The Sales Management

Function
A Satish Kumar

The Sales Management Function 1

BACKGROUND & KEY
DEFINITIONS

The Sales Management Function 2

Sales Management

Sales Management originally

referred to the direction of Sales
Force personnel

Then took a broader significance –

included all marketing activities of
advertising, sales promotion,
marketing research, distribution,
pricing & merchandising

Finally it was agreed that – Sales

Management would refer to – the
planning, direction & control of
personnel selling; including
recruiting, selecting, equipping,
assigning, routing, supervising,
paying & motivating of personal
salesforce

The Sales Management Function 3

Sales Management

Sales Managers are ‘in-

charge’ of personal selling
activities
However personnel-related
tasks do not form part of
their responsibility
Personnel related
responsibilities are classified
as ‘Sales Force Management’

The Sales Management Function 4

 Key Objectives of Sales
Management

Continuin
g Growth
Contributi
on to
Profits
Sales
Volume

1. However The Sales Manager is NOT the ONLY one responsible

for the above
2. Top Management Team carries overall responsibility to supply
Products/Goods that satisfy final buyer needs
3. Marketing team gets involved in developing the required
Products The Sales Management Function 5
 Key Objectives of Sales
Management

Continuin
g Growth
Contributi
on to
Profits
Sales
Volume

5. Sales Management then charts a future course of operational

activities
6. Provides top management with informed estimates/facts for
making marketing decisions, setting sales & profit goals
7. Sales targets are set based on the above data points  these
evolve into targets for sales volume,The
gross margin, net
Sales Management profit
Function 6
 Sales Management & its Bearing
on Financial Results
Cost Gross
Sales of Margi
Sales n

Gross
Expens Net
Margi es Profit
n

1. Sales management & financial results of a firm are closely

related
2. Sometimes sales managers stress sales volume whilst
neglecting gross margin & expenses. Here although sales
volume goes up, gross margin declines, expenses increase &
net profits are reduced The Sales Management Function 7
DESIGNING THE
SALES FORCE

The Sales Management Function 8

Setting up a Sales
Organization
• Top management driven
Defining the • Long/Medium/Short Term
Objectives • Achieve market leadership, achieve profits, capture
market share, etc

• Determining the necessary activities & their volume of

Delineating the performance
Necessary Activities • Activities would vary from firm-to-firm & industry-to-
industry

Grouping Activities • Grouping in order to have closely related tasks aligned

together
into ‘Jobs’ or • Above enables determining the positions required in the
‘Positions’ Sales Organization

• Recruiting specialist individuals OR fill/modify the

Assigning Personnel positions to leverage people available within the firm
to Positions • Cross-training or re-skilling processes

Providing for • Key here is NOT to overburden Sales Executives by having

Coordination & sales members reporting to them
• Have appropriate structures & line of control defined
Control

The Sales Management Function 9

Types of Sales
Organizations

Line &
Line Functiona
Staff
Sales l Sales
Sales
Organizat Organizat
Organizat
ion ion
ion

The Sales Management Function 10

 Sample: Line
Sales
Department
Organization

The Sales Management Function 11

 Sample: Line &
Staff Sales
Organization

The Sales Management Function 12

 Sample:
Functional Sales
Organization

The Sales Management Function 13

Few Key Concepts in Sales Force
Management
Centralization v/s
Decentralization
Schemes for Division of Line of
Authority
◦ Geographic Division
◦ Product Division
◦ Customer (or Marketing Channel)
Division
◦ Line of Authority on ‘more than one
basis’
The Sales Management Function 14
Sales Force Management:
Defining Job Objectives &
Responsibilities

Steps in Sales Force

Management are
SAME as in General
Personnel
management
Selection, Recruitment, Training &
Supervision,
Job Job Analysis
Performance
Specifications, Evaluation, Job
Job Evaluation,
CompensationDescription
& Motivational Programs
Job Analysis –
determining
objectives,
duties/responsibilities
, performance criteria

The Sales Management Function 15

Sales Force Management:
Employee Turnover

Number of
Rate of Sales separations x
Personnel 100 / average
Turnover total sales
force size

The Sales Management Function 16

Selection & Recruitment of Sales
Personnel
Evaluation of Recruiting Sources
Sources within the Company
◦ Company sales personnel
◦ Company executives
◦ Internal transfers
Sources outside the Company
◦ Direct unsolicited applications
◦ Employment agencies
◦ Salespeople making calls to the company
◦ Employees of customers
◦ Sales forces of competing & non-competing
companies
◦ Educational institutions

The Sales Management Function 17

ESTIMATING MARKET
POTENTIAL

The Sales Management Function 18

Demand & Forecasting
Paradigm!!!

It will be
It will be
It cannot be different
different
known with from what
from what it
certainty! we expect it
is now!
to be!

