SALES AND DISTRIBUTION

Introduction to Selling

It is a process of exchange of goods and services in exchange of money or some value.

Difference between Sales & Marketing

The objective of sales is to make profit whereas objective of marketing is customer satisfaction

The Sales is seller oriented whereas Marketing is Buyer Oriented

The purpose of Marketing is to identify the different sources for revenue whereas sales help in
realizing these revenues

Nature of Sales Management

Scope of Sales Management

• Efficiency and Effectiveness of sales team

• Higher Productivity
• Profitability
• Market growth
• Market share
• Image & Goodwill

Ethical Leadership
Types of Sales

Auction (the value of these kind of sales is very high, auction happens for mines, natural resources,
many agri products etc.)

Tender

Across the table

On the counter

General Sales

Sales = (Pre-Sales + Sales + Post Sales)

SELLING PROCESS

Types of salesperson

Charismatic salesperson

Missionary salesperson

Ordinary salesperson

Selling Skills

• Market Research Skills (knowledge about the market, product., knowledge about the
market, product knowledge, competitors, laws, etc.)
• Strong Communication Skills
• Presentations Skills (3 popular methods are canned approach, stimuli response & need
based)
• Positive Attitude
• Human Skills
 • Negotiation skills
• Strong Interpersonal Skills
• Technical Skills (sales call planning, sales pitch etc..)

Emerging Trends in Sales Management

• ERP solutions
• E-commerce Portals
• CRM
• Distribution Management
• Reverse Logistics
• Use of Population Science in Territory Designing
• Cross functional recruitment etc.

Sales Management Function

Setting up Sales Organization

This is one of the key tasks for any organization to establish an excellent sales organization. If the
organization is well designed, it will serve the efforts of the team in fulfilment of strategic sales
objectives.
Need for Sales Organization

a) Defines lines or authority

b) Ensures that all necessary activities are assigned and performed

c) Establishes lines or communication

d) Provides for coordination and balance

e) Provides Insight into avenues or advancement

f) Economizes on executive time

Common Sales Organization Structure

General Manager (Sales & Marketing) – Zonal Sales Manager – Regional Sales Manager – Area Sales
Manager – Sales Executive – Management Trainee

Sales Forecasting

Sales forecasting is an estimation of projected sales for a time period. Simply speaking, the process
of sales forecasting involves reviewing performance, history of the product or service, and relates it
to the marketing and sales efforts of the firm within the anticipated market environment (economic,

competitive, technological, public policy etc.) and buyer behaviour. A short-term sales forecast (say
for a period of one year) when linked to the sales budget

Helps in the preparation of an overall budget for the firm as a whole. The short-term sales forecast
in effect also provides the essential financial dimension to sales in terms of expected sales revenue
and expenses required. Also, it helps in assessing the cash inflow and outflow needs and their
sources. A long-term sale forecast (say for a period of 5 years or so) on the other hand, focuses on
capital budgeting needs and process of the firm. It provides for changing the marketing strategy of
the firm, if needed, and includes reference to emerging product market needs, new market
segments to be catered, review of distribution network and promotional programmes, organization
of sales force, and marketing set up. The long-term sales forecast triggers the task of aligning the
production, procurement, financial and other functional needs of the firm with the finalised sales
forecast.

Information Needs for a Sales Forecast

Use of reliable, up-to-date and relevant information is the most critical aspect of sales forecasting.
The information required for a sales forecast should cover:

1 An assessment of the total market size

2 An appreciation of the market trends

3 Innovations, which may have an impact on the market

4 Market trends in foreign countries where the market pattern is in advance of the domestic market
5 An evaluation of the market share obtained

6 An evaluation of competitive strengths

7 The criteria on which purchase decisions are likely to be made

8 Assessment of elements at work in the market, which will influence sales

9 The influence in the market of competitors

10 The level of sales needed by the company to obtain optimum use of resources

11 The image of the company in the market

12 The marketing Weaknesses

13 An evaluation of the market share, which can be obtained

14 Assessment of factors within the company, which will influence sales levels

15 Planned distribution and sales promotion activities by the company

Methods of Sales Forecasting

Let us now consider various methods used for preparing the sales forecast. These methods are
commonly grouped into 5 categories: executive judgement, surveys, time series analysis, correlation
anti regression methods and market tests.

