SALES MANAGEMENT

SALES MANAGEMENT TITLE 1. Modern Trends In Sales Management 2. Sales Organization 3. Market Potential, Sales Potential & Sales Forecasting 4. Sales Territories 5. Sales Quotas 6. Recruiting of Salesman 7. Selection of Salesmen 8. Training of Salesmen 9. Compensation of Salesman 10.Marketing Channel Concepts & Channel Participants Pg.No. 2 6 13 24 27 33 40 46 55 63

I.Modern Trends in Sales Management

During the past decade several significant changes have taken place in sales management. These new developments have not only increased the responsibilities of sales executives, but have also brought about a more scientific and professional approach to find effective solutions to marketing problems.
Greater dependence on Research:

Earlier the executives did not give much credence to research under the pretext that it is expensive and time consuming. They made their decisions largely on intuition, observation and personal experience. Today executives have realized that facts disclosed by research are essential in reducing wasteful sales expenses, making salesmens effort more productive by revealing wasteful activities. Now executives are able to realize that the time and money spent on research is often insignificant when compared to the possible losses that could be incurred by the firm in the absence of research. Today research is no longer considered to be a curative medicine, but it is also a diagnostic tool.

In the present day research is being used for a number of purposes like knowing new product opportunities, consumer likes and dislikes, determining market potentials, evaluating effectiveness of advertising and sales force, etc. Thorough Planning of Sales Sales management earlier was highly opportunistic, i.e. taking advantage of the current situation with little concern for long run consequences. There were no clear-cut objectives ad methods for solving problems and decisions mostly were ad hoc.

As a consequence costly mistakes were made and waste and ineffectiveness were common. As markets became saturated and profits declined executives were forced to realize the importance of planning. Today research precedes planning and managers plan operations by determining in advance what should be done, timing and scheduling operations and entrusting the responsibilities to competent individuals to carry out plans. Developing Effective Salesmen: The earlier belief was that salesmen are born and they cannot be made, so they were given little or no training, equipment or assistance. This lead to an increase in the turnover of salesmen, low morale and low productivity with increasing costs. The current belief is that salesmen should be made through rigorous training and they cannot be born. This has become more important due to the rapid growth in marketing of services. Decentralization of sales management: With the rapid growth in competition slow moving, top heavy, centralized authority for managing sales operations is rapidly being replaced by decentralization through divisional, district and branch managers. The main advantage of decentralization is that operating decisions can be made with greater speed and accuracy at the local level due to the

availability of facts and local conditions and results can be checked easily without overlapping or joint responsibility. Decentralization improves sales by lowering costs and makes it easier to adapt selling methods to local conditions. Greater specialization in the functions of sales management: Sales functions are becoming highly specialized, like specialists are being appointed to take care of personal selling, advertising, marketing information system etc.

The basic advantage of sales specializations are they relieve the top management marketing executives from attending to routine staff work and allow them to better utilize their time saved for policy making, planning and coordination. Better coordination of sales and other departments: This trend has brought about better coordination and greater unity of effort by all concerned in accomplishing sales objectives and also improving relations between several departments. Greater concern for product design and development: With the rapid development of technology, the consumer expectations are ever increasing. Therefore, the industry has to invest several millions of rupees on product design and development. This extensive product development has created new challenges to sales executives by opening new markets, new ways of reaching customers through different channels, new media for advertising etc. Greater concern for sales costs and profits: The earlier tendency on the part of the salesmen was to expand the markets with least concern for reducing selling costs.

This lead to a criticism that and not cost or profit conscious.

salesmen are more sales volume minded

This has lead to a situation where the sales volume was increasing without commensurate increase in the profit. Now the name of the game is cost cutting and making everyone profit consciousness through increasing sales volume by limiting sales costs. Reduce turnover of salesmen: In the past one of the major weaknesses of a sales organization was high turnover of salesmen. This was because of poor selection, inadequate training, weak supervision and ineffective control. Off late, this problem has been solved through greater dependence on research through proper selection, professional training, and better supervision and also through scientific determination of sales territories, sales quotas, better compensation packages and self-performance evaluation techniques. Sales management is improving relations with salesmen: In the past sales managers have been criticized for unfair and antisocial practices in dealing with their salesmen. These were in the areas of inequitable compensation plans, unfair territorial design, unrealistic quotas, poor working conditions and favoritism and nepotism in performance evaluation. .Many of these pitfalls has been set right now through scientific research and professional sales management practices.

II.THE SALES ORGANIZATION 1. Like any other organization, a sales organization is a group of individuals striving jointly to attain a set of predetermined objectives and bearing formal and informal relationships with one another. 2. The organization in a vehicle and a facilitator through which the members of the firm hope to achieve their objectives. 3. An organization is not an end by itself. 4. Managers in what ever field they are should appreciate the importance of a sound organization and realize how it helps them to increase their efficiency by reducing the costs. 5. Unfortunately, some sales executives are still content with inefficient organizations, at-least as long their sales volumes are increasing. 6. For instance, production executives were the earliest to realize the advantages that a logically conceived organization would go a long way in helping them realize the manufacturing economies and help them in reducing the production costs. Reasons for the neglect of a sales organization: 1. Sales executives, because of their immediate concern for sales volume, often overtook the importance of realizing economies in selling operation and the urgency of controlling selling expenses. 2. The basic criticism against the sales executives are that, they are sales minded, rather than profit minded. 3. Organizational defects in sales departments often exist due to lack of attention on marketing activities during the early life of the firm. 4. When the firm newly comes into existence, the management is more concerned with acquiring manufacturing facilities and not organizing the marketing activities.

7 5. As the firm succeeds, the management increases the quantity of good produced,

adds new products and production processes and the production department adapts itself to changing conditions, but unfortunately such changes are not brought about in the marketing department.
Marketing department is often a neglected child and efforts to reorganize it are not realized until there is a fall in the sales volume, rising sales expenses and declining Profitability of the firm.
6.

Under the concept of profit centre decentralization that is currently in vogue, there is urgency on the functional managers in every area to scientifically organize their respective departments to eliminate wastages and improve their efficiency.
7.

A good sales organization early in the firms history need not necessarily be the best one later on.
8.

9.

In fact a good sales organization should adapt itself to changing needs.

Purpose of sales organization:

1) General Purpose: - of a sales organization is to eliminate duplication of efforts,

minimize friction among salesmen and increase co-operation among them.

2) To permit development of specialists:

As business expands the various marketing activities to be performed by the firm increase in number and become increasingly complex. As tasks grow in number and complexity, they should be broken down into manageable units and assigned to specialized personnel. E.g.:

Manager Marketing

Manager personal Manager Selling Advertising

Marketing Information

Physical Distribution

After Sales Service

3. To assure that all necessary activities are performed:

As firms grow in size the gap between them and their final customers is going to become wider and wider. In such cases essential tasks may not be performed, simply because they are not assigned to specific individuals and this finally affects customer satisfaction.
Therefore, in order to overcome such loss of customer goodwill a growing firm should perform all those activities that a sole trader is offering to his customers by virtue of his proximity to them. It is for this reason that several of the firms have recently being emphasizing on customer relations management. 4. To achieve Co-ordination and balance: Another purpose of Sales organization is to achieve better co ordination both at the Micro and Macro levels of organization. 5. To Define Authority:

The sales executives should clearly know whether the authority attached to them is Line, Staff or Functional.
6. To economize Executive Time:

By virtue of dividing the activities and assigning them to functional specialists, the top executives devote less of their time to routine operations and concentrate more on long range planning and other functions. Setting up of Sales Organization:
1. It is very rare to build a sales organization from scratch.
2.

What usually happens is re-organizing the existing set up to ensure that the sales organization is suitable to the objectives that the firm intends to achieve and is also in tune with the current market trends and competitive
situations.

3. Five major steps are involved in organizing a sales department.

I. Defining the objectives :

No organization can exist without a clear definition of its objectives and sales function is no exception to this rule.
1.

2. The basic objectives of a sales department can be identified as (i) survival (ii) to generate profits (iii) growth and (iv) diversification.
II.

Determination of Activities:
1. The fundamental requirements for a sound organization are recognizing

the following : a) What executive positions are required? b) What should be the duties and responsibilities of people who occupy these positions and? c) What should be their relations with other positions?
III.

Conversion of Activities into Positions:

1. Activities should be classified and grouped together in such a way that

all the closely related tasks are assigned to the same position. 2. Each position should contain not only sufficient number of tasks but they should provide sufficient variation to give job challenge, interest and involvement. IV. Assigning personnel to positions:
1. The basic question here is, since it is a process of reorganization should

the positions be created according to the capabilities of available personnel or should we recruit special individuals to fit the positions that have evolved through logical analysis of the objectives and activities required. 2. The second proposal is always viable from the firms point of view, since no individual is considered to be indispensable.

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3. The organizers always feel that it is always better to have individuals -grow" into particular jobs rather then to have jobs -grow" around individuals.

V.

Provision for Co-ordination and control : Types of Sales organization: The sales organization structures are tailor made according to the needs and objectives of the firm.

No two companies have identical sales organizations although they exist in a similar type of business. e.g.:- Eureka Forbes a domestic durable of vacuum cleaners has door to door selling while others selling Refrigerators etc use retailer channels. The type of a sales organization selected by a firm depends on its (a) customers (b) marketing channels (c) company size (d) geographic scope of its operations (e) product line (f) Practices of its competitors (g) financial resources. There a four basic types of sales organizations (a) Line (b) Line and Staff (c) Functional (d) Committee.

Functional organizations and pure form of committee organizations are rarely used.

Most sales departments have hybrid organizational structures to often suit their specific operating conditions. 1- Line Sales organization: 1. This is the simple and old type of organizational structure that is commonly used by small firms. 2. A small firm is considered to be one which has (a) a narrow product line (b) limited marketing area to be covered (c) limited number of sales personnel employed and (d) limited financial resources.

