WERABE UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MARKETING MANAGEMENT

MODULE OF SALES MANAGEMENT

Degree program BA in Marketing

Module Name: Sales and channel management

Program ------------------------------------- Marketing Management

Course Title: ----------------------------------- Sales Management

Course Code: ---------------------------------- MKTM 2052

Compiled by: Jemal Gashaw

Date: Jan, 2023

Course Description

The course aims at providing students with an overview of the most recent concepts related to
the management of salespeople. This course will cover contemporary issues related to the
management of professional salespeople. Topics related to strategic management, motivating and
inspiring sales people will be covered. Other human resource aspects will be discussed in this
course including sales force orientation, organizing, staffing, selecting and hiring. Moreover,
topics like sales planning and evaluation of sales performance will also be covered in this course.

Course Objectives

The learning objectives for this course are:

1) To look at and review basic concepts and principles of sales management

2) To develop an understanding of the new role of professional sales people and sales managers

3) To expose the students to case studies related to the field of sales management
 CHAPTER ONE

1.1. Introduction to sales management

1.1.1. What is sales management?

Originally, the term ‗sales management‘ referred to the direction of sales force personnel. But, it
has gained a significant position in the today‘s world. Now, the sales management meant
management of all marketing activities, including advertising, sales promotion, marketing
research, physical distribution, pricing, and product merchandising.

The American marketers association (AMA‘s) definition, takes into consideration a number of
these viewpoints. Its definitions runs like: the planning, direction, and control of the personnel,
selling activities of a
business unit including recruiting, selecting, training, assigning, rating, supervising, paying,
motivating, as all these tasks apply to the personnel sales-force.
Further, it may be quoted: it is a socio-scientific process, involving‘ group-effort‘ in the pursuit
of common goals or objectives, which are predetermined. Co-ordination is its key, though, no
doubt, it is a system of authority, but the emphasis is on harmony and not conflict.

Sales-management differs from other fields of management, mainly in different aspects: the
selling operation of a business firm does not exist in isolation. Thus, simultaneous with the
changes taking place in the business, as well as marketing-orientation, a new concept of sales
Management has evolved. The business is now society-oriented, on human-welfare aspects. So,
sales-management has to work in a broader and newer environment, in co-existence with the
traditional lines. The present emphasis is now on total development of human resources.
1.2. The five Functions of sales manager

(1)Planning: a business cannot be taken as a chance. Every salespeople or person concerned

have to see for the future, in a planned way like what must be done? And who will do it?
The plan must be based on extensive market research, and the facts must be verified at every
stage. The plan should also be evaluated, after investigating the total-market, for a particular type
of product.
(2) Co-ordination: Co-ordination is all pervasive and permeates passes through every function
of the management-process. For example, ill planning, departmental-plans are integrated into a
master.
Plan, ensuring adequate co-ordination. Similarly, organizing starts by co-ordination wholly,
partially inter-departmental and inter-personnel matters. Co-ordination also helps in maximum
utilization of human-effort by the exercise of effective leadership, guidance, motivation,
supervision, communication etc. The control-system also needs coordination.
(3) Controlling: the sales manager has to check regularly, that the sales activities are moving in
the right direction or not. He guides, leads, and motivates the subordinates, so as to achieve the
goals planned for the business. He has to take steps to ensure that the activities of the people
conform to the plans and objectives of the organization. The controlling system should be such
that one can study the past, note the pitfalls and take corrective measures, so that similar
Problems may not occur in the future. The controller has to ensure that the set targets, budgets
and schedules are attained or followed in letter and spirit. There must be procedures to bring to
light the failure to attain a target. The control-system has to (i) prepare sales and market
forecasts;
(ii) Determine the level of sales-budget; (iii) determine the sales-quotas for each salesman; (iv)
determine, review and select distribution-channels; (v) organize an efficient sales force; (vi)
establish a system of sales-reporting; (vii) establish a system of statistical sales-credit;
(viii) Establish stock control system(s); (ix) review of performance of the sales force; and (x)
establish periodical testing programmers.
From the weekly and monthly sales-reports, the control system is established, that
Will prepare records whether a particular salesman is working efficiently or not.
(4) Motivating: Motivation is essentially a human resource concept. It aims to weld together
distinctive personalities into an efficient team. For this, knowledge of human psychology
is needed, as a means of understanding behavior patterns.
(5) Communicating: A salesperson‘s success is linked to his or her ability to communicate
clearly, concisely, and openly, while maintaining positive client relationships. This involves
strong presentation skills, the ability to engage in business conversations with customers at all
levels, negotiating from a win-win stance, and communicating customer needs within their own
company. Furthermore, it‘s critical for salespeople to adapt their message to the needs and
preferences of the customer.

1.3. Sales management positions (types of sales managers)

In the structure of many organizations, several levels or positions are involved in sales
management. The title ‗‘sales manager‘‘ (or field sales manager) may be applied to any sales
executive who manages sales people. There are three levels of sales managers in the
organizational hierarchy as shown in figure 1.1.
These are:
Figure 1.1: levels in sales management

a) Strategic or top-level managers

b) Tactical or middle-level managers
c) Operational or first-line managers

a) Top-level (strategic) managers The highest level in sales management is often called
vice-president, or general manager (sales), or national sales manager. They are
responsible for long-term marketing or sales planning including scanning external
environment, setting long-term and short-term objectives and goals, developing strategies
for them, marketing decisions for implementing strategies and action plans, and
controlling the performance. They are also a part of top management team for the
organization‘s strategic planning and coordination between various functional areas.
b) middle-level (tactical) sales managers These positions mostly carry the title of regional,
zonal, or divisional sales manager, whose major responsibilities are to manage several branches
or districts reporting to them and also to implement the strategies and action plans approved by
the top-management.

c) first-line (operational) sales managers This is the first level of sales management with titles
such as branch sales managers, area sales managers or district sales managers. They are directly
responsible to achieve sales goals and objectives by providing day-to-day supervision to sales
people. They implement the procedures and rules decided by higher levels of management.

1.4. How one does became a sales manager?

Although individuals with no previous selling experience can be promoted in to sales

management position, this is rarely happened. If we observe, in most cases an excellent sales
manager goes through (or promoted from) that company‘s sales representative. This is because
of that top managers usually feel that a person with sales experience has the credibility and the
back-ground to assume higher position. Therefore, it is advisable to promote sales managers
from well experienced sales personnel.
Because it allows him/her to:
a) Learn about the attitudes and procedures of the company‘s sales people

b) Learn about customer‘s attitudes toward the company‘s products and sales person

c) Learn about the company‘s competitors- who are the competitors, what sales strategies
they follow.

d) Gain knowledge of products and their applications which is most important in technical
sales.
Selling skills – since sales managers are responsible to give professional as well as authority
directives they are required to have selling skills.

Once the right person is selected for the position of a first-line sales manager, it is important that
the selected person is given a short training on sales management, because the person should
made aware of the changes that takes place due to promotion to the position of a sales manager
from the position of sales person. Some of the changes are indicated here under:
a) Changes in goals and objectives:
A sales manager achieves organizations goals and objectives, but a sales person tries to achieve
personal goals of sales volume, sales calls, customer satisfaction, and soon.
b) Change in responsibilities:
The major responsibilities of a sales manager are sales administration work, including managing
sales people reporting to him /her. However, the major responsibility of sales person is selling,
therefore, it is better to made aware of his/her changed responsibility while assigned as a sales
manager.
c) Changes in views:
A sales person sees his job as completing certain activities given by the superiors. However, the
sales manager views his/her job as completing the activities pertaining to his territory effectively
in order to achieve the goals or objectives of the territory, through his team.
d) Change in skill requirement:
a sales person need to have selling, negotiation and communication skills. In addition to these
skills, a sales manager must have managerial skills such as planning, directing, training, and
controlling a sales person.

e) Change in relationship: A sales person needs to have a good relation with customers, peers
and supervisors. When the sales person gets promoted to the position of a sales manager, he/she
has to develop new relationship with other managers, subordinates, who were his/her former
peers and his new supervisors. not only these, sales managers are also expected creating external
relations, such as a relation with channel members, regulators and other stock holders.
1.5. Sales management skills

The skills that are critical for the success of a sales manager are:
I. people skills:
 The people skills include the sales manager‘s abilities to motivate, lead, communicate,
and co-ordinate effectively with the people around him/her. Possessing this skill enable
sales managers to be acceptable and respected by others.
II. Managing skills:
 For managing the sales force, the sales manager should have administrative or managing
skills like planning, controlling, and decision making. These skills can be learnt by
attending management development programs.
III. Technical skill:
 These are specific tasks or functions such as training, selling, negotiating as well as the
ability to use computers (or IT skills) and problem-solving abilities in the specific
industry discipline.
 CHAPTER TWO

BUILDING RELATIONSHIPS THROUGH STRATEGIC PLANNING

2.1. Definition and importance of Corporate Planning

Corporate planning is a strategic tool used by companies to set long-term plans to meet certain
objectives, such as business growth and sales volumes. Corporate plans are similar to strategic
plans, but place greater emphasis on using internal resources and streamlining operations to
achieve certain end goals.
Corporate plans are essentially business plans that seek to make improvements and generate
profits by making internal operations more effective and productive. Many corporate plans have
specific action steps that must be taken to achieve certain objectives. These steps are clearly
defined in the corporate plan and can be used as markers to check on a periodic basis to
determine whether or not sufficient progress is being made.

Ideally, corporate plans help companies grow during a period of time, typically a year, by
expanding their consumer base, improving marketing campaigns and attracting new business
partners. Corporate plans are generally structured by first introducing a grand overall vision of
growth and development, then laying out a plan of action on a microscopic level to meet the end
goal.

Corporate plans can be created and used by businesses of all sizes, but are most commonly used
by large organizations. Corporate plans typically consist of a vision statement, mission
statement, identifying available resources and then listing business objectives and strategies to be
used to meet those objectives.

2.2. Difference between Corporate Planning and Strategic Planning

In the surface level, strategic planning and corporate planning are interrelated though, there is
difference between corporate planning and strategic planning in the sense that strategic planning
refers to the larger extent when compared to the corporate planning. In simple, the strategic
planning relates to the entire company, and the corporate planning relates to the specific
functions of the company. Therefore, the corporate planning is less in extent
. Furthermore, the strategic planning determines the overall direction of the company while the
corporate planning determines and function on the foundations of the business.

Also, the strategic planning says how to exist in the volatile business environments and it
emphasizes ways and means of obtaining the competitive advantages over the competitors. In the
meantime, the corporate planning helps to determine the internal functions and issues in the
company. Interconnecting these two, the strategy is a definite part of corporate planning and the
corporate plan incorporates the strategic related issues.

2.2.1. What is Corporate Planning?

Corporations are entities that are designed around a certain set of elements that determines the
shape of a business. Among them, the core of the business is important. This refers to the major
business activity. For an instance, it can be either producing a product, delivering a service, or a
conjunction between the two. Depending on the product or the service the company produces,
there is a set of buyers known as the target audience. So, all these elements are managed by the
corporate plan of the company. Also, the corporate planning involves functioning the company
as well. In this regard, determining the number of units of the company and assigning people to
those units (i.e. departments) depending on their capabilities are also addressed under corporate
planning. Therefore, almost all the internal functionality is handled by the corporate plan.

2.2.2. What is Strategic Planning?

By having a strategy plan, it is expected to determine a long-term direction of a company.

Also, the competitive edge of the company is achieved by executing the strategy. Therefore,
gaining competitive advantage is also addressed in this regard. These facts depict that strategic
plan always address the entire company. Therefore, this involves observing the environment that
is really volatile in nature and determining changes accordingly. This scanning aspect requires
research and development in the company level. As strategic planning determines the long-term
direction of the company, setting mission and vision is also addressed.
Allocating resources among different projects in order to achieve the end state of affairs happens
in the perspective of strategic planning. There are personnel called strategic managers in a
company. They are responsible for scanning the environment and imposing alterations
accordingly.

What is the difference between Corporate Planning and Strategic Planning?

Time Factor:

 Corporate Planning usually comprises of short time periods.

 Strategic planning comparatively comprises of long time periods.

Scope:

• Corporate planning deals with the internal aspects of the company.

• Strategic planning deals with the overall business (i.e. internal and external) and external
environments.

Objectives:

• Corporate planning sets parameters and objectives within the company.

• Strategic planning sets the overall direction of the company.

Response Nature:

• Corporate planning responds to the market segments which the company deals with.

• Strategic planning selects which market segments to deal with.

 Interconnection:

• Corporate plans facilitate or help to achieve strategic plans, and corporate plans are set
according to the motives of the strategic plan.

2.3. Types of Planning

The types of planning differ in terms of their organizational scope and execution period.
Organizational scope refers to the areas or levels that are involved. The execution period
represents the time needed to execute the plan. Taking these two aspects in to account, planning
can be strategic, tactical, or operational
A. Strategic Planning
This is long-term planning that involves all the organization management areas and its content is
relatively general. It focuses on broad and long-lasting issues that ensure the organization long-
term effectiveness and survival. Strategic planning is the responsibility of the organization
director and executive levels. Strategic planning is creative and interactive ongoing process to
determine what an organization wants to be in the future and how it will get there. Development
of a comprehensive long-range plan for guiding the activities and operations of an organization.
Lead by upper management, requires, participation by middle managers, lower-level managers
are responsible for supporting the planning.
A strategy is an overall approach and plan. So, strategic planning is the overall planning that
facilitates the good management of a process. Strategic planning takes you outside the day to day
activities of your organization or project. It provides you with the big picture of what you are
doing and where you are going.