a. Executive Judgement (Qualitative) It is an efficient method of sales forecasting. Based on the past
performance, insights gained and intuition of the executive(s), this method of sales forecasting
works out fairly well particularly when the market is stable. However, this method generally suffers
from difficulty in realistically reflecting changes in the market. Sales force composite method and
jury of executive opinion are the two popular forms of this method of sales forecasting.

b. Surveys (Quantitative) A second way of sales forecasting is by surveying the customers, sales
force, experts, etc. and ascertaining their predictions. Customer surveys can provide information
relating to type and quantity of products which customers intend purchasing. Sales force surveys can
provide estimates of overall territory offtake, company's share and the share of the major
competitors. Dealers survey may also form part of the sales force survey if a firm so desires. Expert
surveys provide sales forecast as the experts and industry consultants look at it. They bring in an
outsider's view to the company's internal forecast and help many a time by adding new dimensions
for consideration of management.

c. Time Series Analysis (Quantitative) Using the historical sales data, this method tries to discover a
pattern or patterns in the firm's sales volume over time. The identification of the patterns helps in
sales forecasting. Time series analysis helps locate the trend, seasonal, cyclical and random factor
changes associated with the past sales data. In this way, it improves the prediction from the past
sales data. Experience reveals that time series analysis for sales forecasting are quite accurate for
short and medium term forecasts and more so when demand is stable or follows the past behaviour.

Some of the popular techniques of time series analysis are: moving averages, exponential
smoothing, time series extrapolation, and Box-Jenkins technique.
d. Correlation and Regression Methods: Quantitative. These methods attempt at examining the
relationship between past sales and one or more variables such as population, per capita income or
gross national product, etc. The use of regression analysis is done in order to determine whether any
relationship exists between the past sales, and changes in one or more economic, competitive or
internal variables to a firm.

The accuracy of forecasts made by using correlation and regression methods is generally better than
the other methods. Typical forecasting applications of these methods are sales forecasts by product
class. Though the correlation method helps in identifying the I association between the factors, it
does not explain any cause and effect relationship between them.

Some more advanced forecasting methods explaining cause-effect relationship besides regression
method include econometric model, input-output model and life-cycle analysis method. The life-
cycle analysis method is used for forecasting of new product's growth rate based on curves. The
phases of product acceptance by the various groups of customers such as innovators, early adopters,
early majority, late majority, and laggards are central to the analysis.

f. Market Tests

Market tests are basically used for developing one-time forecasts particularly relating to new
products. A market test provides data about consumers' actual purchases and responsiveness to the
various elements of the marketing mix. On the basis of the response received to a sample market
test and providing for the factor of a typical market characteristic as well as learning from the
market test, product sales forecast is prepared. Substantial fluctuation that one finds in reality from
market to market limit the accuracy of sales forecasts made by this method~ unless the market test
is designed systematically.

g. Combining Forecasts and Using Judgement (qualitative)

Experience brings out that the forecasts resulting from the use of multiple methods in a combined
way greatly surpass most individual methods of sales forecasts. Research also supports the
combined use of quantitative and qualitative methods of sales forecasting in a given situation rather
than using either of the two. Application of judgement to quantitatively arrived forecasts should be
done in a structured manner with a view to adding in sights and realism to the forecasts so arrived
at, since a forecasts is a prediction and needs the subjective perception too. Several studies have
shown how combining forecasts by using one or the other methods can improve accuracy of the
forecasts. The methods which can be used for combining forecasts are:

A simple average of two or more forecasts, and By assigning historical or subjective weights to such
forecasts, w which more closely reflect, the changing reality. In short, being aware of the conditions
under which some forecasting methods work better than others enable the firm to prepare for
different alternative forecasts. By monitoring which alternative works better, the firm can learn to
achieve its goal more effectively.
A sales budget is a programme designed for a stipulated time frame that highlights the selling
expenses and anticipated sales, quantitatively and in value terms.

