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Module-I: Definition, objectives, Functions and classification of Sales Management, Selling under the Marketing concept, Interdependence of Salesmanship

and Advertising. The Sales Organization: Purpose, principles and policies of sales organization, Setting up of the sales organization, Typical sales organization structure, planning of the selling factors.

Definition, objectives, Functions and classification of Sales Management: Definition: Sales management is a sub-system of marketing management, which translates the marketing plan into marketing performance. Sales managers in the modern organization are required to be customer oriented and profit directed and performs several tasks besides setting and achieving personal selling goals of the firm. Sales management as defined by the American marketing association, The planning ,direction and control of personal selling including recruiting, selecting, equipping, assigning , routing, supervising, paying and motivating the sales force. It is important to differentiate sales management from personal selling and salesmanship. Sales management directs the personal selling efforts, which in turn is implemented largely through salesmanship. Personal selling is a broader concept than salesmanship. It is the art of successfully persuading prospects or customers to buy a product or service from which they can derive suitable benefits, thereby increasing their total satisfaction. Sales managers have still other responsibilities. They are responsible for participating in the preparation of information critical to take key marketing decisions, such as those on budgeting, Quota setting and territory management. They also participate in product decisions, marketing channels and distribution policies, advertising and other promotion and pricing. Thus a sales manager is both an administrator in charge of personal selling activity and a member of the executive group that makes marketing decisions of all types. Sales management is a key function in many kinds of enterprises. It may be a manufacturing concern, a wholesaling unit, a retail outlet, a real estate broker, or a automobile dealer. Even firms selling intangibles such as insurance companies, stock brokers, mutual funds, tours and travel have sales management problems. Objectives of sales management: From company viewpoint there are three general objectives of sales management. These are as follows: Enhancement of sales volume. Contribution to profit Continuous growth.

Though the sales manager is responsible to make major contribution on the above areas, yet the top management is accountable for supplying an ever-increasing volume of socially responsible products that the final buyers want at satisfactory prices. To achieve the above objectives, the following goals are set for the sales manager. 1. Sales executives provide estimates on market and sales potential. 2. To guide and lead the sales personnel and middlemen. 3. To develop strategy for future operations. 4. To provide information to the higher management for making marketing decisions and for setting sales and profit goals. 5. Comparing marketing opportunities with the projected growth rate, the sales manager is responsible for achieving a particular sales volume, gross margin and net profit in units of products and in dollars. 6. To create and maintain relationship with the channel members. 7. To negotiate with the customers. 8. To provide smart service and develop the goodwill for the firm. 9. To provide solutions to the problems Functions of sales management: The determination of sales force objective and goals Sales force organization, size, territory, and quota finalization Sales forecasting and budgeting Sales force selection, recruitment, and training Motivating and leading the sales force Designing compensation plan and control systems Designing career growth plans and building relationship strategies with key customers Selling under the Marketing concept: Sl. No. 01 02 03 04 05 06 MARKETING Emphasis is on customers needs and wants. Satisfaction of the customer is primary. Planning is long-term oriented. External, market segmentation. Consumer determines the price and price determines the costs. It is an activity that converts the consumer needs into products. SELLING Emphasis is on the product, and the needs and interests of the seller. Sales are the primary motive. Planning is short-term oriented. Internal, company orientation. Cost determines the price. It is an activity that converts the goods into cash.

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Marketing overall a whole process.Selling is a part of marketing process. Emphasizes on innovation in every Emphasizing on staying with the sphere; on providing better value existing technology and reducing to the customer by adopting the the cost of production. most innovative technology.

Interdependence ship between salesmanship and advertising: Salesmanship is an art of successfully persuading prospects or customers to buy a product or services from which they can derive suitable benefits, thereby increasing their total satisfaction. Salesmanship therefore is a seller initiated effort that provides prospective buyers with information and other benefits, motivating and persuading them to decide in favor of the sellers product or service. Personal selling effort is a two way communication process. It can be easily measurable. Advertising is any form of non-personal form of communication between the buyer and seller by an identified sponsor. Advertising is a one way communication. In advertising customer does not come in direct contact with any representative of the organization. So the reaction, attitude or perception of the viewers cannot be immediately gauged in advertising.

%age of Promotion al effort

Personal selling

Advertising Simple/ Inexpensive goods Complex/Expensiv e goods

Let us understand a very interesting aspect of advertising and selling, about the relative importance of the two, during the three different stages i.e. pre-purchase phase, the

purchase phase and the post purchase phase. of a products/brands market. Pre-purchase stage is a time period when the companies try to generate demand for the product. In purchase stage the customer actually buy the product. In postpurchase stage the consumer evaluates his/her purchase decision. The figure shows that personal selling has an increasing role in all the three stages of purchase decision and particularly a leading role in the purchase stage. But advertising has a leading role in the pre-purchase stage and post purchase stage to generate mass demand and congratulating the consumer for taking the right product decision.

The Sales Organization:


Effective sales executive insist upon sound organization. They recognize that the sales organization must achieve both qualitative and quantitative personal selling objectives. The qualitative objectives are instrumental for the long term growth and the quantitative objectives in terms of sales, profit and market share are important for the short term growth of the organization. Therefore the sales organization needs people striving jointly to reach qualitative and quantitative objectives by creating a suitable structure of human relationship. The sales organization should not have a rigid structure. It should have build-in adaptability to respond appropriately in fluid and diverse marketing environments. Purpose: The sales organization must not be worried of designing a formal structure. How an organization works is more important than how it suppose to function. Sales management should direct its organizational efforts towards a informal organization through intelligent leadership. The followings are the purpose of setting a sales organization. 1. To permit the development of specialists: The sales department is organized and reorganized to retain the specialized workforce through proper delegation of authority and responsibility. When the organization grows, the tasks also grow in number and complexity. Therefore it needs to be broken into smaller parts through division of labor. So the structure needs to be reshaped to encourage the specialists to develop. 2. To perform all necessary activities: When an organization grows and specialization increases, it becomes difficult to supervise all the activities. Therefore the change is required to restructure the system. For instance, when the company is small, its executives are in close contact with the end users of the product. But as the company grows, as the marketing channels lengthen and the marketing area expands geographically, the executives become farther and farther from the customers. Therefore the company appoints public relation officer and missionary salesperson to keep such contacts. So there is a change in the structure. 3. To achieve co-ordination or balance: Sales people are the field workers. The entire department is target oriented either qualitatively or quantitatively or both. Sometimes they do not prefer to work in the team because of ego miss-match. Motivating individuals to work together toward common objectives is important in achieving co-ordination. Individual goals are subordinated to the organizational goals. This is achieved through indoctrination and training

