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SALES AND DISTRIBUTION MANAGEMENT

Unit I: Definition, Objectives and Scope, Role of Sales Management in Marketing Management,
Recent trends in Sales Management

Unit I: INTRODUCTION
Evolution of Sales Management
• Situation before industrial revolution in U.K. (1760AD)
• Situation after industrial revolutions in U.K., and U.S.A.
• Marketing function splits into sales and other functions like market
research, advertising, physical distribution

What is Sales Management?


• One definition: “The management of the personal selling part of a
company’s marketing function.”
• Another definition: “The process of planning, directing, and
controlling of personal selling, including recruiting, selecting,
equipping, assigning, supervising, paying, and motivating the personal
sales force.

Nature of Sales Management


• Its integration with marketing management

• Relationship Selling

Transactional Value – addedCollaborative / Partnering


Relationship / Selling Relationship / Selling Relationship / Selling

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Importance of Personal Selling and Sales Management
• The only function / department in a company that generates revenue /
income
• The financial results of a firm depend on the performance of the sales
department / management
• Many salespeople are among the best paid people in business
• It is one of the fastest and surest routes to the top management

Roles and Skills of a Modern Sales Manager


Some of the important roles of the modern sales manager are:
• A member of the strategic management team
• A member of the corporate team to achieve objectives
• A team leader, working with salespeople
• Managing multiple sales / marketing channels
• Using latest technologies (like CRM) to build superior buyer-seller
relationships
• Continually updating information on changes in marketing
environment

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Skills of a Successful Sales Manager
• People skills include abilities to motivate, lead, communicate,
coordinate, team-oriented relationship, and mentoring
• Managing skills consist of planning, organizing, controlling and
decision making
• Technical skills include training, selling, negotiating, problem-solving,
and use of computers

Types of Sales Managers / Levels of Sales Management Positions


CE
O/
Pre
sid
ent

V. P. Sales /
V. P. Marketing

National Sales Manager

Regional / Zonal / Divisional


Sales Managers

District / Branch / Area Sales Managers

Sales Trainee / Sales Person / Sales Representative

Sales Objectives, Strategies and Tactics


The main components of planning in a company are objectives, strategies
and tactics. Their relationship is shown below

E.G. A company wants to increase sales of electric motors by 15 percent, as


one of the sales objectives. (see next slide)

Emerging Trends in Sales Management


• Global perspective
• Revolution in technology
• Customer relationship management (CRM)
• Salesforce diversity
• Team selling approach
• Managing multi-channels
• Ethical and social issues
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• Sales professionalism

Unit II: Sales Organization, Type of sales Organizational Structures, Analysis of Market and
Sales Potential, Sales Quotas, Sales Territories and Sales Budgets.

Unit II: Sales Organization


Concepts of Sales Organisation
• A sales organisation assists the sales manager to carry out
needed tasks efficiently and effectively to achieve results
• The basic concepts of the sales organisation are:
• Degree of centralisation
• Degree of specialisation
• Line or staff positions
• Market orientation
• Effective co-ordination

Basic Types of Sales Organisations


Sales organisations are generally classified into four basic types:
• Line Organisation
• Line and staff organisation
• Functional organisation
• Horizontal organisation
We shall discuss main characteristics, advantages, and
disadvantages of each type of sales organisation

Line Organisation

Characteristics: Specialist staff managers are available for


senior marketing / sales managers. Staff managers’ role is to
assist / advise line managers. Used in medium and large size
organisations
Advantages: Better marketing decisions, superior sales
performance
Disadvantages: High cost and coordination, slower decision
making, conflict may arise if staff managers’ role is not clear

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Head-Marketing

Marketing Research Promotional Customer Service


Sales Manager Manager
Manager Manager

Area Sales Area Sales Area Sales


Manager-1 Manager-1 Manager-1

Salespeople Salespeople Salespeople

Line and Staff Organisation


Characteristics: Specialist staff managers are available for senior
marketing / sales managers. Staff managers’ role is to assist /
advise line managers. Used in medium and large size
organisations
Advantages: Better marketing decisions, superior sales
performance
Disadvantages: High cost and coordination, slower decision
making, conflict may arise if staff managers’ role is not clear
Head-Marketing