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General Manager Sales manager Asst. Sales Manager Asst. Sales Manager Asst. Sales Manager Asst. Sales Manager Division I Division II Division III Division III Sales people Office staff Sales people Sales people

Advantages:1. It is very simple as the number of levels is low. 2. It is economical and decisions and communications flow rapidly with greater degree of accuracy due to few levels. 3. The morale of the employees is usually high. Disadvantages:1. Much depends on the individual who heads the department as he should possess outstanding ability and rare qualification. 2. The head should have a comprehensive knowledge of all sales management functions, as he is deprived of advice and assistance of subordinates with specialized skills and knowledge. 3. This structure is not suitable for rapidly growing firms with a wide product line and a large sales staff.

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Line and staff organization

This is the most frequently used by large and medium size firms. Chief Marketing Manager Manager Advertising Director Sales promoter & training Director Sales General Manager Sales Asst G.M. Sales Manager Marketing Research. Director Dealer & Distributor relations

Asst G.M. Sales

Director Sales Manager Branch Sales Manager Line positions Staff positions Sales Personnel Advantages: 1. Provides the Chief Marketing manager with the assistance of a group of Specialists 2. Staff relieve he burden of the chief marketing manager from routine work.

13 4. More sound decisions in functional

areas due experts in their respective areas.

Disadvantages: 1. Expensive and time consuming due to more number of levels and Executives involved. 2. The work of staff specialists must be properly co-coordinated and such Coordination is costly. 3. Close control over line-staff is essential as this usually leads to several conflicts

III.Market Potential
A market potential is an estimate of the maximum possible sales opportunities for a commodity or group of commodities open to all sellers in a particular market segment for a stated period under consideration Before going to the stage of establishing market potential, commodity grouping must be established in such a way that the individual commodities concerned are uniform with respect to the demand function. Since most products do not greatly differ from others, consumers often resort to product substitution. So in order to accurately arrive at a market potential for a product the degree of product substitution and the conditions under which it takes place have to be considered. The decision as to include or exclude closely related substitutes would have a significant effect over the market potential. E.g. Furniture wood, leather, steel feather light etc. Several market potentials for a product can be arrived at by making different assumptions.E.g.tooth paste. Methods of calculating Market potentials: Direct Data Method: In this method the data on the actual product for which one wishes to estimate market potential is collected.

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Collecting data about the sales for a particular product in the entire market from the various retail outlets. Advantages: These are the actual sales for a year that are being collected to arrive at the market potential. (2) The method is straightforward when compared to other methods. Disadvantages: (1) there are very few commodities on which total sales data is available. (2) Past sales are used to indicate the market potential. (3) Previous sales were made with the help of certain advertising and sales methods, so changes in these activities, as well as changes in price may shift demand and redistribute total sales. Corollary Data Method: This is based on the assumption that if a given series is related to another or to a group, the second series may be used as a measurement of the distribution of the first. Single Factor Index: This is the most simple of the corollary data method for analyzing market potentials. E.g. the sale of one product is taken to arrive at the market potential for another product when the product is having a closely related demand. Calculating market potential for automobile tyres. It is assumed that a new set of tires would last for 25,000 Kms. On an average an owner would be driving for 10,000 kms a year. Therefore, every vehicle that is 2.5 years old by the year for which we want to calculate the market potential is going to be a prospect for the replacement of tires. The number of vehicles that are going to be 2.5 years old can be got from the registration authorities. Multiple Factor Analysis: When the demand for the product is going to depend on more than one factor, then we take all the factors into consideration for the purpose of arriving at the market potential. E.g. the demand for soft drinks is going to depend on factors like the number of households, number of members in the household, their age, income, duration and intensity of summer etc. Sales Potential, Sales Volume and Sales Forecasting: Definition: Sales potentials are the quantitative estimates of the maximum possible sales opportunities present in a particular market segment open to a specific company for a particular product or a service during a specific future period under consideration.

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The sales potentials are usually and generally derived from market potentials after analyzing the previous market share relationships and by making necessary adjustments in the companys and competitors selling strategies and policies. Sales volume is the quantitative expression of the actual sales of a product attained by a firm in a particular market segment during a specific period under consideration. It so happens that in most of the cases the sales potential is greater than the sales volume. Such a situation arises due to various reasons like (1) the firm might not have sufficient production capacity to capitalize on the full sales potential. (2) Where the firm might not have developed the distributive network to a stage where they are in a position to reach every potential customer. (3) The firm might not be able to realize the total potential due to its financial constraints. So the sales potential indicates how much a firm could have possibly sold, if it had all the necessary resources and utilized them for the purpose of realizing the sales potential. Purpose of calculating sales potentials: The firms intend to derive the following benefits by calculating the sales potentials. Assigning sales territories: The market of the firm is divided into different territories based on the sales potential. This is done so as to ensure that every salesmen of the company is given equal opportunity when compared to every other salesmen of the company. The firm assumes that salesmens territory has an optimum potential, this is so because if the potential is below the optimum level, he cannot use all his time to advantage, so the overheads will be increasing thus lowering the profitability. If the territory has a potential that is more than the optimum level, the salesmen will not have the time to handle all customers, so there is a possibility of the firm loosing some of its customers to its competitors. Allocation of Sales Effort: Sales effort consists of the money spent by the firm towards sales force, advertising and sales promotion.

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The sales effort that is to be allocated to a territory by the firm will partly depend on the sales potential available in the territory. If a firm is distributing its products all over the nation, it will try to allocate greater funds in a particular market where it feels there is a wide potential for its products. Establishing Sales Quotas: Sales quotas set on the basis of sales potentials are better basis for measuring the efficiency of salesmen than quotas being set on unscientific basis. Performance Evaluation of Salesmen: The firm can be more professional in evaluating the performance of its salesmen if it can take sales potential as a base rather than just the sales volume generated by the salesmen. The following example illustrates the case.
Salesmen Potential wholesale Purchasing power (PWPP) Rs. 6,00,000 Rs.5,00,000 Rs.7, 00,000 Rs.8, 00,000 --------------Rs.6, 20,000 sales volume % of sales to PWPP

A B C D Average of 10 salesmen

2,00,000 (3) 2,10,000 (2) 1,75,000 (4) 2,40,000 (1) --------------2,10,000

33 (2) 42 (1) 25 (4) 30 (3) -------34

Sales forecasting: The success of a market plan of a firm to a very great extent depends on how accurately it is able to arrive at its sales forecast. Arriving at a reasonably accurate sales forecast is very important, as this is the basis for planning all the other operations of the firm. Definition: A sales forecast is an estimate of sales, in monetary terms or physical units for a specific future period under a proposed marketing plan or a programme and under an assumed set of economic and other forces outside the unit for which the

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forecast is made. The forecast may be for entire product line.

a specific item of merchandise or for an

In the above definition the significant point to be stressed is that the sales forecast is influenced by the firms proposed marketing plan and a programme. Sales forecasting periods: The periods for which the forecasts are being made essentially depends on the nature of the product, and the economic conditions prevailing in the country. If the economic conditions in the country are fast changing, the sales forecasts need to be reviewed periodically to make them relevant and more meaningful. There are essentially two types of sales forecasts i.e. short range or operational sales forecast and a long-range sales forecast. The minimum period for the operational sales forecast is related to the length of the production cycle of the product for which the forecast is being made. Production cycle means the minimum time required to convert the raw material into a finished product. The long range forecast is relatively for a longer period and it depends on the technology being used, nature of raw material, etc. Methods of forecasting sales: Sales forecasting can be done is two ways (1) top down or Break down procedure or (2) Bottom up or Build up procedure. Top down or Break down procedure: 1. 2. 3. 4. Forecast of general economic conditions is made as the basis to Determine the market potential for the product Sales potential is arrived from the market potential Sales forecast is derived from the sales potential and sales forecast in turn forms the basis for all planning and budgeting operations of the firm.

Bottom up or Build up Procedure:

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In the build up procedure the firm gathers estimates of future sales from various territories and consolidates them to arrive at the sales forecast for the entire firm. Techniques for forecasting sales: There are basically three techniques for forecasting sales. They are (1) Unsophisticated (2) Partly sophisticated and partly unsophisticated and (3) the Sophisticated techniques.
Techniques for forecasting sales Unsophisticated partly sophisticated & Partly Unsophisticated Regression analysis Jury of executive Opinion Sales force composite Method Projection of Past sales Time series Analysis Exponential Smoothing Survey of Buyers opinion Sophisticated Econometric Model Building

Unsophisticated techniques: Jury of Executive opinion: This method involves the grouping of small number of high-ranking executives and seeking their individual opinions of future sales. The sales forecast is arrived at by averaging the opinions of the executives. The effectiveness of this method depends on the experience of the executives. The executives who are selected for this job should be those who are well informed about the industry outlook and the firms relative market position and its capabilities. To increase the accuracy of this forecasting method the executives should be asked to support their estimates with as much factual information as possible and less of speculation. Advantages: It is a relatively easy way to determine the forecast in a short time.

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This is the only method of forecasting if the firm is new and has not got sufficient data to make use of the other methods. This method might have to be used when adequate sales and market statistics are not available. Disadvantages: The forecast is based much on opinion rather than on factual data or evidence. Using this method increases the workload of the high-ranking executives, who could use this time more effectively in their respective fields. A forecast made through this method is difficult to be broken down according to products, customers, markets, time, etc. If the forecast cannot be broken down into above categories; it looses its value as an effective control device. Sales force composite method: Sales force opinion method is the grass root approach.
Under this method the sales force forecast sales for their respective territories

and submit to their higher authorities.

The individual forecasts are combined and modified, as managements thinks

necessary and the overall forecast is finally determined.

