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SALES MANAGEMENT - READING MATERIALS#1

Sales management refers to the administration of the personal selling component of an


organization's marketing program. It includes the planning, implementation, and control of sales
programs, as well as recruiting, training, motivating, and evaluating members of the sales force.
The fundamental role of the sales manager is to develop and administer a selling program that
effectively contributes to the achievement of the goals of the overall organization. The term "sales
manager" may be properly applied to several members of an organization, including: marketing
executives, managers of field sales forces, district and division managers, and product line sales
administrators. This text emphasizes the role of managers that oversee a field sales force.

The art of meeting and exceeding the sales goals of an organization through effective planning,
controlling, budgeting and leadership refers to sales management. Sales Management helps the
organization to achieve the sales targets efficiently.

Sales management is a business discipline which is focused on the practical application


of sales techniques and the management of a firm's sales operations.

THE ROLE OF SALES MANAGEMENT

Although the role of sales management professionals is multidisciplinary, their primary


responsibilities are: (1) setting goals for a sales-force; (2) planning, budgeting, and organizing a
program to achieve those goals; (3) implementing the program; and (4) controlling and evaluating
the results. Even when a sales force is already in place, the sales manager will likely view these
responsibilities as an ongoing process necessary to adapt to both internal and external changes.

GOAL SETTING

To understand the role of sales managers in formulating goals, one must first comprehend their
position within the organization. In fact, sales management is just one facet of a company's overall
marketing strategy. A company's marketing program is represented by its marketing mix, which
encompasses strategies related to products, prices, promotion, and distribution. Objectives related
to promotion are achieved through three supporting functions: (1) advertising, which includes
direct mail, radio, television, and print advertisements, among other media; (2) sales
promotion, such as contests and coupons; and (3) personal selling, which encompasses the sales
force manager.

The overall goals of the sales force manager are essentially mandated by the marketing mix. The
mix coordinates objectives between the major components of the mix within the context of internal
constraints, such as available capital and production capacity. For example, the overall corporate
marketing strategy may dictate that the sales force needs to increase its share of the market by five
percent over two years. It is the job of the sales force manager, then, to figure out how to achieve
that directive. The sales force manager, however, may also play an important role in developing
the overall marketing mix strategies that determine his objectives. For example, he may be in the
best position to determine the specific needs of customers and to discern the potential of new and
existing markets.

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PLANNING, BUDGETING, AND ORGANIZING

After determining goals, the sales manager must develop a strategy to attain them. A very basic
decision is whether to hire a sales force or to simply contract with representatives outside of the
organization. The latter strategy eliminates costs associated with hiring, training, and supervising
workers, and it takes advantage of sales channels that have already been established by the
independent representatives. On the other hand, maintaining an internal sales force allows the
manager to exert more control over the salespeople and to ensure that they are trained properly.
Furthermore, establishing an internal sale force provides the opportunity to hire inexperienced
representatives at a very low cost.

The type of sales force developed depends on the financial priorities and constraints of the
organization. If a manager decides to hire salespeople, he needs to determine the size of the force.
This determination typically entails a compromise between the number of people needed to
adequately service all potential customers and the resources made available by the company. One
technique sometimes used to determine size is the "work load" strategy, whereby the sum of
existing and potential customers is multiplied by the ideal number of calls per customer. That sum
is then multiplied by the preferred length of a sales call (in hours). Next, that figure is divided by
the selling time available from one sales person. The final sum is theoretically the ideal sales force
size. A second technique is the "incremental" strategy, which recognizes that the incremental
increase in sales that results from each additional hire continually decreases. In other words sales
people are gradually added until the cost of a new hire exceeds the benefit.

Other decisions facing a sales manager about hiring an internal sales force are what degree of
experience to seek and how to balance quality and quantity. Basically, the manager can either
"make" or "buy" his force.

IMPLEMENTING

After goal setting, planning, budgeting, and organizing, the sales force plan, budget, and structure
must be implemented. Implementation entails activities related to staffing, designing territories,
and allocating sales efforts. Staffing, the most significant of those three responsibilities, includes
recruiting, training, compensating, and motivating sales people.

Before sales managers can recruit workers to fill the jobs, they must analyze each of the positions
to be filled. This is often accomplished by sending an observer into the field. The observer records
time spent talking to customers, traveling, attending meetings, and doing paperwork. The observer
then reports the findings to the sales manager, who uses the information to draft a detailed job
description. Also influencing the job description will be several factors, chiefly the characteristics
of the people on which the person will be calling. It is usually important that salespeople possess
characteristics similar to those of the buyer, such as age and education.

CONTROLLING AND EVALUATING

After setting goals, creating a plan, and setting the program into motion, the sales manager's
responsibility becomes controlling and evaluating the program. During this stage, the sales

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manager compares the original goals and objectives with the actual accomplishments of the sales
force. The performance of each individual is compared with goals or quotas, looking at elements
such as expenses, sales volume, customer satisfaction, and cash flow. A common model used to
evaluate individual sales people considers four key measures: the number of sales calls, the number
of days worked, total sales in dollars, and the number of orders collected. The equation below can
help to identify a deficiency in any of these areas:
An important consideration for the sales manager is profitability. Indeed, simple sales figures may
not reflect an accurate image of the performance of the overall sales force. The manager must dig
deeper by analyzing expenses, price-cutting initiatives, and long-term contracts with customers
that will impact future income.

ENVIRONMENTS AND STRATEGIES

The goals and plans adopted by the sales manager will be greatly influenced by the industry
orientation, competitive position, and market strategy of the overall organization. It is the job of
sales managers, or people employed in sales-management-related jobs, to ensure that their efforts
coincide with those of upper-level management.

The basic industry orientations are industrial goods, consumer durables, consumer nondurables,
and services. Companies or divisions that manufacture industrial goods or sell highly technical
services tend to be heavily dependent on personal selling as a marketing tool. Sales managers in
those organizations characteristically focus on customer service and education, and employ and
train a relatively high-level sales force.

REGULATION

Besides markets and industries, another chief environmental influence on the sales management
process is government regulation. Indeed, selling activities at companies are regulated by a
multitude of state and federal laws designed to protect consumers, foster competitive markets, and
discourage unfair business practices.

OBJECTIVES OF SALES MANAGEMENT

Sales management entails numerous objectives which are executed by sales managers. There are
mainly three such objectives:
1. Sales Volume
2. Contribution to profits
3. Continuous Growth

The sales executives in this case are the ones who help implement these objectives. However it is
the top management who has to outline the strategies to achieve these objectives of sales
management. The top management should provide products which are socially responsible and are
marketed in a manner which meets customers expectations and does not break it. Thus sales
management involves a strong interaction between Sales, marketing and top management.

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PROCESS OF SALES MANAGEMENT
1. Sales Planning - involves strategy, setting profit-based sales targets, quotas,
sales forecasting, demand management and the writing and execution of a sales plan.

A Sales Plan is a strategic document that outlines the business targets, resources and sales
activities. It typically follows the lead of the marketing plan, strategic planning and
the business plan with more specific detail on how the objectives can be achieved through
the actual sale of products and services.

Marketers must plan things well in advance for the best results. It is essential to
have concrete plans. Mere guess works do not help in business.
Know your product well. Sales professionals must know the USPs and benefits of
the product for the consumers to believe them.
Identify your target market.
Sales Planning makes the products available to the end users at the right time and
at the right place.
Sales Planning helps the marketers to analyze the customer demands and respond
efficiently to fluctuations in the market.
Devise appropriate strategies to increase the sales of the products.

WHY BUILD A SALES PLAN? DONT JUST THINK IT INK IT

Helps to plan for the unforeseen risks so they can be overcome


Gives a benchmark of where we want to go, how we can get there, and allows us to adjust the
plan as necessary. It drives creative thinking- helps focus on the bigger picture.

1ST STEP OF BUILDING A SALES PLAN IS ANALYZED WHERE YOU ARE AT?

To determine where you are going you first have to see where you have been.
Some questions to ask yourself are:
What business are we in?
Who are our customers?

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Where did most of my sales come from?
Where do we want my sales to come from?
What are some external/Internal factors that can impact my sales? Eg. Industry trends, Technology,
Competition, Business Environment etc..

2ND SET YOUR GOALS

Your goals should be SMART (Specific, Measurable, Attainable, Relevant, Time Bound)

Some samples:
Achieve 1 Million in New Sales by December 31st, 2015
Sell 2 Corporate wide Licenses by December 31st, 2015
Grow Distributor Network by 30% by December 31st, 2015

3RD STEP DEVELOP THE PLAN

This is the meat of your sales plan and is the most critical in helping you achieve your goals. It
should outline all the strategies and tactics that you are going to use to overcome the obstacles that
you may face in meeting your goals.

STRATEGY YOUR PLAN OF ATTACK TO REDUCE RISK

A Strategy is a plan or action designed to achieve a particular goal. One way to develop sales
strategies is to write down the risks/obstacles that you see in achieving your goals then write down
some ideas on how you can overcome them. These include internal and external factors.

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TACTICS- SHORT-TERM ACTIONS TO HELP YOU EXECUTE ON YOUR
STRATEGY

Tactics have clear deliverables and outputs using people, tools and time and have minimal risk.
When trying to determine your tactics its best to write down the steps/milestones that will help
you to execute and support your strategy.

HOW TO CREATE A PROFITABLE SALES PLAN

Todays small businesses are tech-savvy and leveraging new ways in order to enhance and expand
their seasonal sales. Many businesses are reaching out to their buyers through mobile phones and
others are attracting customers through social media marketing. There are many who lag behind
in sales due to their inadequate planning. For their help, we have created a list of to-be created-
plans, which will help you in organizing and planning your seasonal sales.

Sales and Inventory Plans

First thing which needs to be done is creating detailed sales and inventory plan even before the
season starts. Use these plans in your inventory buying and merchandize sales promotion.
Before you begin, you require data which will help you in calculating the exact number of profits
you earned throughout the previous year, and also about the inventory you bought for producing
sales for that year. After collecting this entire information you then require a weekly sales plan.

Weekly Sales Plan

This plan will help you in organizing your entire buying and production schedule. It will also
divide profits and sales for the previous year. As by now you know about your previous years
sales, you need to make a crisis situation plan in order to avoid unnecessary fluctuations in profits.
Such fluctuations may occur due to economic downturns.

Based on your previous years experience, you can then easily forecast the increase and decrease
in your small businesss profits and sales. How much you can expect and how much you can afford
to increase without applying any possible negative effect on sales.

Inventory Plan

Plan ahead of time for the merchandize you require. It will be extremely unwise to buy inventory
more than the required amount because then you will find your inventory overstuffed. Yes,
problems do occur due to unexpected increase or decrease in sales, but first create a plan and then
pile your inventory so that nothing goes to waste.

Discount Plan

Plan your promotional sales. Even before you begin your sales process you need to create viral
plan for your promotional sales. Along with that, your Clearance Sales Plan should also be marked
out in advance.

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These sales plans should be created in accordance with months. Buying and ending inventories by
month. Sales and discount plans by month.

Create month by month plan and follow it in accordance with time. If sales fall behind then
inventories also begin to back up. If this happens, then there will be great pressure on prices and
eventually on your small business, which if not addressed can decimate margins. At this point you
need to clear out inventory as soon as possible, start from 25% discount instead of stocking
everything up and waiting for clearance sales.

Your sales should always be in sync with your sales plan. If something is amiss and sales are going
down, for example, it is priced too high or is not being marketed effectively then the problem needs
to be taken care of immediately. Customers are not always looking for sales, but for good quality
products at fair rates from brands they trust.