Marketing Research Promotional Customer Service


Sales Manager Manager
Manager Manager

Area Sales Area Sales Area Sales


Manager-1 Manager-1 Manager-1

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Salespeople Salespeople Join easymbaguide@yahoogroups.com
Salespeople
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Functional Organisation
Characteristics: Each functional specialist has line responsibility
over salespeople. Used by a large firm with many products /
market segments, minimising line authority to functional
managers
Advantages: Qualified specialists guide salesforce, simple to
administer
Head-Marketing
Disadvantage: confusion due to more managers giving orders to
salesforce

Marketing Customer
Promotional
Research Sales Manager Service
Manager
Manager Manager

Area Sales Manager #4

Salespeople

Horizontal Organisation
Characteristics: Removes management levels & departmental
boundaries. Except planning team, all others are members of
cross-functional teams. Used by firms having partnering
relationships with customers.
Advantages: Reduction in supervision, unnecessary tasks, &
cost; Improved efficiency and customer responses.

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Analysis of Market and Sales Potential

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Sales Quotas
• What are Sales Quotas?
• Sales quotas are sales goals or targets set by a
company for its marketing / sales units for a time period
• Marketing / sales units are regions, branches,
territories, salespeople, and intermediaries
• Generally, company sales budget is broken down to
sales quotas for various marketing units
• Objectives of Sales Quotas
• To use quotas as performance standards or
performance goals
• To control performance
• To motivate people by linking quotas to compensation
plans
• To identify strengths and weaknesses of the company
Types of Quotas
• Organisations set many types of sales quotas: (1) sales
volume, (2) financial, (3) activity, (4) combination
• Sales volume quotas
• For effective control, sales volume quota should be set
for the smallest marketing units, such as salesperson,
districts / branches, product items / brands
• Sales volume quotas can be stated in (a) rupees /
dollars, (b) units, or (c) points
• Rupees / dollars sales volume quotas are appropriate
when salespeople are required to sell many products
• Unit sales volume quotas are suitable when
• Salespeople are selling a few products
• Prices of the product fluctuate rapidly
• Price of each product / service is high
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• Point sales volume quotas are appropriate when the
company wants salespeople to sell products that contribute
more to profits

Financial Quotas
• Financial quotas control (a) gross margin or net profits, and
(b) expenses of marketing units
• Gross-margin / Net-profit quotas
• Calculate gross margin by subtracting ‘cost of goods
sold’ (i.e. cost of manufacturing) from sales volume.
Sales managers are not responsible for cost of
manufacturing
• Net profit quotas are generally accepted by sales
mangers as it is calculated by subtracting direct selling
expenses from the gross margin
• Expense quotas
• In many companies, expense quotas are stated as a
percentage of sales
• Expense quotas to be administered with flexibility, to
make salespeople cost conscious, allowing reasonable
expenses
Activity Quotas
• These are set when salespeople perform both selling and
non-selling activities
• Objective is to direct salespeople to carry out important
activities
• For effective implementation, activity quotas are combined
with sales volume and financial quotas
• E.G. Calling on high potential customers, payment collection
from defaulting customers

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Combination Quotas
• Used when companies want to control salesforce
performance on key selling and non-selling activities
• Focus on a few types of quotas, to avoid confusing
salespeople. An example:
Type of Quota Actual Percent Weight Percent
Quota Quota (Importance) Quota x
Weight
Sales 5,00,000 4,50,000 90 3 270
Volume (Rs)
Receivables 45 50 89 2 178
(days)
New 04 05 125 1 125
Customers
(Nos)
Total 6 573

• Total point score=573/6=95.5 for a salesperson


• Typically use ‘points’ as a common measure to resolve the
problem of different measures used by various types of
quotas

