MBA306A: SALES AND DISTRIBUTION MANAGEMENT MODULE-1

Module I Sales Management; Objectives and Functions, Setting up a sales organization, Personal Selling, Management of Sales force, Recruitment & Selection, Training, Motivation and Evaluation, Compensating Sales Force, Sale forecasting, Territory Management, Sales Budget, Sales Quota.

SALES (OVERVIEW) A. INTRODUCTION: The top line of the income statement and the driving force of all organizations, ideas and progress... also used to describe the greatest profession in history and greatest skill one can ever have. That is how Sales is described and this statement is a testimony to the importance sales has in an any organization. Sales refers to the exchange of Goods or services for some consideration be it money or some equivalent. Sales organization is like a fuel to the engine and this is the only department in the company which generates revenue. While other functions are equally important and play a vital role like Advertising, Marketing, Public relations etc the money spent and resultant impact would not be there if the sales process and person are ineffective. Sales in some form have been there from times immemorial. For example in Stone Age, while there has been no formal process, they used to leave some gifts/articles for a Safe passage. Slowly socialization started increasing and the concept of Demand/Supply started taking shape. When men started cultivating and harvesting crops around 10,000 BC they used to go around to sell the extra surplus in lieu of Jewellery and other valuable metals. Agriculture produce slowly started coming to the marketplace and the concept of intermediaries started evolving. This prevailed for several thousand years and with the advent of the Shipbuilding industry, rapid advancement was made and goods started selling across the seas. Sales person were employed on commission or on a daily basis. Gradually commercial laws were passed and currency started finding a place in the market. Around 670BC Government backed coinage was issued which facilitated Trade and then after a brief period of lull due to fall of Rome, Trade started picking up again in the middle east and Trade fairs started gaining a lot of acceptance. The industrial revolution brought a dramatic change in the selling process and gave rise to the modern sales and marketing practices. Advancement in the means of Transport like Roads, Rail, Air and Shipping have further revolutionized the selling process. Thus a constant evolution has happened in the Sales function from the early Stone Age through the Iron and the Middle ages. The selling function in addition to generating revenue for the organization, builds relationships with Customers, suppliers and distributors and constantly tries to capture the right value for the company produce. In spite of being a pivotal function it has got some kind of a negative image in the society and a career in sales is something which is viewed with a bit of negativity. This has got to do more with the general misconceptions which the larger people have rather than based on hard facts. The main objectives of sales function is to:C Generate revenue C Increase the customer base C Maintain or increase the profitability of the company products so that the right value is captured. Marketing is one more function within the broad area of Sales and Marketing, It is important that both these functions perform like a well oiled machine, have a sound understanding between them, failing which, there will be a lot of chaos in the marketplace and the intended strategies of marketing can never get executed to perfection by the Sales organization. AGRICULTURE INDUSTRY SALES OVERVIEW: The customers are farmers and they buy Agriculture equipment (Tractors, Motors, Pumps, etc) Seeds, Pesticides, Herbicides, Fertilizers and Micro nutrients. Sales
Prepared By: Ms.Subhra Mondal Page 1