2. Sales Reporting -includes the key performance indicators of the sales force.

The Key Performance Indicators indicate whether or not the sales process is being
operated effectively and achieves the results as set forth in sales planning. It should enable
the sales managers to take timely corrective action deviate from projected values. It also
allows senior management to evaluate the sales manager.

Sales strategies are implemented in this stage.


Check the effectiveness of the various strategies. Find out whether they are bringing
the desired results or not.
The sales representatives should be aware of their roles and responsibilities in the
organization.
It is essential for the organization to evaluate the outcome of proposed strategies
for any particular department. Organizations depend on KPI also called Key
Performance Indicator or simply Performance Indicator to measure the
effectiveness of implemented strategies.
Ask the sales team to submit reports of what all they have done throughout the
week. The management must sit with the sales team frequently to assess their
performance and chalk out future course of actions.
Mapping individual performance over time is essential.

3. Sales Process - is a systematic approach involving a series of steps that enables a sales force to
close more deals, increase margins and make more sales through referrals.

Sales representatives should work as a single unit for maximum productivity. A


systematic approach results in error free work.
The management must make sure sales managers follow a proper channel to reach
out to the customers. It pays to adopt a step by step approach.

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DEFINITION OF SELLING
Selling is a process involving the interaction between a potential buyer and a person hired by a
company to sell its products to potential buyers. Sale is a recognized business profession, and
ranges from a shoe salesman to an investment banker who manages company stock with billions
of dollars at stake.

SALES PROCESS
Professional selling involves a series of seven distinct steps.

1. Prospecting is finding and qualifying potential customers. Qualifying is the process of


determining whether a potential customer has a need or want that the company can fulfill,
and whether the potential client can afford the product.
2. Preparation involves preparing for the initial contact with a potential customer. You will
need to collect and study relevant information such as product descriptions, prices, and
competitor information. You will also need to develop your initial sales presentation.
3. Approach is the first face-to-face interaction you will have with the potential customer. In
the premium approach, you give your prospect a gift at the beginning of the interaction.
It may be a pen, a novelty item or company calendar, for example. Another method is
the question approach, in which you ask a question to get the prospect interested. For
example, 'would you have a problem making a 15% annual return on an investment?' You
may also use the product approach, in which you give the prospect a sample to review.
The idea behind all of these approaches is to get the prospect involved in the interaction
quickly.
4. Presentation is actively listening to the needs and wants of the potential customer and
demonstrating how your product can meet those needs and wants.
5. Handling objections is an important part of the process. Objections can be useful because
they tell the salesperson what to focus upon in addressing a prospect's concerns. Successful
salespeople learn how to overcome objections through preparation and having the right
information at hand to address them.
6. Closing involves identifying closing signals from the prospect that indicate it's decision
time. There are different approaches to closing. In the alternative choice close, you
assume the sale and offer the prospect a choice such as, 'Will this be a cash or credit
transaction?' An extra inducement close involves you offering something extra to get the
buyer to agree, such as a discount or a free product. In the standing room only close, you
inform the prospect that time is of the essence because some impending event, such as a
price increase, will change the terms of the offer.
7. Follow-up is building a long-term relationship with your customer for purposes of repeat
sales. For example, you make contact with the customer sometime after the sale and make
sure the product was received and is in good condition. Again, the idea is not to sell at this
stage, but to create a solid relationship for future sales.

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STEPS FOR MAXIMUM SALES AND BETTER OUTPUT

Do not ignore any step.

i. Initial Contact/Lead
Collect necessary data of potential customers once the target market is decided.
ii. Information Exchange
Inform the customers about various product offerings.
Make the customers aware of your brand and its benefits.
The information exchange can be either:
Over the telephone or
Face to face interaction with the potential customer.
iii. Lead Generation
Make a list of the people who show inclination towards purchasing your
organizations products or services.
The sales representatives must identify those who have the potential to buy their
products.
iv. Need Identification
Fix a meeting with the prospective buyers. Sit with the client and try to find out
more about his needs and expectations.
Suggest them various options which would fulfill their demands.
v. Qualified Prospect
Identify individuals who are keen on purchasing your companys products or
services.

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vi. Proposal
Once the buyer agrees to purchase particular products, the seller presents a written
proposal to him quoting the rates as well as other necessary terms and conditions.
Such a document is often called a proposal.
vii. Negotiation
Negotiation is a stage where two parties (buyer and seller) discuss and negotiate for
the best deal beneficial to all.
viii. Closing of Deal
This is the stage where the transaction between the seller and buyer takes place.
The selling happens in this stage.
ix. After Sales Service
Keep in touch with the customers even after the purchase for higher customer
retention.

SALES MANAGEMENT STRATEGIES


The art of meeting the sales targets effectively through meticulous planning and budgeting refers
to sales management. Sales Management helps to extract the best out of employees and achieve
the sales goals of the organization in the most effective ways.

SOME SALES MANAGEMENT STRATEGIES:

Identify goals and objectives of the sales team. Be clear on your sales targets. Make sure
the targets are realistic and achievable. Also assign a fixed timeline to achieve the targets.
Know your product well. Understand what benefits end-users would get from your
brand. The marketers must interact with customers to find out more about their
expectations from the product as well as the organization. One would not be able to
convince the customers unless and until he himself is clear with the benefits of the products.
Identify your target market. Selling techniques and strategies cant be same for all
individuals. Each audience has different needs, interests and requirements.
Hire the right individual for the sales team. Remember the sales professionals have a
major role in the success and failure of organizations. Recruit individuals who are
aggressive, out of the box thinkers and nurture the dream of making it big in the corporate
world. Make the sales representatives very clear about their roles and responsibilities in the
team. Develop a lucrative incentive plan for them. Incentives and monetary benefits go a
long way in motivating the sales team.
Dont lie to your customers. It is important to maintain transparency. Communicate
what your entire product actually offers. It is unethical to make false promises. Only
commit to what you actually can deliver to customers.
Know what your competitors are offering. It is essential to do a SWOT analysis of your
organization to know its strengths, weaknesses, threats and opportunities. A marketer must
know how his product is better than his competitors.
Sales representatives must do their homework before going for a sales call. One should
never go unprepared. Remember the customer can ask you anything and you have to be
ready with your answers. The management must promote training sessions at the workplace
to upgrade the skills of the sales professionals and expect them to deliver their level best.

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Devise strategies as per the target audience. Know your market well. The individuals
must be able to relate to your products. The strategies must be formulated in the presence
of all. Each one should have a say in the same. Let everyone come out with his suggestions.
Be ready with alternate plans if one plan fails.
The management must conduct frequent meetings with the sales team to review their
performances. Keep a track on their daily activities. The sales team must prepare Daily
Sales Reports (DSR) for the superiors to know what they are up to.
One must assess his own performance. Recall your interactions with the clients and
analyze where you went wrong and where things could have been a little better.
Treat your customers well for higher customer satisfaction and retention. Dont
oversell. Once you are through with your sales presentation, dont be after your clients
life. Give him time to think and decide.
The sales pitch must be impressive for the desired impact.

SALES OPERATION
Sales Operation refers to various activities which help in the timely achievement of sales targets
for the successful functioning of an organization.

Sales Operation includes various strategies and techniques employed by an individual to achieve
sales goals within the stipulated time frame.

WHY SALES OPERATION?

Sales Operation activities help the sales professionals to meet the sales targets in a
systematic and the best possible way.
Sales Operation activities help to devise relevant strategies and plans (both long term as
well as short term) to achieve the sales goals.
In simpler words sales operation activities help in generating revenues for the organization
through meticulous planning, better budgeting and adopting a methodical approach.

VARIOUS STEPS IN SALES OPERATION:

1. Sales representatives should prepare their own database. Make sure you have a long
list of potential customers. Mere sitting at office doesnt help in sales. Go out in the field,
meet people and gather as much information as you can. Put canopies at strategic locations.
Networking helps in sales.
2. The next step is to segregate the data according to age, sex, income and so on. Classify
the data under various sub heads like working/non-working, middle class/upper class,
employed/unemployed etc. Such classifications help you to understand the customers
better and identify your target audience.
3. Sales strategies ought to be different for every segment. The needs and interests of a
female would be different as compared to a male. Similar products would not excite a
youngster and an individual who is 50 years old. Create relevant strategies for different
segments as per their needs, interests and demands. The promotional plans must excite the
customers and attract them towards the organization.

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4. Speak to the customers and seek for appointment. Fix up a time as per their
convenience. One should never call a customer more than twice in a single day. It irritates
him and he tends to avoid you in future. Give him time to think and decide. Avoid being
pushy. One can also send a soft reminder through email to the customer.
5. Once you get an appointment, make sure you reach the venue on time. Dont expect
the customer to wait for you. Remember the customer can ask you anything related to the
product. Make sure you know everything about the product and its offerings.
6. Understand the needs and expectations of the customers. Try to make him understand
how your product would benefit him? Make him realize how your product is better than
the competitors. Dont oversell.
7. Attend sales deal with an open mind. Dont be too rigid on price and other terms and
conditions. Give the best deal to the customers for them to come back again to your
organization.
8. Sign a written agreement with the buyer. The agreement should have the description of
the product, model no, date of purchase, warranty details and other necessary terms and
conditions. Some organizations also give bills to the customers. Bills are required when
the customer comes for an exchange.
9. Make sure products are delivered in good and working condition to the customers. It
is the duty of the sales representatives to assist the customers in installing, using or
maintaining the products.
10. Make sure you are in touch with the clients even after the deal for higher customer
satisfaction, higher customer retention and eventually higher revenues.

MANAGING THE SALES CYCLE


WHAT IS A SALES CYCLE?

Sales Cycle refers to the various processes which help the products reach the end users. Customers
go through a sequence of activities before the product finally reaches them. Such activities are a
part of the sales cycle.

A SALES CYCLE HAS THE FOLLOWING STEPS:

1. Identifying Prospects
The first step in the sales cycle is to make a list of potential customers.
Try to gather as much data as you can. Ask your team members to visit markets,
shopping malls, restaurants to map potential customers and collect information
about them.
Placing canopies at strategic locations also invite potential customers.
A sales professional should ideally spend his maximum time outside office meeting
people. Interact with as many individuals as you can.
Distribute questionnaires amongst the potential customers to know them better.
2. Setting Appointments
The next step is to make the people aware of your product and its offerings.
Try to get in touch with the people. Call them and seek an appointment.
Dont arrange meetings at your convenience.

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Take his address and courier relevant information brochures beforehand for him to
know more about your product and its benefits.
Marketers also depend on cold calls to inform the customers about their products
and services. Dont be after the individuals life to fix an appointment.
Do take care of your pitch while speaking over the phone. Make your speech
interesting. Dont drag conversations.
3. Know Your Customer Well
It really helps if you know something about your client before meeting him.
Try to gain some information about him from social networking sites like
Facebook, linked in, twitter and so on. These networking sites do give some
information about the client which definitely helps in preparing the sales pitch.
Understand the customers needs and expectations from the product. Check
whether the customer has the potential to purchase a particular product or not. There
is no point selling an air-conditioner to someone whose monthly income is 10,000/-
. Find out more about the background of the customer.
4. Determine Clients Solution
Suggest the right option for the customers. A sales representative must never lie to
the customers. Say what your product actually offers.
It is unprofessional to make false commitments. Sit with the customer and help him
with the best solutions. Dont always think about your own targets and incentives.
Think from the customers perspective as well. Dont prompt him to buy something
which you yourself feel is not right for him.
5. Written Proposal/Document
Once the customer decides on the product, present a proposal to him with the
proposed rates and other necessary terms and conditions.
6. Negotiation Round
There should always be room for negotiation in deals. Dont be too rigid. Negotiate
with an open mind.
The customers should be aware of even the minutest details. For higher customer
satisfaction, give him the best deal.
A sales professional should always aim to close the deal as soon as both the parties
accept the terms and conditions.
7. After Sales Service
Make sure customers are satisfied with your service.
Find out whether all his demands are fulfilled or not.
Be in touch with him even after the deal is over.