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Methods for Setting Sales Quotas
• Several methods are used for establishing sales quotas
• In practice, companies use more than one of the
following methods to increase their confidence in sales
quotas
• Total market estimates
• Territory potential
• Past sales experience
• Executive judgement
• Salespeople’s estimates
• Compensation plan
We shall briefly discuss each of the above methods

Total Market Estimates Method


• The Process followed by established companies is as under:
1) Estimate next year’s total market demand, or industry
sales forecast, using sales forecasting methods
2) Decide the company’s estimated market share for next
year
3) Company’s next year sales forecast= (1) x (2)
4) Find each territory’s percentage share out of the total
company sales in the previous year
5) Territory sales quota = (3) x (4)
Territory Potential Method
• The procedure followed by new companies is as under:
1) Estimate next year’s industry sales forecast or market
potential, using sales forecasting methods
2) Estimate multiple factor index (MFI) for each territory, based
on factors that influence sales of the product. These factors
are given weights corresponding to the degree of sales
opportunity.
3) Industry sales forecast in a territory (or territory market
potential=(1)x(2)
4) Territory sales quota = (3) x estimated market share of the
company in the territory
Past Sales Experience Method

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• The process consists of taking past one year’s sales (or an
average of previous 3 to 5 year’s sales), adding an arbitrary
percentage (or a percentage by which the market is
expected to grow), and thus setting each territory sales
quota
• The assumption that future sales are related to past sales
may not be always correct
• This method should not be the only method used
• Past sales should be one of the factors used for deciding
sales quotas
Executive Judgement Method
• Senior executives use their judgement when the
product, territories, and the company are new or very
little market information is available
• Executives predict company sales budgets and also
territory sales quotas
• This method should generally be used along with other
methods

Salespeople’s Estimate Method


• Some firms ask their salespeople to set their own
quotas
• Many salespersons either set very high or too low sales
quotas
Salespeople’s Estimate Method (Continued)
• For setting proper quotas, many sales managers use 2
or 3 of above methods, discuss with salespersons to get
their inputs, and decide sales quotas
Compensation Plan Method
• Some organizations set quotas to fit with their sales
compensation plan
• E.G. A company wants to pay a monthly salary of Rs
5000, and a commission of 3% on monthly sales above
Rs 1,00,000. The quota of Rs 1,00,000 is set in such a
way that salesperson would find it very difficult to cross
total compensation of Rs 8000 per month (5000+3000)
• Sales quotas should not be based only on this method,
because it would “put the cart before the horse”
Insight into Setting & Administration of Sales Quotas
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• Set realistic quotas
• Understand problems in setting quotas
• Ensure salespeople understand quotas
• By allowing salespeople to participate in the process
• By continuous feedback to salespeople on their
performance compared to quotas
• Have flexibility in administering quotas
• Change quotas in cases of major changes in market
demand or company strategies
• Use monthly or quarterly quotas for incentives and annual
quotas for performance evaluation
• Select a few quotas that have relationships with marketing
environment and sales situations

Sales Territories
• A sales territory consists of existing and potential customers,
assigned to a salesperson
• Most companies allot salespeople to geographic territories,
consisting of current & prospective customers
Major Reasons / Benefits of Sales Territories
• Increase market / customer coverage
• Control selling expenses and time
• Enable better evaluation of salesforce performance
• Improve customer relationships
• Increase salesforce effectiveness
• Improve sales and profit performance
Procedure for Designing Sales Territories
• Select a control unit*
• Find location and potential of present and prospective
customers within control units**
• Decide basic territories by using
• Build-up method,
Or
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• Break-down method
*A control unit is a geographical territorial base
**Unnecessary & expensive for consumer products
Procedure in Build-up Method
• Decide customer call frequencies
• Calculate total customer calls in each control unit
• Estimate workload capacity of a salesperson
• Make tentative territories
• Develop final territories
Objective is to equalise the workload of salespeople
Procedure in Breakdown Method
• Estimate company sales potential for total market
• Forecast sales potential for each control unit
• Estimate sales volume expected from each salesperson
• Make tentative territories
• Develop final territories
Objective is to equalise sales potential of territories