Strategic Planning Process

 Define the corporate vision and mission
 Specify achievable goals and objectives
 Develop strategies
 Set policy guidelines
 Determine products, services, and markets
Strategy
Strategy is a comprehensive plan that states how its mission, goals, and objectives will be
achieved. Understanding the end point (mission, goals, and objectives) is critical to the
development of the plan.

Types of Strategy
Business strategy can be classified in to several types, such as:
 Functional strategy
 Business strategy
 Corporate strategy
Differences between these strategies can be seen as follows:

I. Functional Strategy

Strategies of the functional level developed to improve the efficiency of business operations. It is
also called operational strategy. e.g.

 Marketing strategy
 Human resource strategy
 Production strategy
 R and D Strategy
II. Business Strategy
Plans a company uses to gain competitive advantage over competitors in a market. It is unlikely
that a company can serve an entire market all the time. Therefore a company must decide which
parts of the market to aim at and how to be different from competitors. e.g.
 Cost leadership strategy
 Differentiation strategy
 Focus strategy
 Withdrawal strategy
 Market penetration strategy
 New product development strategy
 III. Corporate strategy
Strategies aimed at the long-term development of the organization. For example, a company may
consider where it will be in 10 years time and how it manages to get there. e.g.
 Internal development strategy
 Take over and merger strategy
 Strategic alliances
Strategies and Tactics
A course of action to achieve a long-term goal is strategy. A course of action to achieve a short-
term goal is a tactic.
Elements of effective planning and strategy
To be effective, the strategic planning must have the following characteristics:
1. Focus on the clear purpose of a business
2. Vision or commonly shared and supported view by people
3. Satisfying the needs of customers and clients
4. Achievable time table for the strategy, such as longer time for a corporate strategy
5. Flexible in plans, such as not too ‗tight‘ for people to follow the strategy
6. Suitable for the set goals to be achieved
B. Tactical Planning
When organizations are very large, they require a link between strategic planning and operational
planning processes. Tactical planning is more specific and limited to a single direction, program,
or specific programmatic area with a medium-term scope. It is the responsibility of the
organization‘s mid-level staff.
Tactical plans
A tactical plan is concerned with what the lower level units within each division must do, how
they must do it, and who will have the responsibilities for the accomplishment. Tactics are the
means needed to achieve a strategy, to activate it, and to make it work. Tactical plans are
concerned with shorter time frames and narrower scopes than are strategic plans; they usually
span one year or less and represent short-term efforts required to reach long-term goals.
C. Operational planning
This has a short-term scope, and is specific for the working teams of any operational unit. Its
focus is achieving objectives and carrying out short-term objectives and corresponds to the
annual work plan.
The strategic plan provides the guide lines for heads of the organization‘ different management
units, departments, or technical and programmatic areas. They use the strategic plan to formulate
their tactical plans. These, in turn, allow each operational unit head and his/her working team to
prepare their respective operational plans. It is important to note that small organizations
typically need only a strategic plan and annual operation plans.
Operational Plans
An operational or operating plan is one that a manager uses to accomplish her or his job
responsibilities. It can be a single use plan or an ongoing plan.
A single use plans apply to activities that do not recur or repeat.
 A program is a single use plan. A program deals with the who, what, where, how and how
much of an activity
 A budget is a single use plan for predicting sources and amounts of income and how they are
to be used.
Continuing or ongoing plans are usually make once and retain their value over a period of
years, while undergoing periodic revisions and updates.
a. A policy is an example of an ongoing plan. It provides a broad guide line for managers to
follow when dealing with important areas of decision making. Policies are general statements
about the ways in which managers should attempt to handle routine management
responsibilities.
b. A procedure is the set of step-by-step directions in which activities or tasks are to be carried
out. They spell out the ‗how‘ of a task.
c. A rule is an ongoing, specific plan for controlling human behavior and conduct at work.
Rules are more absolute and rigid. Rules are ‗‘do‘‘ and ‗‘do not‘‘ statements. Unlike policies,
rules tell each employee exactly what to do or what kind of behavior is expected in a given
situation or environment
2.2. Relationship Marketing and the Sales Force
Organizations today have targeted new and present customers. The emphasis is shifting from
selling customers today to creating customers for tomorrow. Thus, business is thinking more
long term than short term.
Relationship marketing is the creation of customer loyalty. Organizations use combinations of
products, prices, distributions, promotions, and services to achieve this goal. Relationship
marketing is based on the idea that important customers need continuous attention.
An organization using relationship marketing is not seeking a simple sale or transaction. It has
targeted a major customer that it would like to sell to now and in the future.
The company wants to demonstrate to the customer that it has the capabilities to serve the
accounts needs in a superior way, particularly if a committed relationship can be formed. The
type of selling needed to establish a long-term collaborative relationship is complex. Dell Inc.,
for example, prefers suppliers who can sell and deliver a coordinated set of goods and services to
many locations, who can quickly solve problems that arise in their different locations and who
can work closely with them to improve products and processes.

Most companies, unfortunately, are not set up to meet these requirements. Today, the levels of
customer relationships vary. Many organizations still sell to customers and then forget them.
Other organizations develop a close relationship, even a partnership, with their customers.
A major issue in an organization‘ relationship marketing program is the role of the sales force.
Firms use salespeople in many ways. However, these four basic questions are guidelines that
define the role of the sales force:

1. How much selling effort is necessary to gain and hold customers?

2. Is the sales force the best marketing tool, compared to advertising and other sales promotion
methods, in terms of cost and results?
3. What type of sales activities, for example, technical assistance, frequent or infrequent sales
calls, will be necessary?
4. Can the firm gain strength relative to its competition with its sales force?
he answers to these questions come largely from an analysis of competition, the target markets,
and the firm‘ product offerings. This helps determine (1) sales force objectives, (2) the level of
resources such as personnel and money allocated to sales force activities, and (3) the importance
of personal selling in the marketing mix.

When selling business to business, IBM, for example, used a variety of marketing and sales
activities for the introduction of one of their new midsized computers. IBM used its direct sales
force to develop a proposal, demonstrate the equipment, and close the sale. It used other
marketing methods for the various sales tasks. Other sellers may use the marketing methods in a
different way, depending on the answers to the above four questions.

2.4. Personal Selling Builds Relationships

Personal selling is an essential element of any organization marketing mix. The main functions
of personal selling are to generate revenue and provide service to help make customers satisfied
with their purchases. This builds relationships and is the key to success in today‘ competitive
marketplace.

Salespeople Generate Revenue

Once a product has been developed, it must be sold. To generate profitable sales, the product has
to be promoted. In today competitive marketplace, a firm has to make personal selling a main
promotional method for selling the product.
Think about this! Virtually every product you see in any factory, office, school, or retail
store was sold to that organization by a salesperson. The next time you are in a grocery store,
stop and look around at the thousands of products you can buy.
Salespeople are responsible for making those products available for you.
Because they are involved in person-to-person discussions, salespeople can customize their sales
presentations to the individual needs of specific people and organizations. Salespeople can see a
customer‘s reaction to a sales approach and make necessary needed adjustments immediately.
Advertising cannot do this.
It‘s true that advertising attracts the consumers attention and arouses desire; however, ads don‘t
close any sales. Personal selling does. In many cases, personal selling ends in an actual sale.
However, the promotional method of selling is costly. The high cost is due to the expense of
developing and operating a sales force. Yet this drawback is compensated for by salespeople
being able to contact specific individuals.
Organizations need a good personal selling effort to compete in today‘s marketplace.
Salespeople help make companies successful.

Salespeople Provide Service

If an organization wants a customer to return—to be satisfied—it must provide an excellent level
of service quality. Service quality is a subjective satisfaction assessment that customers arrive at
by comparing the service level they believe an organization ought to deliver to the service level
that they perceive being delivered.
Some customers may get the product they want but become unhappy because of poor service.
In fact many consumers feel they never really get service anymore. Take this story, for example.
―Mom,‖ the little girl said, ―do all fairy tales begin with ‗once upon a time‘?‖ ―no dear,‖ her
mother said. ―Sometimes they begin with, ‗The couch you ordered has arrived at our warehouse
and should be delivered within five working days.‘ ‖
―Where is service today?‖, is a question frequently asked by customers. An organization‘
salespeople can help ensure that the organization‘ service standards are higher than customers‘‘
expectations.
2.4.1. Salespeople Implement Relationship Marketing
Who better to help develop a relationship marketing program than the personnel constantly in
contact with customer‘s salespeople? Relationship marketing and the marketing concept are
based on the philosophy of being customer oriented. Organizations following this philosophy
rely on their sales personnel to help implement customer contact programs. Salespeople sell
customers products; when customers are unhappy, the salespersons take care of the problems.
Marketing links the organization with the customer. Salespeople are in direct contact with
customers; those who help customers find just the right products to satisfy their particular
requirements are providing good service.
Salespeople who are knowledgeable, who listen well and come up with answers, and who stand
by their customers after the sales are made are providing good service. Sales and service are
inseparable.

2.4.2. LEVELS OF RELATIONSHIP MARKETING

What type of relationships should an organization have with its customers? Is the cost of keeping
a relationship worth it? To answer these questions, let‘s define the three general levels of selling
relationships with customers:
■ Transaction selling: customers are sold to and not contacted again.
■ Relationship selling: the seller contacts customers after the purchase to determine if they are
satisfied and have future needs.
■ Partnering: the seller works continually to improve its customers’ operations, sales, and
profits.
Most organizations focus solely on a single transaction with each customer. When you go to
McDonald‘s and buy a hamburger, that‘s it. You never hear from them again unless you return
for another purchase. The same thing happens when you go to a movie, rent a video, open a bank
checking account, visit the grocery store, or have your clothes cleaned. Each of these examples
involves low-priced, low-profit products. Also involved are a large number of customers who are
geographically dispersed. This makes it very difficult and quite costly to contact customers. The
business is forced to use transactional marketing.

Relationship marketing focuses on the transaction making the sale along with follow-up and
service after the sale. The seller contacts the customer to ensure satisfaction with the purchase.
Toyota contacts each buyer of a new vehicle to determine the customer‘s satisfaction with the
car. If that person is not satisfied, Toyota works with the retailer selling the car to make sure the
customer is happy.
Partnering is a phenomenon of the 1990s. Businesses‘ growing concern over the competition not
only in America but also internationally revitalized their need to work closely with important
customers. The familiar 80/20 principle states that 80 percent of sales often come from 20
percent of a company‘s customers. Organizations now realize the need to identify their most
important customers and designate them for their partnering programs.
The organization‘s best salespeople are assigned to sell and service these customers. Let‘s take a
closer look at partnering since it is becoming so important to organizations.

2.4.3. Partnering with customers

The ultimate outcome of relationship marketing is the building of a partnership between the
seller and the buyer. The seller‘s company works continuously to help the customer. As the
customer prospers, so does the seller. The customer is not sold and then forgotten, nor is the
customer sold and much later asked, How did you like it? The seller continues to work with the
buyer and the company after the sale to ensure the customer‘s satisfaction with the product‘s
quality and value.
Partnering encourages both buyer and seller to share information such as marketing research
findings and production cost data. Their goal is to share risks and profits together. When two
businesses create partnership plans, each accepts a redefinition of its goals. Each accepts an
implicit contract to stimulate the others growth.
When this occurs, they become distinctly different species than when they started. They‘re no
longer a buyer and a seller one striving for the lowest possible cost, the other aiming for the
highest possible margin. They‘re no longer opponents, but two companies working toward an
objective.
Both are now in the business of enriching the other, not getting rich at the other‘s expense.
They‘re not concerned with growth simply by conquest and market penetration. They‘re not
concerned with simply planning in private, each using its own resources. They now share
objectives with a partner committed to achieving them.
Partnering gives a whole new meaning to customer focus. Companies that put partnering into
practice find they reduce or eliminate conflicts of interest between themselves and their clients.
Those who work at partnering find that very quickly their sensitivity and responsiveness improve
significantly. They begin to anticipate trends in their customers‘ businesses. They begin to know
their customers‘‘ requirements almost before the customers do.
2.4.4. The new consultative selling

Not too long ago, the typical sales presentation was a pitch focused on a specific product and
tightly controlled by the salesperson. Today, the best sales calls are highly interactive dialogues
between a salesperson and a customer working toward a common goal. The sales call is a
balanced exchange of information, based on trust and focused on achieving a mutually beneficial
agreement.
Salespeople have gone from selling goods, to selling goods and services, to selling goods,
services, and value-added services. Customer needs have become more complex, which makes
customers want to do business with sales organizations that can help them meet those needs.
Sales executives feel the critical skill salespeople need is the ability to develop customer
relationships over time. This is usually referred to as consultative selling. Consultative selling is
the process of helping the customer achieve strategic short- and long-term goals through the use
of the sellers good and/or service. The term consultative selling is not a new one, but sales
managers are redefining it to reflect the values of today‘s more sophisticated customers and sales
forces.