SALES FUNNEL AND ITS IMPLICATIONS FOR MARKETERS

The sales funnel is a concept that is used to visually describe the sales process from initial leads to
final closure. It uses the image of a funnel where the opportunities are dropped into the funnel
and go through the sieve towards each stage. The opportunities that do not make it to the final
stage are described as the leaky funnel where they are removed from the funnel and fall by the
wayside. On the other hand, the opportunities that are converted pass through the funnel and into
the container. The sales funnel is a useful representation of the probability of the leads being

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converted and hence, it has become quite popular among managers and sales and marketing
personnel.

MECHANICS OF THE SALES FUNNEL

The mechanics of the sales funnel denotes the process of the sale progressing through the
funnel in steps and at each step, certain actions have to be taken to actualize the sale. This
means that organizations have to handhold each stage of the funnel and this entails targeting clients
appropriately and removing the barriers that prevent the opportunity from progressing into the next
stage. It is for this reason that organizations develop sales metrics which signify the percentage
completion at each stage and which can be used to refine and fine-tune the sales and marketing
process through each phase of the funnel. Indeed, the originators of the sales funnel concept
recommend organizations to develop their own sales funnels so that instead of relying on the
established pattern, which might or might not work for them, they can customize the funnel
according to the specific needs of their business.

STAGES IN THE SALES FUNNEL

The stages in the sales funnel are Lead, Prospect, Qualified Prospect, Committed, and
Transacted which when taken together represent the progress of potential sales
opportunities through each phase and which might result in actual deals being made.

A Lead is an opportunity which is the first stage and which denotes approaching clients with whom
the organization does not have a relationship and yet, these clients are approached because they fit
the profile of the target customer for the organizations.

A Prospect is a client who has passed the first stage and has confirmed interest to the organization.
However, this stage does not actually translate into actual deals as at this stage, the organization
and the client are talking which is a sign of progress though the deal is not completed.

The Qualified Prospect Stage is the most demanding and crucial as well as critical stage in the
funnel because the organization has moved beyond initial contacts, expression of interest, doing
the due diligence and is ready for the talks to progress to the advanced stage. The aspect of due
diligence is important as both the organization and the client have established a rapport after
ensuring that the clients needs and demands are aligned with the organizations capabilities and
the value offered by it. Further, the determination of fit and alignment is also accompanied by the
higher ups of each side taking a personal interest in each other as the groundwork has already been
completed. Therefore, this stage can make or break a deal and hence, many organizations prepare
elaborate presentations and pitches that are not generic but tailored to the clients specific needs.

The Committed Stage is the move by the organization and client towards closure and this stage
is usually the phase when potential red flags that can obstruct the deal have been removed.
Moreover, as the name implies, the client has committed to the deal and the organization has
prepared for the last mile talks, which are usually held between the division heads or managers
depending on the cost of the deal and the potential scope for profits.

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The Transacted Stage represents the closure of the deal and its announcement by both parties.
The focus at this stage is on the specifics of how the deal would be actualized through writing of
contracts, agreeing upon of delivery schedules, and mentioning the legal options in case of any
lapse or slip up on the part of either party. This stage is when contracts are signed and press releases
are prepared to announce the deal to the investors and the stock exchanges (if either party or both
are publicly listed companies)

THE LEAKY FUNNEL

We have seen how opportunities can be converted into actual sales and how the stages of the sales
funnel indicate the process of the sales leads and their actualization into real deals. However, not
all opportunities are converted into actual deals and if a particular opportunity does not move down
the funnel and the sale is not fructified, and then it is known as a leaky funnel opportunity and
therefore, must be discarded from the funnel. Of course, this means that the conversion rate takes
a hit, which can be a good thing or a bad thing depending on how the organization views that
opportunity. For instance, for many organizations, approaching potential clients is a fact of
business and this is done through cold calling, which denotes the approach even at the prospect of
being rejected. This does not really bother the company since all that their sales and marketing
personnel are interested in is to approach clients who can be converted into opportunities at a later
point in time. Moreover, once the leaky funnel manifests and the opportunity is removed from the
funnel, it gives the organization a chance to focus on potentially profitable leads instead of wasting
time in chasing dead ends.

MOTIVATING THE SALES TEAM

Sales Professionals play a pivotal role in generating revenues for the organization. They are the
ones who are responsible for product promotion and making a particular brand popular amongst
the end users. In simpler words, sales representatives are the true face of an organization.

The individuals representing the sales and marketing vertical must be satisfied with their
organization. A sense of belonging at the workplace is important.

Superiors must motivate the sales team from time to time to extract the best out of them.

VARIOUS WAYS TO MOTIVATE THE SALES TEAM:

1. Regular Interaction
The management must interact with the sales team more often to understand their
needs and expectations from the organization.
The sales representatives must have an easy access to the bosss cabin at the times
of queries. Transparency is essential at all levels.
The sales manager must sit with his team once in a week to address their grievances.
No issue should be left unattended.
Healthy communication between the management and sales team is a good way to
motivate the individuals. The sales executives must be aware of the latest
developments at the workplace.

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Take them out once in a while for picnics, outings or dinners. Such activities bind
the team members together and motivate them to work as a single unit.
2. Roles and Responsibilities
Roles and responsibilities must not be imposed on any of the members. Let them
accept responsibilities on their own. It is for the superiors to understand which
employee can perform which function in the best possible way. Job mismatch leads
to demotivated employees.
They should be aware of their KRAs from the very beginning. The management
should make it very clear that a sales representative is expected to go out and meet
clients. No individual should have unrealistic demands. It leads to problems and
confusions later on.
A sales professional must be aggressive, smart and a little diplomatic. They must
be excellent in follow ups. Impatient individuals find it difficult to do well in sales.
3. Realistic Targets
Targets for the sales team must be realistic and achievable. Dont ask for anything
which you yourself know is not possible.
Dont expect miracles overnight.
4. Incentives and Monetary benefits
Handsome incentive plans go a long way in motivating the sales professionals.
Nothing works better than money. Attractive incentive schemes prompt the
employees to work hard and make the maximum use of their ability.
Performers must be rewarded with attractive gifts, coupons, cash prizes or
certificates for them to feel motivated and deliver the same performance every time.
Acknowledge the hard work of employees.
5. Appreciation
Appreciation plays an important role in motivating the employees. Praise the ones
who perform exceptionally well. A pat on their back can actually do wonders. Let
them feel special and indispensable for the team as well as the organization. Give
them their due credit.
Display their names on the notice boards for everyone to get a glimpse. Give them
badges to flaunt.
6. Involvement
Involve the team members in the companys strategies. Let them participate in
important discussions. Dont criticize their ideas or views.

ROLES AND RESPONSIBILITIES OF A SALES MANAGER

A sales manager plays a key role in the success and failure of an organization. He is the one who
plays a pivotal role in achieving the sales targets and eventually generates revenue for the
organization.

A sales manager must be very clear about his role in the organization. He should know what he is
supposed to do at the workplace.

Let us understand the roles and responsibilities of a sales manager:

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A sales manager is responsible for meeting the sales targets of the organization through
effective planning and budgeting.
A sales manager cant work alone. He needs the support of his sales team where each one
contributes in his best possible way and works towards the goals and objectives of the
organization. He is the one who sets the targets for the sales executives and other sales
representatives. A sales manager must ensure the targets are realistic and achievable.
The duties must not be imposed on anyone, instead should be delegated as per interests and
specializations of the individuals. A sales manager must understand who can perform a
particular task in the most effective way. It is his role to extract the best out of each
employee.
A sales manager devises strategies and techniques necessary for achieving the sales
targets. He is the one who decides the future course of action for his team members.
It is the sales managers duty to map potential customers and generate leads for the
organization. He should look forward to generating new opportunities for the
organization.
A sales manager is also responsible for brand promotion. He must make the product
popular amongst the consumers. A banner at a wrong place is of no use. Canopies must be
placed at strategic locations; hoardings should be installed at important places for the best
results.
Motivating team members is one of the most important duties of a sales manager. He
needs to make his team work as a single unit working towards a common objective. He
must ensure team members dont fight amongst themselves and share cordial relationship
with each other. Develop lucrative incentive schemes and introduce monetary benefits to
encourage them to deliver their level best. Appreciate whenever they do good work.
It is the sales managers duty to ensure his team is delivering desired results. Supervision
is essential. Track their performances. Make sure each one is living up to the expectations
of the organization. Ask them to submit a report of what all they have done throughout the
week or month. The performers must be encouraged while the non-performers must be
dealt with utmost patience and care.
He is the one who takes major decisions for his team. He should act as a pillar of support
for them and stand by their side at the hours of crisis.
A sales manager should set an example for his team members. He should be a source of
inspiration for his team members.
A sales manager is responsible for not only selling but also maintaining and improving
relationships with the client. Client relationship management is also his KRA (Key Result
Area).
As a sales manager, one should maintain necessary data and records for future reference.

QUALITIES OF A SALE PROFESSIONAL

Sales Professionals are the face of an organization. They have the responsibility of making the
brand popular and promoting the products amongst the end users.
They help in the successful running of organization by generating revenues and earning profits.

1. Patience

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A sales manager needs to be extremely patient. You just cant afford to be rude to
your customers.
Clients do need time to believe in you and trust your products. Dont get hyper and
make the clients life hell. Give him time to think and decide.
2. People Oriented
It is essential for a sales manager to be customer centric. Understand customers
needs and expectations. Dont simply impose things on him.
Individuals representing the sales vertical need to be caring and kind towards
customers.
Dont only think about your own targets and selfish interests. One should never
misguide the customers. Be honest with them. Avoid telling lies and creating fake
stories.
3. Aggressive
A sales professional needs to be aggressive and energetic. Lazy individuals dont
make great sales professionals.
4. Go-Getter Attitude
It pays to be optimistic in sales. Sales professionals need to have a go-getter attitude
for the best results.
It is really not necessary that all customers would like or need your product. Dont
expect results every time. Remember failures are the stepping stones to success.
One must learn from his previous mistakes and move on. Dont take failures to
heart.
5. Value Time
People in sales must value time. Being late for meetings create a wrong impression
in the minds of customers.
It is a sin to make customers waiting unless and until there is an emergency. Start a
little early and make sure you reach meetings on time.
6. Sense of Commitment
A sales representative who is committed towards his work manages to do well and
make his mark as compared to others. Commitment in fact is essential in all areas
of work.
If you have promised someone to meet at 5pm, make sure you are there at the
desired venue at 4.45 pm sharp. Dont make silly excuses. Trust is lost when
commitments are taken back. There should be no turning back.
7. Reliable
The customers must be able to depend on the sales professionals. A sense of trust
is important.
8. Flexible
A sales professional must know how to change his sales pitch as per the client.
Dont just stick to one plan or one idea.
Learn to take quick decisions as per the situation. Be adaptable to changes. People
in sales should not be too rigid and demanding.
9. Be Transparent
Dont hide things from the customers. Transparency is essential to avoid problems
later on.
Convey only what your product offers.