Advantages: The forecasting responsibility is entrusted to the people who should produce results later. This method has the advantage of utilizing the knowledge of those personnel of the firm who are in close touch with the market conditions. The forecasts determined under this method can easily be broken down according to products, time etc. Since the salesmen are responsible for making forecasts, it becomes easy for the firm to gain the acceptance of the sales force in implementing the sales quotas, since quotas are based on forecasts.

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Disadvantages: As the salesmen are not totally trained for making sales forecasts, they heavily depend upon the current business conditions prevailing in their territories and are hence either over optimistic or over pessimistic. They are too close to the market and are unable to see the broad changes taking place in the economy and the business conditions outside their own territory. If the sales force is of the opinion that their quotas are going to be fixed depending on the sales forecast, they deliberately cut down the forecast to make their job easy. Partly sophisticated and partly unsophisticated techniques: Projection of past sales: Forecasting under this method is in various forms. One way is to set the forecast for the next year at the same level as that of the actual sales for the current year. In the second method the next years sales are forecasted by adding a set percentage to the last years sales or to a moving average of the sales figure for past several years. In this it is assumed that the sales will increase by the same percentage as that of the previous years. Next years sales = This year sales X This year sales Last year sales Advantages: It is easy and less expensive to determine the forecast.
The forecast is made depending on a quantitative base.

Disadvantages: The sales of a particular product depend on the interaction of various factors. So there is no guarantee that the forces that operated last year are likely to operate with the same intensity for the future period to come. This method does not take into consideration the changes in the various forces that influence the sales of the product.

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Time series Analysis: This does not projection of the past sales.

greatly differ from that of the simple

Time series analysis is a statistical procedure for studying historical sales data. The procedure in this method involves isolating and measuring the four chief types of sales variations; they are (1) long term trends (2) cyclical changes (3) seasonal variations and (4) irregular fluctuations. After this a mathematical model describing the past behavior of the series is selected and assumed values for each type of sales variation are inserted and the sales forecast is arrived at. The time series analysis is of more practical importance in making long-range forecasts. Only when sales patterns are clearly defined and relatively stable from year to year is time series analysis used successfully for making short term operating sales forecasts. The greatest disadvantage of this analysis is that it is extremely difficult to predict the changes in trends. Only when the trend is predicted sufficiently in advance, it can be of use to the firm to enable it to maximize sales opportunities when the trend is favorable and minimize losses when the trend is unfavorable. Exponential smoothing: This is a statistical technique for short-range sales forecasting, which has received much attention in recent years. Exponential smoothing is a type of moving average, which represents a weighted sum of all past numbers in a time series, with the heaviest weight being placed on the most recent data. Next year sales = a (this year sales) + (1-a) (this years forecast) `A` in the equation is called the smoothing constant and is set at a value between 0 to 1. Determining the value of `a` is the main problem in this technique.

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If the series of sales data changes slowly, the value of `a` should be small to retain the effects of earlier observations. If the series changes rapidly the value of `a` should be large so that the forecasts respond to these changes. Limitations of projection of past sales methods: The main limitation of all forecasting methods involving projection of past sales is that past sales history is assumed to be the only factor influencing future sales. No allowance is made for rapid ups and downs in business activity. Another difficulty is that the accuracy of the forecast may depend largely upon how close the company is to the market saturation point. If the market is entirely saturated this method can be of use, for instance, a certain percentage figure, which is equivalent to the annual replacement demand, can be added to past sales. Survey of customers opinions: This is largely made use of by firms marketing industrial products rather than consumer products. This method is used where the potential market consists of (1) small number of customers and prospects (2) where substantial sales are made to individual customers (3) where manufacturers sell direct to users and (4) where customers are concentrated in few geographical areas. The two main assumptions underlying this forecasting method are (1) the customers know what they are going to do and (2) that buyers plans once made, will not change. Both these and at least the second assumption are somewhat unrealistic. Although this method is generally classified as an unsophisticated forecasting method it can be made sophisticated in the marketing research sense, if the selection of respondents is made by probability sampling technique. Sophisticated Techniques:

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Regression Analysis: This is a statistical

process used for forecasting sales.

This method basically determines and measures the association between company sales and other variables. This method involves the formulation of an equation to explain the fluctuations in sales in terms of related and cause variables and substituting for these variables values considered likely during the period to be forecasted and solving for the value of sales. The three major steps involved in forecasting sales by using regression analysis are (1) identifying variables that have cause relationship to company sales (2) estimating the values of these variables related to sales and (3) deriving the sales forecast from these estimates. We can use simple or multiple regressions. Multiple regressions are used when two or more independent variables influence the sales of a product. E.g. Sales of domestic electric appliances is influenced by (1) consumer price of the product (2) Disposable personal income (3) the changes in the total number of households. Limitations: Forecast made by this technique is based on assumptions that relations which the variables have to each other in the past, will also hold for the future this is rarely true. The greatest danger in using regression analysis for forecasting is that forecasters may put too much faith in statistical output and they may be tempted to abandon independent appraisals of future events in favor of a forecast developed entirely by a computer. Econometric Model Building: This is a forecasting technique made use of by firms marketing durable goods. This is a technique that uses a mathematical model in the form of an equation to represent a set of relationships among different demand-determining independent variables and sales. By assigning values for each independent variable a sales forecast is produced. An Econometric Model is based upon an underlying theory about the relationships that exist among a set of variables and parameters are estimated by

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statistical analysis of past data. E.g. the sales equation for a durable product can be written as S = R + N. Where S = Total Sales, R = Replacement demand and N = New Demand.

IV.SALES TERRITORIES

1. One of the most important and difficult aspects of sales planning is the task of dividing the companys market into different units. 2. The process of dividing the companys market into different units for being assigned to different salesmen is known as establishment of sales territories. 3. a) b) c) d) Scientific allocation of sales territories requires a through knowledge of Companys customers and prospects. Trading areas. Competition Transport and Communication facilities, which influence the coverage of a 4. Other basic questions that need to be answered before resorting to the process of establishing sales territories are: a) Should the company go for extensive or intensive MARKETING PHILOSOPHY? b) How many salesmen would be required in each case and

sales territory at reasonable costs.

c) Would it be logical to attempt to cover the entire country or would better results be obtained by ignoring areas of low potential. E.g. Hindustan Lever & Rural Marketing. What is a Sales Territory?
A sales territory represents an optimum number of actual and potential customers that can be effectively served by an individual salesman.

25 1. To the Company a sales territory is a grouped into a single geographical area. given number of actual and potential customers

2. From a salesmans point of view a sales territory is a unit, which gives him an equal opportunity when compared to every other salesmen employed by the company and allows him to earn a reasonable wage in return for the effort and skill he employs. Misconceptions of Sales Territories: 1. Geographical areas constitute markets 2. It is people not geographical areas that constitute markets. 3. Modern view is that It is not people alone but people With needs, With resources and Those willing to spend the resources to purchase goods, that constitute the market,

4. According to the above concept, the salesmen are now assigned a specific number of customers, wholesalers, retailers, institutions or industries, which are located within certain geographical areas. REASONS FOR ASSIGNING SALES TERRITORIES: 1. 2. To eliminate duplication of sales calls. To give a specific task to a salesman so as to enable him to plan his activities.

3. To facilitate an organized coverage of a sales territory e.g.: 52% of the sales calls were made on customers whose purchases accounted for 4% of the companys potential sales and 11% of the sales calls were made on customers whose purchases accounted for 41% of the companys potential sales. 4. To meet competition more effectively

5. To enable the company to make use of cost accounting data to determine the profitability of different territories . 6. 7. 8. mix. To control salesmen by eliminating unnecessary travel by scientific routing of salesman. To bring about organizational stability by minimizing the turnover of salesmen. To achieve better co-ordination between personal selling and other elements of the promotional

REASONS FOR HAVING FREE SALES ORGANISATION:

26 1. 2. Salesmen are more productive when their areas are unrestricted.

The firm need not spend time and money to establish and revise territories.

3. The dissatisfaction among salesmen in the process of re-organizing the territories can be eliminated. Companies that prefer to operate without sales territories: 1. Small firms with limited product line, few salesmen and a limited market area to be served.

2. Firms, introducing new products in new market areas or existing products in new market segments. 3. Firms selling highly competitive specialties and intangibles like insurance policies or investments through commission salesmen. Methodology for establishing sales territories: The first step in the process of establishing sales territories is gathering information on a) b) c) d) e) f) The total purchase made by the existing customers. The previous purchases made by the existing customers. Any information on potential future purchases by existing customers. Information on prospective customer. Number of calls that can be made by a salesmen during a day. Desired call frequency.

Process of Establishing Sales Territories: 1. Selecting the appropriate Sub-territorial units.

DIFFERENT TYPES OF SUB-TERRITORIAL UNITS: State District City Trading areas Factors determining the size of the sales territory I. Quantitative factors: Total No. Of calls per day8

27 Total No. Of working days per yearTotal No. Of calls per yearDesired call frequency- 1 call per month. Therefore size of territory 300 300x8=2400 12 calls per year 2400/12=200 customers.

II.

Qualitative factors: 1. Competition 2. Method of distribution e.g.: Wholesale or Retail 3. Nature of the product e.g.: industrial or domestic 4. Ability of the salesman 5. Business conditions e.g.: inflation or depression 6. Stages of the product life cycle

V.Sales Quotas
The sales quota is a quantitative objective assigned to a marketing unit or individual salesmen for use in the management of sales effort. Quota is a common yardstick used by sales executives to measure the performance and compare it with other salesmen in generating sales volume. In general sales quotas are set by the firms for their salesmen but some companies establish quotas for the middlemen also like wholesalers, retailers, agents, etc. At the top quotas are set for various regions and as they come down the hierarchy they are broken down into quotas for each sales territory. Quotas involve the time factor i.e. the quantity of sales to be made with in a stipulated period.

