Operations

Management

A Book review on
Sales and Distribution Management
By Pingali Venugopal

About The Author –Pingali Venugopal

Prof. Pingali Venugopal is a postgraduate from IIM, Ahmedabad, and is a
professor of marketing at XLRI since 1994. He is the visiting lecturer at IIM
Ahmedabad, Calcutta and Lucknow and in American University of Armenia.

What is Sales Management?

Sales management is attainment of an organization's sales goals
in an effective & efficient manner through planning, staffing,
training, leading & controlling organizational resources.

What is Distribution Channel?

The Distribution Channel is the System of intermediaries between
the producer of goods and / or services to the final user. It is a
path or 'pipeline' through which goods and services flow in one
direction (from vendor to the consumer), and the
payments generated by them flow in the opposite direction (from
consumer to the vendor). A distribution channel can be as short
as being direct from the vendor to the consumer or may include
several inter-connected (usually independent but
mutually dependent)intermediaries such
as wholesalers, distributors, agents, retailers. Each
intermediary receives the item at one pricing point and moves it
to the next higher pricing point until it reaches the final buyer.

About the Book

Sales and Distribution Management: An Indian
Perspective, adopts a customer-centric approach to sales and
distribution management where strategic and operational
decisions are made keeping the end consumer in mind. It
develops a framework to integrate the sales and distribution
management functions with other marketing mix elements so that
there is no overlap with other functions of the marketing
department.

The book also describes the service orientation required for

selling different products and the importance of behavioral
transactions that need to take place for a sale to complete.
Generalized frameworks are built using examples from industrial
products, consumer products and services.

Roadmap of the Book

1. Marketing & Retail Management.

2. Strategic Decisions in Sales & Distribution Management

3. Operational Decisions in Channel Management

4. Operational Decision in Sales Management

 Marketing & Retail Management

Consumer Decision Process:

In any business, the first step is to understand the consumer so the author
started the first part of the book with the understanding of the consumer
decision process. Consumers adopt different decision process for different
products and under different situations. The different decision processes are
as follows:

1. Picking- It involves a random choice of the product where the brand is

not given importance. Here there is low involvement of the consumer.

2. Variety Seeking- It also involves a random choice but here the buyer
seeks variety and thus requires significant differences between brands.

3. Legalistic- It is a low involvement process which is done only because

it is required by the legal or societal norms.

4. Sub contracted- The buyer obtains a brand recommendation from a

personal source with the intention of purchasing the brand without
acquiring any other information.

5. Heuristics- In this the consumer employs simple thumb rules like

symbol of quality (ISI Mark) etc. to make quick decisions.

6. Problem solving- It involves extensive search of the product by the

buyer and different brands makes a lot of difference to the decision
process.

7. Habit- Habit involves the purchase of those products which are tried
and tested previously by the consumer.

These being the consumer decision process the company then plans its
marketing strategies based on that.

Types of Channel Members:

As the economic development took place the markets evolved and the
members of the distribution channel increased. The different channel
members are as follows:

1. Distributors or Stockists- Distributors or stockists are invoiced

directly from company. These channel members are the points at
which the title is transferred from company to the trade.

2. Carrying and Forwarding Agent- These agents not only stock the
products but also performs other functions for the company like
arranging the delivery of the product, implementation of company’s
promotional activities, etc.

3. Wholesalers- A wholesaler buys from the distributor or stockist. They

provide reach by selling to outlets not covered by distributor or
stockist.

The Retail Formats:

The retailer is the most important member of the whole distribution. They
are the ones from whom the consumer buys the product. In India different
retail formats exists. The various formats are as follows:

1. Malls- It is a complex of shops where under one roof different types of

products are available.

2. Specialty Store- A specialty store is a store, usually retail, that offers

specific and specialized types of items. These stores focus on selling a
particular brand, or a particular type of item. For example, a store that
exclusively sells cell phones.