Three Roles of Consultative Selling

The roles of a salesperson center around what customers want from him or her. Typically
customers want three things. First, they want salespeople who are committed to helping them
succeed. To ensure the success of a long-term relationship, salespeople must help their customers
achieve short- and long-term objectives. Next, they want salespeople who will stay involved with
them over time even if there is not an immediate sales opportunity. Finally, customers want the
salesperson always to focus on their needs when developing recommendations and suggesting
products to the buyer. These three needs of the customer require the salesperson to take on the
roles of team leader, business consultant, and long-term ally.
 I. The Team Leader Role

For many of today sales organizations, salespeople do not work alone they are not ―Lone
Rangers.‖ They work on multifunctional teams just as many organizations have set up buying
teams. Buying teams are composed of multifunctional specialists who ensure that their
organizations accurately convey their complex needs to the seller and thoroughly assess the
accuracy of the supplier recommendations.

In the role of team leader, the salesperson coordinates all of the information, resources, and
activities needed to support customers before, during, and after the sale. The team leader works
to bring together all of the organization resources for the customer. The salesperson serves as the
primary contact between the buyer and seller organizations and makes the customer aware of the
network of resources that stand behind the salesperson.

The salesperson knows who within the company can best create a unique solution for a customer.
This often requires the salesperson to form a team. Team selling brings together the appropriate
people and resources needed to make the sales call. The sales call may take place over the phone,
in person, and/or by video teleconferencing. The customer can be quickly provided with a wide
range of information, advice, ideas, and even decisions.
II. The Business Consultant Role
As a business consultant, the salesperson gives advice and service. The salesperson uses
internal and external resources to gain an understanding of the customer‘s business and
marketplace.
Customers are under great pressure to grow their sales and profits. Their time is valuable. Often
prospective customers do not have time to educate salespeople about their organization. Today
they expect salespeople to arrive at the very first meeting prepared to discuss some of the deeper
issues surrounding the customer‘s organization and its needs because customers have many
suppliers.
 III. The Long-Term Ally (give support) Role

In the role of long-term ally, the salesperson acts as a helper in meeting the customer‘s needs.
The salespersons goal is to create a win win situation. As the customer‘s sales and profits grow,
so do the sales persons. Thus, the salesperson presents goods and services honestly and turns
down business that is not in the customer‘s long term interest. The salesperson ―goes to bat‖ for
customers with the seller‘s employer whenever necessary and helps customers carry out fact-
finding missions within the customer‘s company.

The ability of a salesperson to fulfill the role of long-term ally is a pivotal factor in determining
whether a sales interaction is just a transaction or the beginning of a relationship. This is a
dramatic change from the past, when many salespeople considered their job completed after
closing the sale.

It seems to be human nature for a salespersons interest in the customer to decline after the sale.
This difference between the salespersons pre- and post-sale concern for the customer is referred
to as the relationship gap. Yet the customer‘s interest in using the product increases rapidly
after the purchase. This is one of the reasons service after the sale is so important to the long-
term relationship.

Salespeople who fulfill the role of long-term ally work to eliminate the relationship gap by
ensuring that the customer is receiving the level of support and service that meets expectations
now and throughout the duration of the customer relationship process.
2.5. E-selling: technology and information build relationships

The good news is that technology has exploded the boundaries of today‘ knowledge frontiers.
Salespeople have access to almost any conceivable piece of information or data. Technology is
making it possible to improve a person sales and service performance. Desktop and laptop
computers, iPods, cell phones, CD-ROM videodiscs, automatic dialers, electronic mail, fax
machines, and teleconferencing are quickly becoming popular sales tools. The salesperson has
truly gone high tech. Not only is sales and inventory information transferred much faster, but
also specific computerized decision support systems have been created for sales managers and
sales representatives.

The goal is to help salespeople do such things as increase the speed with which they can find and
qualify leads, gather information prior to a customer presentation, reduce their paperwork, report
new sales to the company, and service customers after the sale. Technology has provided the
answer.

Technology is expensive. Hardware, software, and training take a large investment. Yet
companies believe it is worth the cost because of decreased travel and paperwork, more
productive sales calls, and better customer service.
 CHAPTER THREE

FORECASTING MARKET DEMAND, SALES BUDGETS, AND SALES

QUOTA
3.1. Forecasting Market Demand
Accurate forecasting requires a clear definition of the market in question. Markets may be
differentiated on the basis of the following variables.
Geography: A market may be defined at world, country, state, region, sales territory, town, and
store or customer level. When formulating a forecast or other marketing plans, the geographical
dimension must be clearly indicated. Planning Coca Cola consumption for the year 2018 Mosco
world cup for example, will necessitate the forecasting of increased consumption for the sales
region, but not necessarily for Sydney.
Time: A forecast must be defined for a specific time period. Initially several levels of forecast
may be set at differing levels of specificity for the short term, the medium term and the long
term, with increasingly larger confidence intervals around the forecasts, the further into the
future the projection. Generally companies will set specific forecasts on a monthly, quarterly or
annual basis.
Product Level: A forecast may be set for the industry, the company and the product. Even at
product level, separate forecasts might be made for product assortment, product line and product
item. Johnson and Johnson might use survey analysis and demographic data to forecast the
industry sales of the product assortment, shampoo, for the forthcoming year; from this total
industry figure the company might further estimate its market share to create a company forecast.
From this forecast, using past sales projections and company sales strategy information, Johnson
and Johnson might further dissect a forecast for the product line of children‘s shampoo. A further
dissection might produce a forecast for the product item
Availability and Potential: In the process of estimating what proportion of the population will
ultimately consume a company‘s product, a marketer must estimate the proportion of the
population that:
1. Wants to buy your assortment, line and item of product and has not already satisfied their
need for this demand in the current time period
2. Has the income to pay for your product
 3. Is interested in buying the brand which your company has for sale.
Thus the estimation of market potential involves consideration of many factors

3.2. The Forecasting Process

A sales forecast is an estimate of sales (in dollars or units) that an individual firm expects to
achieve during a specified forthcoming time period, in a stated market, and under a proposed
marketing plan. A company may make a forecast for an entire product line or for individual
items with in the line. Sales may forecast for a company‘s total market or for individual market
segments.
The general steps in the forecasting process are as follows:
1) Identify the general need
2) Select the Period (Time Horizon) of Forecast
3) Select Forecast Model to be used: For this, knowledge of various forecasting models, in which
situations these are applicable, how reliable each one of them is; what type of data is required.
On these considerations; one or more models can be selected.
4) Data Collection: With reference to various indicators identified-collect data from various
appropriate sources-data which is compatible with the model(s) selected in step (3). Data should
also go back that much in past, which meets the requirements of the model.
5) Prepare forecast: Apply the model using the data collected and calculate the value of the
forecast.
6) Evaluate: The forecast obtained through any of the model should not be used, as it is, blindly.
It should be evaluated in terms of ‗confidence interval‘ – usually all good forecast models have
methods of calculating upper value and the lower value within which the given forecast is
expected to remain with certain specified level of probability. It can also be evaluated from
logical point of view whether the value obtained is logically feasible? It can also be evaluated
against some related variable or phenomenon. Thus, it is possible, sometimes advisable to
modify the statistically forecasted‘ value based on evaluation.
3.3. Sales Forecasting Methods
There are two types of forecasting technique. They are:

d. Qualitative forecasting techniques

e. Quantitative forecasting techniques
1. Qualitative Approaches
Qualitative forecasting technique is a technique that is used when there is no historical data
available about past performance. These forecasting techniques are subjective and judgmental in
nature and most of the time they are based on opinion and expertise judgment. Qualitative
forecasting techniques rely on analysis of subjective inputs obtained from customers, sales
Person, managers and experts.

Forecasts based on judgment, experience or opinions are appropriate when:

a. Forecasts must be prepared quickly in a short period of time,

b. Available data may be obsolete or up to date information might not be available
because of rapid and continuous changes in the external environment such as
economic and political conditions,
c. Historical data cannot be available like demand for a newly introduced product, and
d. The forecasting period is long range that past events will not repeat themselves in a
similar fashion.
There are four common types of qualitative forecasting techniques. They are:

1. Expert opinion method

2. Sales opinion
3. Consumer surveys
4. Delphi technique
1. Expert Opinion methods

One of the most simple and widely used method of forecasting which consists of collecting
opinions and judgments of individuals who are expected to have the best knowledge of current
activities or future plans. The forecasts made by the executives are averaged to yield one forecast
for all executives, or the differences are reconciled through discussions among executives.

2. Sales force Opinions

In this method, the sales representatives are required to estimate the demand for each product and
the forecast of each sales representative is consolidated to prepare the overall forecast for the
company.
 3. Consumer Surveys

This forecasting technique is based on the data which is collected from the consumers. Because it
is the consumers who ultimately determine demand, it seems important to solicit information
from them.

4. Delphi Method

This is a qualitative method of forecasting which involves the development, distribution,

collection and analysis of series of questionnaires to get the views of expertise that are located at
different geographic areas to generate the forecast. A moderator compiles results and formulates
a new questionnaire that is again submitted to the same group of experts. The goal is to achieve a
consensus forecast.

2. Quantitative Forecasting Techniques

Qualitative techniques consist of mainly analyzing objective or hard data. This usually avoids
personnel biases that sometimes contaminate qualitative methods. It is based on actual historical
statistical data using mathematical and statistical methods to forecast demand. Thus, it is
objective and is also called statistical forecasting.

There are two types of quantitative forecasting techniques:

D. Time Series Analysis

E. Causal Methods
1. Time Series Analysis: A time series is a set of some variable (demand) overtime (e.g.
hourly, daily, weekly, quarterly, annually). Time series analyses are based on time and do not
take specific account of outside or related factors.
Time series analysis is a time-ordered series of values of some variables. The variables value in
any specific time period is a function of four factors:

a) Trend c) Cycles
b) Seasonality d) Randomness
i. Trend – is a general pattern of change overtime. It represents a long time secular movement,
characteristic of many economic series.
ii. Seasonality- refers to any regular pattern recurring with in a time period of no more than one
year. These effects are often related to seasons of the year.
iii. Cycle – are long-term swings about the trend line and are usually associated with a business
cycle (phases of growth and decline in a business cycle).
iv. Randomness – are sporadic effects due to chance and unusual occurrences.
Types of Time Series Analysis

A. Simple Moving Average: A simple moving average is obtained by summing and averaging
values from a given number of periods repetitively, each time deleting the oldest value and
adding the new value.

At 1  At  2  At  3  ...  At  n
SMA = Ft =
n

= Ai 1
t i

n
Where

SMA – simple moving average

Ft - Forecast for period t

At-i - Actual demand in period t-i

n - Number of periods (data points) in the moving average

Simple moving average is preferable if the demand for a product is neither growing nor declining
rapidly and also does not have any seasonal characteristics.
Example 1: A food processor uses a moving average to forecast next month‘s demand. Past
actual demand (in units) is shown in the following table

Month 1 2 3 4 5 6 7 8

Actual 105 106 110 110 114 121 130 128

demand

Required

a. Compute a simple 5 month moving average to forecast demand for month 9

b. Find a simple 5 month moving average to forecast the demand for month 10 if the actual
demand for month 9 is 123.

Solution

128  130  121  114  110

a) SMA9 = F9 =
5

= 120.6

Therefore, the forecasted demand for month 9 is 120.6.

123  128  130  121  114

b) SMA10 = F10 =
5

=616/5 = 123.2

Therefore, the 5 month moving average forecasted demand for month 10 is 123.2.

Note: In moving average, as each new actual value becomes available, the forecast is updated by
adding the newest value and dropping the oldest value and computing the average. Consequently
the ‗forecast‘ moves by reflecting only the most recent values.
B) Weighted Moving Average: In weighted moving average, the weight is given in such a way
that more weight is given to the most recent value in the time series. Weights can be percentages
or any real numbers. In weighted moving average, forecasts are calculated by:

Ft = WMA = W1At-1+W2.At-2+… +Wn.At-n

n
= A
i 1
t 1 .Wi

Where

Ft =forecast in time t

WMA = weighted moving average

W = weight

A = Actual demand value

Example 1: A department store may find that in a four month period the best forecast is derived
by using 40% of the actual demand for the most recent month, 30% two months ago, 20% of
three months ago and 10% of four months ago. The actual demands were as follows.

Month Month 1 Month 2 Month 3 Month 4

Demand 100 90 105 95

Required:

a. Compute weighted 4-month MA for month 5

WMA = 95x0.4+105x0.3+90x0.2+100x0.10

= 97.5 units

b. Suppose the demand for month 5 actually turned out to be 100. Compute forecast for month 6.

F6 =WMA = 0.4x100+0.30x95+0.2x105+0.1x90

F6 = 102.5 units.
C) Simple Exponential Smoothing: The other type of time series forecasting method is simple
exponential smoothing which weights past data in an exponential manner so that most recent
data carry more weight in the moving average.

With simple exponential smoothing, the forecast is made up of the last period forecast plus a
portion of the difference between the last period actual demand and the last period actual demand
and the last period forecast.

Mathematically

Ft = F t-1 + (A t-1 - F t-1)

Where

Ft = Forecast for period t

Ft-1 = Forecast for the previous period

 = Smoothing constant (0<<1)

A t-1 = Actual demand for the previous period

The difference between the actual demand and the previous forecast (i.e. A t-1 – Ft-1) represents
the forecast error. As we observe from the equation, each forecast is simply the previous forecast
plus some correction for demand in the last period. Thus,

 If actual demand was above the last period forecast, the correction will be positive, and
 If the actual demand was below the last period forecast, the correction will be negative.
The smoothing constant, actually dictates how much corrections will be made. It is a number
between 0 and 1, and it is used to compute the forecast.
Exponential smoothing is the most widely used of all forecasting techniques, because;

 Exponential forecasting models provide closer forecasts to actual demand.