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10. Diligent
Mere sitting at office does not help in sales. One needs to go out, meet people and
make prospective clients. Dont complain if it is too hot or cold outside.
A sales professional ideally should spend his maximum time in field to achieve
targets in the best possible way.
11. Good Communicator
A sales professional must be a good communicator for the desired impact.

DIFFERENT TYPES OF SALES PROFESSIONALS

A sales professional in a workplace is responsible for meeting the sales targets of the organization
and maintaining relationship with the existing and potential clients. He plays a central role in
generating revenues for the organization.

TYPES OF SALES PEOPLE IN ORGANIZATIONS:

1. The Diplomat
As the name suggests, a diplomat is one who always tries to play a safe game.
Hates taking risks in life and accepts things as they come.
These people tend to have a casual approach towards work.
A diplomat never believes in putting pressure on the customers. If he fails to
convince the client in the first attempt, he would never try to do it again. He would
simply ignore and try with the next client.
Such sale professionals are calm, have an easy going attitude and are never under
pressure.
2. The Rejection Dreader
Such sales professionals fear rejections and failures at work. They find it very
difficult to accept failures at the workplace.
They depend more on cribbing and complaining rather than working and getting
results.
Such kinds of people fail to motivate themselves and tend to develop a laidback
and negative attitude after a single failure.
3. The Militant Closer
As the name suggests such sales professionals are extremely aggressive and can go
to any extent to get results.
They are only concerned about their targets and results and hardly think about the
needs and expectations of the clients. For them the only thing which matters is
closing the deal. They hardly bother whether a customer requires a particular
product or not
In most cases they make the clients life hell just to sell their products and earn
revenues.
4. The Sales Scholar
Such sales professionals believe in lots of research and planning before going for a
sales call.

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They spend their maximum time browsing internet, reading books and newspapers,
checking various articles on sales rather than going out in the field and meeting
people.
Sales scholars put more emphasis on theoretical knowledge as compared to
practical exposure.
They have an eye on even the minutest details.
5. The Phony
There are certain sales representatives who simply pretend to be clients best friend.
Such people fall in this category.
They always speak well and appear to be sugar coated.
6. The Overcooked Casualty
This category involves people who do sales just to earn their bread and butter, not
as a passion.
Such people chose sales as a profession because they feel it is an easy way to earn
money as there are huge incentives involved.
Their main motive is to close deals and earn incentives. They do not care much for
the customers.
7. The Professional
As the name suggests the professionals are the ones who look forward towards
providing the right solution to the clients.
They enjoy interacting with people and suggest only what is right and best for them.
Professionals ensure clients are satisfied with their service. For them client
relationship is of utmost importance.
They never get impatient or hyper while attending customers instead suggest them
the best available option

ROLE OF COMMUNICATION IN SALES MANAGEMENT


Sales Management refers to the art of achieving the sales targets within the stipulated time
frame through effective budgeting and meticulous planning. Sales management enables the
sales representatives to close sales deals in favor of the organization and eventually earn revenues
for the same.

Communication plays an important role in sales management. Sales professionals need to be good
communicators for the desired impact. In simpler words, communication is the backbone of sales
management. It is absolutely not possible to close a sales deal without effective communication.

There must be healthy communication between the sales professionals and the customers as well
as amongst the sales representatives.

COMMUNICATION BETWEEN SALES PROFESSIONALS AND EXTERNAL


CLIENTS

Keep your sales pitch simple and precise. Complicated sales terminologies and jargons confuse
the customers. It is important for the customers to understand your products for them to believe in
them and eventually purchase the same. The sales professionals must be well aware of the benefits
of the products.

SALES MANAGEMENT READING MATERIALS 20


Sales professionals must be very careful about their tone of voice. Never be too loud or too soft.
Be polite. Make sure you are audible to the customers. Dont ever be rude to them.

While addressing a group of customers make sure even the individuals sitting on the last bench
can hear you properly. Dont just speak for the front benchers.

One should never interfere when the second party is speaking. Wait for your turn to speak.

Dont play with words. Convey exactly what your product offers. Fake promises and wrong
commitments lead to problems and confusions later on. Transparency is essential for a long
term relationship with the customers. Avoid telling lies to them.

Make sure your sales presentation is interesting.

While speaking to the customers over the phone, make sure you are not chewing or eating
something. Dont put the customers on long holds. Never avoid customers calls unless and until
there is an emergency.

Understand the needs and expectations of the customers and suggest them the best solution.

The customer can ask you any question under the sun and it is your duty to clarify his doubts.
Make sure you are well prepared. One should never lose his temper while interacting with the
customers. Include warm greetings in your conversation for a personal touch.

COMMUNICATION AMONGST THE SALES TEAM

The sales manager must communicate with his sales team on an open platform for everyone to
participate and give their valuable inputs and suggestions.

Transparency must be maintained at all levels for healthy relationship amongst the sales
professionals. The sales representatives should be aware of their targets and incentives from the
very beginning to avoid confusions later on. Make sure the targets are realistic and achievable.

All important information should be circulated through emails. The related members should
be kept in loop for everyone to get the same information. Do not communicate with individuals
separately in closed cabins. It gives a wrong message

Each one should have the liberty to express his/her views and participate in decision making
process of the organization

The roles and responsibilities of sales representatives must be communicated to them well in
advance. They must know what is expected out of them.

Effective communication is instrumental in closing sales deals and maintaining healthy


relationship with the existing as well as potential clients.

ROLE OF ATTITUDE AND PERSONALITY IN SALES MANAGEMENT


The art of achieving the sales targets within the desired time frame through effective planning and
budgeting refers to sales management.

SALES MANAGEMENT READING MATERIALS 21


Effective sales management ensures timely generation of revenue and profitability of the
organization.

Sales professionals in simpler words are the face of any organization and have the responsibility
of making a particular brand popular amongst the end-users. They are the ones who directly
interact with the customers, understand their needs and expectations and try to provide them the
best solution.

ATTITUDE AND PERSONALITY PLAY AN IMPORTANT ROLE IN SALES


MANAGEMENT.

Dont go for meetings with a negative mind. Remember a negative mind leads to wrong
thoughts and negativity all around. A cheerful individual spreads happiness all around and
leads to a positive ambience at the workplace. It always pays to be optimistic in sales. If
one puts his heart and soul in work, the outcome will definitely be in his favor.
One should always look at the brighter sides of life. Negativity is all in the minds of
individuals. Avoid complaining or cribbing over petty issues. The customer might not think
along the same lines as you, but that does not mean you can be rude to him. It is important
to be polite and kind to them. Understand what they expect from you and your organization
and give them the right suggestion. Make them feel comfortable.
One cant achieve results every time. It is absolutely okay if one customer does not agree
to your presentation and prefers your competitors offerings. Dont take failures to heart.
Remember failure is just the opposite of success. Never lose hope; instead find out the
causes of failure and move on. There is no point crying over spilt milk. Be your own critic,
analyze the things and find out what went wrong. Incorporate the necessary changes in
your sales pitch for better results next time. Go out, meet people and increase your list of
potential customers. Develop a strong network. It helps in sales.
Sales professionals should never be shabbily dressed as they directly interact with the
clients. Avoid wearing casuals as customers would never take you seriously. Follow the
professional dress code but make sure you dont feel uncomfortable. Dont wear loud
clothes to work or for meetings. Ensure you smell good. Foul smell irritates the customer.
Do shave before you go for sales deals. Make sure your nails are short and clean. It is
essential for sales professionals to look good and clean for the desired impact.
Sales representatives ought to be aggressive and have a pleasing
personality. Individuals with a laidback attitude should not take sales and marketing as
profession. People in sales should have a charismatic personality to attract and influence
the customers.
Individuals willing to make a career in sales should be extroverts. They should love
interacting with people. It is important for the sales representatives to break the ice and gel
with the customers.
Sales representatives should look confident and sound intelligent. Never show your
desperation to the customers. Dont tell them how badly you need to sell the product to
meet your targets.

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TIPS FOR SUCCESSFUL SALES PROFESSIONALS
Sales professionals play an essential role in the success or failure of an organization. Their key
responsibility areas include promoting a product and making a brand popular amongst the end-
users.

Sales representatives earn profits and generate revenues for the organization.

Understand your product well. Customers would find it difficult to believe you unless
and until you yourself are convinced with the product. Know the benefits of your product
or service. Sales professionals must be very clear with the USPs of the products for the
customers to believe them.
Take pride in your profession. An individual should not choose sales as a profession just
because it is a quick source of earning money in the form of incentives. Individuals should
have a passion for sales. Enjoy your work to the fullest for the best results. Never treat your
job as a burden.
Sales representatives cant afford to be impatient. Customers would definitely take
some time to believe in you and your product but thats absolutely okay. It is a sin to shout
or ill-treat customers. They must be dealt with utmost patience and care. Be kind to the
customers.
Interact with the customers more often and try to find out their needs and expectations.
Be honest with people. Suggest them only what is right for them.
Create a target market for your products. Dont try to sell a flat screen television or air
conditioner to someone whose monthly income is rupees ten thousand only. It would be a
sheer wastage of time, energy and talent. Understand the purchasing power of the
customers.
Dont oversell. One should never irritate the customers. Dont make their lives hell. Being
pushy never leads to closure of deals; rather it leaves the customers irritated. Give them
time to think and decide. It is good to be aggressive but never cross that fine line.
A sales representative must never show his desperation in front of the customers.
Dont show him how badly you need to sell the products to achieve your targets. He has
nothing to do with it. If he really needs the product, he would definitely buy it.
Be a self-motivator. Set a goal for yourself and try to achieve the same in the best possible
way. Give your heart and soul in each deal.
Avoid adopting a casual attitude. Dont go casually dressed for sales meetings. Clients
will never take you seriously.
Be a good communicator. Take care of your pitch while speaking to the customers. Avoid
being too loud or too soft. Make sure you are audible and the customers understand you.
Convey what your product actually offers. Lies and fake stories cost later.
Dont be afraid of the targets. Accept them only when they are realistic and achievable.
Sitting in the office doesnt help in sales. Sales representatives must go out and meet
people. Make a list of prospective customers. Exchange contact details and visiting cards
to reach a wider audience.
Dont feel bad if you are unable to close a deal. Understand where you went wrong and
how things could have been a little better. Be your own critic.
Be a good listener. Listen to what the second party has to say.

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TIME MANAGEMENT AND PLANNING IN SALES MANAGEMENT

Sales management helps in the achievement of sales targets within defined deadlines through
effective planning and budgeting.

Through effective sales management, individuals generate revenues and earn profits for the
organization.

It is essential for the sales professionals to understand the value of time. One must fulfill
commitments and there should be no turn backs in the same.

TIME MANAGEMENT AND PLANNING PLAY AN IMPORTANT ROLE IN SALES


MANAGEMENT:

Managing time well increases productivity of an individual and also avoids forgetting
important things.
Time management ensures the completion of tasks at a much faster rate and more
effectively.
Plan your day well in advance. List out things that are important and need to be done on
a priority basis.
Prepare a task plan or a TO DO list. Jot down important things against the time assigned
for each activity. Try to finish the work within the stipulated time frame. Tick the activities
already done and concentrate on the remaining.
Develop the habit of using a planner, organizer or desk calendar to avoid forgetting
important tasks.
One of the best ways to manage time is to be organized. The more you are organized, the
more quickly you finish off tasks.
Avoid keeping stacks of files and heaps of paper at your workstation. Keep your desk
clean and organized. Throw away what you dont need.
A cluttered desk leads to negativity all around and one tends to waste his maximum time
in searching documents and files. Put a label on top of each file. Keep the important
documents handy.
One must not do any work halfheartedly. Make sure you put your heart and soul in work
to avoid delays.
Human beings are not machines who can work at a stretch. Everyone needs time to
rejuvenate. Do take a break for half an hour anytime during the day. Surf internet, logon to
Facebook, chat with your friends or do anything you like. Dont think about work during
this time. This would help you to concentrate better on work and eventually complete
assignments on time. Avoid distractions while working. Dont interfere in your colleagues
work or roam around at the workplace.
Review your own performance regularly. Evaluate whether you have finished your work
on time or not?
Sales professionals should never be late to meetings. Dont make the customers waiting.
It is always better to start a little early to reach the venue on or before time. Make sure you
are there at the venue before the customer reaches.