3. Kirana Stores- Kirana stores are the traditional grocery shops offering
food and household merchandise. Kirana stores are owned and
operated on a small scale by the owner himself.

4. Supermarkets- A supermarket, also called a grocery store, is a self-service store offering

a wide variety of food and household merchandise, organized into departments. It
is larger in
size and has a wider selection than a traditional grocery store.

5. General Merchants-They are the merchants dealing in products and

sell through their own shops.

6. Kiosks- A kiosk is a small shop usually a rectangle box, in which few

products like are sold.
 7. Paan\Bidi Shops- These are the shops selling cigarettes and tobacco.
However in India these shops keep some products of daily use like
soap, shampoo sachets, toothpastes, chocolates, etc. These are
normally used for urgent purchases.

Retail Profiling:
The products are available in more than one of the previously mentioned
formats. A chocolate might be available in a supermarket as well as a paan/
bidi shop. A consumer rate different formats differently. Thus, a detailed
profiling is necessary for the company to identify types of retailer outlets
suitable for marketing their products to their target segment. Retail profiling
will help the company to understand the extent of service the company has
to provide to maximize retailer and consumer satisfaction.

To understand the retail profiling the author has given the example of the
Indian Tyre Industry.
India’s automobile boom and the expansion of the highway network have
created a huge business opportunity for the country’s tyre manufacturers.

A variety of formats were emerging for retailing the tyres. The traditional
multi-brand dealership was given competition by exclusive stores which was
first brought up by Applo Tyres. Then MRF came up with MRF Tyredom in
which along with tyres various services are provided. Thus, retail profiling
for the tyre outlets can be explained with the following table:

Factor Multi-Brand Exclusive Dealer Franchisee tyres

Dealer and service

Customer Satisfies customers Satisfies customers Satisfies customers

Satisfaction who want variety who are partially who are loyal to
loyal to brand brand & also want
service

Type of Locality Not locality specific Centrally located In posh, high-end

commercial areas
Factors Competitive Pricing Availability of the Ambience and total
Influencing desired model tyre solution
Brand Choice

Basket of Goods Does not have full Maintains full- Maintains full-
range of any brand range range

Here, The retail outlets taken are Multi-Brand Dealers, Exclusive Dealers and
Franchisee tyres and Services. The factors taken for retail profiling are
Customer satisfaction, Types of Locality, Factors Influencing brand choice
and Basket of Goods. Other factors such as profitability of the retailer and
services could also be used. In this, the retail profile of Multi-Brand Outlet is:

a) It satisfies customers who want variety in brands.

b) It is not very specific for the location of its shop.
c) The Pricing here is competitive as different brands give competition to
each other.
d) It has a variety of products but does not have a full range of products of
any brand.

This way the retail profile of Exclusive stores and Franchisee and Services
Store can also seen from the table.

After understanding the retail formats and retail profiling the company needs
to identify the management practices of the retailers to formulate
programmes to manage retailers. The retail management practice consists of
strategic decisions and managerial decisions of the retailers. This determines
the which retail format is suitable for the company.
 Strategic Decisions in Sales &
Distribution Management

The strategic decisions taken by the company can be explained with the help
of the example of Usha International and ING Vysya Life Insurance.

 Usha International:
Company Profile :-
• Usha has a network of 55 company showrooms located in best
market showrooms.

• Francis Kanoi Market Research Planning Ltd.certified.

• Warehouse numbering 30, Sales & service numbering 5000

 ING Vyasa Life Insurance:

Company Introduction :-

• The company has 3 main distribution channels :-

 1. Tied Agency – over 12000 trained and committed agents.

2. Bancassurance – Vyasya Bank, Bharat Overseas Bank.

3. Alternate channel – over 45 alliance partners.

• Increase tie-ups with other co-operative banks.