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Quotas are mainly established as directing and control devices for the salesmens activities. The usefulness of a sales quota as a control device mainly depends on how accurately the quotas have been established depending on the marketing information and how the management is able to implement the quota system. Quotas should be established basing on various market informations like (1) Market and sales potentials (2) Sales forecasts (3) Competitive situation and (4) Cost estimates. Apart from these sources of information the effectiveness of a quota also depends on executive experience and judgment. Sales quotas if carefully set act as very good devices for controlling and directing salesmen. But if they are set on unsound or arbitrary basis they act as fundamental troubleshooters in the field sales force. Relationship between Sales forecast, Sales budget and Sales quotas: There is close integration among the above three factors. The degree of integration among the factors differs from firm to firm. When the degree of integration is very high they act as effective devices for controlling sales operations of the firm. The firms planning operations start with sales forecast and from these they evolve the sales budget as a control base and from this they adopt performance standards i.e. sales quotas. When the firm has decided a particular profit target i.e. after estimating the sales and deducting the probable expenses the next step is to decide what should be the quantity of sales that should be generated from each territory. With this intention the sales executives allocate quotas to each salesman. Reasons for establishing quotas:

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To evaluate the performance of the salesmen: If quotas are set on scientific basis they act as a common yardstick to measure the performance of different salesmen with out arbitration. By comparing the quotas with sales performance and by conducting a deep probe the management can identify its strong and weak points in different market segments. Quotas are used as incentives to motivate salesmen: If quotas are set scientifically and with a realistic point of view they motivate and create inspiration among salesmen to do a better job. But on the other hand if they are set unrealistically high they have a negative effect over the salesmens performance. The salesmens efforts show a declining trend when they have an easily attainable quota. This is a psychological effect of over confidence and breeds laziness among salesmen. If quotas are to act as motivators they should be set not only on market statistics and potential but also on the experience of executives. The reward to salesmen for exceeding his quota will normally be high and at the same time his next years quota will be increased by 50% of his previous years achievement. The criticism between quotas and personnel motivation is most salesmen are quota achievers rather than rupee maxi misers. Quotas as Budgetary control measures: Only a certain percentage of sales expenses incurred by the salesmen will be reimbursed by the firm. This is to ensure that the quotas are not being achieved at a huge cost thus minimizing the net profit margin of the firm. Quotas are also used to fix the compensation of the salesmen. Types of Sales Quotas:

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Sales volume quotas: This is one of the oldest one and management uses this for measuring the performance of salesmen and middlemen. By arriving at a quota and by communicating it the management tells each salesman of his target and the time by which it should be achieved. These quotas can be for different products in a product line, for different territories, customers or middlemen. These act as effective control tools and measures for directing the various activities of the salesmen. Utmost importance is given to quotas because before any profit can be earned a certain volume of sales should be generated so as to enable the firm to break even and keep the wheels running. The quotas could either be set in physical units or expressed in rupees or in a combination. If the prices of the firms products keep changing very often and if it intends to compare its performance with the previous years the quotas will be set in physical units. If the firm has products with high prices it sets units as quotas for psychological reasons.e.g. 40 units vs Rs.40, 000. Some firms with a narrow product line whose prices do not widely fluctuate have quotas both in units and rupees. Budget quotas: These are set for different units in the sales organizations for controlling expenses. Budget quotas are set so as to ensure that the salesmen do not achieve their quotas at an exorbitant cost, thus making the entire sales uneconomical. Expense quotas: are a part of the budget quotas. These quotas are expressed as a percentage of sales volume rather than in rupees. Expense quotas are set so as to increase the profit contribution. Incentives are also given to the salesmen if they achieve their sales volume quota with in the expense quota.

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However, there are certain disadvantages in setting uniform expense quotas as a percentage of sales volume because the transport facilities are not equal in all the territories of the firm. The only aim of the firm in establishing budget quotas is to make the salesmen cost conscious and this will act as one of the yardstick to measure the performance of salesmen. Gross Margin or Net Profit quotas: This has the same impact as the budget quotas. The aim of the firm in setting these quotas is to create cost consciousness among the salesmen. By having these quotas the possibility of the salesmen to over emphasize the sales volume quota is minimized. Net profit quotas are established to increase the profitability and this depends on increasing the sales volume and minimizing the sales expenses. So the salesmen try to restrict their expenditure while achieving the sales volume. This is useful when the firm has both high and low profit margin items in the product line. Salesmen usually sell low profit margin items because they are easy to sell in the market. So by fixing Net Profit quotas they are compelled to sell high profit margin items also because it will be impossible for salesmen to achieve their target if they are not sold. But fixing of Gross Profit quotas is difficult because the salesmen do not fix the prices and they have no control on manufacturing costs. Fixing and administering of Net Profit quotas are also difficult because the salesmen have no power to control the expenses incurred at the branch office. Activity Quotas: To set these quotas the management should first have knowledge about what are the main activities to be performed by the salesmen and how much time do they need to spend on each of these activities.

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Some of the activities for which quotas are set are (1) total calls made (2) Calls on each class of customers (3) Calls on prospects (4) product demonstrations and displays organized (5) New accounts tapped (6) collection of bills, etc. Combination of Quotas: Various quotas mentioned above are combined together and points are allocated for each activity to evaluate the performance of the salesmen. Methods of establishing sales quotas: Quotas may be established from territorial sales potential by pooling estimates form various territories. They may be established from total sales estimates by adopting the break down procedure from the census data available. Quotas set on past sales experience based on averages for previous years. Sales personnel setting their own quotas. Characteristics of a good quota plan:
Simplicity: The method used to arrive at the quota should be simple and easy to

administer.
Accuracy: Guesswork should be eliminated while arriving at quotas. Definite Task: The salesmen should definitely know what the quota to be

achieved is and what are the other duties the firm wants him to perform.
Incentive: The quota should provide some incentive to the salesmen. Fairness: Every salesman should be treated fairly without any bias. Flexibility: The quota should be flexible so that when basic business conditions

change; a change should also be brought about in the quota.

Coordination: Quota should be planned so that it will facilitate coordination

between various activities of the firm. Like production, marketing, finance, promotion, etc. Reasons for not using sales quotas:

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If it is difficult to obtain accurate sales forecasts and if quotas are to be based on guesswork executives prefer not to have quotas. If the determination of quotas requires using of statistical techniques executives prefer to avoid them because salesmen might view them with suspicion. Due to over emphasis on sales activity.

VI.RECRUITING SALESMEN Recruiting salesmen is becoming quite an important activity in the present days. The stress on this aspect is on the increase primarily due to rapid changes in the technology, LPG, and the fluctuations in business cycles. Previously the goods were in short supply, so that the consumer had no choice, other than buying what was available in the market. Now due to rapid changes in the technology many of the economies have reached a stage of market saturation. Due to the increase in the production, increase in the competition, and rapid change in the technology and fashion every entrepreneur is facing the problem of marketing his products. The present job of the sales executives is to have sufficient number of properly trained and motivated salesmen on hand to meet the needs of the existing and potential customers for the firm products. Increasing competition has compelled several firms to have sufficient and efficient sales force. The pressing task of the present sales executives is to identify the sources from which he can have efficient salesmen.

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Recruitment of salesmen has achieved such importance because of the scarcity of men in the profession. This is because, once upon a time sales job was considered to be an inferior profession, so many youngsters choose other activities like engineers, doctors etc, thus causing scarcity in the area of sales. Recruiting the salesmen is a continuous job, because vacancies arise due to the existing sales people retiring, deaths, promotions, disabilities, resignations and discharges by the firms. Apart from the above reasons, recruitment also depends upon the marketing policy of the firm like introduction of the new products, revising the sales of the existing products that are not able to do well and the firm deciding to enter into the new markets. The importance of the recruitment depends upon the type of the product sold, the type of the customer served, the method of distribution, the volume of the sales and the capital available. Recruitment becomes a more serious problem for firms selling high priced luxuries and specialties due to high turnover of salesmen. PLANNING A RECRUITMENT PROGRAM: The first step in planning a recruitment program is to make an analysis of the manpower. The abilities of the present salesperson should be analyzed and classified as (1) Satisfactory (2) Questionable and (3) Worthless. The points to be considered for rating the salesmen as above should be (1) their volume of sales (2) direct selling expenses. (3) Profit performance (4) credit sales (5) their future potential etc. The questionable people should be given reasonable time and training to prove themselves and should not be brought into an organization until the worthless salesmen have been eliminated and the questionable people show the signs of improvement.

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RECRUITMENT PHILOSOPHY: There are two philosophies concerning the recruitment problem. Careful selection by employing all the proven methods of choosing salesmen through a rigid selection process. Law of averages in which all the salesmen who agree to work for the compensation offered are hired with the hope that some of them will be successful. However, many sales managers have discovered the first method gives best results in terms of quality and cost of the manpower. ANALYSIS OF THE RECRUITMENT PROBLEM: Turnover of the salesmen: One of the most important factors indicating the need for a sound recruitment plan is the turnover of salesmen in an organization. The usual experience is that turnover among salesmen selling specialties and intangibles are high when compared to those selling common items. An analysis of the number of terminations over a period should also be computed, so as to calculate the turnover. The turnover rate will show the number of new men required as yearly replacements for resignations, disabilities, retirements, deaths, promotions, discharges etc. Effectiveness of present salesmen: For arriving at the future salesmen needs, the effectiveness of the present salesmen in the firm should be considered in relation to the firms desired sales volume. E.g.: 5 salesmen are able to sell 100 units @ 20 units each. If the firm

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intends to attain a sales volume of 160 units, then it needs to employ 3 more salesmen. Number of salesmen needed according to potential market area to be covered: The number of salesmen needed is also determined by the size of the market, actual and potential customers to be contacted, the frequency of contacts and the total number of calls that can be made by a salesman during a given period like a day or month etc. E.g.: there are 400 actual and 600 prospective customers. If A salesman can make 10 calls a day, it will take him 100 days to cover the market. However, if the firm wants the salesmen to visit the customers once in 20 days, then it requires hiring 5 more salesmen. Cost of recruiting the salesmen: Cost of recruiting the salesmen include advertising cost, fees to employment services, cost of preliminary training, executive time for sitting on the interview board etc. The cost of recruitment should be determined and efforts should be made to keep these expenses at the lowest level possible.