 Formulating an exponential smoothing model is relatively easy.
 The user can easily understand the model
 It requires little computation
 It requires only three pieces of data
 The most recent forecast
 The actual demand of the previous period
 The smoothing constant, 
Example 1: The production supervisor at a fiber board plant uses a simple exponential
smoothing technique ( = 0.2) to forecast demand. In April, the forecast was for 20 shipments,
and the actual demand was for 20 shipments. The actual in May and June was 25 and 26
shipments. Forecast the value for July.

Solution

First forecast the demand for May and June

Fmay = FApril +  ( A April –F April)

= 20+0.2(20-20)

= 20

FJune = FMay +  (AMay –FMay)

= 20+0.2(25-20)

= 21

FJuly = FJune +  ( AJune –FJune)

= 21+0.2(26-21)

= 22

Therefore, the forecast for July is 22 shipments.

 D) Trend equation : A linear trend equation has the form
Ft = at + b

Where : Ft = forecast for period t

a = slope of the line

b = value of Ft , at t = 0

t = specified number of time periods from t = 0

The coefficients of the line, a and b can be computed from historical data using these two
equations.

n. ty  t.y
a=
n.t 2  (t ) 2

y  at
b=
n

Example: Monthly demand for Wonji sugar factory over the past six months for sugar is given
below

Month (in ‗000 tones) Sept. Oct Nov. Dec. Jan. Feb.

Actual demand 112 125 120 133 136 140

Required:

a) Obtain the trend equation?

b) Forecast the demand for the next two months?
Solution

First let‘s find the values of the coefficients a and b.

n.ty  t.y y  at

a= , b=
n.t 2  (t ) 2 n

T t2 y ty

1 1 112 112

2 4 125 250

3 9 120 360

4 16 133 532

5 25 136 680

6 36 140 840

=21 91 766 2774

Now let‘s compute a, and b

n.ty  t.y 6 x 2774  21x766

a= = = 5.314
n.t  (t )
2 2
6 x 91  (21) 2

y  at 766  5.31 x 21

b= = = 109
n 6

a) The trend equation

Ft = Y = at + b

= 5.31t + 109

b) Forecast for the next two months (i.e. March and April)
 Fmarch = F7 = 5.31(7) + 109

= 146,000 tones

FApril = F8 = 5.31 x 8 + 109

= 151,000 tones

2. Causal Forecasting Methods

Casual forecasting techniques rely on identification of related variables that can be used to
predict values of the variable of interest (demand). Casual methods are used when historical data
are available and there is relationship between the factors to be forecasted.

Types of Casual Methods of Forecasting

Regression and Correlation Methods

Regression and correlation techniques are means of describing the association between two or
more variables. More specifically, regression and correlation methods are related to the
following issues

I. Bringing out the nature of relationship between any two variables, say X and Y
II. Measuring the rate of change in one (the dependent) variable associated with a
given change in the other (independent) variable.
III. Evaluating the strength of the relationship and quantifying the closeness of such
relationship.
Regression: - It is concerned about the first two issues, i.e.

 Bringing out the nature of relationship between any two variables.

 Measuring the rate of change in one (the dependent) variable associated with a given
change in the other (independent) variable.
Regression means ‗dependence‘ and involves estimating the value of a dependent variable, Y,
from an independent variable X.
Correlation: - is concerned about evaluating the strength of the relationship and quantifying the
closeness of such relationship.

Simple Linear regression and correlation

In simple linear regression, only one independent variable is used and the model takes the form

Y = a + bx

Where

Y = predicted (dependent) variable, demand

a = value of Y at X = 0

b = slope of the line

Note:

1. It is convenient to represent the values of the predicted variable on the Y-axis and values
of the predictor variable on the X-axis.
2. The coefficients a and b of the line are obtained by using the formula
n.xy  x.y
b=
n.x 2  (x) 2

y  bx
a= , or y  b x
n

n = Number of Period Observations

3. The correlation coefficient r, can be obtained by using the following formula and
coefficient of determination is
n.xy  x.y
n.x  
Coefficient of correlation (r) =
 x  2 ny 2  y 
2 2
 Example: The general manager of a building materials production plant feels the demand for
plaster board shipments may be related to the number of constructions permits issued in the
country during the previous quarter. The manager has collected the data shown in the
accompanying table.

Construction Plaster board shipments

permits

15 6

9 4

40 16

20 6

25 13

25 9

15 10

35 16

Required:

 Derive a regression forecasting equation?

 Determine plaster board demand when the number construction permit is
i. 30
ii. 35
iii. 40
 Compute coefficient of determination (r2) and coefficient of correlation (r), and interpret the
numbers
Solution

 To derive the regression forecasting equation, first let‘s find the values of the
Coefficients a and b
2 2
X Y XY X Y

15 6 90 225 36

9 4 36 81 16

40 16 640 1600 256

20 6 120 400 36

25 13 325 625 139

25 9 225 625 81

15 10 150 225 100

35 16 560 1225 256

x=184 y=80 xy=2146 x2=5006  y2=950

n = 8 pairs of observation

n.xy  x.y
b=
n.x 2  (x) 2

8 x 2146 184 x 80
=
8 x 5006  (184) 2

2448
=  0.39
6192

y  bx 80  0.39(184)
a = = = 0.915
n 8
Thus, the regression equation is;

Y = a + bx

 Y = 0.915 + 0.395x

B) plaster board demand,

 if no of permit = 30
Y = 0.915 + 0.395 (30) = 12.76

= 13 shipments

ii) if no of permit = 35

Y = 0.915 + 0.395 (35)

= 14.74

= 15 shipments

iii) if no of permit = 40

Y = 0.915 + 0.395 (40)

= 16.75

= 17 shipments
 C) Coefficient of correlation and determination
n.xy  x.y
n.x  
Coefficient of correlation (r) =
 x  2 ny 2  y 
2 2

8 x 2146 184 x 80
8 x 5006  184  x 8 x 950  80 
r= 2
2

2448
r=
2,430,400

r = 0.90  r2 = 0.81

Interpretation

* r = 0.81 means 81 percent of the total variation in plaster board shipments is explained by
construction permits. What remains is the coefficient of determination (i.e. 0.19). It indicates that
19% of the total variation, which remains unexplained, is due to the factors other than the quantity
of shipments.

Note: Correlation coefficient, r is a number between -1 & 1.

Correlation coefficient can be positive, zero or negative.

r = 1  perfect positive relation.

r = 0 lack of any relationship between the two variables.

r =-1  perfect negative relationship.

Coefficient of correlation, r overstates the degree of relationship. Thus, we use coefficient of

determination, r2. Coefficient of determination, r2ranges from 0 and 1, and it is a more objective and
definitive measure of the degree of relationship.
3.4. What Is a Sales Budget?

A budget is a financial plan and tool of control. In a sales budget, resources are allocated to
achieve the sales forecast. It states what and how much each salesperson will sell. It also spells
out what and how much will be sold to the different classes of customers. A budget is an
estimate of sales, either in units or value and the selling expenses likely to be incurred while
selling. Once the budget is accepted in terms of estimated sales, expenses and profit figures, the
actual results are measured, and compared against the budgeted figures. It is an instrument of
planning that shows how to spend money to achieve the targeted sales. A budget also anticipates
a particular level of profit.

Budgeting is a short-term exercise that attempts to optimize business profits by accommodating

customer-service activities and incurring expenses to acquire new business. For instance, to
increase the sales volume by Br. 2,000, sales management may have to rope in new customers.
The expense of appointing new customers is also included in the budget

The Budgeting Process

In many organizations, sales are the key variable for formulating the budgets of the other
departments. Thus raw materials and production are purchased and planned in accordance with
the sales estimate, leading to the purchasing budget. Finance is arranged in accordance with the
requirements of production and other departments. Human resources are deployed to realize the
overall planning requirements. The starting point becomes the sales budget. It generates other
budgets like the inventory budget, purchase budget, production budget and so on. The sales
budget becomes a major input in the financial plan.
Planning can be top-down or bottom-up. In a top-down plan, the plan flows from the top, and is
broken down into smaller units. In a bottom-up plan, the departments and units set their own
goals, which are aggregated at the top. In sales budgeting, some organizations adopt a top-down
approach in which the goals are set by the immediate higher level. Some organizations follow a
bottom-up approach where each level in sales right from the salesman puts forward sales and
profit objectives. The bottom-up style is more participatory.
Each budget has quotas or standards, against which management has to measure performance.
Evaluation and control are vital parts of the management process. As the opening scenario
suggests, management needs feedback on the effectiveness of its plan and the quality of its
execution to operate more effectively; otherwise it is easy to lose sight of the firm‘s objectives.
In order to achieve goals and objectives, sales managers plan by outlining the essential costs to
be incurred. The budget acts as an instrument of coordination. Selling is one of the functions of
marketing and needs support from the elements of marketing mix. Budgets help in integrating all
functions, like sales, finance, production and purchase.
A comparison between budgeted and actual cost results in the analysis of factors causing
variations and enables the sales manager to spot problem areas or plan better for expected
outcomes

Methods of Sales Budgeting

Affordable Method: Many companies set the promotion budget at what they think the company
can afford. This method is adopted by firms dealing in capital industrial goods.
Rule of Thumb (percentage of sales) Method: Most companies set their sales budget as a
specified percentage of sales (either current or anticipated). Mass-selling goods and companies
dominated by finance are major users of this method.
Competitors’ Parity Method: This method is adopted by large-sized companies facing tough
competition. The knowledge of competitors‘ activities and resource allocation is important if an
organization wants to pursue this method.
Objective and Task Method: This method calls upon marketers to develop their budgets by
identifying the objectives of sales function and then ascertaining the selling and related tasks to
achieve the objectives.

Preparing the Sales Budget

The sales budget is the most important element of sales. There are three basic sales budgets,
namely:
1. Sales budget: This budget is kept for sales activities.
2. Selling expense budget: This budget is basically designed for dealing with sales expenses.
3. Sales department administrative budget: This budget is designed for expenses related to
administrative purposes.
3.5. What is Sales Quota?
A sales quota is a performance goal assigned to a marketing unit for a specific period of time.
The marketing unit may be a salesperson, a branch office, a district or region, or a dealer or
distributor. For example, each sales person might be assigned a sales volume goal or a gross-
margin goal for the coming three-month period. This quota goal may be stated in dollars,
product units, or selling activities. The specified time period usually is a month, a quarter, six
months, or a year; but it may be for as short a period as a week. Marketing unit‘s quota may also
be established for individual products and/or types of customers. When salespeople achieve their
quotas, they often receive some sort of reward for their performance.

The most frequently used types of sales quotas are those on: sales volume; gross margin or net
profit; activities; expenses; and some combination of the four. The types of quota that
management selects depend on several factors, including the nature of the product and the
market. Undoubtedly, the most widely used type of sales quota is one based on sales volume. A
volume quota may be established for a geographical area, a product line, a customer, a time
period, or any combination of these bases. Ordinarily, it is more effective to set a monthly or
quarterly quota than an annual one. Some high-performance sales organization even set daily
sales quota.

Even when a company sells a large number of products, it may be feasible to group them into a
few broad lines and then set unit quotas for each line. Management uses volume goals because
they are simple to understand and easy to calculate. Many sales managers still regard sales
volume as the only real measure of a sales person‘s worth to the company.

However, sales volume alone does not tell the full story of a salesperson‘s productivity and
effectiveness. It does not indicate the profit generated by the person‘s efforts nor does it
measures the effort to which the sales person has done a fully balanced sales job. In fact, volume
quotas discourage balanced activities by the sales force because they stress volume to the
detriment of non-selling activities.
Many companies set quotas based on gross margin or net profit. These goals may be established
on many of the same bases as a volume quota. One significant drawback to gross margin or net
profit quotas is the possibility that friction may arise between management and the salespersons.
The sales people may not understand how their quotas were calculated, and the salespersons may
not be able to measure their progress during the quota period.

Another limitation-especially of a net profit quota – is that the salesperson has no control over
some of the factors on which the quota is based. For example, unexpectedly high production
costs may leave the company with little or no profit on a certain product. A compromise
approach is to base the quota on a salesperson‘s contribution to profit. Contribution to profit, or
contribution margin, is the amount left after deducting a salesperson‘s direct expenses from his
or her gross margin. The remainder is the amount the salespersons is contributing to cover the
overhead costs.
Some companies attempt to encourage a profit consciousness by establishing a quota based on
the salesperson‘s travel and other expenses. Often the expense quota is related to sales volume or
to the compensation plan. A salesperson may be given an expense quota equal to 2 percent of
sales. That is, direct expenses, such as travel, entertainment, food, and lodging, must not exceed
2 percent of net sales volume. Expense quotes probably encourage a salesperson to be more
aware of costs and profit than volume goals. Nevertheless, it seems that an expense quota is a
negative approach to the problem. A person‘s attention may be devoted more to cutting expenses
than to boosting the sales of profitable products.