Ecommerce DefinitionTypes of e-commerce

Ecommerce (e-commerce) or electronic commerce, a subset of e-business, is
the purchasing, selling, and exchanging of goods and services over computer
networks (such as the Internet) through which transactions or terms of sale
are performed electronically. Contrary to popular belief, ecommerce is not
just on the Web. In fact, ecommerce was alive and well in business to
business transactions before the Web back in the 70s via EDI (Electronic
Data Interchange) through VANs (Value-Added Networks).

Types of e-commerce
Ecommerce can be broken into four main categories: B2B, B2C, C2B, and
C2C.

B2B (Business-to-Business)
Companies doing business with each other such as manufacturers selling to
distributors and wholesalers selling to retailers. Pricing is based on quantity
of order and is often negotiable.

B2C (Business-to-Consumer)
Businesses selling to the general public typically through catalogs utilizing
shopping cart software. By dollar volume, B2B takes the prize, however B2C
is really what the average Joe has in mind with regards to ecommerce as a
whole.

Having a hard time finding a book? Need to purchase a custom, high-end

computer system? How about a first class, all-inclusive trip to a tropical
island? With the advent ecommerce, all three things can be purchased
literally in minutes without human interaction. Oh how far we've come!

C2B (Consumer-to-Business)
A consumer posts his project with a set budget online and within hours
companies review the consumer's requirements and bid on the project. The
consumer reviews the bids and selects the company that will complete the
project. Elance empowers consumers around the world by providing the
meeting ground and platform for such transactions.

C2C (Consumer-to-Consumer)
There are many sites offering free classifieds, auctions, and forums where
individuals can buy and sell thanks to online payment systems like PayPal
where people can send and receive money online with ease. eBay's auction
service is a great example of where person-to-person transactions take place
everyday since 1995.

Companies using internal networks to offer their employees products and

services online--not necessarily online on the Web--are engaging in B2E
(Business-to-Employee) ecommerce.

G2G (Government-to-Government), G2E (Government-to-

Employee), G2B (Government-to-Business), B2G (Business-
to-Government), G2C (Government-to-Citizen), C2G
(Citizen-to-Government) are other forms of ecommerce that involve
transactions with the government--from procurement to filing taxes to
business registrations to renewing licenses. There are other categories of
ecommerce out there, but they tend to be superfluous.

The example of Automobile Lubricants Industry.

Automobile Lubricants:
 There are two key markets in India viz. Original Equipment segment &
retail

 In Lubricants the major manufactures are as follows:-

1. Castrol India Ltd.

2. Mobil & PSU such as

 Bharat Petroleum Corporation

 Indian Oil Corporation

 Hindustan Petroleum Corporation.

 Operational Decisions in Channel
Management

SELECTION OF A DEALER
This can be explained with the help of the example of Maruti Udyog’s
process of selection of the dealer.

Background of a person- Background of a person is utmost important.

Maruti asks the applicants to furnish exhaustive details of their nature of
work, field, experience and capabilities.

Availability of Infrastructure- Infrastructure availability includes a

minimum floor space of 5000sq.ft exclusively for the showroom. in addition
the dealer has to maintain his own stockyard which calls for adequate
infrastructure build-up.

His/Her Managerial Capabilities- Managerial capabilities include

handling of stream of footfalls in the showroom.

Financial Position of Concerned Party- Financial position includes

capacity of an individual to invest about 10-20 million for infrastructure
development.

Channel Evaluation
Effectiveness- is related to Delivery and Stimulation.

1. Delivery- How well the channel meets the demand for service outputs
placed on it by the consumption sector.

2. Stimulation-How well the channel members stimulate latent demand

to reach optimal levels of demand for service output.

Efficiency-is divided into Productivity and Profitability.

1. Productivity- Efficiency with which output is generated from

resources and inputs used.

2. Profitability-is a general measure of financial efficiency of channel

members in terms of ROI, liquidity, leverage, market share & so on.

Equity- is extent to which marketing channels serve market segments such

as disadvantaged or geographically isolated consumers.it also deals with
slow moving products.

Case of TATA Steel

• Customer Satisfaction.

• Indian Market Research Bureau (IMRB).