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Prepare an action plan as to how a particular task can be accomplished. Adopt a step by
step approach. It is important to first finish one task before starting the next.
Sales professionals must discuss various options and ideas amongst themselves and devise
strategies and techniques to accomplish tasks in the best possible way. Do keep in mind
the budgets allocated to each task.
Analyze the results and outcomes of previous years activities and prepare a business
plan. Make sure the business plan is concrete and reflects every individuals future course
of action.
Sales representatives can focus more and concentrate better as a result of effective
planning. Planning in most cases makes the future secure.

AFTER SALES SERVICE / CUSTOMER SERVICE

Customers are the assets of every business. Sales professionals must try their level best to satisfy
customers for them to come back again to their organization.
WHAT IS AFTER SALES SERVICE?

After Sales Service refers to various processes which make sure customers are satisfied with the
products and services of the organization.

The needs and demands of the customers must be fulfilled for them to spread a positive word of
mouth. In the current scenario, positive word of mouth plays an important role in promoting brands
and products.

After sales service makes sure products and services meet or surpass the expectations of the
customers.

After sales service includes various activities to find out whether the customer is happy with the
products or not? After sales service is a crucial aspect of sales management and must not be
ignored.

WHY AFTER SALES SERVICE?

After sales service plays an important role in customer satisfaction and customer retention. It
generates loyal customers.

Customers start believing in the brand and get associated with the organization for a longer
duration. They speak well about the organization and its products.

A satisfied and happy customer brings more individuals and eventually more revenues for the
organization.

After sales service plays a pivotal role in strengthening the bond between the organization and
customers.

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AFTER SALES SERVICE TECHNIQUES

Sales Professionals need to stay in touch with the customers even after the deal. Never
ignore their calls.
Call them once in a while to exchange pleasantries.
Give them the necessary support. Help them install, maintain or operate a particular
product. Sales professionals selling laptops must ensure windows are configured in the
system and customers are able to use net without any difficulty. Similarly organizations
selling mobile sim cards must ensure the number is activated immediately once the
customer submits his necessary documents.
Any product found broken or in a damaged condition must be exchanged
immediately by the sales professional. Dont harass the customers. Listen to their
grievances and make them feel comfortable.
Create a section in your organizations website where the customers can register their
complaints. Every organization should have a toll free number where the customers can
call and discuss their queries. The customer service officers should take a prompt action
on the customers queries. The problems must be resolved immediately.
Take feedback of the products and services from the customers. Feedback helps the
organization to know the customers better and incorporate the necessary changes for better
customer satisfaction.
Ask the customers to sign Annual Maintenance Contract (AMC) with your
organization. AMC is an agreement signed between the organization and the customer
where the organization promises to provide after sales services to the second party for
certain duration at nominal costs.
The exchange policies must be transparent and in favor of the customer. The customer who
comes for an exchange should be given the same treatment as was given to him when he
came for the first time. Speak to him properly and suggest him the best alternative.

CUSTOMER RELATIONSHIP MANAGEMENT - MEANING, NEED AND STEPS IN


CRM

Customer Relationship Management (CRM) deals with automating all customer related data
related to the sales, marketing, customer care, technical, finance, and human resource departments.
CRM is defined in the book Sales Force Management by Johnston and Marshall (2009) as any
application or initiative designed to help your company optimize interactions with customers,
suppliers, or prospects via one or more touch points such as call center, sales person, distributor,
store, branch office, web or e-mail for the purpose of acquiring, retaining, or cross selling. CRM
aims at putting the customer at the center of the business process. In a client meeting you see not
only the sales representative but also may see members from marketing, finance, technical
departments participating. A system is required to be in place where all these business operations
need to be aligned. This is where the CRM applications come into picture.

CRM application for the sales department provides the following benefits: Improved sales
planning and management automating the lead system Managing sales opportunities effectively

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Streamlining account management Boosting sales productivity Enhancing sales pipeline
management Simplifying workflow management Analytics for improved decision making

In an organization, sales representatives have the responsibility of creating brand awareness and
making products popular among the end users. They are the ones who interact with the customers,
understand their requirements and fulfill their needs and expectations.

WHAT IS CUSTOMER RELATIONSHIP MANAGEMENT?

The art of managing the organizations relationship with the customers and prospective
clients refer to customer relationship management.

Customer relationship management includes various strategies and techniques to maintain healthy
relationship with the organizations existing as well as potential customers. Organizations must
ensure customers are satisfied with their products and services for higher customer retention.
Remember one satisfied customer brings ten new customers with him where as one dissatisfied
customer takes away ten customers along with him.

In simpler words, customer relationship management refers to the study of needs and expectations
of the customers and providing them the right solution.

NEED FOR CUSTOMER RELATIONSHIP MANAGEMENT

Customer Relationship Management leads to satisfied customers and eventually higher


business everytime.
Customer Relationship Management goes a long way in retaining existing customers.

Customer relationship management ensures customers return back home with a smile.

Customer relationship management improves the relationship between the organization and
customers. Such activities strengthen the bond between the sales representatives and customers.

STEPS TO CUSTOMER RELATIONSHIP MANAGEMENT

It is essential for the sales representatives to understand the needs, interest as well as
budget of the customers. Dont suggest anything which would burn a hole in their
pockets.
Never tell lies to the customers. Convey them only what your product offers. Dont cook
fake stories or ever try to fool them.
It is a sin to make customers waiting. Sales professionals should reach meetings on or
before time. Make sure you are there at the venue before the customer reaches.
A sales professional should think from the customers perspective. Dont only think
about your own targets and incentives. Suggest only what is right for the customer. Dont
sell an expensive mobile to a customer who earns rupees five thousand per month. He
would never come back to you and your organization would lose one of its esteemed
customers.

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Dont oversell. Being pushy does not work in sales. If a customer needs something; he
would definitely purchase the same. Never irritate the customer or make his life hell. Dont
call him more than twice in a single day.
An individual needs time to develop trust in you and your product. Give him time to
think and decide.
Never be rude to customers. Handle the customers with patience and care. One should
never ever get hyper with the customers.
Attend sales meeting with a cool mind. Greet the customers with a smile and try to solve
their queries at the earliest.
Keep in touch with the customers even after the deal. Devise customer loyalty programs
for them to return to your organization. Give them bonus points or gifts on every second
purchase.
The sales manager must provide necessary training to the sales team to teach them
how to interact with the customers. Remember customers are the assets of every business
and it is important to keep them happy and satisfied for successful functioning of
organization.

COMPENSATION AND MOTIVATION OF SALES PERSONNEL

Successful sales managers have three primary concerns in managing the sales force- attracting
outstanding salespeople, motivating them to work both effectively and efficiently, and holding on
to good sales people. Among the most important tools for accomplishing these three objectives is
the organizations compensation plan. The sales force of any company needs to be compensated
adequately to keep its morale high and to enable it to contribute to its maximum. A sales force is
the representative of the companys philosophy and business principles. The building and
maintenance of sales force is possible through proper compensation plan.

Motivation is derived from the Latin term movere meaning to move. Motivation stimulates the
movement of an individual. It can be defined as a dynamic process set in motion by creating or
arousing internal needs that activate goal-directed efforts and determine their intensity and
persistence. In simple words motivation is goal-directed behavior, underlying which are certain
needs or desires. It is generally regarded as the process of getting people to work towards the
achievement of an objective. Sales force cannot be controlled, administered in the way factory
workers can be monitored. The salesforce is required to be self-starters, highly ambitions, result
oriented and go getters. Thus, the salesforce has to be kept highly motivated and committed.

REQUIREMENTS OF A GOOD SALES COMPENSATION PLAN

A good sales compensation plan meets seven requirements. First, it provides a living wage,
preferably in the form of a secure income. Individuals worried about money matters do not
concentrate on doing their jobs well. Second, the plan fits with the rest of the motivational
program-it does not conflict with other motivational factors, such as the intangible feeling of
belonging to the sales team. Third, the plan is fair-it does not penalize sales personnel because of
factors beyond their control within the limits of seniority and other special circumstances, sales
personnel receive equal pay for equal performance. Fourth, it is easy for sales personnel to
understand- they are able to calculate their own earnings. Fifth, the plan adjusts pay to changes in

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performance. Sixth, the plan is economical to administer. Seventh, the plan helps in attaining the
objectives of the sales organization.

DEVISING A SALES COMPENSATION PLAN

Whether contemplating major or minor changes or drafting a completely new sales compensation
plan, the sales executive approaches the project systematically. Good compensation plans are built
on solid foundations. A systematic approach assures that no essential step is overlooked. Written
job descriptions are the logical place to start. Other aspects of company operations are considered
in relation to their impact upon the sales job. Sales department objectives are analyzed for their
effect on the salespersons job. The impact of sales-related marketing policies is determined.
Distribution policies, credit policies, price policies, and other policies affect the salespersons job.
Current and proposed advertising and sales promotional programs assist in clarifying the nature of
the salespersons goals, duties, and activities. Most large companies, and many smaller ones, use
job evaluation system to determine the relative value of individual jobs.

Job evaluation procedure is not scientific; it is an orderly approach based on judgement. It focuses
on the jobs, without considering the ability or personality of individuals who do the work. Its
purpose is to arrive at fair compensation relationships among jobs. Traditionally, sales executives
have opposed using formal job evaluations to determine the compensation levels of sales
personnel. They contend that compensation levels for sales personnel are more closely related to
external supply-and-demand factors than to conditions inside the company. Because compensation
levels for sales personnel are related to external supply-and-demand factors, it is important to
consider prevailing compensation patterns in the community and industry.

Management needs answers to four questions- (1) what compensation systems are being used? (2)
What is the average compensation for similar positions? (3) How are other companies doing with
their plans? And (4) what are the pros and cons of departing from industry or community patterns?

A program for setting compensation of sales personnel is sound only if it considers the relation of
external compensation practices to those of the company. Effective sales executives maintain
constant vigilance against the possibility that the pay of sales personnel will get out of line with
that paid for similar jobs in the community or industry. Management must determine the amount
of compensation salesperson should receive. Although the compensation level might be set
through individual bargaining, or on an arbitrary judgement basis, neither expedient is
recommended. Management should ascertain whether the caliber of the present sales force
measures up to what the company would like to have. Management weights the worth of individual
persons through estimating the sales and profit that would be lost if particular salespeople resigned.
Another consideration is the compensation amount the company can afford to pay.

A sales compensation plan has as many as four basic elements: (1) a fixed element, either a salary
or a drawing account, to provide some stability of income; (2) a variable element (for example, a
commission, bonus, or profit-sharing arrangement), to serve as an incentive; (3) an element
covering the fringe or plus factor, such as paid vacations, sickness and accident benefits, life
insurance, pensions, and the like; and (4) an element providing for reimbursement of expenses or
payment of expense allowances. Not every company includes all four elements.