Key Personal Selling Strategies

1. The kind of sales force required

2. The size of sales force required

There are three types of sales expenses:

Fixed Expenses: These expenses pertain to the compensation of salespersons, office rent, insurance
and interest on fixed assets like vehicles, office space, office equipment, etc.

Performance-related Expenses: These include commissions, incentives, bonus and awards, etc.

Activity-related Expenses: These include travel and communication expenses, etc

Sales Territory

Comprises a number of present and potential customers, located within a given geographical area
and assigned to a salesperson, branch, or intermediary (retailer or wholesaling intermediary).

Six Steps To Consider When Determining A Firm’s Basic Territories

 Forecast sales and determine sales potentials

 Determine the sales volume needed for each territory

 Determine the number of territories

 Tentatively establish territories

 Determine the number of accounts for each territory

 Finalize the territories, and draw the boundary lines

Routing the Sales Force

• Routing is the managerial activity that establishes a formal pattern for sales reps to follow as
they go through their territories.
• Reduces travel expenses as it ensures more efficient territory coverage.
• Some reps resent it.
• Best for routine sales jobs with regular call frequencies.

Evaluation and Revision Of Sales Territories

o Determine, number, location & size of customers & prospects in each tentative territory
o Estimate time required for each sales call

o Determine length of time b/w calls

o Decide call frequencies

o Calculate number of calls possible within a given period

o Adjust the number of calls possible during a given period by desired call frequencies for different
classes of customers & prospects

o Check out the adjusted territories with sales personnel

Sales Quota

Provide goals:

• sense of directions
• salespeople have to focus on work in keeping with co. objectives
• present challenges to work harder and perform better

The following quotas can be fixed for salespersons

(i)Sales Volume Quotas: Most simple, set for product/territory/line/channel or distribution; may be
re Sales/unit sales; annual quota can be broken down into half yearly / quarterly / monthly quotas
Managers can evaluate / compare performances

ii. Gross margin / Net Profit Quotas: Fixed on gross margin / net profit aimed at; cuts expenses (Sales
/ Expenses); Gives an accurate picture of profits generated Commission paid is more accurate when
calculated on gross margin Help managers do profitability analysis for organizational effectiveness
But sales people can concentrate on selling only profitable products

iii. Budget / Activity Quotas: Emphasis on non selling activities; Have to know that apart from selling
there are other considerations – should be clubbed with sales volume quotas – prospects called –
displays – service – demos – dealer training …; After sales calls, customer relations, promotion
management

iv. Expense quotas: For making people cost conscious – expense tied to sales volume.

Factors considered in sales quota setting

a. Sales forecasts and market potential

b. Sales forecast alone (used when company does not have data / software / personnel to calculate
market potential

c. Past experience; arbitrary increase over past years sales / averaging sales over past years; used
when company does not have sales forecast / market potential data

d. Executive judgment; common in small orgn’s

e. Sales people compensation

f. Set by sales people themselves

Sales Motivation Factor’s influencing the salesperson

a. Personal characteristics • Current job • Career (Exploration, Establishment, Maintenance&

disengagement) • Demographic variable • Experience and physiological variable
b. Environmental Conditions • Territory potential • Strength of competition
c. Organizational Regulatory norms • Sales Supervision • Span of control • Leadership style •
Type of communication • Compensation plan

Sales Compensation

Sales Organizations design compensation Plans with multiple objectives.

 One of the key objective is attract the quality salesperson  Improve the productivity level

 Optimizing the sales effort

 Reduces the sales expenses and production cost

 Reducing the attrition rate in the firm.

 Good rapport within the organization

Types of compensation

Financial

Non-financial

Financial Compensation

Straight Commission Plan

Allied Methods

Straight Salary Plan

Straight Commission Plan

Bonus & Incentive

Salary Plus Incentive Plan (Combination Plan)

Drawing account and combination plan

Non –Financial Compensation

Promotions

Recognition Programmes

Fringe Benefits
Expense Accounts

Perks

Sales Contests