programmes, group meetings, supervision and guidance and two way communications. Throughout the sales organization different activities are kept in proper relation to one another in order that the greatest organizational effectiveness is realized. Modern sales organizations should be divided into small, freely communicating and face to face groups to reduce the possibility of un coordinated proliferation. 4. To define authority: Sales executives should know whether their authority is line, staff or functional. Where as the functional authority is suitable technical product or services the staff authority is combined with the line in providing consultancy or advice to the line members. The sales organization should be clear whether the order is unidirectional or multi directional. The organization should be developed to promote harmony among the employees. 5. To economize on the executive time: As the sales departments operations and activities increase in complexity and number, additional subordinates are added. This permits the higher ranking sales executives to delegate more authority towards planning decisions and less time on operational activities. Therefore the lower level sales executives have wider span of control and the higher levels have lower span of control. This change will definitely initiate structural reforms in the organizational set-up. It is all important for time and man management. Principle and Policies of organizational structuring: There must be clear lines of authority running from the top to the bottom of the organization. b. Responsibility should always be coupled with corresponding authority. c. Authority should be delegated as far down the line possible. d. The work of every person should be confined as far as possible to the performance of a single leading function. e. There should a limit to the number of positions that can co-coordinated by a single objective. f. The number of levels of authority should be kept as a minimum. g. The organization should be flexible so that it can be adjusted to changing conditions. h. The organization should be kept as simple as possible. The responsibility and authority of each level should be clearly defined, if necessary in writing. Setting of a sales organization: There are basically five major steps in setting up a sales organization. These are as follows: 1. Defining the objectives: The objectives of the sales department are derived from the objective of the company. Looking into the vision, the top management establishes the shape of the organization. The top management for instance may want the firm not only to survive but to achieve industry leadership, develop a reputation for outstanding technical research, diversify in product lines, provide excellent service to the customers, provide generous a.

2.

3.

4.

5.

return to the investors or establish an image for public responsibility and so on. From these composites, the sales management determines the implications for the sales departments and articulates a set of qualitative and quantitative personal selling objectives. The general objectives may be summed up in three words: sales, profits and growth. Determination of activities and their volume of performance: Fundamental to the sound organizational design is the determination of all the necessary activities and estimating their volume of performance. Then only we can know what executive positions are required and what should be their relationships to the other positions, and what should be the duties and responsibilities of the persons who fill these positions. Grouping activities into the positions: After the activities are identified, they are allocated to different positions to achieve certain objectives. This is mainly done through job description (in terms of reporting relationships, job objectives, duties and responsibilities and performance measures.) Activities are classified and grouped so that closely related tasks are assigned to the same position. But there is variation in job challenge, interest and involvement. Generally in very large organizations, where extreme specialization is practiced, the position comprised of single activity and the burden of proof should be on those proposing such a move. Sometimes a single position is responsible for highly diversified activities like product merchandising and pricing. It has implications in organizational design. Assignment of personnel to positions: The next step is to assign personnel to positions. This is the fitment study. It is a very controversial debate whether the unique talents and abilities those are prudent and profitable will be having the same positions or the positions need to be modified. The ideal approach before the planners to permit situations to have individual growth into a particular job. Provision for co-ordination and control: Co-ordination and control is obtainable through both informal and formal means. Strong leaders control and co-ordinate the efforts of their subordinates largely on an informal basis through their personality. Such leaders make minimal use of formal instruments of control and co-ordination. But the sales executives prefer to use formal means of control to improve effectiveness. The most important formal instrument of organizational control is the written job description where the reporting relationship, job objectives, duties and responsibilities, performance measurements etc are clearly mentioned.

Sales organization structure:


There are basically four types of sales organizations from the standpoint of position and relationship. These are as follows: 1. Line organization 2. Line and staff organization 3. Functional organization 4. Committee organization

Line Organization: It is the oldest and the simplest form of sales organizational structure. It is widely used in smaller firms with small number of selling personnel. For instance the companies that cover limited geographic location or sell narrow product line. The chain of command flows from the top sales executives down through subordinates. All executives exercise line authority and each subordinate is responsible only to one person in the next higher order. The lines sales organization sees its greatest use in companies having a vertical structure and all sales personnel report directly to the chief sales executive. There is no cross communication between persons at the same level. This is purely indirect and effected through the next higher level.