Assigning Salespeople to Territories


Sales Manager should consider two criteria:
(A) Relative ability of salespeople
• Based on key evaluation factors:
(1) Product knowledge, (2) market knowledge, (3) past sales
performance, (4) communication, (5) selling skills
(B) Salesperson’s Effectiveness in a Territory
• Decided by comparing social, cultural, and physical
characteristics of the salesperson with those of the territory
• Objective is to match salesperson to the territory
Management of Territorial Coverage
• It means: How salesperson should cover the assigned sales
territory
• It includes three tasks for a sales manager:
• Planning efficient routes for salespeople
• Scheduling salespeople’s time
• Using time-management tools
Routing
• Routing is a travel plan used by a salesperson for making
customer calls in a territory
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• Benefits of or Reasons for routing:
• Reduction in travel time and cost
• Improvement in territory coverage
• Importance of routing depends on the application:
• Nature of the product – Important for FMCG
• Type of jobs of salespeople – Important for driver-cum-
salesperson job, but creative selling job needs a flexible
route plan
Procedure for Setting up a Routing Plan
• Identify current and prospective customers on a territory
map
• Classify each customer into high, medium, or low sales
potential
• Decide call frequency for each class of customers
• Build route plan around locations of high potential customers
• Computerised mathematical models are developed
• Commonly used routing patterns are:

Scheduling
• Scheduling is planning a salesperson’s visit time to
customers. It deals with time allocation issue
• How to allocate salesperson’s time?
• Sales manager communicates to salesperson major
activities and time allocation for each activity
• Salesperson records actual time spent on various
activities for 2 weeks
• Sales manager and salesperson discuss and decide how
to increase time spent on major activities
• Companies specify call norms for current customers, based
on sales and profit potentials, and also for prospective
customers
Time Management Tools
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To help outside salespeople* to manage their time efficiently and
productively, the tools available are:
• High-tech equipment like laptop computers and cellular
phones
• Inside salespeople to provide clerical support, technical
support, and for prospecting, and qualifying, as they
remain within the company
• Outside salespeople can then spend more time getting
more orders & building relationships with major
customers
*Outside salespeople travel outside the organisation

What is a Sales Budget?


• It includes estimates of sales volume and selling expenses
• Sales volume budget is derived from the company sales
forecast – generally slightly lower than the company sales
forecast, to avoid excessive risks
• Selling expenses budget consists of personal selling
expenses budget and sales administration expenses budget
• Sales budget gives a detailed break-down of estimates of
sales revenue and selling expenditure
Purposes of the Sales Budget
• Planning
• Coordination
• Control

Sales Budget Process


• Many firms follow a process for preparation of annual sales
and company budgets. It generally includes:
• Review past, current, and future situations
• Communicate information to all managers on budget
preparation – guidelines, formats, timetable
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• Use build-up approach, starting with first-line sales
managers
• Get approval of sales budget from top management
• Prepare budgets of other departments

The Sales Process


As a part of selling activities, if salespeople follow the steps or
phases shown below, their chances of success are far better.

The sequence of above steps may change to meet the sales


situation in hand.
• Some of the above steps may not be applicable for selling to
the trade
• We now discuss application of above steps to industrial
selling
Prospecting
• It is identifying or finding prospects i.e. prospective or
potential customers.
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• Methods of prospecting or sales lead generation are:
(1) referrals from existing customers, (2) company sources
(website, ads., tradeshow, teleprospecting), (3) external
sources (suppliers, intermediaries, trade associations), (4)
salespersons’ networking, (5) industrial directories, (6) cold
canvassing
Qualifying
• Companies qualify sales leads by contacting them by mail
or phone to find their interests (or needs) and financial
capacity.
• Leads are categorized as: Hot, Warm, and Cool
Preapproach
• Information gathering about the prospect.
Sources of information: the Internet, industrial directories,
government publications, intermediaries, etc.
• Precall planning
• Setting call objectives
• Tentative planning of sales strategy: which products,
features and benefits may meet the customer needs