Market Estimation - Potential &

Forecasting 19
Demand Measurement & Sales
Forecasting

Market Potential (industry potential)

Company Potential (sales
potential)
Market Demand (industry
demand)
Company Demand
(sales Market
possibilities)
Forecast
Compan
(industry
y
forecast)
Forecast
(sales
forecast
)

Market Estimation - Potential &

Forecasting 20
 Market v/s Sales Potential
Sales Potential –
Market Potential maximum
– maximum possible sales
possible sales of ONE
of ALL sellers in individual firm
a given product in a given
category, in a product
given market, in category, in a
a given time given market, in
period a given time
period

Example:
• Assume Noodles (of all brands) sold INR 9 million in India, in a year
• What would be the market potential for next year?
• Based on available data, noodles industry is expected to grow by 20%
next year
• Thus noodles market has a potential of INR 9 million x 1.20 = INR
10.8 million next year
• From this, Maggie may have a market share of 35% - thus Maggie
sales potential next year will be INR 10.8The
x 0.35 = INR 3.78 million
Sales Management Function 21
Measurements
1. Measuring Market Demand
a) Current market demand
i. Total Demand
ii. Demand within an area
b) Future market demand
2. Forecasting Company Sales
a) Short range forecast
b) Long range forecast
c) Perspective planning forecast
Market Estimation - Potential &
Forecasting 22
Potential for Planning Strategy
Case: Reliance Jio Launch in India
A market potential (total demand) estimate
provides a basis for planning
3 categories of stakeholder groups need
demand forecasts:
1. Engineering design & implementation
2. Marketing & commercial
3. External entities (investors, suppliers, Govt agencies
Key questions:
1. Where should the sales outlets be located?
2. How many are required to cover the target market?
3. What sales volumes may be expected from each
outlet?
4. What are sales, revenues & profit targets?

The Sales Management Function 23

 Relationship between Potential &
Forecast
Forecasts:
Evaluate Determin Customer
Economi Assess e By Product
Allocate
c Industry Market / Customer Selling
Territory
By Product Efforts Advertisin
Condition Situation Sales By g
s Potential Territory Distributi
on

Buyers, Expected
Final Competitio Develop ,
Consume n,
Inventorie
Standard Potential
r
s,
s, Demand
s & Actual
Demand Demand
Trends Sales

• The Sales Forecast represents the firm’s best estimate of the

expected sales revenue from a given marketing strategy
• Market Potential estimates are used to determine where the firm’s
attention is to be focused, the total & relative expenditure to apply to
each opportunity, etc
• Estimates of actual sales over next year guide management in
planning production, purchasing, inventory levels, working capital
The Sales Management Function 24
management, etc.
Sales Forecasting Methods
1. Jury Method / Executive Opinion Method
a) Group of participants give opinion & exercise their judgment
b) Final judgment is arrived by averaging all collective opinions
i. Gives due weightage to experience & wisdom
ii. BUT is based on opinions & NOT facts
2. Survey of Expert’s Opinions
a) Experts in concerned field, inside/outside of company, are
approached for their estimates
b) Relevant more in industry forecast THAN company forecast
3. The Delphi Method
a) Mainly an Expert Opinion method
b) Experts are NOT co-located ; kept anonymous
c) Opinions & views are analyzed & final forecasts are
published

Market Estimation - Potential &

Forecasting 25
Sales Forecasting Methods
4. Sales Force Composite Method
a) Developed by salesmen, for their resp. territories & rolled-
up across larger regions
b) Uses a salesmen’s intimate knowledge
c) BUT salesmen are NOT necessarily experts in forecasting
5. User Expectation Method / End Use Method / Survey
of Buyer Intentions
a) End users of the product are listed & their likely demand is
ascertained
b) Merit – comes straight from the horses-mouth
c) Demerit – suited mostly for industrial users
6. Marketshare Method
a) Developed based on past trend, company’s present
competitive position, its future plans, brand preference
b) Collate the same with overall industry numbers
Market Estimation - Potential &
Forecasting 26
Sales Forecasting Methods
7. Substitution / Replacement
Method
8. Market Test / Test Marketing
Method
9. Analytical & Statistical Methods
10.Market Survey Method

Market Estimation - Potential &

Forecasting 27
DETERMINING SALES
RELATED MARKETING
POLICIES

The Sales Management Function 28

 Sales Related Marketing
Policies
These are policies that impact the functioning & operations of the sales depar

Pricing Policies
(at what value
to sell)

Distribution
Policies (to
whom to sell)

Product Policies
(what to sell)