Gen. Manager Sales manager

Asst. S. Mgr Div- 1 Sales people

Asst. S. Mgr Div-2 Sales people

Asst. S. Mgr Div-3 Sales people

Asst. S. Mgr Div-4

Sales people

As per the above figure , if the assistant sales manager of division 1 wants to contact with the assistant sales manager of division 2, it can be effected through the sales manager. Similarly the sales people of two division can interact each other through the assistant sales manager which is ultimately through the sales manager. The basic simplicity of the line organization is the main reason for its use. The clarity of authority and responsibility saves time in policy making, deciding new plans and converting plans into action . But the greatest weakness of this structure is the excessive dependency on the department head and therefore inappropriate for the growing concerns having large sales staffs. Line and staff organization: The line and staff sales department is often found in large and medium sized firms, employing substantial number of sales personnel, and selling diversified product lines over wide geographic areas. In contrast to the line organization, the line and staff organization provides the top sales executives with a group of specialists- experts in dealer and distributor relations, sales promotions, sales analysis, sales training, sales planning, service, traffic and warehousing and similar fields These

staffs helps the top sales executives by providing the necessary informations and saves the time of the top executives. Similarly the tasks involving deep study and analysis are given to the staffs and the top sales executives devote more time towards planning and strategic matters. The staff sales executives do not have authority to issue orders and directives. Their recommendations are submitted to the top sales executives and if approved is transmitted to the line members for its implementation. The advantages of the line and staff organization are mainly those of specialization. The chief sales executives being relieved from much detailed work, can take a broader view to the department. Problems can be seen in clear perspective and connection between un related problems are brought into focus. A pool of experts provides advice and assistance in the specialized fields. President

V.P- Marketing

Advertising Mgr

Gen. Sales Mgr

Mgr- Marketing Research Mgr- Sales Promotion Dic. Dealer &Distributor Relations

Dic. Sales Training

Dic. Sales Personnel

Asst. Gen. Sales Mgr District Sales Mgrs (6) Branch Sales Mgrs (32)

Sales Personnel (450) The greatest weakness of the line and staff model is the role ambiguity and conflict. The success of this model depends upon the co-coordinated effort between the line and staffs which is very much costlier. Sufficient time should be devoted for problem recognition and corrective action which may hamper the decision making process. Functional Sales Organization: Some few sales departments use functional organization .This structure has been developed as the brainchild of Frederic W Taylor which is based upon the principle of specialization. The outstanding advantage of the functional sales department is improved performance. Specialized activities are assigned to the experts whose guidance should help in increasing the effectiveness of the sales

force. The sales operations are highly centralized and therefore becomes ineffective for many large firms. Even the practicality of a functional organization do not finds its feasibility for small and medium sized firms. It is not financially possible to adopt high degree of division of labor.

Director of Sales Administration

MgrInstallation & service

Mgr- Sales Training

Mgr- Sales Promotion

Mgr- Dealer & Distributor Relation

Salesperson

Salesperson

Salesperson

Salesperson

It is sometimes contended that functional organization is suitable for large firms with stable operations and opportunity for considerable division of labor. But the large companies with stable selling operations are the exceptions rather than the rule. Committee sales organization: It is not the sole basis for organizing a sales department. It is a method of organizing the executive group for planning and policy formulation while leaving the actual operation including implementation of plans and policies to the individual executives. Therefore the organization may have many committees such as sales training committees, customer relation committees, human resource committees and new product committees. The sales training committee may consist of sales training manager, his/her assistants, the general sales manager and the regional sales manager. All the members sit together to draft training plans and formulate sales training policies but its implementation sole responsibility of the sales training manager. The use of committees in the sales department has many advantages. Before policies are made and action is taken, important problems are deliberated by committee members and are measured against varied viewpoints. It also promotes co-ordination among members of the executive team. But the committee meetings consume more time. Therefore the agenda of the meeting should be properly framed to avoid wastage of time. The marketing organization can be organized on any of the following basis: a. b. c. d. Function-oriented Sales Organization. Product-oriented Sales Organization. Customer-oriented Sales Organization. Geography-oriented Sales Organization.

e. Combined-based Sales Organization.

a. Function-Oriented Sales Organization: When departmentation of sales organization is done on the basis of sales activities, it is called departmentation on function basis. MARKETING MANAGER

Advertising Deptt.

Sales Promotion Deptt

Marketing Research Deptt.

Sales Planning Deptt.

Sales Manager Sales Supervisor Sales Supervisor

Salesman b. Production Oriented Sales Organization:

Salesman

Product type of departmentation is done when the enterprise produces or manufacturers or markets different types of products. In this case separate sales executives are appointed for each product or group of products in the product line. Each will have its own organization to perform the various sales tasks. GENERAL MANAGER MARKETING

Marketing Officer Product - 1

Marketing Officer Product - 2

Marketing Officer Product - 3

Sales Supervisor

Sales Supervisor

Sales Supervisor

Salesmen

Salesmen

Salesmen

c. Customer-oriented Marketing Organization: When the departmentation sales organization is done on customer basis, it is called customer oriented Marketing Organization. We may also call it as departmentalization on the basis of distribution channels. MANAGER MARKETING Sales Officer Direct Marketin g Salesme n Sales Officer Foreign Customer s Salesme n

Sales Officer Channel Mktg. Salesme n

Sales Officer Industrial Products Salesme n

Sales Officer Consumer Products Salesme n

d. Geography/Territory Oriented Marketing Organization: Here for the selling of a particular product types, the total marketing area is divided into territories. Each territory is under the control of a separate sales executive. He is assisted by a separate sales force. COUNTRY MARKETING MANAGER

Regional Sales Manager NORTH

Regional Sales Manager SOUTH

Regional Sales Manager EAST

Regional Sales Manager WEST

Sales Supervisor

Sales Supervisor

Sales Supervisor

Sales Supervisor

Sales man

Sales man

Sales man

Sales man

e. Combined-base Marketing Organization:

The combination of two more basis of departmentation such as territorial, product and customers basis etc. is called combined basis of departmentation of sales organization.