One way to decrease the emphasis on sales volume is to establish a quota based on activities.
Management may select from such tasks as: daily calls; new customers called on; orders from
new accounts; product demonstrations made; and displays built. Activity quota properly
established and controlled can do much to stimulate a fully balanced sales job. This type of quota
is particularly valuable for use with missionary salespeople. Probably, the principal difficulties in
administering an activity quota are, first, to determine whether the activity actually was
performed and, second, to find out how effectively it was done. Companies that are not satisfied
with any single type of quota may combine two or more types.
A combination quota seeks to use the strong points of several types of quotas, but frequently
such a plan is limited by its complexity. In many cases, combination quota structures are so
complicated that they are not easily understood by the salespeople: then the quota becomes a
source of dissatisfaction rather than an incentive.

A sales quota – especially a sales volume quota is related to both the sales potential and sales
forecast. The sales potential influences the sales forecast, and the sales forecast helps to shape
the quota. However, a sales quota is not the same as either of these planning tools. Management
usually sets sales quotas so that their total equals the sales budget. Thus if all the salespersons
reached their quotas, the sales budget would be met.

Fundamentally, two general approaches may be used to set volume quotas: Quotas are set in
conjunction with territorial sales potentials. Also quotas are set on the basis of considerations
other than sales potentials, such as past sales,

executive judgment, salesperson determination, or compensation design. Sales quotas help in

planning and evaluating sales force activities. When setting sales quotas, the sales managers
should consider the goals and strategies developed in the marketing planning. If the marketing
goal is to increase market share, then a sales volume quota may be appropriate. However, if the
goal is to increase a company‘s return on investment or net profit as a percentage of sales, then a
sales volume quota probably is not appropriate. Instead, some form of quota based on gross
margin, or even an expense quota, is more in line with a profit – oriented goal. Thus good sales
quota can help effectively implement the strategic plans.

3.6. Why IS Quotas Important?

o To indicate strong or weak spots in the selling structure
o To Furnish goals and incentives for the sales force
o To Control salespeople activities
o To evaluate productivity of salespeople
o To improve effectiveness of compensation plans
o To control selling expense
o To evaluate sales contest results.
3.7. Methods for Setting Sales Quotas
 Quotas based on forecasts and potential
 Quotas based on forecasts only
 Quotas based on past experience
 Quotas based on executive judgments
 Quotas sales people set
 Quotas related to compensation
3.8. Factors Influencing the Sales Forecast
The sales forecast must take in to account consideration changes that have occurred or are
anticipated that may affect sales. These changes can be placed in four general categories:
Marketing Plans: any changes in the price structure, channels of distribution, promotional
plans, products, or other internal marketing policies may influence future sales. The forecaster
must estimate the quantitative extent of these influences. He or she may know, for example, that
the firm will soon have to raise prices. Although this action will reduce unit volume, total dollar
volume might go up or down, depending on the products price elasticity. Thus, formulating a
realistic sales forecast is impossible without taking price changes in to consideration. If the firm
planned to alter its channels of distribution or its advertising expenditures, these actions would
also influence future sales.
Conditions within the Industry: a firm obtains its sales volume from total industry sales.
Therefore, any change within the industry has an impact on the firm. Whet ever volume new
producers in an industry gain must come from existing companies. Thus, the sales forecast for
those companies may have to be revised downward. If a competitor is planning to redesign its
line of products, the firm must consider the possibility that the competitor may obtain a larger
share of the market during the coming period.
Market Conditions: if basic demand factors are in a slump, the future sales of the firm will be
affected. The firm‘s manager must be aware of any basic changes in the primary demand for the
industry‘s output. An analysis of future market conditions is particularly important if the concern
sells to relatively few industries.
General Business Condition: a major influencing factor in future sales development is the
general state of the economy. Basically, many of the methods of sales forecasting are simply
reflections of overall opinion of what the general economy will be like during the coming period
 CHAPTER FOUR
PLANNING FOR AND RECRUITING SALES PEOPLE SUCCESSFUL
4.1. The Recruitment Process
Staffing is the crucial step in building an effective sales organization. The success of any sales force
hinges on how well this task is performed. The sales manager must be both a good salesperson
(recruiter) for the company and a good judge (selector) of the ability or potential of new hires. A
systematic approach for recruiting and selecting sales people includes three major steps: -

 Analyzing sales personnel needs;

 Recruiting sales candidates; and
 Screening and selecting applicants
A sales personnel planning involves two important activities:

E) – determining the number of sales people required, and

F) - identifying the type of personnel desired.
A realistic understanding of above needs enables management to develop recruitment, selection, and
training programs that will make optimum use of the company‘s existing sales force and meet the
sales organization‘s human resource needs of the future.
―Recruiting involves identifying potential of salespeople and attracting them to join the company‖.
Managers must be aware of the best sources for sales recruits. They must cultivate these sources
through personal and indirect recruiting techniques.
―Recruitment is a process to discover the source of manpower to meet the requirements of the
staffing schedule and to employ effective measures for attracting that manpower in adequate
numbers to facilitate effective selection of an efficient working force‖. – Dale Yoder

―Recruitment involves seeking and attracting a pool of people from which qualified candidates for
job vacancies can be chosen‖. - Byars and Rue.

―All the activities involved in securing the applications for the sales positions are referred to as
recruitment. Recruitment sets out the necessary stages to clarify what kind of person is required.
Where he/she might be found and how to make the right choice. The choice of he/she is very
significant‖.
―It is a process of searching for prospective employees and stimulating and encouraging them to
apply for jobs in an organization‖. - Edwin. B. Flippo.

Factors affecting the recruitment policy of sales personnel:-

According to Yoder, ―The recruitment policy is concerned with quality and qualifications of
manpower‖. It establishes broad guidelines for the staffing process. Generally, following factors are
involved in the recruitment policy:-

o Number of recruits desired

o Recruitment sources
o Recruitment needs
o Recruitment cost
o Size of sales organization
o Rate of turnover
o Forecasted sales volume
o Government policies
o Personnel policies of competing organization
o Organizational personnel policies.
o
4.1.1. Sequence of Recruitment Process

Before an organization begins recruiting people, it should form a checklist of questions which
outline a chronological sequence for the recruitment and selection process as follows:-

1. What kind of job is to be filled?

2. What sort of person would do this job successfully?

3. Where will this person be found?

4. What recruitment sources can be employed to find this person?

5. Which person is to be recruited out of the selected applications?

4.2. Job Analysis

In simple terms, job analysis may be understood as a process of collecting information about a
job. The process of job analysis results in two sets of data:
i) Job description and
ii) Job specification.
A few definitions on job analysis are quoted below
1. Job analysis is the process of studying and collecting information relating to the operations
and responsibilities of a specific job. The immediate products of this analysis are job descriptions
and job specifications.
2. Job analysis is a systematic exploration of the activities within a job. It is a basic technical
procedure, one that is used to define the duties, responsibilities and accountabilities of a job.
3. A job is a collection of tasks that can be performed by a single employee to contribute to the
production of some products or service provided by the organization. Each job has certain ability
recruitments (as well as certain rewards) associated with it. Job analysis is the process used to
identity these requirements.
Specifically, job analysis involves the following steps:
1. Collecting and recording job information
2. Checking the job information for accuracy.
3. Writing job description based on the information
4. Using the information to determine the skills, abilities and knowledge that are required on the
job.
5. Updating the information from time to time.

4.3. Man Power Planning

Manpower planning is determination of right number and right skills of human force to suit
present and future needs. Manpower planning is defined by stainer “strategy for the requisition,
utilization, improvement and preservation of an enterprise‘s human resource. It relates to
establishing job specifications or the quantitative requirements of jobs determining the number of
personnel required and developing sources of manpower.” Manpower planning is a process
determining requirements of right number and right kind of human force at right place and right
time.
 Objectives of manpower planning are to ensure optimum use of human resources currently
employed. To assess future skills requirement, to provide control measures to ensure that
necessary resources are available as and when required, to determine requirement level, to
anticipate redundancies and avoid unnecessary dismissals and assess training and development
needs.
Each organization needs manpower planning. An organizational unit is started to accomplish
certain goals. Which requires human resources with necessary qualification? These are provided
through effective manpower planning. Comprehensive manpower planning helps to optimize
effectiveness of human resources. In an organization, employees who have grown old or who
resign, retire, die or become incapacitated because of mental or physical ailment have to be
replaced and new employees have to be recruited. This can be done through manpower planning.
It is also needed for identifying surplus or shortage manpower areas and there by balancing
manpower. In short manpower planning provides right size and structure of human resources
which provides the basic infrastructure for smooth functioning of an organization. It minimizes
the cost of employment and nullifies the effects of disruptions in developing and utilizing the
human resources.
4.4. Job Descriptions
Job Description is an important document, which is basically descriptive in nature and contains
a statement of job Analysis. It provides both organizational information‘s (like location in
structure, authority etc) and functional information (what the work is).

It gives information about the scope of job activities, major responsibilities and positioning of
the job in the organization. This information gives the worker, analyst, and supervisor with a
clear idea of what the worker must do to meet the demand of the job.

Who can better describe the characteristics of good job description?

Earnest Dale has developed the following hints for writing a good job description: -

1) The job description should indicate the scope and nature of the work including all-important
relationships.

2) The job description should be clear regarding the work of the position, duties etc.

3) More specific words should be selected to show:-

 a) The kind of work

b) The degree of complexity

c) The degree of skill required

d) The extent to which problems are standardized

e) The extent of worker‘s responsibility for each phase of the work

So friends we can conclude by saying that Job description provide the information about the type
of job and not jobholders.

4.5. Contents of Job Description:

F. Nature of the product(s) or service(s) being sold

G. Types of customers to be called on, including the policy of the organization

H. Specific tasks and responsibilities to be carried out

I. Relationship between the sales position and other positions within the organization

J. Mental and physical demands of the job, including the level of technical knowledge the sales
person should have concerning the organization‘s product

K. The sales responsibilities to his/her immediate superior

L. Environmental pressures and constraints

4.6. Job Specifications

It tells us, what kind of person to recruit and also under what qualities that person should be
tested. Job Specification translates the job description into terms of the human qualifications,
which are required for performance of a job. They are intended to serve as a guide in hiring and
job evaluation.
Job specification is a written statement of qualifications, traits, physical and mental
characteristics that an individual must possess to perform the job duties and discharge
responsibilities effectively.
In this, job specification usually developed with the co-operation of personnel department and
various supervisors in the whole organization
Job Specification Information: -

The first step in the program of job specification is to prepare a list of all jobs in the company
and where they are located. The second step is to secure and write up information about each of
the jobs in a company.

Usually, this information about each of the jobs in a company. Usually this information includes:

1. Physical Specifications: - Physical specifications include the physical qualifications or

physical capacities that vary from job to job. Physical qualifications or capacities

2. Include Physical features like height, weight, chest, vision, hearing, ability to lift weight,
ability to carry weight, health, age, capacity to use or operate machines, tools, equipment etc.

3. Mental specifications: - Mental specifications include ability to perform, arithmetical

calculations, to interpret data, information blue prints, to read electrical circuits, ability to plan,
reading abilities, scientific abilities, judgment, ability to concentrate, ability to handle variable
factors, general intelligence, memory etc.

4. Emotional and social specifications: - Emotional and social specifications are more
important for the post of managers, supervisors, foremen etc. These include emotional stability,
flexibility, social adaptability in human relationships, personal appearance including dress,
posture etc.

5. Behavioral Specifications: - Behavioral specifications play an important role in selecting the

candidates for higher-level jobs in the organizational hierarchy. This specification seeks to
describe the acts of managers rather than the traits that cause the acts. These specifications
include judgments, research, creativity, teaching ability, maturity trial of conciliation, self-
reliance, dominance etc.
4.7. Sources of Sales Recruits
A. Internal sources
Internal recruitment sources come from inside the company.

 Current employees
 Promotions
 Transfers
B. External sources

External recruitment sources come from outside the organization.

 Public employment agencies

 Private employment agencies
 Radio and television
 Newspaper advertisements
 Telephone-in advertisements
 The Internet
 Internships
 Colleges and Universities
 Competitors
4.8. Problems in Screening Applicants
Internal and external environmental circumstances influence employee selection process.

Internal environment: A number of characteristics of the organization can influence the amount and
type of selection process it uses to hire needed employees. Size, complexity, and technological volatility
are a few of these. Since the development and implementation of large-scale selection efforts can be very
costly, complex selection systems are most often found in larger organizations with the economic
resources necessary to pay for such systems. Size alone, however, doesn‘t determine how selection is
approached. For an organization to recover the costs of developing an expensive selection system there
must be a sufficient number of jobs that need to be filled. In structurally complex organizations with
many job titles but very few occupants, the number of years needed to get back the money invested in
such a selection system may be too great to justify its initial expense.
 Another characteristic of the organization that is an important determinant of the kind of selection system
it develops is its attitude about hiring from within. Many organizations have elaborate internal job posting
programs designed to help fill as many job vacancies as possible from within. Other organizations look
more quickly to external supplies of new employees. While these two models of filling job vacancies will
have some overlapping selection processes, each will also focus to some extent on different criteria on
different techniques.

External environment: The external environment is an equally important determinant of the kind of
selection system that an organization utilizes. One of the most significant environmental influences on
selection is the size, composition, and availability of local labor markets. These, in turn, are affected by
economic, social, and political pressures on a community. At a basic level, when unemployment rates are
low, it may be difficult for an organization to identify, attract, and hire the number of people it needs. On
the other hand, when there is an oversupply of qualified applicants, selection strategies can be very
different.