MBA306A: SALES AND DISTRIBUTION MANAGEMENT MODULE-1

and Distribution largely was in the Govt. and Public sector domain and it was more a seller driven market with quotas and allotmentsThe key input was Fertilizers and seed which was also supplied by the Govt. agencies or the farmer largely used saved seed. However things started changing and chemicals (Pesticides, Fungicides and Herbicides) usage was being propagated largely by the European and American Multinationals. Agriculture equipment industry was largely driven by big Indian Industrial houses with collaboration from MNCs. The seed industry evolution is more recent relatively in the Agriculture industry with a very aggressive participation by the Private industry (Indian and MNC) with lot of technological breakthroughs. Currently there is a lot of investment being made by organizations in Sales and Marketing and from a seller driven market it is now turning into a buyer driven and the farmer has got a wide choice across the inputs. Unlike the FMCG industry DEMAND GENERATION is largely a function of sales given the MEDIA DARK markets in which we operate and the non-impulsive nature of the product .Demonstrating the product features and benefits on the field is one of the important ways of driving sales. The position of a sales person becomes much more critical as in most of the cases he is everything to the prospective customer (farmer). He would plant a new variety of seed only depending on the rapport he enjoys with the salesman and his confidence on the neighbourhood retail. Since the selling process involves a lot of technologies it is essential that apart from a formal qualification in Agriculture he should be willing to walk that extra mile and keep himself updated on the latest technological advancements. B. ROLE OF SALES ORGANISATION: The main component of a Sales Organization is the sales force which is guided and kept constantly motivated by a team of sales managers. The sales organization acts as a medium through which the sales managers achieve the overall objective of the organization. The specific roles of sales organizations are:a. Creating specialists: Who can help appropriate the product in the right manner? In Agriculture industry within the sales organization we have personnel who would specialize in Agronomy and whose job is to help the product get into the right segment and position it accordingly so that it is suited to those environment conditions and delivers the best. During product launch/ new product demonstrations or preseason it is not uncommon in our industry to find few hundreds who are recruited with a special mission of canvassing for company products. b. Achievement of companys objectives: The structure of the sales organization should be in line with the company objectives. For example, if some company believes strongly in demand generation and pull activity, it should accordingly make heavy investments on the field force and impart training accordingly. In the other instance if company believes in Trade push as their core of the strategy then the resourcing intensity as well as the specs of the resourcing needs will be different. Similarly during the case of special projects and special drive companies put huge manpower for short period of 3-6months to propagate the products. c. Coordination and balance: A sales person is involved in selling as well as administration activities with respect to reporting, analysis, statutory compliance apart from spending major part of his time in building relationships. In order to do justice to the variety of activities within the broad function --Span of control or supervisory control should be restricted to 6-7. This way the supervisor can devote quality time to their team members and guide them and keep them motivated for deliveries. d. Time optimization: Organizations may follow different structures depending on what they want to drive in the marketplace. In our industry there are organizations which drive the business, Product wise (Key crops) and some drive it across the crops through one person in specified geography. None of them is right or wrong as long as the objectives for driving in a particular way are clear and are articulated rightly with the support to the frontline person. The basis for designing a sales organization mainly depends on the following:

Prepared By: Ms.Subhra Mondal

Page 2

MBA306A: SALES AND DISTRIBUTION MANAGEMENT MODULE-1

a. b. c. d. e. Vision and the Mission of the organization Target Market segments Core competencies Flexibility The type of culture one wants to show f. g. h. i. j. Size of the sales force Compensation Market strategy (Push or Pull) Technology Company size