Best time to recruit salesmen: The recruitment of salesmen is often postpone until there is a fall in the sales force due to resignations and retirements, which often results in the decline of sales volume and profits of the firm. This practice is found to be wrong because a customer lost once is lost forever. The best time to recruit salesmen is when the firm is entering in new markets or introducing new products or at a time when it does not strain the financers of the firm or weakens management control.

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Decide when and where more salesmen are needed: All the sales territories of the firm should be analyzed to determine which ones need additional salesmen, because either the potential has increased or the competition has become more severe. Potential retirements, resignations, promotions and discharges must be considered for deciding the time of recruitment.

Type of salesmen needed: To arrive at the type of salesmen needed, the important answer to this question is to analyze the background of the existing successful salesmen to establish the qualification required for future salesmen.

FUNTIONAL TYPE OF SALESMEN:

Specialty salesmen: employed for either launching new products or reviving the sales of existing products. Junior salesmen: employed to save the time of senior salesmen by performing non -selling activities like maintaining information about prospects, conducting displays and demonstrations etc. Missionary salesmen: they assist wholesalers and retailers in the sale of manufacturers products. Senior salesmen: involved in full sales activity with out the work of locating prospects. Expert salesmen: those serving in foreign market. They are usually promoted from domestic sales force. Sales Engineers: engages in the sale of technical product and usually sell to professional buyers whom demand technical information.

RESPONSIBILITY FOR RECRUITING SALESMEN:

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In small firms turnover of salesmen is usually low and the recruiting problem is relatively simple. In such firms the responsibility for recruitment is on the sales manager, who locates and recruits the salesmen through his personal contacts. In large organizations where the turnover of salesmen is high, the responsibility for recruitment is centralized at head quarters. RECRUITMENT METHODS: The first step in recruitment is too clearly state the type of salesmen required. The type of salesmen required depends on products sold, type of buyers, demand for the product and the nature of the sales job. The type of salesmen required may be determined through job analysis. Job Analysis: This is a technique to establish the personal characteristics necessary for the job. Job analysis is done by the sales managers through their own knowledge of the nature of the sales job, by observing salesmen on the job or even by asking each salesman to list out his duties. Then the difficulties encountered by the salesmen while performing them is determined by observing them on the job and asking them to list out their problems. Such type of job analysis clearly describes the qualifications needed for the success in selling, with respect to personal qualities, experience and abilities to perform the specific duties.

Analyze personal history records:

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Another way of determining the desirable traits for a salesman of a specific product is by going through the personal history records of the existing successful salesmen of the firm. By going through the records the salesmen are given ratings depending on factors like sales volume producers, new accounts secured, sales expense ratio, product contribution etc. After arriving at the successful salesmen, this is taken as a guide to fix the qualifications for the salesmen the firm is looking for. Analysis of Terminations: Analysis of the personal characteristics and qualification of the salesmen who have left the firm is also important for fixing the qualifications for new salesmen. At the time of a salesman having an exit the sales executive to find out the reasons for leaving conducts interview. The information got by the firm through this method also of immense value in fixing the qualification for new salesmen. ESTABLISH SALESMEN: STANDARD PERSONAL QUALIFICATION FOR

By going through all the steps mentioned above standard of personal qualifications in going to be established by the firm. The qualification of the applicant may be readily compared with the standard establishment to determine the applicants suitability for the job. SOURCES OF THE SALESMEN: Sources from which present successful salesmen were secured. Previous occupation of present salesmen. Present salesmen through their references.

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Present customers. Present middlemen of the company. Within the organization. Salesmen from related lines. Salesmen from competitors. Sales managers in other lines. Open advertisement. Business schools. Employment services. Voluntary or unsolicited applications. VII.SELECTION OF SALESMEN One of the most difficult parts of the sales manager is the job of selecting salesmen. This is considered to be the difficult job because the sales manager is aware of the loses that arise due to poor selection. The success of the sales manager depends on the performance of his salesmen. If the salesmen are effective many problems of the sales manager like sales supervision, motivation and control, volume of sales and costs are solved. The high costs involved in bringing a new salesman into profitable sales production emphasize the importance of a good selection procedure. Costs of Poor Selection: The following are some of the costs of poor selection. High turnover of salesmen: If proper candidates are not selected depending on their aptitude for sales or previous back ground etc the result is that salesmen get frustrated and quit their job.e.g. An intelligent and dynamic person being put on to a routine,

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non-challenging job or an under qualified person being put onto a challenging job. In either of the case it leads to higher turnover of salesmen. The effects of higher turn over are: The expenses of hiring and training are increased due to repeating the process a number of times. The salary of the salesman during his training period might be considered to be unproductive because they are no immediate returns. The time spent by the executives for selection and training may be wasted. It might have a negative effect on the customers and prospects in understanding their problems. Others cost: Ineffective work of salesmen affects the performance of other departments like credit, schedule of production etc. The benefits of advertisement may be lost if there is a gap between the issue of the advertisement and the time when the salesmen contacts customers. Characteristics of a good selection programme: A good selection programme should be based on a scientific method and experiences of sales organizations engaged in selecting large number of salesmen over a period of time. Long established methods of selecting salesmen are proving to be inadequate in the present days. E.g. once over interview followed by many executives seems to be a failure in many cases. Pseudo-scientific methods are found to be valueless and illogical. A sound selection programme is a custom made one. It differs from firm to firm depending on the product sold. Type of customers to be catered, marketing policies of the firm, etc. Standardized selection tools like standard aptitude tests etc are not universally applicable.

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A good selection progrmme should be tailor made according to the specific needs of the firm. It is undoubtedly true that effective sales selection involves time and money. But too much haste in selection creates high turnover and increase costs further. The usual practice is when ever a vacancy arises the inexperienced executives rush for a candidate, conduct a nominal interview and immediately push him on to the job. This is a wrong practice. Although thoroughness in selection is slow and involves time it is more economical in the long run. The investment cost of recruiting, selecting and training new salesmen are small when compared to the total cost of bringing new salesmen unto a profitable sales production. A thorough knowledge of the sales job and the qualification needed to perform the job are a good foundation for a good selecting program. This information could be got through job analysis and the analysis of the previous history of the existing successful salesmen. Standards of measurements are essential for a good selection program. A standard of personal qualifications is necessary to measure the qualifications of probable new candidate and the qualification yardstick should be specific rather than saying a young man who likes a sales job. This qualification yardstick could be established by going through the previous histories or existing successful salesmen. Before a new or improved selection programme is generally adopted, it should be tested on a small group of applicants to determine its effectiveness. Process of selection of salesmen: This is a two tier basis (1) Establishing the standards for each of the functional types of salesmen to be employed (2) Establishing a system of measuring the qualification of the applicant with the predetermined standards. First consider the job and the man needed: This involves the establishment of personal qualifications as mentioned earlier in the recruiting program.

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Application form: This is a basic tool in the selection process. The purpose of this is to provide factual information about the applicant for future reference and to provide facts to interviewers to use in conducting the interview. Application forms are of two types: Preliminary application form: This is for screening to save the time of the applicant and give the interviewer a quick understanding of the candidates basic qualification. This is used when mini9mum qualifications of age, education, health and experience are considered essential for the job. This is to reject candidates who do not posses the minimum requirements. Formal application form: This is to secure complete information of the applicant about their personal histories. The questions to be asked in this form are determined by the analyzer of the sales hob and the characteristics and personal histories of successful salesmen. Every question in this form should be considered in respect to its relationship to a particular sales job. Weighted application form: The importance of the personal history information in completed forms may be judged numerically by establishing a score for each item. Interviews: A single interview with the applicant is the traditional and frequently the only method of selecting salesmen. This is considered to be inadequate, so weighted application forms, tests and other measures are being made use of to select salesmen. / Personal interviews alone are ineffective because they may be highly subjective and affected by personal bias. Now several types of interviews are made use of in selecting salesmen. Preliminary interview: To eliminate unqualified applicants.

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Patterned or guided interview: To analyze and appraise the applicants history and experience in respect of the abilities demanded by the sales job. Cross check interview: For comparing the judgments of several interviewers and minimizing bias. Formal employment interview: Preliminary interview: The preliminary application form is made use of for this interview to determine whether the applicant satisfies the basic requirements. This interview is conducted by a sales supervisor or assistant sales manager. The applicant successful in this interview is given a formal application form to complete and an appointment is made for a patterned interview with the branch manager or executive who will make the final decision to hire or reject the candidate. Patterned or guided interview: This is an improved way to assess the candidate by aiding interviewers in securing and evaluating facts of the applicant in an organized manner. A standard interview guide form is given to each interviewer to record his reaction to an applicant. The guide provides the key questions to ask the applicant. All the facts and the reactions of the interviewers are recorded on the guide form for analysis, decisions, permanent record and comparison with other interviewers opinions. This standard interview procedure minimizes the usual bias and prejudice of interviewers. Some of the topics discussed in a patterned interview are work experience, education, family back ground. Social status, financial status and health. Interview rating form is also some times incorporated in the interview guide the essential characterist5ics for success in the sales job are listed in the form. A rating scale such as good, fair, poor is used. Conducting a Patterned Interview:

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Proper time and place for interview are essential in a good selection program. Interviews should be arranged at a time when there are no interruptions. Privacy is essential. At the opening of the interview, the interviewer should get acquainted with the applicant by discussing informally and friendly with out directly asking questions related to the job. This is to infuse confidence in the applicant. The applicant should be encouraged to talk freely about his previous history, work experience, life, etc. The interviewer should use the questions in the interview form to bring back the discussion on to the track if it is deviating. Some interviewers take notes on the interview guide form while the discussion is in progress, but some take notes after the applicant has left. The first one might create self consciousness in the applicant. Cross check interviews: These are used to minimize bias, personal prejudices, influences, etc. These interviews are conducted in the same manner as guided interviews. The number of cross check interviews varies from 2 to 5 with an average of 3.