4.9. Selecting Applicants

4.9.1. Selection Process

The main objective of a selection procedure is to determine whether an applicant meets the
qualification for a specific job, and then to choose the applicant who is most likely to perform
well in that job. The entire process of selection begins with an initial screening interview and
concludes with a final employment decision. When a selection policy is formulated,
organizational requirement like technical and professional dimensions are kept in mind.
Selecting a suitable candidate can be the biggest challenge for any organization. According to
Dale Yoder - "Selection is the process in which candidates for employment are divided into 2
classes - those who are to be offered employment and those who are not."
1. Pre Interview Screening
This is generally the starting point of any employee selection process. Pre Interview screening
eliminates unqualified applicants and helps save time. Applications received from various
sources are scrutinized and irrelevant ones are discarded. A preliminary Interview is conducted.
2. Preliminary Interview
The application of candidate whose screening is successful is found to be eligible for the
preliminary interview which covers the personal as well professional details of the prospective
candidate.
 3. Final Interview
This interview is formal in depth conversation conducted to evaluate applicant‘s acceptability.
4. Medical Examination
If all goes well, then at this stage, a medical examination is conducted to make sure that the
candidate enjoys sound health and does not suffer from any serious ailment.

5. Checking References
Most application forms include a section that requires prospective candidates to put down names
of a few references. References are contacted to get a feedback on the person in question
including his behavior, skills, conduct etc.
6. Job Offer
A candidate who clears all the steps is finally considered right for a particular job and is
presented with the job offer. An applicant can be dropped at any given stage if considered unfit
for the job. Only after successfully clearing all the hurdles, an applicant can enjoy the feeling of
being selected for a particular job.
7. Induction Program
New entrants after joining are given induction program. It helps the new employee to understand
and develop a sense of identification with the company and he can clearly understand his job and
will be able to perform his work in good manner.
 CHAPTER FIVE
CHOICES IN SALES FORCE ORGANIZATION
5.1. Principles of Organization Design
1. Organizational structure should reflect a marketing orientation

When designing a sales organization, management should focus first on the market and the
customer. Executives should consider the selling and marketing tasks necessary to capitalize on
the market demand and to serve the firm‘s customers. From this base, an organizational structure
can be built.

2. Organization should be built around activities, not around people

This goal is sometimes difficult to achieve because it may be almost impossible to avoid some
organizing around people-that is, making ‗‘ people adaptations‘‘ in the structure.

3. Responsibility and authority should be related properly.

When you give someone a job to do, also give the person the tools to do it. Responsibility for
each activity should be clearly spelled out and assigned to some individual. Then the necessary
authority should be delegated to that person.

4. Span of executive control should be reasonable.

By span executive control, we mean the number of subordinates who report directly to one
executive. What constitutes a ‗‘reasonable‘‘ span of control depends on the nature of the
subordinate‘s jobs and the abilities of the executives and subordinates. As a guideline, the span
should be small-usually not more than six or eight people. However, there are many exceptions,
and the recent trend to fewer organizational levels of management has resulted in broader spans
of control at each level.
5. Organization should be stable but flexible

An organization should be like a tree- firmly rooted but flexible enough so that a strong wind
will not break it. Stability in an organization means having trained executive replacements
available when needed. Flexibility refers more to short run situations such as seasonal
fluctuations in the number of workers needed. An organization might subcontract some work
during peak seasons or hire a temporary sales force to deliver samples of new products.

6. Activities should be balanced and coordinated

Balancing activities does not mean making all organizational units equal. Instead, balance means
not letting one unit unduly become more important than another. In sports, you do not stress the
offense to the neglect of the defense. In sales management, effective coordination is needed

B. between sales and non-marketing departments, and

C. Between sales and other marketing units. Some examples:
 Sales- production: sales furnish accurate sales forecasts; production provides
dependable production schedules.
 Sales-finance and accounting: these units collaborate in controlling selling costs and
setting credit policy.
 Sales- advertising: advertising can generate leads to prospective customers and make
them more receptive to sales force calls. Sales representatives can tell retailers how
the producer‘s ads will bring people to the store.
5.2. Types of Sales Organizational Structure
You are familiar with the concept of line, staff and functional authority through your past
exposure. Among the designs of sales organizations that prevail in many industries, line and staff
are more common forms, while functional organization is relatively rare.
No two firms would have identical sales organization as their needs and expectations, markets
and products, company size and marketing channels differ from each other.
 1. Line Sales Organization

The line sales organization is the most basic forms of sales organization, characterized by a chain
of command running from the top sales executive down to the level of the salesman. All
executives have line authority over their subordinates who in turn are accountable only to their
immediate superior. Since lines of authority run vertically in this structure, executives at each
level are generally independent of all others at the same level. Through assignment of quotas or
sales targets, responsibilities are usually, clearly delineated.

Figure 1 gives the sales organization of liquor division of Jagatjit Industries Ltd., designed as a
line sales organization.

Fig 1: Line Sales Organization

The liquor division is headed by the vice president marketing, who has two marketing managers
looking after the southwest region and northeast region, reporting to him. The marketing
manager has a line authority over a number of regional and area managers who in turn control a
field staff of sales executive, field sales officer and sales representatives, each level connected to
the subordinate level by scalar lines of command.
Line organization is extensively used in similar firms are those dealing in a narrow product line,
or selling in a limited geographic area. The line organization places great demands on the time
and abilities of the top sales executives.
You can realize that with all fields reporting finally coming to him through his subordinate area
sales manager, most of his time would be taken up by the task of sales supervision and direction
leaving him with little time for planning and policy making. As the line organization has no
subordinate specialists, which top sales executive needs to be a person with outstanding ability
and all-round knowledge of every fact of the sales function. Since operational details of
managing the sales department take up a large part of the line executive‘s time, sometimes he is
forced to take decisions without benefit of adequate planning.
Line organization also becomes in appropriate in case of rapidly growing organizations are those
with large sales staffs, as growing departments necessitate additional layers of executives to be
added. Increase in vertical levels is often accompanied by distortion directions and reduced
efficiency of communication, resulting in poorer results.

2. LINE AND STAFF SALES ORGANISATION

Line and staff organizations usually result as the size of the operations grows. It is
characteristically found in medium and large firms which sizeable sales staff selling diversified
product lines. The line and staff department is differentiated by the presence to staff specialists
of staff assistants to advise and assist the top sales executive. These specialists are experts in
their own fields which could be sales training, service, sales analysis and planning, dealer
relations, sales promotion, sales personnel development and so on. While staff executives and
assistants do not have the line authority to command, they advise the line executives through
recommendations and provide the benefit of specialization in the organization. The inclusion of
the staff component frees the line executive from the burden of detail. By delegating problem
involving in depth study or detailed analysis to staff specialists, the line executive gets more time
for policy making and planning. A pool of experts becomes available for providing advice and
assistance in specialized fields. The activity of planning can also be subdivided and assigned to
staff specialists. More information is also made available for better decision-making. Figure 2
gives the sales organization of Prentice Hall of India Ltd.Which has both line and staff
components?
The organization is headed by the Managing Director who has, reporting to him line managers
called Regional Managers and staff managers who look after the staff functions of customer
service and sales promotion. The Customers Service Manager is basically in charge of feeding
in information and facilitating procurement of international editions for the organization. He
advises the line managers on the suitability of the various international editions and keeps them
informed about the developments in this field. The sales promotion manager performs the
advisory function with respect to the sales promotion activities of the organization and co-
ordinates with the Regional Sales managers as to the promotional needs. The Regional managers
are the line executives who are accountable for the operating results in their territories and
control their own field staff of sales executives and salesmen.

The problem that arises with line and staff organization is basically one of the coordination. The
work of the staff specialists needs to be actively coordinated with the operations of the line
department and generally a lag develops, as reports and recommendations take time to compile.
Line and Staff organization also sometimes generates problems of interpersonal relations. The
staff executives tend to overstep their advisory authority and try to assume and sometimes
succeed in assuming the authority to issue orders and directions.
This presents difficulties of dual subordination and may create confusion. The fact that staff
specialists do not share direct responsibility for results is also resented by some line executives.
Experience has shown that to a large extent these problems can be minimized if all areas in
which line and staff executives have to share authority and responsibility are specifically written
down as components of the job description.

3. Functional Sales Organization

The functional sales organization is aimed at utilizing the benefits of specialization to its fullest
extent. In the functional sales organization, all sales personnel receive direction from , and are
accountable to different executives, on different aspects of their work. Somewhat in
contravention to the principle of unity of command, the functional organizational structure gives
all executives, each a specialist in his own field, a direct authority to command and issue orders
to his functional authority therefore, simply means that at any given time, a sales person could be
under instruction from a number of executives, depending upon the functional specializations
setup. The top sales executives has coordinating responsibilities in respect of the actions of
functional heads in functional organizations have not been found to be a very appropriate
structure for sales organization. Here each sales person is under direction of several executives.
In larger firms where the size of the sales force is substantial, the degree of centralization
necessitated by the functional organizational structure, renders the operation inefficient. Smaller
the medium sized firms on the other hand find the system expensive because of the high degree
of specialization. Another weakness of the structure is that burden of coordinating the activities
of highly diverse specialists is placed on a single individual. In case that individual is not
capable enough in this regard, the whole structure is likely to become cumbersome and
ineffective.
5.3. Determining the Kinds of Sales Personnel

One key decision on personal-selling strategy is that on the kind of sales personnel. Making this
decision requires consideration of qualitative personal-selling objectives-what contributions
toward the company‘s long-term overall objectives should be expected from those performing
selling jobs? What should be the duties and responsibilities of these individuals? How should
their job performance be measured? Management must face up to these questions when it
decides the kind of sales personnel it requires.

Each company has individualized requirements as to the kind of sales personnel best fitted to
serve its needs. The reason goes beyond the fact that the qualitative personal-selling objectives of
each company have some degree of distinctiveness. Each company deals with a unique set of
marketing factors, such as the strengths and weaknesses of its products (what it sells), the
motivations and buying practices of its customers and prospects (whom it sells to ), its pricing
strategy, and the competitive setting-the relative strengths and weaknesses of competitors.
Furthermore, different selling jobs require different levels of selling and non selling abilities,
training, and technical and other knowledge. The bottler‘s driver-salesperson doing route selling
has a considerably different job from that of the salesperson who sells complex industrial
installations such as lathes and presses.

In determining the kind of sales personnel, then, we must understand what is expected of them:
the job objectives, the duties and responsibilities, and the performance measures.
Knowing the salesperson‘s job means knowing the particular job for the particular salesperson-it
is common for different salespersons in the same company to have quite different jobs. Knowing
the particular job helps management to avoid ―Putting square pegs into round holes. ― It helps in
fitting the job to the person and the person to the job.

Product and Market Analysis

No person is capable of selling all kinds of products to all kinds of customers. At one extreme, a
salesperson sells a single product to many kinds of customers. At the other extreme, a
salesperson sells a wide line of products to a single kind of customer. Most salespeople,
however, have job assignments requiring them to sell some products to some kinds of customers.
One way of categorizing selling jobs, then, is into three classifications: (1) product specialists,
(2) market specialists, and (3) combinations of product and market specialization.

This helps to answer the question: should our sales personnel be product specialists, market
specialists, or a combination? Product specialization is indicated when the product is highly
technical, requiring salespeople to advise on uses and applications, Market specialization is
called for when the product is non-technical but different kinds of customers have unique buying
problems, require special sales approaches, or need special service. In many cases, analysis
reveals that sales personnel need not only considerable knowledge of more than a single
company product line and their applications but skills in dealing with more than one kind of
customer.

5.4. Choice of Basic Selling Style

1) Trade Selling, means the trade salesperson develops and maintains long-term relations with a
stable group of customers. This is low-key selling, with little or no pressure, and the job is dull
and routine. This selling style is applied primarily to products that have well-established markets.

All promotional strategies/forms are more vital to promote this type of selling approach. One
important responsibility of the trade salesperson is to help customers build up their volume
through providing promotional assistance.
2) Missionary Selling: - The missionary salesperson‘s main job objective is to increase the
company‘s sales volume by assisting customers with their selling efforts. The missionary sales
person is concerned only with securing orders incidentally, through primary public relations and
through customers of the customers (i.e., indirect customers). Direct customers persuade indirect
customers and missionary salespersons persuade direct customers.

3) Technical Selling:- The technical salesperson deals primarily with the company‘s established
accounts, and his main objective is to increase their volume of purchase by providing technical
advice and assistance. The technical salesperson devotes considerable time to acquaint industrial
users with technical product characteristics and applications and to helping they design
installations or processes that incorporate the company‘s products. In this selling style, the ability
to identify, analyze, and solve customer‘s problems is important. Technical salespeople often
specialize, either by products or markets.

4) New-business Selling: - In this mode of selling the salesperson‘s main job is to find and
obtain new customer‘s, i.e., to convert prospects into customers. The salesperson should be
universally creative and ingenious and possess a high degree of resourcefulness.

Hence lots of changes took place in professional selling since 1990‘s and the change is still
continuing. This might be because of changing markets, diversified products, R&D,
Economic/Purchasing abilities, communication and transportation developments.
 CHAPTER SIX
TRAINING THE SALES TEAM
6.1. What is Sales Training?
Training of the sales person will never become absolute. As long as technology changes, and
new people enter the force work, businesses strive to improve, organizations will need to impart
training. The term training may change into learning, coaching, facilitating etc. But the concept
remains the same which is continuously needed by people to help in by mastering new skills,
applying new knowledge and – or- adjusting their attitudes.