The types of the organization are: The types of Sales force structure: C Formal and informal organizations C Product based sales force structure C Horizontal and vertical organizations C Geographic based sales force structure C Centralized and decentralized organizations C Customer based sales force structure C Line and Staff organizational structure C Combination based sales force structure Sales culture: Every sales organization has a unique culture that is created by the beliefs, attitudes and values of its members and top managers. Sales culture can be successful if every member of the organization imbibes it. The vision of the organization is shared with the larger sales force which motivates the frontline sales personnel and makes them feel tied with. For example -DuPont Pioneer has Safety, Valuing people, Environmental stewardship & Ethical behaviour apart from LONGLOOK of Pioneer which has been the guiding principle of Pioneer business for the 75Years of its existence across the globe. Similarly Monsanto has a pledge and articulates it very aggressively. Sales culture also has unique set of jargons, rituals, values and beliefs which are unique to an organization. In the Indian Agri input industry we have following sales force structure C Product based , C Geographic based C Combination of both of them. All the chemical companies in India follow geographic based structure whereas in the seed Bayer and Monsanto follow a combination of product a geographic whereas Pioneer-DuPont follows geographic based structure. Syngenta follows a product based sales force structure. C. SALES FUNCTION AND POLICIES: We will discuss about the hierarchy in a Sales organization and the different roles each of them play in the Sales organization. Indian Agriculture Organizations largely have 3-5 levels in a Sales organization. The frontline is typically called as Sales officer/Sales Executive/ Territory Manager. He would be covering a predefined geography consisting of a District or couple of Districts. He is like a CEO of his Territory and is responsible end to end, i.e. from Demand generation to connecting the demand back to the channel, Services the channel (Distributor and Retail), Collects money for the good supplied and is also responsible for discovering new markets and expanding the channel. Demand generation as I told in the earlier chapters is the responsibility of Sales in the Agri Input industry because of the product not being an impulse purchase, Media dark, Illiteracy and the farmer wanting to see the results practically before making the purchase decision. A frontline sales person has also to file MIS in predetermined reports and keep his Manager updated on the cropping trends and market. In Non-Agriculture industry the frontline sales personnel is largely involved in servicing the channel, channel expansion and discovering new markets, though he promotes the product using some sales promotional schemesHowever the major responsibility of generating demand lies with the marketing function. The middle level manager is called as a Regional Manager or Area Manager as the case be , he is responsible for a state or part of the state depending on the potential, current turnovers of the company and the geographical distance. He supervises 5-7 frontline sales personnel line- Sales officer/Sales executive or
Prepared By: Ms.Subhra Mondal Page 3

MBA306A: SALES AND DISTRIBUTION MANAGEMENT MODULE-1

Territory Manager. The middle level manager is the vital link between the frontline and the corporate. He presents the vision and mission of the organization to the frontline and aligns them with the broad objective of the organization and translates all the corporate dreams and at the same time presents their aspirations and concerns to the top management. He is responsible for strategizing at a regional level for the crops and drive distribution and farmer engagement programmes. Organisations with a strong middle management are extremely successful. It is important to have a strong and committed middle management failing which, most of the companys objectives would not go beyond them and success will not be on the expected lines. The Sales Manager is known by different designations like National Sales Manager, VP(Sales) and Head( Sales). He is responsible for : i) Preparing sales plan and budgets ii) Set Sales force goals and objectives iii) Estimate demand and forecast sales iv) Determine the size and structure of the sales force organization v) Recruit, select and train sales people vi) Design sales territories, set sales quotas and define the performance standards vii) Compensation and motivation of the sales force viii) Conduct sales volumes, cost and profit analysis ix) Evaluate sales force performance X) Monitor the ethical and social conduct of the sales force. Apart from the above , agriculture industry employs a lot of seasonal Manpower. These people report to the frontline( Sales officer/Territory manager). Each of the frontline would typically have 2-6 people reporting to them depending on the aggression of the company on investments on ground as well as the maturity of the market. These people in most of the cases are Agriculture graduates. Sales force remuneration can be in the following ways : i) Straight salary ii) Straight commission on sales iii) Salary and commission on sales iv) Salary and commission on sales above a certain amount v) Salary and different rates of commission on varying totals vi) Salary and share in profits The compensation structure is largely driven by a combination of fixed and variable amount. The variable compensation as part of the salary goes up as the level (depends on the level in the organization). Current system followed by most of the organizations in the Agriculture industry is to have a higher variable pay at the higher levels of the organization. The frontline also have special incentives for certain products if they achieve some benchmark volumes. Apart from the incentive there are other non financial motivators like year end meetings at exotic locations, mementos and certificates for outstanding performance. The temp staff reporting to the frontline has a larger component of their salary on variable compensation and is sometimes on a per unit basis. Some of the established companies in the field of direct marketing keep their 90% of the compensation as variable, Eureka Forbes is a good example which has been following this system successfully for so many years.

Prepared By: Ms.Subhra Mondal

Page 4