INTRODUCTION TO SALES MANAGEMENT, BCOM, BBA, MBA

INTRODUCTION TO SALES MANAGEMENT

Sales management can be seen as a segment of the organization’s marketing mix. It deals with the formation of sales strategies; product merchandising and pricing; sales promotion activities; distribution function; and planning, staffing, supervising, motivating and controlling of sales personnel to attain the desired sales objectives.

Nature of Sales Management

To understand the concept of sales management clearly, we must go through its following characteristics:

• Goal-Oriented: Similar to other management activities, sales management also has a specific purpose and intended for the achievement of specified goals or objectives.

• Continuous Process: The sales manager needs to perform sales management functions regularly, and this process is never-ending.

• Systematic Approach: It is an organized way of handling the sales function of the company where every problem has a defined and proven solution.

• Relationship Selling: The salespeople make efforts to build a strong customer relationship to sell the products or services effectively.

• Marketing Management Integration: Marketing is a broader concept; marketing management includes all the activities related to sales management.

• Different Sales or Job Position: It is the combined efforts of the whole sales team, including salesperson, sales executive, sales head, sales manager and after-sales service personnel.

• Pervasive Function: It is a universally applicable concept which has been adopted and tested by every kind of business organizations.

Sales Management Scope

Sales management is a field which has emerged from marketing management; however, the latter is a broader concept.

Let us now learn about the extent to which sales management is applicable in business organizations:

Sales Planning or Forecasting: The sales-related activities need to be planned well in advance through anticipation of future sales perspectives.

Sales Budgeting: The sales manager needs to determine or estimate the sales budget, i.e., the expenses which will be incurred in carrying out the sales activities.

Determining Structure and Size of Sales Organization: The department of a company which is solely responsible for all the sales-related functions is termed as a sales organization.

Sales management provides for determining the size, composition and structure of a sales organization.

Human Resource Planning: The sales management ensures a proper estimation of sales personnel requirements in the organization.

Hiring Sales Personnel: It initiates the recruitment and selection of efficient and suitable candidates for various vacant sales positions.

Training and Development of Salespeople: It also includes providing training and orientation to the selected candidates to develop their skills and knowledge to match those required for the job position.

Developing Salesperson’s Objectives: The sales manager set up achievable objectives or goals for the salespeople appointed under him/her.

Fixing Sales Quotas: Also, the sales quota (monthly, quarterly or yearly) is fixed, either in terms of volume or value of sales to set targets for the sales team.

Determining Sales Territories: Every sales team or salesperson is given a particular region or area as a target market, where they need to penetrate for selling products or services.

Motivating Sales Personnel: It also emphasizes on reviewing the work of salespeople and driving them frequently to perform better.

Compensation and Remuneration of Salespeople: It ascertains appropriate salary, remuneration, allowance, commission and other benefits to the salespeople.

Controlling Salesforce: Exercising sufficient control by monitoring the performance of the sales personnel is also a crucial function of sales management.

Branding, Labeling and Packaging: The sales personnel gathers customer feedback on the acceptability of the product packaging, presentation, branding and labeling.

Managing Distribution Channel: It also ensures keeping track of the marketing channels and filling the loopholes if any.

Sales Promotion: The product advertisements and other promotional tactics are also determined through sales management functions.

Organizing and Support Service: It includes handling of queries and solving problems of the sales personnel through proper guidance and support service.

After-Sale Services: The customer recognizes a company mostly through the effectiveness and efficiency of the after-sale services it provides, which is the concern of sales management.

PERSONAL SELLING

Personal selling is an integral part of the promotion mix. It involves face to face interaction with prospective buyers for presenting goods and services and convincing them to make a purchase. Personal selling efforts comprise connecting, engaging and persuading buyers to satisfy their needs/problems in the most effective way. It is direct and personal communication to influence prospective buyers to make a purchase decision. 

According to the American Marketing Association (AMA) “It is a personal process of assisting and persuading a prospective customer to buy a commodity or service and to act favorably upon an idea that has a commercial significance”. 