Selection is important even from the training aspect as it would be a waste of money to train bad
material. The training aspect is thus connected with recruiting and selecting the salesmen.

6.2. Importance of Sales Training

The following are the advantages of training a sales person.

 Increase volume of sales resulting from training is not only advantageous to the company,
but can act as an incentive to make the salesmen work harder.
 Trained salesmen can see opportunities in a market which have been previously overlooked.
 Training salesmen acquire deeper insight into the customer‘s needs and wants.
 Training enables salesmen to give a deeper understanding of the customer‘s problems and
can help solve such problems.
 The trained salesman knows his job and therefore needs less supervision cost.
 The trained man sale is less likely to leave the job as he sees many opportunities for
advertisement through increased sales and compensation.

6.3. Types of Training

Training can be continuous by having the new salesman accompanied by experienced and senior
salesman or a supervisor. Training may consist of different forms and may include a definite
preliminary course of lectures and demonstrations. Refresher lectures, study of the sales manual
and sales bulletin and the use of sales portfolio.
 The lectures may be arranged at headquarter or at the branches, being delivered by visiting
lecturers traveling lecturers, of the firm or by suitable executives. Training may also include
personnel attendance at an independent school or college. Training in the subject of ship
salesmen and commerce is either directly or through correspondence course.

The types of training may be divided into three categories.

 Initial (or) Break-in training

 Continuous (or) coaching in the field.
 Stimulation (or) motivation of the salesmen.
Initial (or) Break-In Training:

To be molded into a perfect salesman, the recruited must be convinced that he has entered a
profitable career and not merely a job i.e. A position in which he can utilize his talents and gets
satisfaction which he has to be sold on

 The fact that salesmanship is an honorable and noble profession.

 The objectives and policies of the organization.
 The necessity of learning to accept responsibilities.
 The feeling of belongingness to the group with whom he works.
 The benefits that he will get in selling the company‘s products.
 The necessity of knowledge of the principle of selling.
 The benefits he will receive through adequate training.
Requirements for Break-In Training

 Encouragement and good support is required.

 The trainer should be patient and praise when the salesmen turn to be more productive in
due a course.
 Trainer should be sympathetic with helpful attitude to remove the nervousness of the
recruited.
 The complete data and information about company and its products and customers should
made available to the trainers to train recruited.
Continuous or Field Coaching:-

In order to be effective, training must be continuous. This is because the perfect sales men has
still to be produced. The training begins when the salesmen enters the company and continues
until he leaves it. Once the break-in training has been given and the duties along with the
territory, for work has been allotted and assigned it creates certain confidence among the men
sales. But this confidence must not be destroyed in the future course of time during selling
interactions. To prevent this, the trainee is sent out into the field along with a senior executive or
a supervisor. This is a very important stage when the trainee has left the initial training school
and has entered the job arena. The trainer must guide and inspire the salesmen by putting the
salesman at ease create interest and build more self confidence in him. Self-confidence leads to
the enthusiasm and should create positive attitudes such as ―I can do it‖. Rather than ―ICANT‖.
The salesman should be thought how to plan his work, and better arrange the work whenever
necessary. Before the start of every day‘s work, he should be taught to check once again all the
necessary items required for the demonstration etc.. The trainer should observe the operations of
the trainee and should evaluate the performance either directly or indirectly and should create the
effect of betterment from situation to situation.

Stimulation Training (Motivation of Salesmen)

The training is intended to induce in the salesman a desire to improve the working hobbies and
attitude towards the job. It seeks to spur and impel the salesman‘s mind and emotions with a
view to drive him into action. Thus the salesmen should be ―motivated‖ to sell more. The
motivation can be

 Group motivation
 Individual motivation.
The objectives of both types of motivation are the same. Motivation may be a) financial b) non-
financial.

A) Financial Motivation Includes: Commission, prices, bonuses and profit sharing.

b) Non-financial Motivation can also be called as psychic motivation which will be more
effective if it is in the form of approval, respect and fair treatment.
The Training Plan:

The training plan or program contains the following elements:

1. The training objectives

2. The subject matter of training

3. The place of training

4. The time of training

5. The person involved in the training

6. The criteria of training

7. The methods of training.

1) Training Objectives:-

This is the first step which is to identify the objectives of training. It consists whether the training
is for new recruited or for existing sales force. It also should specify about the technical
knowledge to be passed or to incorporate the fundamentals of salesmanship to the new recruited.
In this type if the training objectives are crystallized it will identify what should be thought i.e.
the subject content of the training.

What should be taught? (The subject-matter)

The job description is the basis or the standard around which a training program should be
framed. Greater emphasis must naturally be laid on the more important duties. The (difficulty)
analysis (should) specify the best methods for overcoming specific selling problems. The stress
in training should be on skill, knowledge, work habit and attitude. Attitude is a very important
factor in selling success. In order to secure proper attitude it is necessary to include in the
training program information which would insist in the sales man an understanding of:

1. The distribution system in general and how it affects the company in particular.
2. How the industry or product plans fit into the general company.
3. How this particular company fits into the industry.
 4. The company‘s policies and objectives.
5. The history and reputation of the company, and
6. The reasons for and the type of disciplinary action introduced in the company.
 Where should Training be Given
Training may be divided into (1) Group training and an Individual training. The former can be
given in centralized schools (at the home office or factory) and (2) Decentralized schools (at
branches or districts). Individual training may be in the form of job training, job rotation, by
correspondence or by attending regular school of commerce. Group training is not suitable for
the development of attitudes. Of course this is a very difficult question as the problem of attitude
has to be considered not only from the training angle but also involves proper selection,
supervision, organization and so on. Group meetings are also good for the knowledge training or
giving necessary information about the products to the trainee. Of course the technical aspect
must be very closely interlinked with the possible benefits to the customers. Attitude training and
work habit training are at best given in the field.

Centralized VS Decentralized training:

The advantages of the centralized training school i.e. training at the home office or factory are:

1. Instruction is uniform.

2. The instruction quality is generally higher.

3. The home-office staff can be used to train in the subjects in which they specialize.

4. A smaller number of instructors are needed than in the case of the decentralized system.

5. The visual aids approaches, which can be used in training, would be superior and less costly as
only one set has to be prepared and it is not required to be carried from one place to another.

6. The trainees would get better appreciation of the operations at the home-office.

7. The imaginary or real barrier between those in the field and the home-office is removed and
this result in a greater sense of cooperation and working as a team.
As against this, the following are disadvantages.

1. The academic atmosphere which might be created may render the training less effective than
local training.

2. The cost factor has to be considered. As transportation and housing may also have to be
provided, the expenditure caused by the man sales office for a certain period of time must be
borne in mind.

3. There is a tendency for the salesman to consider this type of trip as their vacation.

4. It may interface with the normal home-office routine as it might require the execution to come
in as trainers and help.

The home-office school is most effective in attitude training as it gives the salesman immediately
a complete and intimate knowledge of the company itself. A recent development for combining
the advantages of centralized and decentralized methods is the introduction of television.
Television can also be used to bring the office operations right into the home-office classroom.
However, as far as India is concerned, we have to wait some time more before this might become
possible.

When should Training be given:-

Training should commence immediately after the joining of the salesman and should be
continuous up to the exit of the salesman from the organization. Sometimes as an interesting
technique the salesman will be trained before selection. He will be required to work in the field
for few days with his senior and experienced person. This passes a clear cut information to the
prospective sales person about what the expectations are on him. It also gives the applicant an
opportunity to become acquired with the real job.

Who Gives the Training:-

With regard to this question as who should do the actual training, the one feeling seems to be that
the responsibility must rest in the line (i.e., with persons like the sales supervisor or immediate
boss) since the line is in fact responsible for the results secured by the salesman in the field. It is
felt that it is difficult to separate the two. Besides, the line would have an intimate knowledge of
the selling problems. Again salesmen generally respond more favorably to a lineman than to a
man staff. The other point of view is in favor of training being a staff function.

The advocates of this view express the feeling that although the responsibility for training is in
the line, common sense requires assistance from the training staff. Trainers, who are skilled in
training techniques, are in a better position to do the job than a supervisor or branch manager
who rarely has such skill.

The training formula (or) how training should be given :

The training program should be conducted by a formula which consists of four steps.

1. Preparation

2. Representation

3. Application

4. Inspection

This has been developed by Charles R Allen in his book ―The Instructor‖ in 1919. This has now
become the sales formula to prepare, tell, show, practice and check the trainees.

Preparation means preparing the salesmen for the performance by explaining the financial and
psychic rewards such that the sales person becomes ready for effective performance.

Telling to the sales man is about explaining the nature of the duty and the job. Here the salesmen
should be informed about the qualities required to perform. For getting the sales done, showing
of a man sale includes the demonstrations before the trainee sales person in ascertaining the
attention of the prospects and to convince the prospect for the purchase of the product. Practice
in the sense, means applying the knowledge with more self-confidence and encouraging the sales
person after the experience of the earlier three steps. It is an on the job learning process and this
practice makes the sales person perfect. Checking is the process of evaluation of the performance
by the supervisors/counselors for improving more professionalism of the sales job.
6.4. Methods of Sales Training

The three basic methods of group training are:

1. Telling

2. Showing and

3. Conferring.

(1).In the telling method, material is presented in the form of lectures with chart representation
as may be appropriate. This is a traditional method of teaching and is good for giving facts and
information. (2).The showing method uses actual showing i.e.; how it is done for example,
demonstration by an experienced salesman or sales trainer.(3). The latest development in training
methods is the conferring method. Under the leadership of a capable conference leader the
salesmen are made to participate. All those present will acquire new information on the basis of
the actual experience of the other‘s problems which are analyzed. Everybody contributes
something in this process of learning.

2. Visual Aids Method:-

The telling or the straight lecture method can be made more interesting by the use of visual aids
such as filmstrips, slides, movies, charts, posters, cartoons and actual objects.

3. Conferring Method:-

This consists of pooling of thoughts of various persons and the group needs to learn and not to be
instructed.

This method can create greater degree of interest, gives a chance to each one to participate,
develops group morale and stimulates analytical thinking. It is not a good method for giving new
information or is used for in - experienced trainees.
The Discussion and Case Method:-

This method is used for training persons who have some knowledge of a given subject in the
pure conference method. The basis is that, all ideas and solutions will come from the group itself.
The discussion must be guided; by a well-trained leader.

In the case method, an actual or hypothetical sale is discussed.

The Panel Method:-

This method encourages original thinking but has to be skillfully handled. Here, a discussion is
presented by certain number of experts on the panel who face the trouble to prepare and present
the facts and the discussions. Often the panel method and the discussion method are combined
and the panel may present certain facts which are followed for general discussion.

The Role Playing Method:-

This method compels the sales person to act according to the situation / problem by instantly
defining the role and the version.

The Round Table Method:

This method which can also be called as ―SHIRT SLEEVE SESSION OR SHIRT SLEEVE
METHOD‖ requires the persons sitting around the table to discuss ideas relating to the particular
subject. A good discussion leader is essential for this.

The Group Dynamics or Multiple Table Technique:-

This is a similar method but involves the use of many tables. Each table will be having a leader
and a group who will carry the discussion of different subjects or different phases of a common
subject.

At the end each leader presents the brief summary of the discussion table wise. This enhances the
chances of getting the success with more knowledge of sale proceeds and conditions.
The – Each – One – Train – One Method:-

In this method where two or three good men sales are required to tell their colleagues how they
did it. Through the discussion they can exchange their ideas and can opt for better tools and
techniques in future, on a continuous basis like a chain reaction.

Storming Brain Method:

In this method a problem or a situation is thrown at the persons sitting round the table and they
participate through whatever comes to their minds. No one is permitted to contradict. There is a
scope of demolishing the ideas into a waste paper basket in this method.
 CHAPTER SEVEN
COMPENSATING (REMUNERATING) SALES PEOPLE
7.1. Requirements for Sound Remuneration Plan
A good sales compensation meets seven requirements.

1) It should provide a living wage by providing a secured income.

2) The plan should match with the motivational program by avoiding conflicts.

3) It should be fair enough and should be designed as equal pay for equal performance.

4) It should be fine enough and facilitate easy calculation.

5) The plan should adjust the changes in the performance.

6) The plan is to be economical to administer.

7) The plan helps in attaining the objectives of the sales organization.

7.2. Objectives of Compensation (Remuneration) Plan

The objectives of a good compensation plan can be viewed from the perspective of the company
as well as from the perspective of the individual sales person. None of these objectives are
mutually exclusive. In some situations, one goal may conflict with another. All, however, are
valuable guidelines for a sales executive to recognize and follow.

The Company’s Perspective

We begin by considering objectives from the company perspective.

 To Motivate Salespeople
Companies want to encourage salespeople to reach and exceed their goals. Thus, compensation
plans are designed to motivate sales people to perform. According to a survey of sales and
marketing executives, most companies do a relatively good job of using the sales compensation
plan to motivate their sales people. Clearly, designing a plan that motivates salespeople to meet
or exceed their goals is not an easy task.
 To Correlate Efforts and Results with Rewards
Correlating efforts and results with rewards is an ideal that most companies constantly seek yet
seldom achieve. One people in sales management is that it is frequently hard to equate efforts
with results. Another is that sometimes it is difficult even to measure results.