Planning of the selling factors:


Examine customers in each market. Determine the types of sales jobs needed to serve a market. Note the job activities salespeople must do. Design sales jobs around customers. Set up the sales force organizational structure, which includes the various sales jobs and geographic territories. Product and service related factors Organization related factors Marketing mix related factors External factors: . The speed of market change . Reduction in the number of vendors per buyer . Closer to customer relationships . Changes in regulations and international practices

Other Factors like: The product The customers Territory Techniques of selling Promotional materials His/Her own organization Targets

Stages in the selling process:

Pre-sale preparation

Prospecting

Preapproach before the interview Handling Customer Objections

Approach to the customer

Follow up action

Closing the Sale

Sales Presentation

Module II

Sales Forecasting Sales strategies and policies determining the size of the sales force, Sales territories, routing and scheduling, Controlling the selling effort Sales budget and budgeting procedures Quota setting and administration. Management of sales force: Personnel problems of sales management, recruiting and selecting, training and development, motivating salesman, sales meetings and contests, compensating sales personnel, evaluation and supervising salesmen. ===============================================================

Sales Forecasting:
Sales Forecasting: Sales forecasting is as estimate of sales, in dollars or physical units, in a future period under a particular marketing programme. A sales forecast may be for a single product or for an entire product line. Although a sales forecast can be made for a short run or long run yet the short run or operating sales forecast is important to the sales executive. The operating sales forecast is the prediction of how much of a companys particular product (or product line) can be sold during a future period under a given marketing programme and an assumed set of out side factors. Sales Forecasting Methods: The sales forecasting methods are the procedures for estimating how much of a given product (or product line) can be sold if a given marketing program is implemented. No sales forecasting method is foolproof. Each is subject to error. But some are unsophisticated such as expert opinion or the pool of salespersons opinion and others are sophisticated as they use statistics. Therefore the well managed companies do not rely upon a single sales forecasting method but use several of them. The followings are the different sales forecasting methods. Jury of Executive Opinion: According to this method, a company invites the opinion of the executives and consultants who are well informed about the industry outlook and the company marketing position, capabilities and marketing programme. The companies use this experts opinion method for one or more of the four reasons.

1. This is a quick and easy way to turn out a forecast. 2. This is a way to pool the experience and judgment of well informed people. 3. This is a feasible approach for the young companies who do not have experience in other forecasting methods. 4. This method may be used when adequate sales and market statistics are missing. But the weakness of this method is the difficulty of breaking down the estimates of probable sales by products, by time intervals, by markets, by customers and so on. The Delphi technique: In this method the experts responds to a sequence of questionnaires which is vividly discussed. Out of the brainstorming the estimate is calculated on the basis of past performance. Poll of Sales Force Opinion: This is otherwise known as the grass-root approach. Here the individual sales person forecast sales for their territories. These individual forecasts are combined and modified as the management thinks necessary to arrive at the company sales forecast. This approach appeals to the practical sales managers because the forecasting responsibility is assigned to those who produce the results. Furthermore, there is a merit in utilizing this method as the salesmen become closest to the market conditions. Again the quota can easily be broken down according to the products, territories, customers, middlemen and sales force. But the weakness of this method is the use of inexperienced sales force who sometimes become optimistic or pessimistic about the sales prospects just looking at the current business conditions. Some times they are too near the trees to see the forest. They are unaware of the sudden changes in the business conditions. Projection of Past Sales: The projection of past sales method of sales forecasting takes a variety of forms. To calculate the next years sale, the formula is Next years sales = this years sales x this years sale Last years sale This method is more appropriate for the companies which are more or less stable or mature industries. Time- series analysis: It is a statistical procedure for studying historical sales data. This procedure involves isolating and measuring four types of sales variations. 1. Long term trends 2. Cyclical changes 3. Seasonal variations 4. Irregular fluctuations. Generally these methods are used for the long run forecasting .Incase of the short run if the sales pattern is clearly defined or relatively stable from year to year, then the time series analysis can be appropriately used. Exponential Smoothing: Exponential smoothing is a short range sales forecasting technique in the form of moving average that represents a weighted sum of all past numbers in a time series, with the heaviest weight placed on the most recent data. The formula is: Next years sales = a(this years sales)+ (1-a)(this years forecast)

a in the equation is called the smoothing constant and is set between 0.0 and 1.0. If for example, actual sales for this year came to 320 units of products and the sales forecast for this year was 350 units and the smoothing constant was 0.3 , the forecast for the next years sales is= (0.30)(320) + (0.7)(350) = 341 units of products. Determining the value of a is the main problem. If the series of the sales data changes slowly, a should be small but if the series changes rapidly, a should be large enough so that the forecast respond to those changes. Survey of Consumer Buying Plans: This method is basically used for industrial marketing where the potential market consist of small numbers and prospects, substantial sale is made to the individual accounts, the manufacturer sells directly to the users and the customers are concentrated in few geographical areas. In such cases it is inexpensive to survey a sample of customers and prospects to estimate the product or project the sales forecast. Regression Analysis: Regression analysis is a statistical process used in sales forecasting determines and measures the association between company sales and other variables. There are three major steps of regression analysis. 1. Identify variables causally related to company sales 2. Determine or estimate the values of these variables related to sales. 3. Derive the sales forecast from these estimates. There may be two types of regression; simple and multiple. Exponential Smoothing: Exponential smoothing is similar to the moving-average forecasting method. It allows consideration of all past data, but less weight is placed on data as it ages. Next Years Sales = a (This Years Sales) + (1-a) (This Years Forecast) a in the equation is called the smoothing constant and is set between 0.0 and 1.0. Moving Average: Moving averages are used to allow for marketplace factors changing at different rates and at different times. The 3-yearly moving average can be computed with the following formula: a+b+c b+c+d c+d+e d+e+f --------- , ----------- , ---------- , --------- , . 3 3 3 3 A sales forecast is important for at least five reasons: 1. A sales forecast becomes a basis for setting and maintaining a production schedule manufacturing. 2. It determines the quantity and timing of needs for labor, equipment, tools, parts, and raw materials purchasing, personnel.

