus on CRM - customer profitability and value analysis - the few accounts give incremental returns - national accounts
Sales process automation - EDI – Electronic Data Exchange
Emerging organizational design
• agency and distribution selling • shared sales force • telemarketing • TQM and team-based selling
Customer
Sales
Marketing
Technical Support
Manufacturing
Supplier selling team
Number of sales people
• determined by: - territories vary in their demand structure for prospecting - product mix demands - levels and types of prospecting - nature of the customer segments
Affordability method (based on sales budget) Incremental method Workload method Number of sales people = (Number of (Number of (Ideal (Length of X Potential existing X frequency of X a call) customers) customers) calls)
Ideal selling time available for a salesperson
Sales territory
• a group of present and potential customers assigned to an individual • sales person, a group of sales person, a branch, a dealer, a distributor or a marketing organization at a given period of time
Sales territory (contd.)
Advantages of designing a sales territory :
it ensures better market coverage effective utilization of the sales force efficient distribution of workload among sales people it is convenient to evaluate the performance of sales people to control over the direct and indirect costs of the sales function optimum utilization of sales time by sales people
Designing sales territories
Factors influencing the modifications of a territory: • mergers • market consolidation • split in division • sales force turnover • customer relocations • product life cycle change • product line change
Select the basic geographic control units Decide on the criteria for allocation Decide on the starting point Combine control units adjacent to starting point Compare territories on allocation criteria and conduct workload analysis Assign sales force to new territories Modify territorial boundaries to balance workload and potential
Territory shapes
circle
wedge
Clover leaf
Strategic Planning Matrix
Opportunity
H i g h
The account offers a good opportunity. It has high potential and the sales organization has a differential advantage in serving it.
Opportunity
The account may represent a good opportunity. The sales organization needs to overcome its competitive disadvantages and strengthen its position to capitalize on the opportunity.
Strategy
Commit high levels of sales resources to take advantage of the opportunity.
Strategy
Either direct a high level of sales resources to improve the position and to take advantage of the opportunity or shift resources to other accounts.
L o w
Opportunity
The account offers stable opportunity since the sale organization has differential advantages to serving them.
Opportunity
The account offers little opportunity. Its potential is small and the sales organization is at a competitive disadvantage in serving it.
Strategy
Strong
Strategy
Allocate a moderate level of resources to maintain current advantage.
Either commit a minimal level of resources to the account or consider abandoning the account altogether.
Weak
Sales Territories
New Territories..?
Use of Information Technology
IT enabled services computer programmes simulation techniques