Philip Kotler defines “Personal selling is a face-to-face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions and procuring orders.”

OBJECTIVES OF PERSONAL SELLING 

The objectives for which the personal selling exercise is undertaken can be outlined as follows 

1. Identifying prospective buyers: The primary objective of personal selling is to identify and search the prospective buyers for the products. The direct communication between the buyer and seller helps to recognize the most suitable prospects for carrying out the personal selling activities. Personal selling enables you to connect and engage with those persons who are interested in the offerings of the company.

 2. Stimulating demand: Once the prospects have been identified, the next step is to push the products by convincing efforts of the salesperson. The interaction with the potential buyer helps in determining the specific needs and requirements. The salesperson has to present and demonstrate in such a manner that arouses the interest and desire for acquisition of product. 

3. Informing, educating and guiding: The task of personal selling involves providing information and assistance, promoting, educating and guiding the customers throughout their journey of seeking the solution to their problem. The information about the new products and services, educating the potential buyers with respect to handling and disposal of products, and guiding them in finding the best solution to their requirements are embedded as a goal of personal selling exercise. It also includes supplementary services like installation, repairs and maintenance that can be made available to buyers. 

4. Persuading and reinforcing prospects: The persuasion and positive reinforcement is the key objective of personal selling. The reinforcement with respect to finding or suggesting products/services to the best interest of potential buyers helps to create a satisfying experience. The features, advantages, benefits and competitive edge of products must be communicated to the prospects and customers. The need- benefit linkage must be established through personal selling. 

5. Building long term relationships: The personal selling efforts are undertaken to cultivate relationships with buyers. Even if the salespersons may not be able to close the sale successfully.it cannot be considered as failure of person selling rather it should be seen as an opportunity to understand the needs better and provide solutions accordingly. The strength and conviction of personal selling helps in building the trust and confidence in the minds of customers. 

Personal Selling Strategies

Personal selling strategies should be derived from the marketing strategy and should be consistent with other elements of the marketing mix. The following variables should be considered while formulating a sales strategy.

Personal Selling Strategies

Below are few Personal Selling Strategies

1. Call Rates

If the intensity of competitive rivalry is high in the industry, salespersons involved in personal selling should be calling on their customers more frequently.

If the rate of technological changes in the industry is high, the customer is more likely to change equipment frequently and may require the services of the sales team more often to evaluate options. Also when the buyer is expanding his facilities or is venturing into a new business, salespersons should be calling on the buyer more often.

2. Percentage of Calls on Existing and Potential Accounts

A salesperson has to divide his time between existing and potential customers in a way that maximizes the sales or profits of the company. Some salespeople fix some formula for themselves so that they do not spend excess time with either type of the customers i.e. he will spend 40 % of his time with existing customers and the rest with prospective customers. But this may not be a good strategy all the time.

The division of time between the existing and potential accounts should depend upon the type of industry and the state of business in the industry. If the industry has big buyers and the salesperson’s company has a sufficient number of those big accounts, the focus should be on retaining those accounts. But if the salesperson’s company has only a few of these accounts, the salesperson should divide his time between serving existing accounts and acquiring new ones.

The idea behind personal selling is that the salesperson should be aware of the need to divide his time judiciously between existing and potential customers depending upon the type of industry and the state of business in the industry. But he should be flexible because a formula will become irrelevant when the state of business changes.

3. Discount Policy

Salespeople are prone to announcing discounts at every hurdle in the personal selling process. It is important to provide flexibility in prices that salespersons can offer to customers because many deals can be clinched by offering small discounts. Many a time discounts have to be given to demonstrate to customers that they are important. But there should be guidelines prescribing the number of discounts that can be offered to customers under exceptional circumstances.

When discounts become pervasive, customers start expecting discounts as a routine part of their buying process and the list price loses its sanctity. The company should reduce its list price under such circumstances to restore its sanctity. The company will be in a better position to know the realized price. Salespeople should be able to sell on the merits of the product and on the strength of the relationship that they have with the customers. Discounts should be provided in exceptional circumstances only.