3. It influences the amount of borrowed capital needed to finance the production and the necessary cash flow to operate the business controller. 4. It provides a basis for sales quota assignments to various segments of the sales force sales management. 5. It is the overall base that determines the companys business and marketing plans, which are further broken down into specific goals marketing officer. THE FORECASTING PROCESS:

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Sales strategies and policies determining the size of the sales force:

Determining the sales force size is an important decision for every sales department. As compensating sales people is a very costlier affair, there fore its size should be appropriate to serve customer and the firm needs. The customer needs may be easy availability of the product, timely delivery, providing sufficient product informations etc the firm needs may be increase of sales volume, increase of profit margin, creating a strong customer base etc. Therefore the sales person should work both efficiently and effectively. Similarly each company has individualized requirements as to the kind of sales personnel best fitted to serve its needs. Furthermore different selling jobs require different levels of selling and non-selling abilities, training and technical and other knowledge. Therefore in determining the kind of sales people and their size we must

understand what is expected of them: the job objectives, the duties and responsibilities and the performance measures. It is difficult, perhaps impossible to determine the exact number of sales persons that a particular company should have. Three basic approaches are used in approximating this number. 1. The workload method 2. The sales potential method 3. The incremental method 1. The Work Load Method: In the work load method the basic assumption is that all sales personnel should shoulder equal work loads. The management first estimates the total work load involved in covering the companys entire market and then divides by the work load that an individual sales person should be able to handle, thus determining the total number of sales person required. Companies applying this method generally assume that the interactions of three factors such as customer size, sales volume potential, and the travel load determine the total workload involved in covering the entire market. The work load approach is very attractive to the practicing sales executives. It is easy to understand and easy to apply. Large firms such as IBM, AT &T, and HLL etc use this approach. But the basic flaw in the work load approach is that, as usually applied it disregards profit as an explicit consideration. However practically many factors other than account size such as gross margin on the product mix purchased by an account, the expenses incurred in serving an account etc determines the length and frequencies of the sales calls which ultimately influence profitability. Another shortcoming of this approach is that not only should all sales personnel have the same work load but they all should utilize their time with equal efficiency. 2. The Sales Potential Method: The sales potential method is based on the assumption that performance of the set of activities contained in the job description represents one sales personnel unit. A particular sales person may represent either more or less than one sales personnel unit. If the individuals performance is excellent, that individual may do the job more than one unit; if the individuals performance is below par, he/she may do less. If management expects all companys sales personnel to perform as specified in the job description, then the number of sales person required equals the number of units of sales personnel required. The formula used in this method is N = S/P + T(S/P) or N = S/P (1+T) Where N = number of sales personnel units. S = forecasted sales volume P = estimated sales productivity of one sales personnel unit T = allowance for rate of sales force turnover. For example, a firm with forecasted sales of $1 million estimated sales productivity per sales personnel unit of $ 100,000 and an estimated annual rate of sales force turnover of 10 percent. So N = $10, 00,000/ $1, 00.000 (1.10) Or N = 11 sales personnel units. This is a simplified model for determining the size of sales force. The crucial estimate of the sales productivity of one unit of sales strength relies heavily on the accuracy and

completeness of the sales job description, it depends also on the managements appraisal of what reasonably maybe expected of those who fill the position. In addition both the estimates for the unit sales productivity and the sales force turnover rate require management to have some means of evaluating the efficiency of individual sales person and of determining the probabilities of their retention rate. 3. Incremental Method: Conceptually the incremental method is the best approach to determining the sales force size. It is based on one proposition that the net profits will increase when additional sales personnel are added if the incremental sales revenues exceed the incremental costs incurred. Thus to apply this method, one needs two important items of information. Incremental cost and incremental revenues. Though this method is most conceptually correct, it is also most difficult to apply. It requires first that the company develop a sales response function to use in approximating (in terms of sales volume) the markets behavior in relation to alternative levels of personal selling effort. A sales response function is a quantitative expression that describes the relationship between the personal- selling effort and the resulting sales volume

Sales territories, routing and scheduling:


A sales territory is composed of a group of customers or a geographic area assigned to a salesperson. Reason for establishing Sales territories: Sales territories are set up and subsequently revised as the market conditions dictate to facilitate the planning and control of sales operations. More specifically there are five reasons for having sales territories. 1. To provide proper market coverage 2. To control selling expenses 3. To assist in evaluating sales personnel 4. To contribute to the sales force morale 5. To aid in the co-ordination of personal selling and advertising efforts. To provide proper market coverage: Some times a company looses business to competitors because it does not have proper market coverage. To overcome this problem, generally management must establish sales territories, if the company does not have them or revise those that it has. If the sales territories are intelligently set and the assignments of the sales personnel are carefully made it is possible to obtain proper market coverage. Good territorial design allows sales personnel to spend sufficient time with customers and prospects and minimize the travel time. This permits them to become thoroughly conversant with customers problems and requirements. To control selling expenses: Effective territorial design combined with careful deployment of sales person results in low selling expenses and high sales volumes. Sales person spend fewer nights away from home which reduces or eliminates many

charges for lodging and fooding, at the same time cutting travel miles reduces transportation expenses. These savings, plus the higher sales volumes from increased productive selling time reduce the ratio of selling expenses to sales. Well designed sales territories and appropriate assignments of sales personnel increase the total time available for contact with customers and prospects and helps improving sales volume. To assist in evaluating sales personnel: Through geographically dividing the sales territories, management can easily assess the strength and weakness of different areas and appropriate adjustments can be made in selling strategies. This territory analysis will help the management to fix targets/quota by evaluating the sales and cost responsibility against the performance of individual sales person. Contribution towards sales force morale: Good territorial design helps maintaining sales force morale. Well designed territories help the sales force to cover areas with reasonable workloads and their effort yields results. Effective territorial design combined with intelligent sales person assignment makes each sales person productive; develop their self confidence and job satisfaction. Factors to consider while designing sales territories: Sales force objectives may be based on factors such as contribution to profits, return on assets, sales/cost ratios, market share, or customer satisfaction Scheduling: refers to establishing a fixed time when the salesperson will be at a customers place of business. In theory, strict formal route designs enable the salesperson to: 1. Improve territorial coverage. 2. Minimize wasted time. 3. Establish communication between management and the sales force in terms of the location and activities of individual salespeople. The customer contact plan involves scheduling sales calls and routing a salespersons movement around the territory.