• TNS Mode.

• Customer/Distributor Relationship Index.

• Professional Research Firm.

 Operational Decisions Of Sales
management

1-Sales Force Recruitment

 A sales force can be a marketer’s most decisive weapon, up to
35% of a buyer’s purchase decisions is directly related to a
salesperson’s effectiveness.

The Process of recruitment has the following stages:

a. Identifying the salesperson tasks
The sales person would broadly some of the tasks while selling, those tasks
can be

Prospecting, Targeting, Communicating, Selling, Servicing, Information

gathering, Allocating etc…

b. Identifying the skills suited for the tasks

The skills required by a sales person should be so described that it would help
the company identify the right person for the job. Some of the characteristics
that the company would look for a sales person are as follows:

Good Communication, Positive Attitude & Enthusiasm, Research Oriented &

Investigative, Product Knowledge, Objection Handling, Presentation Skills,
Personal Skills.

c. Identifying the selection criteria appropriate to match the profile of

the salesman identified the job.
A company with an objective to hire sales person who would not only
maximize sales for the company but would also be seeking a career with the
company had following selection criteria with weightage given to each
criteria is as follow:

DEFINING THE SELECTION CRITERIA

CRITERIA WEIGHTAGE

Educational qualification 20 %

Relevant work experience 30 %

Leadership & managerial potential 15 %

Extra-curricular 10 %

Communication & interpersonal 15 %

skills
Family background 05 %

Physical appearance 05 %

Relationship Between Selection Criteria & Sales

Performance
Several studies have proved that many of the selection criteria
may not identify the right candidate for the post

FOR EXAMPLE:

A good educational background needs not success in work. A

study result shows that the kind of person who excels in sales
is not a diligent, reflective type whose college transcript is
loaded with “A” grades. Students who make average grades
often turn out to be real go-getters.

Combing various studies have identified that people who had

family responsibility when they were young, those who are
married, have children & other financial obligations performs
better. The summary of the study is given in the table below:

Selection criteria Contribution

Demographic & physical 01 %

characteristics

Background & experience 24 %

Current status & lifestyle 19 %

Aptitude 13 %

Personality 06 %

Skill variables 26 %
d. Process of socialization

SALES FORCE SOCIALIZATION

The recruited salesperson should undergo a process of socialization in
the organization.

The two stages of socialization relevant & selection are

A. Achieving Realism

B.Achieving Congruence

Candidates are also more likely to choose an organization if they perceive

its goals & values to be congruent with theirs. Accurate job description,
matching candidates to the job & organization & perhaps offering a job preview
through a field visit with a salesperson are suggested for achieving realism &
congruence in recruitment & selection.

Thus if the objectives of recruitment & selection are met, sales force
socialization is enhanced, sales force performance, job satisfaction & job
involvement & commitment are improved.

TERRITORY DESIGN
A Sales territory is the number of present & potential customers assign to a
salesman usually, but not necessarily within a given geographic area.

Sales Territories affect

1. Sales force morale: The sales force morale can be enhanced by taking into
account differences in the difficulty of assigned territories while evaluating
the performance of individual salespersons.

2. A firm ability to serve market: Undefined sales territories can lead to loss
of sales. If there are no territories, efforts of the salesperson would be
concentrated on the developed markets with future potential are neglected. This
also creates unhealthy competition amongst the sales persons themselves.

3. Firm’s ability to evaluate the selling effort: Without proper demarcation

of territories, the effort put by a sales person cannot be measured.

The three methods for deciding sales territories are as follows:-

1. Breakdown method

2. Geographical method

3. Workload method

1. Breakdown method

Number of Sales Territories=Forecasted sales

Estimated sales by

A salesperson

For example, in Coron (India), the avg. estimated sales per person was
400litre of INDION 48 & 500lit. of INDION 96.In rupee terms, the avg. sales
per person was Rs.180,000 & 150,000 respectively. The forecasted sale
for INDION 48 & INDION 96 were Rs.4,237,000 & Rs.2,397,000
respectively.