Final Employment Interview: All the scores of the applicants in different tests and interviews are carefully assembled and viewed carefully for possible weakness, by the executives before a final decision to hire or reject is made. The assets and liabilities of the applicant should be listed and he can be classified as above average or below average. Above average candidates are employed immediately. Reference check: Reference check is made from the previous employer during the selection procedure. Reference check is made usually after the final employment interview.

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In the reference check, what others do not say about an applicant may be of greater significance than what may be said in his favor. Sales Aptitude Tests: Tests in the following areas are conducted (1) Mental ability test (2) Test of ability to deal effectively with others (3) Tests of Personality (4) Tests of interest in selling as a vocation (5) Tests of sales aptitude (6) Accounting aptitude (7) Mechanical aptitude. Physical examination by a doctor is also important. Field Observation of Applicant: In some cases the sales manager suggests the applicant to accompany a salesman on a few calls to give a better understanding of the job and give the employers salesmen and opportunity to appraise the applicant and report his impressions. Agreements with salesmen: (1) Compensation agreements (2) Sales Territories (3) Terminations (4) Price quotations (5) Traveling Expenses (6) Rights to discoveries and improvements.

VII.Training of Salesmen
The need for training of salesmen on scientific lined has been recognized in recent times. Previous conception of salesmen was that he was a man with art and considered to be born salesmen. The recent opinion is that salesmen are not only born, but they could also be made through successful training methods. In the present days of severe competition it is a must for every salesman to have a thorough knowledge of his product, organization, policies, market and methods of distribution. Apart from the above, due to the emphasis on the customer in the recent times the salesmen should have a comprehensive knowledge of the needs of the customers and how to satisfy these needs to the best satisfaction of the customer.

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To acquire knowledge on all these aspects the salesmen should be studying continuously and he should be provided with training. The present opinion of salesmen is that he is a specialist in consumer needs. He must be able to diagnose the problems of his customers and recommend the optimum solutions for them. To fulfill his job successfully a salesmen should have a working knowledge of economics, marketing, statistics, accounts, etc. From the salesmens` point of view training makes it possible for him to increase his sales and earnings, gain recognition and qualify for promotion and increase self -confidence. From the firms point of view it gains through (1) increased sales volume (2) reduced selling costs (3) less turnover of salesmen (4) reduced supervisory costs (5) customers are served better and (6) intangible losses through mistakes of untrained salesmen are avoided. In spite, of these advantages still many firms do not believe in training on the plea that is expensive and the results are intangible and slow in materializing. Older salesmen resist training by saying that it is not practical to train a man to deal with complex sales situations. Training salesmen on an average takes about 6 months to one year and depends on the complexity of the sales job. Development of sales training programme: A sales training programme to be effective must be planned and it is a continuous process. An un-coordinated training programme will fail to attain its objectives. A good training programme should answer some fundamental questions like (1) who should be trained (2) who should be responsible for training and (3) what should be the objectives of training? Who should be trained?

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This is the fundamental question to be answered. From the producers point of view a firm should train its own salesmen of all types including the supervisors, regional, and district and branch managers first. In the second phase the producer should undertake to train the salesmen of its whole salers and retailers depending on the volume of their sales. As different people have to be trained, the content of the training programme for each class should be different based on its objectives and field studies of sales job etc. The people to be trained include (1) beginner salesmen (2) senior salesmen (3) middle management training (4) distributor dealer training and (5) training retail and institutional salesmen. Who should be responsible for training? To a large extent the success of a training programme depends on the person or organization responsible for training. In small organizations the responsibility for training lies on the sales manager or his assistant. Due to the heavy work on these people, they are forced to adopt a simple and often inadequate training programme or entrust the job of training to outside consultants to plan and conduct training. In large organizations the training is the responsibility of the Vice President in charge of sales and is assisted by a staff of sales training specialists who give full time to planning, preparing training material and supervising training. A sales training staff usually consists of a director, assistant director, field trainers, conference leaders, production manager, research manager and clerical assistants. The size of the staff varies depending on the content of the training programme and the number of people to be trained.

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An important function of the sales training staff is to first train the line executives in training techniques, by providing them with training material and helping them in conducting training. Training Objectives: It is a must that every training programme should be according to specific objectives to keep the training on the right footing. The general objectives of sales training are: 1. 2. 3. 4. 5. 6. 7. To increase sales and profits. Selling more of high priced items. Introducing new products. Making better sales presentation. Reducing salesmen turn over. Improving the sales performance of distributors and dealers and Maximizing consumer satisfaction.

Sales Training Research: It is important to study the salesmens` needs to do more effective selling and also helps in establishing the content and scope of the sales training programme. Many sales training programmes have failed because information given to salesmen was academic, impractical, highly generalized and standardized and not related to the particular job and problems of the salesmen. So an initial sales training research involves a study of salesmen` duties and responsibilities What they do, the special knowledge needed to do the job What they must know and their essential attitudes What they must feel. Sales Job Analysis: This is done as was already mentioned under recruitment of salesmen. Sales Difficulty Analysis: After job analysis an analysis of the difficulties encountered in selling is important and this aspect should be stressed in the training programme.

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The typical difficulties usually as follows:

encountered in the sales job may be listed

1. Personality difficulty: Due to lack of confidence, tactlessness, non2. 3. 4. 5.

attentiveness, discourtesy, ill health and poor voice. Knowledge difficulty: created by ignorance of product features and application, advertising, price and competition. System difficulty: Resulting from poor time control, routing, record keeping and paper work. Selling technique difficulty: Due to lack of information concerning prospects, anticipations of objections, proper approach and knowledge. Trade difficulty: arising out of competition between distributors, pricecutting and preferential treatment.

Salesmens`Attitude Survey: A salesmens effectiveness in performing his job or over coming difficulties depends on his attitudes towards his work, supervisors, and company policies. Management must know how salesmen feel about their work, organization and products. Development of constructive attitudes in salesmen may be included in the training progrmme. There are various indicators to measure the salesmens, attitude or morale. These are the sales volume, salesmens turnover in the organization and absenteeism. Product and company Knowledge: The training programme should also contain information of product, its uses, raw material, technology used, etc. It should also give the company history, its organization and development, financial status, competitive position, activities in research, distribution methods, etc. Price and promotion policies should also be included.

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Content of a Sales Training Programme: The content of the sales training programme is determined by a through study of the above factors. The sales training programme should cover the following aspects: 1. 2. 3. 4. 5. 6. 7. Knowledge of salesmens` job. Knowledge of firm. Selling techniques. Knowledge of product and service. Knowledge of Advertising and promotion. Knowledge of sales policies. Knowledge of customers and markets.

Methods of Sales Training: The two main types of training methods are Group training and individual training. Group Training Methods: These include Lectures, demonstrations, dramatizations, conferences and panel discussions. This is the most common method used because it is economical, quick, reaches more persons and is effective for presenting certain types of information. This is a better way to present facts about products and their applications, firms policies on prices, credit, distribution and promotion. Individual Sales Training: This is used by small organizations where the turnover of salesmen is low and the number employed is very limited. In large organizations it is used to supplement group-training programme.

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This is an effective way of training because it takes into consideration individual attitude, skills and capacities of salesmen. This is not very much in use due to the expense and time involved. The three common methods of individual sales training are (1) individual training conferences this is between the supervisor or sales manager and the trainee (2) Training on the job by the experienced salesman taking the beginner on to the job in the field (3) Correspondence training by sending information about firm history, policies etc to the trainer. This is not an effective training method for training in sales techniques. Time for Sales Training: Sales training is a continuous activity which begins when the new salesmen enters the organization and continues till he quits the organization. Induction or Basic Training: This is given to every salesman when he enters the organization irrespective of his previous experience. This is designed to develop the right attitude toward a sales job and impart knowledge and skills needed to succeed in selling. There are two approaches to the length of this type of training. 1. This method aims to get the new salesmen into sales production at the earliest possible time by giving him some essential facts to enable him to make sales presentations. 2. The method involves preliminary training on the job, followed by training at head quarters, laboratories, production departments and branch offices, etc.

Continuous or follow up Training:

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Once the new salesmen has completed his induction training they are provided with follow up training to provide them with more information about products, policies, and developing constructive attitudes and selling skill. After finishing initial training the beginners are usually assigned to field training on the job under senior supervisors and later they are supplemented by correspondence and group training. Experienced salesmen are given follow up training at regular intervals on a predetermined plan and schedule like (1) weekly sales training meetings. (2) Periodic regional district schools and (3) Correspondence training. Where to Train Salesmen? The choice of training location depends on the type of product, size of sales organization, number of men to be trained, the geographical distribution of salesmen, the facilities and resource of the organization etc. Head Quarters Training: Centralized sales training has certain advantages (1) complete training facilities and equipment are available at home offices especially for product and technical training (2) they can have a favorable impression about the head quarters, plant, chief executive, etc, (3) uniform training can be given (4) it is more economical than field training. Disadvantages:
Cost of bringing salesmen to headquarters and providing them with housing etc is high (2) salesmen trained at head quarters have to forego sales for some time and thus their earnings. This type of training is provided by small organizations having few salesmen. Firms with technical or complex products where product knowledge is essential and where unit price of the product is high have training at head quarters. Branch Office Training: Decentralized training at branch offices under the direction of branch manager or supervisor is employed by firms, which operate branch offices.