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Management selects the combination of elements that best fits the selling situation.

Management should consult the present sales personnel. Management should encourage sales
personnel to articulate their likes and dislikes about the current plan and to suggest changes in it.
Criticisms and suggestions are appraised relative to the plan or plans under consideration. For
clarification and to eliminate inconsistencies the tentative plan is put in writing. Then it is pre-
tested. The amount of testing required depends upon how much the new plan differs from the one
in use. The greater the difference, the more thorough is the testing. Pretests of compensation plans
are almost always mathematical and usually computerized. The plan is then revised to eliminate
trouble spots or deficiencies. If alternations are extensive, the revised plan goes through further
pretests and perhaps another pilot test.

At the time the new plan is implemented, it is explained to sales personnel. Management should
convince them of its basic fairness and logic. The sales personnel are made to understand what
management hopes to accomplish through the new plan and how this is to be done.

Details of changes from the old plan, and their significance require explanation. Provisions for
follow-up are made. From periodic checkups, need for further adjustment is detected. Periodic
checks provide evidence of the plans accomplishments, and they uncover weaknesses needing
correction.

TYPES OF COMPENSATION

Direct: The direct compensation package for a salesman is more or less the same in all companies.
However, as you must have also seen in your experience, a company employing technical person
as salesman for selling, say, industrial or electronic products may offer a high basic salary.
Sometimes, when the product is in the introductory stage the function of the salesman is to create
new markets and make customers understand how to use the product as in the case of a new
consumer durable product like vacuum cleaners of a new electronics products used by certain
industries; the basic salary of the salesman may be on the higher side. The direct compensation
package of a salesperson thus consists of the basic pay plus allowances covering all travel and
entertainment expenses etc. In case, the salesman has to stay overnight his boarding and lodging
allowances are also provided for. The basic salary and other allowances are revised from time to
time. They also increase with promotion of the salesman.

Indirect: It consists of financial as well as non-financial incentives.

Financial incentives
(i) Salary plus commission on sales above a certain amount- Herein, the salesman receives direct
salary and a commission in addition to it. Every salesman is assigned a fixed quota. The
commission is awarded on achievement of the targeted quota. A fixed percentage of sales achieved
over and above the target is also set. This type of compensation scheme ensures a direct salary as
well as an in-built motivation system through incentives.
(ii) Salary plus share in profits- This is not a very prevalent method. It is generally suggested for
a company selling high value items with high profit margins. The incentive here is based on profits
earned. The selling expenses to sell a product may also be large and this is incorporated in the

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profit sharing scheme as it acts as a control mechanism. Also salespeople working to obtain
contracts are generally given a share in profits rather than awarded on direct sales.

Non-financial incentives
(a) Training program- Most companies offer training programs for their salesmen. On an average
a salesman has to undergo a training course every one or two years. These programs enable
interaction between salesmen of different territories as well as provide them with latest
developments in the field. These training programs are viewed as an indirect benefit by the
salesmen.
(b) Awards, recognitions and prizes- In addition to training programs the award ceremonies for
outstanding achievements in sales are held in exotic locations like hill stations or five-star hotels.
The awards are presented through foreign dignitaries or important people in the field, thus
providing the salesman with the much needed recognition.

FACTORS INFLUENCING COMPENSATION

Although the basic structure of a compensation plan may be similar across the companies, some
factors do predominantly shape the structure of the companys compensation plan.

The Relation with Product Life Cycle


The amount of selling effort is directly related with the stage at which a product is in its life cycle.
The compensation structure is a function of selling effort. When the product is in the introductory
stage the company needs a dynamic salesforce which can establish the product in the desired
market. The salesforce must be enterprising, willing to travel, take criticism easily, have a good
knowledge of the product, have good communication skills and last but not the least, have
tremendous stamina to work. To keep such a salesforce motivated, adequate compensation is the
basic need. In the growth stage, the motivation of the salesforce has to be sustained to exploit all
the opportunities available in the market. They have to approach the market with renewed vigor.

At this point indirect compensation schemes which are incentive linked play an important role.
When the product has firmly established itself, the salesforce also needs a break from the
monotony. Other indirect benefits like training programs in good environmental locations; foreign
trips for training and understanding markets; promotions to much responsible positions are the
requirements at this stage.

When the product is in the decline stage some fresh incentive schemes may be introduced in the
compensation scheme to generate fresh interest in the product. The number of people involved
with the product has also to increase marginally.

Compensation Related with Demographic Characteristic


The compensation package preferred by the salespeople depends upon their demographic
characteristics also. Their age and size of family or number of dependents play an important part
in the preference for a basic salary and/or incentives. However, this cannot be generalized and
depends largely on the individual. Role of selling in marketing strategy of the company, and
competitors practices are other important factors influencing compensation.

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DIMENSIONS OF SALES MOTIVATION

Motivational effort is generally thought to include three dimensions- intensity, persistence, and
choice. Intensity refers to the amount of effort the salesperson expends on a given task; persistence
refers to how long the salesperson will continue to put forth effort; and choice refers to the
salespersons choice of specific actions to accomplish job-related tasks. For example, a salesperson
may decide to focus on a particular customer (choice). He may increase the number of calls he
makes on this customer (intensity) until he gets the first order (persistence). The choice of a
specific action may affect the intensity and persistence. Likewise, intensity and persistence may
affect the choice of specific actions.

The sales job consists of a large variety of complex and diverse tasks. Because of this, it is
important that the sales persons efforts be channeled in a direction consistent with the companys
strategic plan. Therefore, the direction of the salespersons effort is as important as the intensity
and persistence of that effort.

IMPORTANCE OF MOTIVATION

The nature of the sales job, the individuality of salespeople, the diversity of company goals, and
the continuing changes in the marketplace make motivating sales persons a particularly difficult
and important task.

Unique Nature of the Sales Job- Salespeople experiences a wonderful sense of exhilaration when
they make a sale. But they must also frequently deal with the frustration and rejection of not
making the sale. Even very good sales person does not make every sale. Also, while many
customers are gracious, courteous, and thoughtful in their dealings with salespeople, some are
rude, demanding, and even threatening.

Salespeople spend a large amount of time by themselves calling on customers and travelling
between accounts. This means that most of the time they are away from any kind of support from
their peers or leaders, and they often feel isolated and detached from their companies.
Consequently, they usually require more motivation than is needed for other jobs to reach the
performance level management desires.

Individuality of Salespeople- Sales people has their own personal goals, problems, strengths, and
weaknesses. Each sales person may respond differently to a given motivating force. Ideally, the
company should develop a separate motivational package for each sales person; but a totally tailor-
made approach poses major practical problems. In reality, management must develop a
motivational mix that appeals to a whole group but also has the flexibility to appeal to the varying
individual needs.

A related point is that the sales people themselves may not know why they react as they do to a
given motivator, or they may be unwilling to admit what these reasons are. For example, a
salesperson may engage in a certain selling task because it satisfies his ego, rather than admit this;
however, he will say that he is motivated by a desire to serve his customers.

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Company usually has many diverse sales goals, and these goals may even conflict with each other.
One goal may be to correct an imbalanced inventory and another may be to have the sales force to
missionary selling to strengthen long-term customer relations. These two goals conflict somewhat
and require different motivating forces. With diverse goals such as these, developing an effective
combination of motivators is difficult.

Changes in Market Environment- Changes in the market environment can make it difficult for
management to develop the right mix of sales force motivational methods. What motivates sales
people today may not work next month because of changes in market conditions. Conversely, sales
executives can face motivational problems when market conditions remain stable for an extended
period of time. In this situation, the same motivators may lose their effectiveness.

MOTIVATION THEORIES

Researchers in the behavioral sciences have shown that all human activity is directed toward
satisfying certain needs and reaching certain goals. How sales-people behave on the job is directly
related to their individual needs and goals. Thus, some individuals will behave differently and will
be more successful because of different motivational patterns. Many people feel that individual
motivation is dependent upon whether or not salespersons find something in the job that is
personally motivating for them. Therefore, the job of the sales manager must be redefined, with
greater emphasis placed upon understanding and accepting the idea of how motivation works. The
sales manager is responsible not only for motivating the sales force per se but also for counseling
each salesperson individually to find the source of that persons self-motivation.

Maslows Need Theory


Maslows well-known theory contends that people are motivated by a hierarchy of psychological
growth needs. Relative gratification of the needs at one level activates the next-higher order of
needs. The hierarchy-of-needs theory implies that salespeople come to their jobs already motivated
and that they only need the opportunity to respond to the challenges of higher-order needs. Sales
managers applying need theory should keep in mind its two major premises:
The greater the deprivation of a given need, the greater its importance and strength.
Gratification of needs at one level in the hierarchy activates needs at the next-higher level.

Sales managers must keep track of the level of needs most important to each salesperson, from the
beginning trainee to the senior sales representative. Before salespeople become stagnated at one
level, they must be given opportunities to activate and satisfy higher-level needs if they are to be
successfully motivated toward superior performances. Since various salespeople are at different
need levels at any one time, sales managers have to retain their sensitivity to the evolving needs
of individual sales person through close personal contact with each member of the sales force.

Motivator-Hygiene Theory:
Herzbergs classic research studies found two types of factors associated with the satisfaction or
dissatisfaction of employees. Sources of satisfaction are called motivators because they are
necessary to stimulate individuals to superior efforts. They relate to the nature or content of the
job itself and include responsibility, achievement, recognition, and opportunities for growth and
advancement. Sources of dissatisfaction are called hygiene factors because they are necessary to

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keep employee performance from dropping or becoming unhealthy. They comprise the
environment; include salary, company policies and administration, supervision, and working
conditions. According to Herzbergs theories, to improve productivity, sales managers must
maintain hygiene factors (pleasant work environment) while providing motivators (job
enrichment) for the sales force. Here are some examples of job enrichment:

Give salespeople a complete natural unit of work responsibility and accountability (e.g. specific
customer category assignments in a designated area).

Grant greater authority and job freedom to the salespeople in accomplishing assignments (e.g., let
salespeople schedule their time in their own unique way as long as organizational goals are met).

Introduce salespeople to new and more difficult tasks and to challenges not previously handled
(e.g., opening new accounts, selling anew product category, or being assigned a large national
account).

Assign salespeople specific or specialized tasks enabling them to become experts (e.g., training
new salespeople on how to close a sale).

Send periodic reports and communications directly to the salesperson instead of forwarding
everything via the sales supervisor. (Of course, the supervisor must be informed about what
information the salespeople are receiving).

Achievement Theory:
Research by McClelland and his associates confirmed that some people have higher achievement
needs than others; they labeled such persons achievement oriented. Children who are given
greater responsibilities and trusted from youth to do things on their own are more likely to have
achievement-oriented profiles. Achievement oriented people readily accept individual
responsibility, seek challenging tasks, and are willing to take risks doing asks that may serve as
stepping stones to future rewards. These individuals receive more satisfaction from accomplishing
goals and more frustration from failure or unfinished tasks than the average person.

Any achievement-related step on the success path may include rewards (positive incentives) or
threats (negative incentives). A path is contingent if the individual feels that immediate success is
required in order to have the opportunity to continue toward further successes and that immediate
failure causes loss of the opportunity to continue on the path. If immediate success or failure has
no effect on the opportunity to continue on the path toward future success or failure, the path is
non-contingent.