Then the no. of territories required for INDION 48=4,237,000

180,000

=24 people

And the no. of territories required for INDION 96=2,397,000

150,000

=16 people

2. Geographic Territory Allocation

Companies generally use small geographical subareas-known as Sales
Coverage Units. These SCUs frequently represent political districts or
some geographical area. Though this will be most convenient way to
design a territory, it is rarely the most profitable. Geographical sales
territories can, however, improve market penetration & evaluation &
control of field selling.
 3. Workload Method
Figure below illustrates the steps involved in Territory Allocation by
Workload Method.

1) Select basic Control unit: It is the most elemental unit used by company to
form sales territories. This could vary from company to company. At the
lowest level, a company could use a consumer account as basic unit.
2) Estimate Market Potential: Any established relationship between product
sales & other variables could be used to estimate the potential for the basic
control unit.
3) Form tentative Territories: Based on the potential, basic control units &
the total time available.
4) Perform Workload analysis: The total effort to cover each territory is
found out by considering the number of accounts, the number of calls to be
 made, call duration & the estimated amount of non-selling & travelling time.

5) Adjust Tentative Territories: After performing the workload analysis, the

territories are realigned to take into account the territory that a sales person
can cover given the selling & non-selling time.
6) Assigned Salespeople To Territories: At this stage, the personal
preferences of the salespersons could be used to allocate the territories. This
act as a further motivator as personal preferences cannot be captured by the
workload analysis.
 SALES FORCE MOTIVATION
Theories of job performance suggest that motivation is the key determinant of
performance. A well-motivated sales force will expand more effort in
achievement of organizational goals; conversely, a demotivated salesperson is
thus an important part of sales Manager’s job. Lets look at some of the
Motivational Theories.

Motivational Theories & Sales Motivators

Maslow Alderfer Herzberg Sales force

motivators

Physical & Existence Hygiene Salary,

safety needs Commission
incentive,
Group
incentive, Basic
training

Social needs Relationship Encouragement

& contact of
supervisor Sales
meetings

Esteem needs Growth Motivators Advanced

training, Travel
prize, individual
incentives

Self- Special
actualization recognition for
outstanding
performance

The lower level needs pertain mainly to monetary incentives. Higher level
needs are primarily non-monetary incentives.
 Thus, sales force motivators could be monetary or non-monetary in nature.

SALES FORCE TARGET AND APPRAISAL

Targets of the sales force must be realistic and must help provide incentives
to boost sales activities. An organization should take note of the fact that the
salesperson considers the target achievable & he is motivate to meet it,
rather than giving the impression that it is an unattainable target.

The purpose of target setting has been largely discussed as a way to

accomplish a specified volume of sales per month. This assumes the fact that
the objectives of the company is to maximize sales.

The company should follow a structured process of evaluation, & at the

beginning of the year the various parameters of performance need to be
identified & weightage allocated. The framework on target setting would
identify the basis of critical evaluation. Other criteria can be identified
depending on the likely changes in the market conditions.

Annual Review Process

The company should have an annual review of the
performance of the salesperson against the evaluation
criteria. This would help the company monitor the
performance & decide whether the person could be
considered for the promotion or would require some training
to improve his/her performance.
 Conclusion:
This book takes a look at the Sales and Distribution management
from an Indian perspective. The unique characteristics of the
Indian markets throw a variety of challenges for any company.
The book gives a better understanding of the Indian market.

Sales and Distribution in an organization aims at providing the

right product at right place and time. It explains the different
channel members in the Indian context. Channel members in
India look beyond monetary gains. It also describes the different
retail formats which are necessary to understand to take
decisions regarding the distribution network. The service requires
for selling different products is described. The book also highlights
the importance of behavioural transactions.

The book can be a useful tool for the management students to

understand the concepts of the Sales and Distribution
management. The book has a practical approach and explains the
concepts with help of examples which makes it very easy and
interesting.