Approach
• Make an appointment to meet the prospect
• Make favourable first impression
• Select an approach technique:
• Introductory
• Customer benefit
• Product
• Question
• Praise
• The approach takes a few minutes of a call, but it can
make or break a sale
Presentation and Demonstration
There are four components:
• Understanding the buyer’s needs
• Knowing sales presentation methods / strategies
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• Developing an effective presentation
• Using demonstration as a tool for selling
We will examine each of the above points
Understanding the buyer’s needs
• Firms and consumers buy products / services to satisfy
needs
• To understand buyer’s needs, ask questions and listen
• In business situations, problem identification and impact
questions are important
E.G.
• Have you experienced any problems on quality and delivery
from the existing supplies?
• What impact the quality and delivery problems will have on
your costs and customer satisfaction?
Knowing Sales Presentation Methods/Strategies
Firms have developed different methods / styles / strategies of
sales presentation
• Stimulus response method / canned approach.
• It is a memorised sales talk or a prepared sales
presentation.
• The sales person talks without knowing the prospect’s
needs. E.G. Used by tele-marketing people

• Formula method / formulated approach.


• It is also based on stimulus response thinking that all
prospects are similar.
• The salesperson uses a standard formula – AIDA
(attention, interest, desire, and action).
• It is used if time is short and prospects are similar.
• Shortcomings are: prospects’ needs are not uncovered
and uses same standard formula for different
prospects.
• Need – satisfaction method
• Interactive sales presentation
• First find prospect’s needs, by asking questions and
listening
• Use FAB approach: Features, Advantages, Benefits
• Effective method, as it focuses on customers
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• Consultative selling method / Problem-solving
approach
• Salespeople use cross-functional expertise
• Firms adopt team selling approach
• It is used by software / consulting firms
Developing an Effective Presentation
Some of the guidelines are:
• Plan the sales call
• Adopt presentation to the situation and person
• Communicate the benefits of the purchase
• Present relevant and limited information at a time
• Use the prospect’s language
• Make the presentation convincing – give evidence
• Use technology like multi-media presentation
Using Demonstration
• Sales presentation can be improved by demonstration
• Demonstration is one of the important selling tools EGs: Test
drive of cars; demonstration of industrial products in use
• Benefits of using demonstration for selling are:
• Buyers’ objections are cleared
• Improves the buyer’s purchasing interest
• Helps to find specific benefits of the prospect
• The prospect can experience the benefit

Overcoming Sales Objections / Resistances


• Objections take place during presentations / when the order
is asked
• Two types of sales objections:
• Psychological / hidden
• Logical (real or practical)
• Methods for handling and overcoming objections: (a) ask
questions, (b) turn an objection into a benefit, (c) deny
objections tactfully, (d) third-party certificate, (e)
compensation
Trial close and Closing the sale
• Trial close checks the attitude or opinion of the prospect,
before closing the sale (or asking for the order)
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• If the response to trial close question is favourable, then the
salesperson should close the sale
• Some of the techniques used for closing the sale are: (a)
alternative-choice, (b) minor points, (c) assumptive, (d)
summary-of-benefits, (e) T-account, (f) special-offer, (g)
probability, and (h) negotiation
Follow-up and Service
• Necessary for customer satisfaction
• Successful salespeople follow-up in different ways: For
example,
• Check order details
• Follow through delivery schedule
• Visit when the product is delivered
• Build long-term relationship
• Arrange warranty service
Negotiation
• Salespeople, particularly in business to business selling,
need negotiating skills
• When to negotiate?
(a) When the buyer puts certain conditions for buying to the
seller, (b) When agreement between the buyer and the seller is
needed on several factors, (c) When the product is customised,
(d) When the final price is to be decided
• How to prepare for negotiation?
(a) planning, (b) building relationship, (c) purpose
• Styles of negotiation
(a) I win, you lose, (b) Both of us win (or win-win style), (c)
You win, I lose, and (d) Both of us lose

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