4. Percentage of Resources Targeted at New and Existing Products

New products will require a push from salespeople and it should be ingrained in salespeople that at the time of launch of a new product they have to travel those extra miles and give those extra hours to make the launch successful. If the launch is very important for the future of the company, salespeople can afford to spend less time selling the old products for some time.

But eventually, the customers’ response towards the product will decide the amount of attention that the new product will get. If the new product is liked by customers, salespersons will pay more attention to it but if customer response is lukewarm their attention will shift back to their old products.

5. Percentage of Resources Targeted at Different Types of Customers

Some companies are competent to serve big accounts, i.e. they can afford to charge lower prices and give a lot of services to their customers. These companies dedicate multifunctional sales teams to such accounts. Retaining the existing customers is the major responsibility of the sales force. Some other companies prefer to serve small accounts which pay full price and do not expect much service from their suppliers. These companies expect their salespeople to spend more time looking for prospective customers than in serving existing customers.

6. Improving Customer and Market Feedback from SalesForce

Some companies compete by launching innovative products. Salespeople of such companies have to be adept at sensing customer response to the new launches of the company. Detailed and early feedback is important for improving the product. They also have to be alert to latent and emerging needs of customers that they can feed to their development team.

But even in companies that are only moderately focused on bringing new solutions to customers’ needs, collecting feedback and information from customers is important, if the new product has to be suitable for the customers. In mature industries, where customers’ needs and enabling technologies are not changing perceptibly, the sales force can almost exclusively concentrate on selling what its company makes.

7. Improving Customer Relationships

Developing and maintaining relationships with customers is expensive and a company need not incur this expenditure on every customer it does business with. There are customers who will always buy from the supplier who offers the lowest price. Some of them buy too little. And more importantly, there are industries in which relationships with customers are not important at all.

Sales territory

A sales territory is defined as a group of present and potential customers assigned to an individual salesperson, a group of salesperson, a branch, a dealer, a distributor, or a marketing organization at a given period of time. For a firm, a profitable sales territory is one which has a number of potential customers that are willing to buy the category of products sold under the firm’s brand name.

Territories are defined on the basis of geographical boundaries in many organizations. Though the geographic market may have a heterogeneous mix of both existing and potential customers, a decision on the basis of geographic coverage has distinctive advantages.

A well-planned territorial design, for example, helps in matching the selling efforts with the sales opportunities in that market. Sales managers assign their sales force the responsibility of serving particular groups of both present and potential customers and serve as a contact point within these markets. This helps to give a direction to the process of sales planning and control.

The following factors may be kept in mind while allocating the sales territories:

1. Even distribution coverage (uniform distribution) – While allocating the sales territories for each salesman, the Sales Manager should keep in mind that the size of territories to be allotted should be in optimum size, as far as possible. An optimum size will help the salesman to provide his services with pleasure and willingness.

2. Elimination of duplication of activities – While allocating sales territories, care should be given to avoid duplication of activities. A salesman may be given a specified territory for operation at a given time.

3. Equal opportunity – While allocating sales territories, care should be given to have equal distribution of responsibilities and opportunities for all the salesmen.

4. Flexibility in allocation – The allocation of territory may be made flexible so that whenever the sales manager feels it necessary to change the territory between salesmen, he may do so very easily. But, as far as possible, such changes should be avoided.

5. Controllable – The allocation of sales territories may be made in such a way so as to exercise control over the sales functions, at minimum costs.

6. Capable of comparative study – The allocation of sales territories may be made in such a way so that a comparative study of sales opportunities and achievement, and job performance of each salesman can be evaluated well.

7. Uniformity in income – The allotment of territories may be made in such a way that all the salesmen should get an average of equal income. Inequality in income may develop dissatisfaction among the salesmen.

8. Economical – The allocation of sales territories should be made in such a way that the traveling expenses of salesmen, sales managers and other sales personnel may come at the minimum. Maximum services at minimum costs should be the policy to be followed.

9. Efficient performance – Allocation of sales territories should be made in such a way that every salesman may get the motivation to discharge his functions in the most efficient manner.