Sales managers need to identify the achievement-motivated salespeople and then give them
personal responsibility for solving definable problems or achieving certain goals. Frequent,
specific feedback is also essential so that these sales-people can know whether they are successful
or not. Managers may have to temper negative feedback because achievement-motivated people
may resign if they feel that they are going to be unsuccessful. Finally, competition among such
salespeople can become cut-throat and damaging to the organization unless carefully monitored
and controlled.

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Contrasted with these achievement-oriented individuals, affiliative people are not as competitive
nor are they as anxious about uncompleted tasks; they require only general feedback regarding
goal achievement. Affiliative types like to work in groups and want to be accepted by others. They
are less self-centered, usually help bind the group together, and are less able to tolerate traveling
jobs involving long periods of solitude.

Although salespeople generally exhibit traits of both task achievement and group affiliation, it is
up to the sales manager to learn the dominant needs of individual salespeople in order to devise
specific strategies for motivating them.

Inequity Theory:
According to the inequity theory of motivation, people compare their relative work contributions
and rewards with those of other individuals in similar situations. As positive-thinking minister
and author Robert Schuller says: Many people hear through their peers, not their ears. Inequity
is experienced when a person feels either under-rewarded or over-rewarded for his or her
contribution relative to that of others. The stronger the feeling of inequity, the stronger the drive
to reduce tension. Although individuals may respond in unique ways to inequity, most people who
feel underpaid or under-rewarded, relative to others makes similar contributions, tend to decrease
their work efforts: people who feel overpaid tend to increase their efforts. People may also reduce
their inequity tensions by distorting their perceptions of their rewards and contributions versus
those of others. Finally, individuals may leave a perceived inequitable situation by quitting the job
or changing the comparison group.

According to inequity theory, it is important that sales managers learn how individual sales
representatives feel about the equity of their contributions and rewards compared with those of
others. If inequity is perceived by some of the salespeople, the sales manager needs to correct the
situation if inequity really does exist or help the salespeople reduce tensions by altering their
perceptions of the comparison groups relative contributions and rewards.

Role Clarity:
Donnelly and Ivancevich contend that one of the most important needs of salespeople is role
clarity, or a concept of exactly what their job entails. Because salespeople often lack sufficient job
knowledge, must deal across departmental boundaries, and are challenged by complex problems
requiring innovative solutions, precisely defined goals and clear role expectations can be
motivational. Empirical research with salespeople correlates increased role clarity with greater job
interest, more opportunity for job innovation, less work tension, more job satisfaction, and a lower
propensity to leave. Salespeople usually want and need more information about what is expected
of them and how they will be evaluated.

Clearly written job descriptions and management-by-objectives (MBO) conferences that set
precise goals (mutually agreed upon by the salesperson and sales manager) can have important
motivational effects and stimulate job satisfaction. Clarifying the role expectations for salespeople
by individualizing achievement plants and providing a continuous flow of helpful information will
consume significant amounts of sales management time. But this seems to be one of the least
complicated, least expensive, and surest ways of obtaining higher sales force productivity.

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MOTIVATIONAL TOOLS
The simple motivational tools of early years such as only financial benefits prove to be a poor
method of motivation beyond physiological and safety needs satisfaction on account of the unique
aspects of a salespersons job. The non-financial incentives become an important component of
motivation. Some of the factors that make a special mark on salesforce motivation are discussed
below.
1. Meeting Between Manager and Salesforce- These are highly regarded by sales managers in
the motivation of their sales teams. This provides opportunity to managers to meet their salesforce
in the field, at head office and at the sales meetings/conventions. This provides a number of
opportunities for improving motivation. These meetings allow the sales manager to understand the
personality, needs and problems of each salesperson.
2. Clarity of Job - Clarity of job and what is expected from the salesperson is a great motivator.
The objectives when duly quantified and well defined properly connected and linked with the
reward and recognition serve as source of motivation to the salesperson.
3. Sales Targets or Quotas- If a sales target or quota is to be effective in motivating a salesperson,
it must be regarded as fair and attainable and yet offer a challenge to him. Because the salesperson
should regard the quota as fair, it is usually sensible to allow him to participate in the setting of the
quota.
4. Sales Contest- The sales contest is an important tool to motivate salesperson. The purpose of
the sales contest varies widely. It may encourage a higher level of sales in general, to increase the
sales of a slow-moving product or to reward the generation of new customers. It provides an
incentive to show better performance and secure more satisfactory results.
5. Sales Conventions and Conferences- These are the devices of group motivation. They provide
opportunities for salesperson to participate, gain social satisfaction and express their views on
matters directly affecting their work. They promote team work, dissolve social barriers, inspire
and raise salespersons morale. Most of the companies are now-a-days adopting this method to
motivate their salesforce.
6. Positive Affect- The positive affect method is also an important technique for motivating the
salesforce to their best. The proper application of praise, positive feedback, and human warmth
and understanding can impel others to perform up to their capabilities. This must be done in a
genuine way and not be perceived as overtly-self-serving.
7. Leadership Style of the Manager- Leadership style of the manager plays an important role in
motivating the salesperson. Inspirational leadership, which refers to influence through referent
power. Identification or charismatic charm is an important tool in the motivational strategy of the
management.
8. Freedom to Work - In order to perform the onerous duties and responsibilities, the salesperson
must be given a reasonable amount of freedom and discretion in performing their job. Discretion
and freedom may be accomplished by allowing salesperson to develop their own call patterns,
more control over the types of promotional packages that are offered to their customers etc.
Freedom or autonomy satisfies the psychological needs and is like power pay (which is a reward),
making the job of salesperson more important in the organization.
9. Reward and Recognition- Although sales quotas, sales contests, conventions and conferences
have positive carry over effects, these are short lived techniques of motivating salesmen. On the
other hand reward and recognition on salesperson accomplishments are more enduring and
relatively economic methods of motivation. Some of the ways to extend recognition and honor to

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salesperson include conferment upon the title of salesman of the month/year. Congratulation
telegrams from members of top management, sales trophies, offering membership of social clubs,
mention in company newsletter, certificate etc.
10. Persuasion- One of the more common and recommended forms of inducing high levels of
motivation is through persuasion. In this situation, managers use rational arguments to convince
salesperson that it is in their own best interests to act in preferred way. Persuasion has the
advantage of getting people to conclude that their actions were performed out of their own free
will. This leads to higher levels of self direction than reward or coercive modes of influence where
one perceives he or she acts more as a function or external compulsion than internal volition.

SUMMARY
The sales compensation plan is an essential part of the total program for motivating sales personnel.
The basic sales compensation elements (salary, commissions or combination of both) should be in
amount large enough to provide the living wage and sufficiently flexible to adjust for changes in
job performance. Motivating sales people is an important aspect of sales force management. Sales
personnel require additional motivation because of inherent nature of the sales job, role conflicts,
the natural tendency towards apathy, and difficulties in building group identity. Implementing
motivational efforts requires that sales executives be skilled leaders, rather than drivers, of sales
personnel. Satisfactory job performance develop out of deep understanding of motivational forces
and processes, effective leadership, two way communications, and effective handling of
relationships.

KEYWORDS
Compensation: It is sum total of financial and non-financial benefits provided to sales force in
lieu of their services provided to organization.
Motivation: It is goal directed behavior of sales force in any organization. It stimulates the
movement and work of an individual.
PLC: Product Life Cycle is the journey of any product from the stage of its introduction to decline.
It depicts the life span of a product.

SALES QUOTA
A sales quota is a quantitative goal assigned to a sales unit for a specific period of time. A sales
unit may be a sales person, territory, branch office, region or distributor. Sales quotas are used to
plan, control and evaluate selling activities of a firm. As standards for appraising selling
effectiveness, quotas specify desired performance levels for sales volume, expenses, gross margin,
net profit, selling and non-selling activities, or some combination of these items. Sales quotas
provide a source of motivation, a basis for incentive, compensation, standards for performance
evaluation of sales person and uncover the strengths and weaknesses in the selling structure of the
firm.

Quotas are devices for directing and controlling sales operations. Their effectiveness depends upon
the kind, amount, and accuracy of marketing information used in setting them, and upon
managements skills in administering the quota system. For effective results, quotas are designed
on the basis of information derived from sales forecasts, studies of market and sales potentials, and
cost estimates. Accurate data are important to the effectiveness of a quota system, but, they are not
sufficient; judgement and administrative skills are required of those with quota setting

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responsibilities. Soundly administered quotas based on thorough market knowledge are effective
devices for directing and controlling sales operations.

PURPOSE OF THE SALES QUOTA

To provide standards for evaluating performance: Quotas provide a means for determining which
sales personnel, territory, other units of sales organization, or distributive outlets are doing average,
below average, or above average job. They are yardsticks for measuring sales performance.
Comparisons of quotas with sales performance identify weak and strong points, but management
must dig deeper to uncover reasons for variations.

To furnish goals and incentives for the sales force: Quotas provide salespersons, distributive
outlets and others engaged in selling activities, goals and incentives to achieve certain performance
level. Many companies use quotas to provide their salesforce the incentives of increasing their
compensation through commissions or bonus if the quota is surpassed and/or recognized for
superior performance. Needless to say, to be true motivators, sales quota should be perceived as
being realistic and attainable and to an extent surpass able.

To control salespeoples activities: Quotas provide an opportunity to direct and control the selling
activities of sales persons. Sales persons are responsible for certain activities e.g. customer calls
per day, calling on new accounts, giving a minimum number of demonstrations and realization of
firms account. If the sales people fail to attain these quotas, the company can take corrective action
to rectify the mistake.

To evaluate the productivity of sales people: Quotas provide a yard-stick for measuring the
general effectiveness of sales representatives. By comparing salespersons actual results with set
quotas the areas of activities are determined where the salesforce need help for improving
productivity.

To control selling expenses: Quotas are also designed to keep selling expenses within limits. Some
companies reimburse sales expenses only up to a certain percentage of sales quotas. Others tie
expenses to the salespersons compensation in order to curb wasteful expenditure. Expense quota
helps companies to set profit quotas.

To make effective compensation plan: Quotas play an important role in the companys sales
compensation plan. Some companies follow the practice that their salespersons will get
commission only when they exceed their assigned quotas. Companies may also use attainment of
the quotas in full or in part as the basis for calculating the bonus. If the salesperson does not reach
the minimum desired quota, he will not be entitled for any bonus.

To evaluate sales contests results: Sales quotas are used frequently in conjunction with sales
contests. Companies mostly use performance against quota as the main basis for giving away
awards in sales contests. Sales contests are more powerful incentives if all participants feel they
have a more or less equal chance of winning by basing awards on percentage of quota fulfilment
which is a common denominator. Hence, it causes average salesperson to turn into above average
performers.

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TYPES OF QUOTAS
Differences in forecasting and budgeting procedures, management philosophy, selling problems,
and executive judgment, as well as variations in quota-setting procedures, cause each firm to have
somewhat unique quota. Ignoring small differences, however quotas fall into four categories:

Sales Volume Quota: The most commonly used quotas are those based on sales volume. This type
of quota is set for an individual sales person, geographical areas, product lines or distributive outlet
or for only one or more of these in combination. Sales volume quotas are also set to balance the
sales of slow moving products and fast moving products or between various categories of
customers per sales unit. The sales volume quota may be set in terms of units of product sales, or
peso sales or both on overall as well as product wise basis.