Three Routing Patterns: I.


S t r a i g h B a s e c c c c W t - L i n e P a t t e r n

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Controlling the selling effort : Sales budget and budgeting procedures:


Budgeting can be defined as the process of planning and anticipating costs and expenditure of various financial resources on projects. It is the process of making specific financial plans for a short period of time. It helps in predicting and controlling the money spent within the organization and also involves day to day monitoring of current budgets. The first budget prepared. Each of the other budgets depends on the sales budget.

It is derived from the sales forecast. It represents managements best estimate of sales revenue for the budget period. Sales Budget is the estimated amount of anticipated sales allocated by product, territory, or person; prepared weekly, monthly, or annually. Sales Budget is the Operating plan for a period expressed in terms of sales volume and selling prices for each class of product or service. Preparation of a sales budget is the starting point in budgeting since sales volume influences nearly all other items. The sales force budget is the amount of money available or assigned for a definite period, usually one year. Sales Budget: The budget is made to forecast sales in terms of units sold and value of goods sold. This budget acts as a base for making production budget. What is Benefit of sales budget? Sales budget is the most important budget while making the overall budget for the organization for a fiscal year. It is important in this sense that how would anybody make fiscal budget for organization if he don't know about how much to sale or what are the organization's sale would be. If you know the sales volume of units of product you want to sale in a fiscal year then you will make production budget according to that sales requirement in mind you will have production information in mind you will purchase raw material, hire labour according to requirements.

So if you don't know about how much you want to sale then how would you budget other things and how would you compare your performance at the end of fiscal year. Purposes of Sales Budget: The sales budget is required for Planning Coordination Control-of the sales activities. Budget Procedure:

Quota setting and administration:


A quota refers to an expected performance objective. Quotas are tactical in nature and thus derived from the sales forces strategic objectives. WHY ARE QUOTAS IMPORTANT? Because: Quotas provide performance targets. Quotas provide standards. Quotas provide control. Quotas provide change of direction. Quotas are motivational. TYPES OF QUOTAS Sales volume quotas. Breakdown total sales volume. Profit quotas. Expense quotas. Activity quotas. Quota combinations. Sales volume quotas includes dollar or product unit objectives for a specific period of time. Product lines. Individual established and new products. Geographic areas based on how the sales organization is designed, which would include:

Sales division. Sales regions. Sales districts. Individual sales territories.

The two types of profit quotas: Gross margin quota determined by subtracting cost of goods sold from sales volume. Net profit quota determined by subtracting cost of goods sold and salespeoples direct selling expense from sales volume. Expense quotas are aimed at controlling costs of sales units. Often expenses are related to sales volume or to the compensation plan. Activity quotas set objectives for job-related duties useful toward reaching salespeoples performance targets. Customer satisfaction refers to feelings about any differences between what is expected and actual experiences with the purchase. METHODS FOR SETTING SALES QUOTAS Quotas based on forecasts and potentials. Quotas based on forecasts only. Quotas based on past experience. Quotas based on executive judgments. Quotas salespeople set. Quotas related to compensation. THE PROCEDURES FOR SETTING OBJECTIVES AND QUOTAS WITH SALESPEOPLE Prepare the way. Schedule conferences with each salesperson. Prepare a written summary of goals agreed upon. Optional group meeting to share objectives.

A GOOD OBJECTIVE AND QUOTA PLAN IS SMART Specific Measurable Attainable Realistic Time specific

Recruitment & Selection of Sales Force:


RECRUITMENTS PURPOSE Recruitment is the set of activities and processes used to legally obtain a sufficient number of individuals in such a manner that the recruits and the sales forces best interests are taken into consideration.

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Bu a e t g i T oi n r n a i nA i ns s g i g n e W o rEk n d T s e r r i t o r e L i n e

FACTORS TO CONSIDER WHEN DETERMINING HOW MANY TO HIRE

S a l e s F o r c e O b j e c t i v e s S t r a t e g P l a n s T D
Q u i t s H i r i n g , C u r r e n t T e r m o t -i o P n r s o , m S a cl e s F + r Pc er o m o i P e r s o n n e T l r a n s f e r s T I r na n s o r R e , i n o t f e t i r a t i o i o= n r s O e m n s , P e o p l e s , F o r e c a s t s u t , e n t

e r r i t o r i a l e s i g n

DETERMINING THE TYPE OF PERSON FOR THE JOB A job analysis refers to the formal study of jobs to define specific roles or activities to be performed in sales promotions. The three steps in the job analysis are to: 1. Examine the total sales force and each job, and determine how each job relates to other jobs. 2. Select the jobs to be analyzed. 3. Collect the necessary information through observation of what people actually do in the jobs, interviews of people in the jobs, and questionnaires completed by job holders.

MAJOR INFLUENCES AND COMPONENTS OF SALES RECRUITMENT

I n t e r n a l S o u r c e s S a l e s H u m a Rn e c r R e s o u r c e P l a n n i n g
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To be an effective recruiter, a sales manager must have the answer to several questions, including: How many people do I need to recruit? Who does the recruiting? Where do I find recruits? How can I develop a qualified pool of applicants? How can recruiting programs be evaluated? SOURCES OF RECRUITS INTERNAL SOURCES Internal recruitment sources come from inside the company: Current Employees. Promotions. Transfers. EXTERNAL SOURCES Walk-ins. The Internet. Employment agencies Radio and television. Newspaper advertisements. Telephone-in advertisements. Internships. Colleges and universities. Competitors.