10. Allocation to new salesmen – New salesmen may not be given the entire responsibility of a sales territory. He should be associated with an experienced salesman so as to learn the sales techniques gradually.

The allocation of sales territories has certain advantages, directly and indirectly to the company, its salesmen and customers.

The company may have the advantages of effective distribution of responsibility to each salesman. The company will be able to evaluate the functions and responsibilities of the salesman so as to determine their remuneration structure, motivation system, etc. It is an effective step to face the competitors’ activities in the territory that can be studied.

The salesmen have many advantages. They have enough freedom in dealing with their respective territories. Their efforts are very much countable and hard work put by a salesman is suitably rewarded.

The customers also have various kinds of advantages such as; efficient and immediate after-sales services, quick disposal of complaints, individual satisfaction by visiting the salesmen regularly and their suggestions in respect of the purchasing decisions by the customers, etc.

Factors which Determine the Size of a Sales Territory:

(i) Prospect density or the number of prospects in the specified area.

(ii) The extent of ground to be serviced.

(iii) Possible volume of sales,

(iv) Frequency of visits necessary.

(v) Intensity of selling effort required during each call.

(vi) Ease with which one can travel within the territory and the mode of transport available.

(vii) The inventory turnover at the retail level.

(viii) Whether it is easy to sell the product or difficult. As a rule, the smaller the territory, the better it is for traveling, and the greater the depth of selling effort. Salespeople, however, would like to have as large a territory as possible. But smaller territories are serviced intensively.

Objectives Of Sales Territories 

1. To facilitate effective sales planning.

2. To cover and manage the entire market.

3. To assign salesmen’s responsibility for a particular territory.

4. For a better evaluation of performance of the salesmen.

5. To reduce the selling costs.

6. To facilitate coordination in marketing functions.

7. To make the marketing research functions.

8. Development of fair competition among all sales persons.

9. To improve the customer relations.

10. To appoint salesmen matching with the territory and customers.

11. Independent work area for each salesman.

12. To compete effectively with competing institutions.

Sales Quota

A sales quota is a sales goal, sales target, or minimum sales level that a sales entity – team or individual – aims to achieve. Sales quotas are typically time-sensitive – set to be reached monthly, quarterly, or yearly – and can be measured in dollar amounts or units sold, or even as specific as number of new customers, or through activities like product demonstrations.

Types of Sales Quotas

Importantly, there isn’t a one-size-fits-all quota solution. Instead, to maximize sales performance management planning and fit organizational strategy, quotas can take many shapes and sizes.

Direct Quota

Direct quotas are reserved for sales reps who play a “front line” role and have the power to impact a quota in their hands, and the responsibility to achieve a quota on their shoulders.

Something like new business quotas could be a direct quota (which would be set by looking at a historic average selling price and conversion rates over a period of time). Another could be existing customer quotas (which is a bottom up summary of expected revenue based on past or committed performance, such as a renewal, plus any incremental sales sold during the quota period).

Overlay Quota

As the name suggests, overlay quotas sit on top of direct quotas, but are better explained through the fact that they’re a sum of all of the direct quotas under them. For example, a sales manager has an overlay quota, which is the sum of all of the rep direct quotas under them. Likewise, a sales VP holds an overlay quota above that sales manager, and so on.

Importance of Sales Quotas

In a general sense, we all know the importance of goal-setting, and that giving someone something to shoot for usually produces better results than just having that same person roam free in their endeavors.

Sales, of course, is no different, and the sales quota is that big visible number out there for all to see. Depending on a salesperson’s pay mix, and the amount of on target earnings they have “at risk,” quota draws the line in the sand and sets the attainment expectation of where a salesperson would want to find their performance at the end of the period.

When you miss the mark with quota setting, expect channel conflict, ownership confusion, and salesperson disengagement. Further, it’s not just that the sales person isn’t motivated to sell—rather, a discouraged mindset will lead to less sales in the face of a plan perceived to be unfair and unattainable. The ultimate result is missed targets not only for the salesperson personally, but if the goals are tied to strategy as they should be, missed targets for the organization as well.