54 Firms employing commission salesmen, selling low priced items directly to consumers prefer this method. Advantages: (1) Its more economical (2) effective training is possible through on the job (3) training is provided according to the peculiarities of the market and competition prevailing there. Disadvantages: (1) This lacks uniformity (2) trainers are not well qualified (3) branch managers are over burdened with other duties (4) equipment available for training is inferior when compared to that available at the head quarters. Territorial Training Centers: These have been established by many firms of large size in the principal markets of the country. These centers combine the advantages of decentralized and head quarters training with experienced trainers, good equipment and facilities and uniform instruction. The advantage is training is brought closer to the salesmen saving time and expenses, having smaller groups and branch managers also can participate in training programmes. Training in the Field on the Job: Skill in making sales presentations is acquired through training in the field in face-to-face contacts with prospects and customers. This is the practical way of training. Training in the Salesman` Home: After completing basic and field training new salesmen are frequently given individual continuation training through correspondence. Sales Training Tools: (1) Manuals (2) Films (3) Charts (4) Products and Models (5) Audio systems (6) Video systems and (7) Power point. Evaluation of a Sales Training Programme:

55 It is important to see how worthy the training is and to see what changes and improvements can be made to make it more effective in subject material, training tools, location, timing, methods, etc. Tangible evidence of effectiveness is known through (1) increased sales (2) lower selling costs (3) lower turnover of salesmen, etc. Intangible evidence is through (1) Improved morale of salesmen (2) Co-cooperativeness (3) interest and good will of salesmen.

IX.Compensation of Salesmen A good compensation plan for salesmen is one of the most important elements in the smooth and efficient functioning of a sales organization. A good compensation plan increases loyalty, maintains high morale, attracts high quality men seeking a fair reward for their services and reduces turnover of salesmen. Apart from financial incentives provided by a good compensation plan, salesmen should also receive non-financial incentives like security, recognition, opportunities for growth and self respect in order to be completely happy. A compensation plan that overpays some men, underpays others, which is frequently changed arbitrarily, fails to provide an adequate income, offers no incentive to high performers and is highly complex that few salesmen can

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understand it, leads to dissatisfaction among salesmen, low morale and high turnover among salesmen Steps in Establishing a Sales Compensation Plan: Responsibility for designing the salesmens compensation plan is assigned to a sales compensation committee. The committee consists of members from with in and outside the company to ensure that the compensation plan is in tune with the plans in competing fields. Objectives of salesmens compensation plan: These can be divided into primary and secondary objectives.
The three general primary objectives of a sound compensation plan are (1)

selling a satisfactory volume (2) selling the most profitable goods/services and (3) selling at the lowest possible cost. Most compensation plans pay salesmen for a satisfactory volume of sales. In such a case sales volume is often obtained by selling low priced, low profit, easily sold products which provide the smallest profit margins. Emphasis on sales volume often leads to price cutting and high selling costs. In view of the severe limitations of a compensation plan that only pays on sales volumes, many firms now are implementing a graduated compensation plan that pays more for sale of most profitable items and less for selling low profit goods. Off late extra compensation is being paid to salesmen who increase their sales volume or profit and at the same time reduce their selling expenses. Secondary objectives of sales compensation plan: It is necessary to establish secondary objectives to enable the salesmen to focus attention on some activities that lead to the successful attainment of the primary objectives. Secondary objectives which lead to attaining increased sales volume are (1) increasing the size of the order, (2) introducing new products (3) opening new accounts (4) reviving an inactive account (5) increasing the frequency of orders

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(6) locating new prospects (7) making demonstrations (8) reducing returns and (9) performing missionary work. Characteristics of a good compensation plan: A good compensation plan should have the following qualities.
Stability of Earnings: A salesmens income should not fluctuate widely and it

should ensure stability in earnings.

Regular earnings strengthen salesmens morale. Control on salesmens activities: A compensation plan that primarily rewards

salesmen for volumes will not encourage missionary work.

Compensation plan should encourage salesmen to perform those tasks that are

most essential in serving customers, creating sales and increasing profits. A salesmens job requires missionary work like organizing displays, restocking shelves, organizing after sales campaign and helping dealers with better management methods.
Incentive to sell: A compensation plan should provide financial reward for

superior performance. Extra compensation should be paid for selling more profitable products, lowering travel expenses, getting new customers, increasing collections, increasing number of calls, etc.
Flexibility in adjusting earnings to selling conditions: A sales compensation

plan should be adaptable to differences in selling conditions, salesmen, products and sales territories. A payment plan that may be sound for experienced salesmen may be unfair for beginners in the organization.
Simplicity of administration and understanding: An effective compensation

plan should be designed in such a way that it can be implemented with out excessive expenditure. The compensation plan should also be easily understood by the salesmen.

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If the compensation plan is complicated to understand, salesmen become suspicious about the plan and assume that management is trying to take advantage of them.
Economical to the Employer: Sales compensation plan should be economical,

where it does not become cost prohibitive to the employer.

Fair and Equitable to both the firm and salesmen: A good compensation

plan should be fair to both employer and salesmen. It should not overpay some men and underpay others.
Some plans are entirely based on volumes and not profitability.

Some plans depend on length of service of salesmen and not his ability to produce high volume of sales, high profits or low expenses. The above two methods might not be considered to be fair from the salesmens point of view.
Competitive: A compensation plan should enable salesmen to earn as much or

more than salesmen employed by competitors in the same industry. Otherwise the salesmens turnover would be increasing.
A plan should enable a beginner to maintain a standard of living comparable to

that of salesmen of equal experience doing similar work in related lines. Factors affecting choice of compensation plan: Job to be done: The duties of salesmen affect features of a compensation plan. When a sales job involves considerable missionary work, salesmen should be compensated for this activity. Nature of Product: More training and ability is required to sell a complex, technical products than a simple, stable product.
A compensation plan should provide a financial reward in proportion to the

training and selling skill demanded by a product. Functional types of salesmen: Various functional salesmen like junior salesmen, senior salesmen, sales Engineers etc are being employed.

59 A compensation plan should

provide for different methods of payment based on the job to be done by each of these functional types of salesmen.

Market for the product or service: Unfavorable markets that are low in purchasing power, poorly developed, or highly competitive create compensation problems. Salesmen working in these areas do not have the opportunity for earning comparable to those salesmen in good markets. Therefore, salesmen working in substandard markets should be given special consideration in fixing compensation plans. Method of Distribution: While selling direct to consumers, salesmen must create demand, demonstrate, sell in small amounts, deliver products and make collections, etc. This type of consumer selling calls for a liberal compensation plan, when compared to salesmen who sell in large quantities to wholesalers, large chain stores etc. Advertising and sales promotion: when extensive advertising and sales promotion make the salesmens job easy and reduces sales resistance, a lower order sales ability is needed and such salesmen can be paid lower levels of compensation. Conversely, when salesmen sell unadvertised products, they must be paid for the greater skill and effort needed. Financial resources of the employer: The financial resources of an employer are an obvious consideration in the selection of a payment method. Ability of the salesmen: Men of outstanding ability work best with a strong financial incentive and a minimum amount of control by management. Compensation of competitive salesmen: In order to attract capable salesmen and retain them, a compensation plan must provide equal or greater income than competitors for the same type and quality of work. Economic conditions: Prevailing economic conditions should be taken into account while designing a payment method.

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Sales compensation methods: There are tow basic methods for compensating salesmen (1) a salary for time spent on the job and (2) commission for specific accomplishment. Salary method: This is the most common method used to pay salesmen. Advantages: It allows management to exercise full control over the time of salesmen. It encourages salesmen to do missionary work. It makes salesmen loyal to their company. Salary is easy to compute and little accounting is required Salesmen can be transferred more easily without adjustment in compensation Salesmen are more contended when they have an assured regular income. Disadvantages: Salaried salesmen become dissatisfied unless salaries are increased form time to time. Salaried salesmen usually become order takers, who secure just enough business to retain their jobs. Salesmen are not paid on the basis of their ability. A salary offers no incentive to salesmen to increase their sales. Commission Method: The straight commission method is most commonly used for paying salesmen who sell specialties and intangibles directly to customers. The commission is paid as a percentage of the volume of net sales. Advantages: Salesmen work harder as they are paid only on results. Commission plan attracts able and hard working salesmen. There is minimum risk to the employer as he does not guarantee any thing and he has to pay only on the sales closed. Disadvantages: Firm has no control over the activities of the salesmen.

61 There is a danger of loss of good will to the firm as salesmen tend to adopt

aggressive selling techniques, due to greed for money. Salesmen tend to concentrate on those items that are easy to sell and often least profitable. The relationship between the salesmen and the firm are more distant. Modifications of the straight commission method: Sliding commission: In sliding commission a salesmen is paid a certain percentage of net sales up to a certain amount, after which figure the rate of commission increases as higher volumes are reached. In this method a salesmen is given an incentive to increase his sales volume. Group commission: Under this method, the various products sold by the salesmen are arranged into groups and a different rate of commission is paid on each group. The commission rates are altered according to the profit value or desirability of selling the various groups of items. The advantage of this plan is it induces salesmen to concentrate on most profitable items by fixing higher rates of commission on these lines. Individual item Commission: Different rates of commission may be established for each of the individual items sold by salesmen. Salary plus Commission: This is a method used to overcome the disadvantages of pure salary and pure commission methods of compensation. Under this method a salesman is usually paid a small salary and a straight or other type of commission on net sales. This method has the advantage of control over the salesman with the stimulation to increase sales by commission.