Sales Training and Development , Motivating Sales personnel:


WHAT IS SALES TRAINING? Sales training is the effort an employer puts forth to provide sales people job-related culture, skills, knowledge, and attitudes that should result in improved performance in the selling environments. PURPOSES OF SALES TRAINING: Increasing customer satisfaction. Helping salespeople become managers. Orienting new salespeople to the job. Improving knowledge in areas such as product, company, competitors, or selling skills. Lowering absenteeism and turnover. Positively influencing attitudes in such areas as job satisfaction. Lowering selling costs. Informing salespeople. Obtaining feedback from salespeople. Increasing sales in a particular product or customer category. A SALES TRAINING MODEL DETERMINE HOW TO EVALUATE TRAINING WHEN PLANNING

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D l a n n i n O g r g a n i z Si n t ag f f i n g h a s e P h a s e P h a s e P

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PHASE ONE: PLANNING FOR SALES TRAINING The first step when developing or maintaining an ongoing sales training program is assessing needs. Needs assessment entails determining the training needs of the sales force and setting objectives for satisfying those needs. ORGANIZATIONAL ANALYSIS Four principles ensure a successful training effort: Value Focus Mass Duration OPERATIONAL ANALYSIS

A difficulty analysis uncovers and analyzes problems salespeople experience. SALES PERSONNEL ANALYSIS The behavioral objectives identify the goals of the training program for both the trainer and the trainee. CUSTOMER ANALYSIS Incorporate the voice of the customer. MAKING THE NEEDS ASSESSMENT This requires the following sequence: 1. 2. 3. 4. 5. 6. 7. 8. Identify the requirements of the position. Determine the difference between performance objectives and results. Determine why a difference exists. Revise the training program (if needed). Develop training objectives. Conduct the training program. Evaluate the training program. Revise the training program (if needed).

PHASE TWO: ORGANIZING FOR SALES TRAINING Training objectives to be accomplished. Number of trainees. Trainers experience. Each salesperson understands of the subject matter. Each trainees ability to learn and past experience. Training materials available. The costs per trainee of each method. Extent of presession assignments PHASE THREE: STAFFING FOR SALES TRAINING WHO IS INVOLVED IN TRAINING? Corporate staff trainers. Sales force personnel. Outside training specialists. PHASE FOUR: DIRECTING THE SALES TRAINING EFFORT TRAINING CULTURE Sales culture is the set of key values, ideas, beliefs, attitudes, customs, and other capabilities and habits shared or acquired as a sales group member.

PHASE FIVE: SALES TRAINING EVALUATION STEPS IN THE EVALUATION 1. Determine what should be measured. 2. Determine the information collection method. 3. Determine the measurement methods. 4. Analyze the data, determine the results, and draw conclusions for making recommendations.

Sales meetings and contests:


Meaning & Definition A meeting of interactive questions directly aimed at - Testing product knowledge, - service features and - Sales policy will clearly show the strengths and weaknesses, and allow you to address any problem areas that would have otherwise gone unseen. Concepts The purpose of a sales meeting is to get sales staff ready to sell. Salespeople hate meetings without an apparent purpose or agenda. And when no new information is shared, they feel as if they're wasting valuable time. It's important that one does not waste salespeople's time, but the person also needs to avoid overloading them with information.

Points of discussion in Sales Meeting 1. Test Product Knowledge 1. 1. 1. 1. 1. Locate Problem Areas in the Sales Process Reinforce Key Issues Address Customer Concerns Prioritize Company Policy Evaluate Service Potential

1.

Spotlight New Features and Services

Sales Meeting Design Design sales meetings with one primary objective: to raise the bar in attaining greater sales results. The right meeting design will encourage participants to be fully engaged, solve roadblocks, find creative ways to shorten sales cycles and inspire each other to sell at a higher level than before. Designing of Sales Meeting requires: Detailed agenda planning Theme achievement Breakouts that are engaging and productive Activities to build skills, Product, service, forecast, presentations will be meaningful and interesting Sales meeting would be more fruitful with expert facilitators who know how to maintain enthusiasm and participation from your team throughout the meeting. Facilitators key role can help senior sales managers get the most out of their sales meetings by Participating - not up in front dealing with details. Assessing talent in the room for future action and development. Focusing on content, not process. How to Evaluate Your Sales Meetings and Obtain Evaluation report In some organizations, every person attending the meeting is asked to evaluate it. We want the opinion of the salesman. Our meetings are strictly for him. This pointed statement was made by the manager of an electronics firm. He obtains an evaluation report from every person in attendance. Other companies get opinions from supervisory personnel only.

The feeling here is that the salesman has no right to evaluate anything management does, including the manner in which it conducts sales meetings. When the salesmen run the company, theres no need for me/ declared a sales manager.

SALES CONTEST
Sales contests should be designed to accomplish specific objectives over short periods. Some objectives that sales Contests might have: To obtain new customers. To secure larger orders per sales call . To overcome seasonal sales slumps. To get higher rates. To sell a higher percentage of retail, direct, or agency business. To sell special inventory or packages. To increase the use and quality of sales presentations. To secure a higher percentage of renewals .

To improve customer satisfaction (as determined by before-andafter surveys) There are three requirements for a successful sales contest: There must be an increased effort which leads directly to increased rewards for both salespeople and a company. Contests in which just salespeople or a company benefits are doomed to failure. Contests must motivate salespeople to increase their efforts. Contests must assist salespeople in patterning their efforts along more productive lines and encourage them to continue these good habits past the contest period.

Types of Sales contests There are two types of contests: direct and novelty.

Direct contests are straightforward, such as "achieve 15 percent higher rates," or "write 20 percent more direct business."