The Sales Management Function 29

 Product Line Policies are
derived from the firm’s Product
•
Objectives
If a product objective states that ‘this company desires to make & market products requiring
extensive after-sales-support’, then the product policies appropriately state how this would
be achieved.
• Example of Eureka Forbes Aqua Guard Water Purifier – after sales service is a very Pivotal
entity in the product sales strategy
• All products in the line must be regularly
Changes in Product reappraised
Offerings • This is to figure out if the product is still in demand
OR needs to be modified/dropped

Reappraising the • Evaluating products in the line vis-à-vis competing

products; determining a products continuing
Product Line & Line profitability
Simplification • Example: Hyundai choosing to dis-continue its top-
selling Santro

Reappraising the • Evaluating product line to diversify, in order to

expand market share & increase profitability
Product Line & Line • Example: HUL adding more products to its Beauty
Diversification Soaps Line

• New product ideas sometimes originate from sales

Ideas for New personnel, based upon the market/customer
Products feedback

• Key questions to be asked: Will this product add to

Appraisal of Proposed profitability?
New Products • Other factors include nature, size of market,
competition, etc
The Sales Management Function 30
Other Product Related
Policies

Product Design
Policy Product Quality Service / Guarantee
Design changes Policy Policy
bought about by a Firm’s need to use Used as a
firm based on Quality as a lever to testimony of
market enhance sales & superior
feedback/need, to improve profitability performance &
promote better e.g. Toyota Service reiability
sales & profitability seen as a e.g. 30-min delivery
e.g. design changes benchmark in guarantee offered
on successive Indian car market by Dominos Pizza
models of iPhone

The Sales Management Function 31

Distribution Policies:
Consumer Market

Manufactu Manufactu Manufactu Manufactu Manufactu

rer rer rer rer rer

Agent Agent Merchant

Consume
Wholesal Wholesal Wholesal Retailer
r
er er er

Merchant
Consume
Retailer Wholesal Retailer
r
er

Consume Consume
Retailer
r r

Consume
r

The Sales Management Function 32

Distribution Policies:
Industrial Market

Manufactu Manufactu Manufactu Manufactu

rer rer rer rer
Industria
Agent Agent
Industria l
Middlem Middlem
l User Distribut
an an
or
Industria
Industria l Industria
l User Distribut l User
or
Industria
l User

The Sales Management Function 33

Distribution Policies

Policies on Policies on
Marketing Distribution
Channels Intensity
• Sales Volume • Mass
Potential Distribution
• Comparative • Selective
Distribution Distribution
Costs • Exclusive
• Net Profit Agency
Possibilities Distribution

The Sales Management Function 34

 Pricing Policies
Pricing
Uniform
relative Pricing Geograp
Pricing to List Discount
to relative hic
Different Pricing s
Competiti to Costs Pricing
Buyers
on

Meeting
Meeting
the
the Full
Full Cost
Cost
competiti
competiti Pricing
Pricing 2
2 Free-on-
One Free-on-
on
on One Price
Price common
common Trade
Trade board
Policy Discounts board
Policy forms
forms –– Discounts (FOB)
(FOB)
printing
printing
the
the price
price
Pricing
Pricing on
on the
the
above
above Promotion
Promotion package
package
Competiti
Competiti Pricing
Pricing OR
OR asking
asking
on
on sales
sales
personnel
personnel
to
to provide
provide
Variable
Variable to
to Quantity
Quantity Delivered
Delivered
Pricing
Pricing Price
Price consumer
consumer Discounts
Discounts Pricing
Pricing
under
under Contributi
Contributi Policy
Policy s
s
Competiti
Competiti on
on Pricing
Pricing
on
on

• Policy on Price Leadership - Being a Price Initiator or a Price Follower.

E.g. domestic airline fare wars in India
• Product Line Pricing Policy - Having the “right price” – not too low nor
too high. E.g Honda Jazz The Sales Management Function 35
OPERATIONAL &
TACTICAL ASPECTS
OF SALES
MANAGEMENT

The Sales Management Function 36

Tactical Aspects in Sales
Management
Training &
Incentives – Competencie
target-driven s – imparting
reward abilities of
modeling sales force to
deliver
Salesforce
Segmenting
Planning –
& Targeting –
abilities & tools
customer
for sales force,
targeting
to plan
based upon
territories &
demand
customers

Resource Measurement
Optimization Sales Force – abilities to
– size, monitor sales
structure & Optimizatio force metrics &
roles of sales n make tactical
team decisions

The Sales Management Function 37

Operational Aspects in Sales
Management
Strategic Financial
Firm’s Policies
Objectives Constraints

Demand Sales Firm’s

Forecasts Operatio Constraints
ns &
Planning

Operational
Sales Plan
Plan

Sales per month by Production per

Product Family month per Product
Family
Demand Mgt., incl Workforce &
new products, Inventory Levels
promotions, etc
Customer Service Backlogs & Lost
Levels Sales
The Sales Management Function 38