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The disadvantages are salesmen are inclined to sell the items that are easy to sell. A salesman who is content with a small salary will not try to increase his efforts to earn the extra commission. Salary, Expenses and Commission Method: This is the same as salary and commission method and in addition the expenses of the salesmen are advanced by the management . Bonus Method: A bonus is paid as a reward for effort resulting in sales volume, profit or reduced expenses, beyond a certain predetermined amount or quota. Types of Bonuses: Bonuses are useful in stimulating salesmen to attain definite objectives in their work. Volume of Sales: This method has the advantage of securing volume for a plant with high overhead or excess production capacity. The disadvantage with this method is it may cause salesman to ignore the high priced, high profit items and push the low priced, low profit, easily sold items. Individual Product Sales: The purpose of this method is to push slow moving or highly profitable products and introducing new items. Bonus is paid to a salesman who has exceeded a certain predetermined volume of sales established for the product to be pushed. Lower selling costs: A bonus is paid for reducing travel expenses below a certain predetermined percentage of expenses to sales volume. This method has the disadvantage of automatically reducing sales activities and frequently sales volume. Company profits: A firm gives an opportunity to its salesmen for a share in its profits; proportion to their ability as measured by their length of service, volume of sales, reduced selling costs, etc. Collection of overdue Accounts: To encourage salesmen to make collections promptly, a bonus of a fixed percentage of past due accounts may be paid half-yearly or annually.

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Cash with orders: A fixed percentage of products on cash purchase basis.

bonuses are given to salesmen who sell

Securing new Accounts: A percentage of bonus is given to salesmen who secure new accounts for the firm. Some firms pay a bonus to salesmen for renewal of contracts. Personal ratings: A bonus is paid to the salesman on the basis of their personal rating. Some of the items included for rating are (1) knowledge of company products, prices and advertising (2) ability to plan (3) thoroughness and accuracy (4) relations with trade (5) initiative and creativeness (6) attitude towards job (7) reports of competition, etc. Other Methods include: (1) Group vs Individual bonus (2) salary and bonus (3) salary, commission and bonus (4) Point method.
.

X.MARKETING CHANNEL CONCEPTS AND CHANNEL PARTICIPANTS

Even before the product is ready for its market, management must determine what methods and routes will be used to get the product into the market.

This task involves the establishment of a strategy covering Channels of Distribution and the Physical Distribution of the product.

Middlemen and Channels of Distribution WHO IS A MIDDLEMAN?

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A Middleman is an independent business concern that operates as a link between producers and ultimate consumers or industrial users. A Middleman renders services in connection with the purchase or sale of products moving from producers to consumers.

A Middleman either takes title to the merchandise as it flows from producer to consumer (Merchant Middlemen) or actively helps in the transfer of ownership (Agent Middlemen).

The importance of Middlemen operations is their active and prominent role in the negotiations involving the buying and selling of the goods. The involvement of Middlemen in the transfer of ownership is what differentiates middlemen from other business institutions such as transportation firms, insurance companies, warehouses and banks.

These other institutions known as (Facilitors) help in the marketing process, but they do not take title of the goods and are not actively involved in the purchase and sale negotiations. WHAT IS A CHANNEL OF DISTRIBUTION?

Definition: A Channel of Distribution or a Trade Channel for a product is the route taken by the title to the product as it moves from the producer to the ultimate consumer or industrial user. A channel always includes both the producer and the final customer for the product, as well as all the middlemen involved in the title transfer.Stanton The external contractual organization which management operates to achieve its distribution objectives.---Bert Rosen bloom There are four key terms in this definition, which should be specially noted. They are (1) External (2) Contractual Organization (3) Operates (4) Distribution
(1) External: Means the Marketing channel, regardless of its type or

structure, exists outside the firm. Management of the marketing channel therefore involves the use of inter -organizational management rather than intra -organizational management.

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In simple terms the distribution channel is not a part of the firms internal organization structure.
(2) Contractual Organization: Refers to those firms or parties who are

involved in negotiatory function as a product moves from the producer to the ultimate user. Negotiatory functions consist of buying, selling, and transferring title to the products. Facilitating agencies do not come under this contractual organization.
(3) Operates: Is meant to suggest involvement by management in the affairs

of the channel.
(4) Distribution objectives: Means that management has certain distribution

goals in mind. The marketing channel enlists as a means for achieving these goals. The involvement of other business institutions such as transportation firms, insurance companies and banks are very important in the movement of the product from the producer to the ultimate user, but they are called facilitators and are not included as middlemen in the distribution channel.

HOW IMPORTANT ARE MIDDLEMEN Middlemen are very important in virtually all cases where consumers are involved. Usually it is simply not practical for a producer to deal directly with ultimate consumers. There is an old saying in marketing that you can eliminate the middlemen, but you cannot eliminate their services.

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Middlemen serve as purchasing agents for their customers and as sales specialists for heir suppliers.

Middlemen frequently provide various financial services for both their suppliers and their customers. MAIN FUNCTIONS PERFORMED BY MIDDLEMEN The three main functions performed by the middlemen are,(1) Concentration (2) Equalization (3) Dispersion. The job to be done involves (1) Collecting or concentrating the outputs of various producers. (2) Equalization- subdividing these outputs into the amounts desired by customers and then putting the various items together in the assortment wanted and, (3) Dispersing this assortment to consumers.

Creation of Utility Middlemen help in the creation of time, place, and possession utilities. CHANNEL PARTICIPANTS: The channel manager should have thorough knowledge about the capabilities of the institutions performing distribution tasks. Such knowledge would enable the channel manager to make better decisions about who should participate in the channel. The three basic constituents of the marketing channel are, (1) Producers (2) Intermediaries (3) Final users. Classification of Channel Participants All channel Participants Do they perform negotiating function? Member Participants Non-Member Participants

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Yes Contractual Organization (Marketing Channel) Transport Insurance

No Facilitating Organization Banks Warehousing

Producers Wholesalers

Intermediaries Final Users Retailers Consumers Industries

WHOLESALING Definition: Wholesaling or wholesale trade includes the sale and all activities directly incident to the sale of the products or services to those who are buying for resale or for business use. In simple terms wholesaling includes sales by any firm to any customer except an ultimate consumer who is buying for personal and non-business use. The only difference between wholesaling and retailing is the purpose for which the buyer is buying the product. TYPES OF WHOLESALING: There are essentially four types of wholesalers. Merchant Wholesalers: They are primarily engaged in buying, taking title to, usually storing and physically handling goods in large quantities and reselling the goods, usually in smaller quantities, to retailers or industrial users or business users.
(1)

Agents Brokers: Functional middlemen who do not take title to the goods in which they deal, but negotiate sales or purchases for clients. They are compensated in the form of commission on sales and purchases.
(2)

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Manufacturers Sales Branches: Establishments that are maintained by manufacturing plants and which are operated by them primarily for marketing of their own products at wholesale.
(3)

Some of these have warehousing facilities where stocks of goods are maintained, where as others are merely sales offices. (4) Assemblers: Establishments engaged in purchasing farm products or seafood in growers markets or producing regions. They usually purchase in relatively small quantities, concentrate large supplies and thus assemble economic shipments for movement into major wholesale market centers. Such establishments may be owned and operated by merchant wholesaling firms and hence are really part of the wholesale merchant classification. Economic justification of wholesaling: Many manufacturing firms are small and specialized and they do not have the needed capital to maintain a large sales force to contact many small retailers who are their customers. Even the manufacturers who have sufficient capital, their output is too small to justify the necessary sales force. On the other hand, most retailers buy in small quantities and they have very little knowledge of the market and sources of supply. Thus, there is a wide gap between the retailer (buyer) and the producer (seller). The wholesaler can effectively fill this gap by pooling the orders of many retailers and furnish a market for the small manufacturers. From a macro-marketing point of view, wholesaling brings the economies of skill, sale and transactions to the distribution system.

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Wholesalers essentially can perform the wholesaling functions at an operating expense percentage much lower than what a manufacturer can do by him self . Eg: if four manufactures want to sell to six retailers without a wholesaler there are 24 transactions. Where as with a wholesaler the number of transactions is reduced to 10. 4 occur when the producer sells to the wholesaler and another 6 when the wholesaler sells to the retailers. Services provided by the wholesalers to the producers: Wholesalers have survived and even grown in numbers and volume because as specialists in the performance of distribution tasks, they can operate at higher levels of effectiveness and efficiency. (1) (2) (3) (4) (5) Planning local distribution. Providing low geographical area. costs sales contact over a wide

Providing low cost warehousing and delivery. Offering credit and capital to finance inventories and extending credit. Accepting relatively large shipments, thus achieving sustainable transportation and order processing savings.

Tasks performed to their customers: (1) (2) (3) Anticipating customers requirements maintaining inventories tailored to meet their requirements. and

Assembling locally the varied products of many suppliers and holding them available for delivery on short notice. Buying in large quantities and bulk breaking to suit customers and also passing on some of the savings affected from buying in larger lots.

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(4) (5) (6)

Providing

rapid delivery.

Extending credit. Providing guarantees, making adjustments and handling returns and allowances.

NATURE OF RETAIL MARKET Retailing: Includes all activities directly related to the sale of goods or services to the ultimate consumer for personal, non-business use. Any manufacturer, wholesaler or retailer that sells something to ultimate consumer for their non-business use is making a retail sale. A retail store is a business enterprise that sells more than half the stores sales volume to household consumers for nonbusiness use. Economic justification for retailing: To get into retailing is easy and it is all the more easy to be thrown out of the retailing. The consumer determines the very survival of the retailer. To survive in retailing, a firm must do a satisfactory job in its primary role, catering to the consumer and in its secondary role serving the producers and wholesalers. This dual responsibility is both the justification for retailing and the key to success in retailing.

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Services provided by the retailer to the consumer and wholesaler and the producer.
Selling for Producers
Sales specialists Advertisers Interprets wants Acts as a buffer

Buyers for Consumers

Anticipate wants Bulk Breaking Storage and Transportation Installation and Repair Financing Guarantees of product Classification the Retailers

Retailing Middlemen

By Sales Volume large scale

Retailers. -Small scale Retailers.

By Product Line Carried -General

Merchandise Stores. -Departmental Stores. -Variety Stores. -Limited Line Stores. Eg: Shoes, Bakery, and Furniture.

By form of By Method of Operation -Full Service Ownership -Corporate

chain. -Independent Stores.

Retailing. -Super Market Retailing. -Discount Retailing. -Non-Store Retailing. -Door-to Door. -Mail Order.