Novelty contests are ones that "hunt for hidden gold," or "win the Super Bowl." Novelty contests are more fun, but many sales managers feel that they tend to insult the intelligence of more sophisticated salespeople. Novelty contests tend to work better with younger, less experienced, less jaded salespeople. Novelty contests can be fun for selling special inventory, special events, or seasonal packages. Generally, there are four kinds of prizes for sales contests: Cash, merchandise, travel and special honor, recognition, or privileges. How Many Prizes? How many prizes are given in a sales contest is an important consideration. In general, it is best to make it possible for everyone to win something. The smaller the staff, the more important this element is in order to avoid destructive competition. Have several big winners (first, second, and third place), but also have a little something for everyone. Remember, in a six-person sales staff, if there is only one winner, five people feel like losersnot a good outcome.

Characteristics of Sales Contests: Contest Duration. The duration of a contest should be no shorter than four weeks and no longer than thirteen weeks. Six weeks is a good duration for a sales contestlong enough to effect behavior and billing and short enough so that the salespeople don't get bored with it. Because contests must be relatively short to maintain interest, it is difficult to run effective sales contests that require longterm, developmental selling. Contest Frequency. Do not use sales contests regularly, because then they are no longer special. In fact, salespeople come to expect the goodies they get from regularly scheduled contests and to see the rewards not as extras but as a normal part of their compensation package. Also, remember, that the competition generated from a hyped contest can cause morale problems, especially among those who do not the top prize. Spread out contests to avoid too frequent postcontest lulls. Two sales contests a year is a reasonable frequency. Standard Setting. Contests help set performance standards. It is vital that nonwinners (don't let a sales staff feel like losers) be given clear advice on ways to improve their performance. Offer additional sales training so non-winners feel they have a chance to win the next contest.

Promote Contests. Promote contests well to keep the enthusiasm level high. Promote them at all levels of the organization, not just in the sales department in order to get everyone in the company involved and supporting the salespeople (even include vital support people in prizes). Promote the progress of contests on a weekly basis. Give feedback on how the individual salespeople or teams are progressing. Weekly bulletins are a vital element of contests in order to give feedback and to create both awareness and excitement. Fairness. Fairness is the most important dimension in a contest. Participants must believe that a contest is absolutely fair and that no one has an edge at the beginning. Simplicity. Sales contests should be designed so that they are easy to understand. Objectives must be clear and progress toward them must be simple and easily represented graphically.

Visibility. Contest progress must be visible to everyone in an office. Among salespeople there is often as strong a motivation not to lose as there is to win, so post progress reports daily so that both those ahead and behind will be continually informed. Sales force Compensation, Evaluation and Supervision: PURPOSES OF COMPENSATION Connect individual with organization. Influence work behavior. Organizational choice. Influence satisfaction. Feedback. Reinforcement. EFFECTS OF PAY DISSATISFACTION:

Perform ance
P D a y i s s a D e s i r e f o r Absente t i s f a M c t oi o r ne P a y eism

Grievan ces Job b J o Dissatisfa ction Turno ver

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o l o g i c a l d r a w a l

t r e s s , n x i e t y o o r M e a l t h e n t a l

Individuals are satisfied with the rewards they receive in the following terms: How much reward is actually received in relation to how much was expected to be received. How the rewards received compare with what others received. Whether the rewards lead to other rewards. The level of extrinsic and intrinsic satisfaction from the rewards. The value of different rewards. FORMAL COMPENSATION PROCESS: E O D e t e r m i n e C o m e te e n r sm a it n o e n M D p i a j o s t a b l i s h S a l e s F o r c e O b j e c t i v e s , S t r Ca t o e mg i pe e ,n s a t i o n s b j e c t i v e s a n d P l a n s a n d T a c t i c s F a c t o r s A p p r a i s a l a n d R e c y c l i n g

I m p l e m e n t L o n g - a n d S h o r t R a n g e P r o g r a m

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o d o c o

m m u n i c a t e s m p e n s a t i o n e l i c y

DESIGNING A COMPENSATION PROGRAM: Compensation plans should have general and specific objectives: Attaining yearly sales volume and gross margins (general). Attaining monthly sales volume and sales on specific products (specific).

Market penetration and exploiting the territorys potential (General). Call management and development of potential in key accounts as well as development of new accounts (specific). Introduction of new products (specific).

DETERMINE MAJOR COMPENSATION FACTORS: Wage level. Wage structure. Individual wage. Administration procedures. TYPES OF COMPENSATION PLANS: STRAIGHT SALARY Of all the compensation plans, the straight salary plan is the simplest: The salesperson is paid a specific dollar amount at regular intervals. PROFILE OF A STRAIGHT SALARY COMPANY Dominant market share in mature, stable industry Highly defined and stable customer base Strongly centralized and closely managed selling effort Significant number of house accounts Highly team-oriented sales effort Service versus selling emphasis STRAIGHT COMMISSION PLANS The straight commission plan is a complete incentive plan. If salespeople do not sell anything, they do not earn anything. Two basic types of commission plans exist: 1. Straight commission. 2. Draw against commission. Situations where commission plans can be used: Little nonselling, missionary work involved. The company cannot afford to pay a salary and wants selling costs to be directly related to sales. The company uses independent contractors and part-timers. PROFILE OF A COMMISSION PLAN COMPANY Low barriers to entry into the job Limited corporate cash resources Small entrant into an emerging market or market segment High risk reward sales force culture Undefined market opportunity or customer base Inability to set quotas or other performance criteria Volume-oriented business strategy

PROFILE OF A COMBINATION-PAY PLAN COMPANY Established company with growth potential, many products, and active competition Need to direct a complex set of behaviors Need for a variable pay component that will ensure top performers are rewarded commensurately When to Use a Combination Salary Plan 1. To motivate the sales force. 2. To attract and hold good people. 3. To direct the sales force efforts in a profitable direction. KEY INDICATORS FOR POSSIBLE SALES COMPENSATION PROBLEMS 1. 2. 3. 4. 5. 6. 7. 8. Declining revenues Declining market share Declining profitability Insufficient premier accounts High sales force turnover Uneven sales force performance Inadequate servicing of customers Concentrating on easy-to-sell and unprofitable products

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