Some companies combine these two and set quota on the point basis. Points are awarded on the
attainment of a certain specific level of sales in units and rupee terms for each product/customer.
For example: A company might consider 1000 peso equal to 1 point, 2000 equal peso to 2 points
and so on. At the same time company may award 3 points for unit sales of product A and 5 points-
for unit sales product B. Companies use this type of approach generally because of problems faced
in implementing either peso sales volume or unit sales volume quota. Unit sales volume quotas are
found useful in market situations where the prices of the products fluctuate considerably or when
the unit price of the product is rather high. Rupee sales volume quotas are found suitable in the
case of sales force selling multiple products to one or different types of customers.

Financial or Budget Quotas: Financial or budget quotas are determined to attain desired net profit
as well as to control the sales expenses incurred. In other words, it is set for various units in the
sales organization to control expenses, gross margin, or net profit. The intention in setting financial
quota is to make it clear to sales personnel that this job consists something more than obtaining
sales volume. It makes personnel more conscious that the company is in business to make a profit.
Expense quotas emphasize keeping expenses in alignment with sales volume, thus,
Indirectly controlling gross margin and net profit contribution. Gross margin or net profit quotas
emphasize margin and profit contributions, thus indirectly controlling sales expenses.

Expense Quotas: In order to make the salesforce conscious of the need to keep selling
costs within reasonable limits, some companies set quota for expenses linked to different
levels of sales attained by their salesforce. And to ensure its conformity they even link
compensation incentives to keep expenses within prescribed limits. Since sales are the
result of the selling tasks performed which vary across sales territories, it is not easy to
determine expense quotas as percentage of sales in a uniform manner. Also very strict
conformity to expense quota norms result in demotivation of salesforce. As such expense
quota is generally used as a supplement to other types of quotas.

Net Profit Quotas: Net profit quotas are particularly useful in multiproduct companies
where different products contribute varying level of profits. Its emphasis is on the
salesforce to make right use of their time. It is important for the management to ensure that
its sales force do not spend more time on less profitable products, because the salespersons
are costing the company the opportunity of earning higher profits from their high margin

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products. In other words, it should ensure that its salespersons spend their maximum time
on more profitable customers. The objective can be achieved by setting a quota on net
profit for its salesforce, and thus, encouraging them to sell more of high margin products
and less the low margin products.

Activity Quotas: Good performance in competitive markets requires the salesforce to perform the
sales as well as market development related activities. The latter activities have long term
implications on the goodwill of the firm. To ensure that such important activities get performed,
some companies set quotas for the salesforce in terms of various selling activities to be performed
by them within a given period. Finally the company must set a target level of performance for the
sales persons. Some of the common types of activity quotas prevalent in other firms are as under:
Number of prospects called on
Number of new accounts opened
Number of calls made for realizing companys account
Number of dealers called on
Number of service calls made
Number of demonstrations made

The chief merit of activity quota lies in its ability to direct the sales force to perform the urgent
selling activities and important non-selling but market development related activities in a balanced
and regular manner.

Combination Quotas: Depending upon the nature of product and market, selling tasks required to
be performed as well as selling challenges facing the company; some companies find it useful to
set quotas in combination of the two or three types discussed above. Peso sales volume and net
profit quotas or unit sales volume and activity quota in a combined manner are found in common
use in a large number of consumer and industrial products companies.

PROCEDURE FOR SETTING SALES VOLUME QUOTA

Quotas Based on Sales Potential: One common practice in quota setting is to relate quotas directly
to the territorial sales potentials. These potentials are the share of the estimated total industry sales
that the company expects to realize in a given territory. A sales volume quota sums up the effort
that a particular selling unit should expend. Sales potential represents the maximum sales
opportunities open to the same selling unit. Many companies derive sales volume quota from sales
potentials, and this approach is appropriate when - territorial sales potentials are determined in
conjunction with territorial design or bottom-up planning and forecasting procedures are used in
obtaining the sales estimate in the sales forecast. Thus, if the territorial sales potentials or forecasts
have already been determined and the quotas are to be related to these measures, the job of quota
setting is largely completed.

For instance, let us assume that the sales potential in territory A is P300, 000.00 or 4 percent of the
total company potential. Then management may assign this amount as a quota for the salesperson
that covers that territory. The total of all territorial quotas then would be equal the company sales
potential. In some cases, management chooses to use the estimate of potential as starting point in
determining the quota. These potentials are then adjusted for one or more of the following factors:

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Human Factors: A quota may have to be adjusted downwards because an older salesperson is
covering the district. The salesperson may have done a fine job for the company for years but is
now approaching retirement age and slowing down because of physical limitations. It would not
be good on human relations - or ethical - to discharge or force the person into early retirement.
Sometimes such persons are given smaller territories with corresponding lower quotas. Likewise
sometimes new sales people are given lower quotas for the first few years until they learn a greater
level of competence.

Psychological Factors: Management understands that it is human nature to relax after a goal has
been reached. Therefore, sometimes sales managers set their quotas a little higher than the expected
potential. On the other hand management must not set the goals unrealistically high. A quota too
far above the sales potential can discourage the salesforce. The ideal psychological quota is one
that is bit above the potential but can still be met and even exceeded by working efficiently.

Compensation Factors: Sometimes companies relate their quotas basically to the sales potential,
but adjust them to allow for the compensation plan. In such a case, the company is really using
both the quota and compensation systems to stimulate the salesforce. For example, one company
may set its quota at 90 percent of potential. It pays for one bonus if the quota is met and an
additional bonus if the sales reach 100 percent of the potential.

Quotas Based on Past Sales Alone: In some organizations, sales volume quotas are based strictly
on the preceding years sales or on an average of sales over a period of several years. Management
sets each salespersons quota at an arbitrary percentage increases over sales in some past period.
The only merits in this method of quota setting are computational simplicity and low-cost
administration. If a firm follows this procedure, it should at least use an average figure for the past
several years as a base, not just the previous years sales. Random or irregular events would greatly
affect a sales index based on only one year. However, a quota setting method based on past
performances alone is subject to severe limitations. This method ignores possible changes in a
territorys sales potential. Generally business conditions this year may be depressed in a district,
thus cutting the sales potential or promising new customers may have moved into the district, thus
boosting the potential volume. Basing quotas on previous years sales may not uncover poor
performance in a given territory. A person may have had sales of P100, 000 last year, and the quota
is increased by 5 percent for this year. The salesperson may even reach the goal of 105,000.

However, the potential in the district may be 200,000. This salesperson may perform poorly for
years without letting the management realize that a problem exists. Quotas set on past sales also
ignore the percentage of sales potential already achieved. Moreover, chase your tail quotas- in
which the more the salespeople sell, the more they are supposed to sell-destroy morale and
ultimately cause top achievers to leave the company.

Quotas Based on Executive Judgement: Sometimes sales volume quotas are based solely on the
executive judgment, which is more precisely called guesswork. Executive judgment is usually an
indispensable ingredient in a sound procedure for quota setting, but to use it alone is certainly not
recommended. Even though the manager may be very experienced, too many risks are involved in
relying solely on this factor without referring to quantitative market measures. This method is

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justified when there is little information to use in setting quotas. There may be no sales forecast,
no practical way to determine territorial sales potential. The product may be new and its probable
rate of market acceptance is unknown, the territory may not yet have been opened, or a newly
recruited salesperson may have been assigned to a new territory. In such situations, management
may set sales volume quotas solely on a judgement basis.

Quotas Based on Total Market Estimates: In some companies management has neither statistics
nor salesforce estimates of territorial sales potentials. These companies use top-down planning and
forecasting to obtain the sales estimate for the whole company; hence, if management sets volume
quotas, it uses similar procedures. Management may either (i) breakdown the total company sales
estimate, using various indexes of relative sales opportunities in each territory and then make
adjustments or (ii) convert the company sales estimate into a companywide sales quota and then
breakdown the company volume quota, by using an index of relative sales opportunities in each
territory. In the second procedure, another set of adjustment is made for differences in territories
and sales personnel before finally arriving at territorial quotas. Note that these choices are similar,
the only difference being whether adjustments are made only at the territorial level, or also at the
company level. The second alternative is a better choice.

Quotas Related Only to Compensation Plan: Companies sometimes base sales volume quotas
solely upon the projected amounts of compensation that management believes sales personnel
should receive. No consideration is given to territorial sales potentials, total market estimates, and
past sales experiences, and quotas are tailored exclusively to fit the sales compensation plan. If for
example, salesperson A is to receive 5000 monthly salary and a 5 percent commission on all
monthly sales over 50,000. As monthly sales volume quota is set at 50,000. As long as As
monthly sales exceed 50,000, management holds As compensation-to-sales ratio to 5 percent.

Note that A is really paid on a straight-commission plan, even though it is labelled salary and
commission. Such sales volume quotas are poor standards for appraising sales performance, they
relate only indirectly, if at all, to territorial sales potentials. It is appropriate to tie in sales force
quota performance with the sales compensation plan, that is, as financial incentive to performers,
but no sales volume quota should be based on the compensation plan alone.

Salesperson Set Their Own Quota: Some companies turn the setting of sales volume quotas over
to the sales staffs, which is placed in the position of determining their own performance standards.
The reason for this is that sales personnel, being closest to the territories, know them best and
therefore, should set the most realistic sales volume quotas. The real reason, however, is that
management is transferring the quota setting responsibilities and turns the whole problem over to
the sales staff, thinking, they will complain less if they set their own standards. There is, indeed, a
certain ring of truth in the argument that having sales personnel set their own objectives may cause
them to work harder to attain them and complain less. But sales personnel are seldom dispassionate
in setting their own quotas. Some are reluctant to obligate themselves to achieve what they regard
as too much; and others far this is just as common-overestimate their capabilities and set
unrealistically high quotas. Quotas set unrealistically high or low-by management or by the sales
force cause dissatisfaction and results in low salesforce morale. Management should have better
information; therefore, it should make final quota decisions. How, for instance, can sales personnel
adjust for changes management makes in price, product, promotion, and other policies?

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CHARACTERISTICS OF A GOOD QUOTA SYSTEM

Realistic Attainability: If a quota is to spur the salesforce to maximum effort, the goal must be
realistically attainable. If it is too far out of reach, the salespeople will lose their incentives.

Objective Accuracy: Regardless of what type of quota management uses, it should be related to
potentials. Executive judgement is also required, but it should not be the sole factor in the decision.

Ease of Understanding and Administering: A quota must be easy for both management and the
salesforce to understand. Also, the system should be economical to administer.

Flexibility: All quota systems need adequate flexibility. Particularly, if the quota period is as long
as a year, management may have to make adjustments because of changes in market conditions.

Fairness: A good quota system is perceived as fair to the people involved. The workload imposed
by quotas should be the same for all sales people. However, this does not mean that quotas must
be equal. Differences in potentials, competition, and ability of the salesforce do exist.

SUMMARY

Quotas are quantitative objectives assigned to sales personnel and other units of the selling
organization. They are intended both to stimulate performance and to evaluate it, through
communicating managements expectations and serving as performance measures. In successful
quota systems, special pains are taken to tie in quota setting procedures with sales potentials and
planning data from the sales forecast and sales budget. Sound judgement is required for adjusting
tentative quotas both for contemplated policy changes and for factors unique to each territorial
environment. Continuous managerial review and appraisal and balanced flexibility in making
changes in quotas and improvements in quota setting procedures characterize successful quota
system. When based on relevant and accurate market information, and when intelligently
administered, quotas are effective devices for directing and controlling sales operations.

KEYWORDS
Sales Quota: It is quantitative goal assigned to a sales person.
Sales Volume Quota: It is the number of products to be sold by an individual sales person.
Activity Quota: It is the various activities assigned to sales force to be performed regarding sales.
Budget/Financial Quota: It is determined to attain designed net profit as well as to control the
sales expenses incurred.

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