 To Control Salespeople’s Activities

A good pay plan should act as an unseen supervisor of a sales force by enabling management to
control and direct the sales representative‘s activities. Today, this usually means motivating the
representatives to ensure a fully balanced selling effort, that is a total selling job. The
compensation plan must offer incentives flexible enough to cover such varied tasks as full-time
selling, missionary work.

 To Ensure Proper Treatment of Customers

Companies will be increasingly competing on the basis of customer service. A seller‘s ability to
maintain strong, long-term relationships with customers depends largely on providing customer
service that result in a high level of customer satisfaction. A good compensation plan is one that
motivates salespeople to treat customers properly, thus providing customer satisfaction.

 To Attract and Keep Competent Salespeople

A good pay plan helps a company build the quality of its sales force. It should also assist in
attracting high-caliber representatives. Finally, a second plan should help to keep desirable
people.

 To Be Economical Yet Competitive

From management‘s stand point, a compensation plan should be economical to administer. A
firm whose compensation expenses are disproportional to its revenues will have to increase the
price of its product or suffer decreased profit margins. Most firms, however, want to keep their
sales force expenses in line with those of competitors. It is not always easy to balance being
economical with being competitive.
 To Be Flexible Yet Stable
A compensation plan should sufficiently flexible to meet the needs of individual territories,
products, and salespeople. Not all territories present the same opportunity. A representative in a
territory where the company is the leader should ordinary not be compensated by the same
method as a representative in a newly entered district.

At the same time, the basic plan should possess stability. The basic pay plan should contain
features that enable a company to meet changing conditions without having to change the basic
plan.

The Salesperson’s Perspective

The salesperson‘s perspective may differ from the company‘s perspective.

A secure Income and an Incentive Income

Every plan should provide a regular income, at least at a minimum level. The principle behind
this point is that sales reps should not have to worry about how to meet living expenses. If they
have a bad mouth, if they are in seasonal doldrums, or if they are sick and cannot work for a
period, they should have some income. However, this steady income should not be so high that it
lessens the desire for incentive pay.

In addition to a regular income, a good pay plan should furnish an incentive to elicit above-
minimum performance. Most people do better when offered a reward for some specific action
than when no incentive is involved. It should be noted that it is not possible to design a workable
system that offers the greatest degree of both security and incentives. The concepts are mutually
incompatible. In practice, the company must develop a compromise structure.

Simplicity

Simplicity is a hallmark of a good compensation plan. Sometimes simplicity and flexibility are
conflicting goals-that is, a plan that is simple may not be sufficiently flexible, and a plan with
adequate flexibility may achieve that goal at the expense of simplicity. However, the plan should
simple enough for salespeople to understand readily; they should be able to figure out what their
incomes will be.
Fairness

A good compensation plan must treat all salespeople fairly. Nothing will destroy salespeople‘s
morale faster than feeling that their pay is inequitable. One way to ensure fairness in a plan is to
strive to base it as much as possible on measureable factors that are controllable by the sales
force.

7.3. Importance of Compensation

A) To Sales People

It is the primary and often the only source of income for almost all employees and their families

It determines his/her status in the social system

A sales people income is a means of his/her usefulness to himself; sales peoples‘ income
determines his/her standard of living. From the view point of employees, pay is a necessity of
life.

B) To Employer Organization

Organization pays its sales people in the form of wages salaries and fringe benefits are quite
important as the cost of production for determining financial success. To increase compensation-
increase sales and profit. Compensation policy should be to pay sales people salaries and wages
high enough to attract, motivate and retain them

C) To the Country’s Economy

Salaries/wages are related to the satisfaction or dissatisfaction of sales people. Thus, these have
an impact on organizations production and county‘s economy. Government gives high attention
on employees
7.4. Factors Affecting Remuneration Plan

The major factors that affect an organizations compensation policies and practices are:

1. Government Factors

One of the strongest and persistent pressures up on compensation policies and practices of an
organization comes from the government. Government may set requirements for minimum wage,
over time, equal pay, and child labor

Government regulations may also enforce the prevention of discrimination toward protected
groups: Equal for women and men if their jobs involve equal skills, efforts, responsibilities and
conditions

2. Labor Unions

In organizations where labor unions represent a good proportion of the labor force, they may be
able to use their power to get an increase in salary and wage rates. In fact, in many organizations,
unions have been acting as pace setters in employees‘ demands for increased pay and other
benefits, and for a better working condition

3. Standard and Cost of Living

As cost of living increases faster than sales peoples‘ income, the main demand will be cost of
living adjustment to sales people salary or wages through different fringe benefits.

4. Comparable Wages

Organization‘s salary or wage policies and practices may, voluntarily or involuntarily tend to
conform to the wage pattern in the organization and in the community

5. Market Conditions

In time of scarcity of the required sales forces, there exists shortage of supply, which may cause
salaries and wages to be higher to attract and retain enough qualified sales people
 6. Ability to Pay

Salary and wage rates are dependent on an organization‘s ability to pay. Salaries and wages
constitute the most important cost item for many organizations. Other factors like the following
also considered

7. Performance

Nothing is more demotivating to productive sales people than to be paid equal salary as less
productive sales people. The organization need to practice various methods to improve
performance. The most common once are:

-Piecework (payment by results)- is a reward system in which rewards are related to the pace of
work/effort. The faster an employee works, the higher the output, and greater reward.

-Bonuses, commission

8. Seniority and Experience

Seniority refers to the length of time sales force have been working in the organization. Sales
people are more committed if seniority considered as value in promotion. Advocates of paying
for seniority believe that it enables the organization to maintain stable workforce. The seniority
must be linked with experience on the job. Organizations compensate on the basis of experience
because sometimes the practice is justified because of the valuable insights that can only be
acquired through experience.

9. Nature of Pay

Relative value of jobs in the organization and absolute value of jobs in the market place

Pay level decisions

 The objective of pay level decisions is to keep the organization competitive in the labor market.

 The pay level is decided by managers who compare the pay of people working inside the
organization with those outside it.

 Essentially , three( pay level strategies can be chosen)

  High pay strategy- this managers believe that paying higher wage s& salaries will attract &
hold the best employees & it is the most effective long range policy( firms are pacesetters

 Low pay strategy- this strategy may be used because this all the organization can pay ( the
ability to pay is restricted by the limited labor budget& forecasted decline in sales & profits
too.

 Comparable pay strategy- the most frequently used strategy is to set the pay level at the
going wage level. motivation & attitude

7.5. Methods of Compensation

The other key task in designing a sales compensation plan (besides setting the pay level) is to
develop the method by which the reps will be paid. The building blocks available to management
when constructing a sales compensation plan include the following elements:

M. Salaries
N. Commissions
O. Bonuses
P. Indirect monetary benefits ( eg. Vacation and insurance)
Some of these components are incentives for the sales force; others offer stability and security in
earnings; still others may help the firm control the sales costs.

Basic Types of Compensation Plans

Fundamentally, there are only three widely used methods of compensating a sales force:

 A straight salary: a fixed element related to a unit of time during which the sales person is
working
 A straight commission: a variable element related to the performance of a specific unit of work
 Some combination of compensation elements
Straight Salary Plans

A salary is a direct monetary reward paid for performing certain duties over a period of time. The
amount of payment is related to a unit of time rather than to the work accomplished. A salary is a
fixed element in a pay plan. That is, in each pay period, the same amount of money is paid to a
sales rep, regardless of that person‘s sales, missionary efforts, or other measures of productivity.

Strengths of Salary Plans

A regular income gives the sales person a considerable degree of security. A salary plan also
provides stability of earnings, without the wide fluctuations often found in commission plans

The assurance of a regular, stable income can do much to develop loyal, well-satisfied sales
people. Sales forces on straight salary usually have lower turnover rates than those on
commission. Also, management can direct the sales force in to various activities more easily
under a salary plan than under any other method of compensation.

Because people on salary are less likely to be concerned with immediate sales volume, they can
give proper consideration to the customers‘ interests. Also, customers often react more favorable
to a sales person if they know he or she is on straight salary.

Limitations of Straight Salary

A frequent objection to the straight salary plan is that it provides no direct incentive to the sales
force. True, a salary plan does not offer the strong, direct incentive that a commission or bonus
plan does. However, salary adjustments can provide incentives. Theoretically, salaries could be
revised daily or weekly in relation to the sales person‘s performance, but this is not practical. The
problem is finding a frequency of salary adjustment that is practical and that works as an
incentive. Companies sometimes do not make adjustments often enough.

Straight Commission Plans

A commission is a regular payment for the performance of a unit of work. A commission is

related to a unit of accomplishment, in contrast to the salary method, which is a fixed for a unit
of time. Sales people usually receive commissions according to factors that are largely under
their control.
 Commission plans generally consist of three items:

 A base on which performance is measured and payment is made-for example, sales in dollars or
units of the product.
 A rate, which is the amount paid for each unit of accomplishment- for example, if a firm pays a
nickel in commission for each dollar of sales, the rate is 5%
 A starting point for the commission payments.
Advantages of Straight Commission Plans

Probably the major advantage of the straight commission method of sales compensation is the
terrific incentive it gives to the sales force. Many firms have no ceiling on sales reps‘
commission earnings, so their income opportunities are un limited. Commission payments also
are a strong motivating factor to get the reps to work hard.

A commission plan probably is the best type of pay plan for weeding out in-effective sales reps.
another big advantage to the company is that a commission is a direct expense- that is, an
expense is incurred only when a sale is made or some other activity is performed.

Disadvantages of the Plans

The limitations of the commission method mentioned most often can be summed up under one
point: it is difficult to supervise and direct the activities of sales people because their overriding
concern is to sell more merchandise, without regard for the interests of the company or the
customer. The reps may concentrate on easy-to-sell items and ignore slow-moving ones.
Customers may be sold more items, or more expensive items, than necessary. Sales reps on
commission often disregard any thought of a fully balanced sales job, and management cannot
expect them to do missionary work.
 Combination Plans

Broadly speaking, the purpose of any combination plan is to overcome the weaknesses of a
single method while at the same time keeping its strong points. Most of the combined plans fall
within the following three categories:

 Salary plus commission

 Salary plus bonus
 Salary plus commission and bonus
Indirect Monetary Compensation

Sales executives are realizing that rewards are due in two other general areas. One is non-
financial compensation in the form of honors, recognition, and opportunities for promotion.
These features help sales people develop a sense of self-worth and a feeling of belonging to a
group.

The other type of reward is an indirect monetary benefit: an item that has the same effect as
money, though payment is less direct than a salary or commission. Indirect monetary benefits,
which are also referred to as fringe benefits or just benefits, include such things as retirement
plans, paid vacation days, and insurance.

Firms also give their sales people paid holidays and provide paid vacation time that varies
according to the employees‘ length of service. Paid vacations present a managerial problem in
connection with sales people who work substantially or entirely on commission. These reps
usually do not receive vacation pay that equals their commissions.

Indirect monetary benefits are important in attracting desirable sales applicants. These benefits
probably give sales people a degree of security and make them more loyal and more cooperative
than they would be otherwise
 CHAPTER EIGHT
EVALUATION AND CONTROL OF SALES PEOPLE
8.1. Performance Appraisals- what are they?

8.1.1. Meaning of Performance Appraisals

Performance Appraisals is the assessment of individual‘s sales force performance in a systematic

way. It is a developmental tool used for all round development of the sales force and the
organization. The performance is measured against such factors as job knowledge, quality and
quantity of output, initiative, leadership abilities, supervision, dependability, co-operation,
judgment, versatility and health. Assessment should be confined to past as well as potential
performance also.
Performance Appraisals and Job Analysis Relationship

Job Analysis à Performance Standards à Performance Appraisals

Describe the work and Translate job requirements Describe the job relevant strengths
personnel requirement of a into levels of acceptable or and weaknesses of each individual
particular job. unacceptable performance sales force.

Objectives of Performance Appraisals

Use of Performance Appraisals

1. Promotions

2. Confirmations

3. Training and Development

4. Compensation reviews

5. Competency building
6. Improve communication

7. Evaluation of HR Programs

8. Feedback & Grievances

8.2. Performance Appraisal Processes and Procedures

Stages in the sales force performance appraisal process include (1) establish sales goals and
objectives; (2) develop the sales plan; (3) set sales force performance standards; (4) allocate
resources and sales force efforts; (5) devise a plan for sales force performance improvement; (6)
conduct the sales force performance evaluation process; and (7) provide feedback on sales force
performance appraisals. Outcome-based measures can be separated into sales efforts, sales
results, and profitability indices. Sales efforts include such measures as number of sales calls
made, selling expenses as a percentage of sales volume, and number of service calls. Sales
results include measures such as number of orders obtained, dollar sales volume, number of new
accounts, and collections of accounts receivable. Profitability indices include net profit
contribution, and performance as measured by financial/economic indicators, such as return on
investment, return on sales, return on assets, and return on assets managed. Behavior-based
outcomes include sales-related activities such as customer relations, territory management, report
preparation and timely submission, product knowledge, and personal characteristics. Successful
sales organizations usually employ a mixture of quantitative and qualitative performance
standards. Competence assessment, which tries to determine the characteristics needed to do a
job rather than the specific tasks of the job, has been successfully used to select high-achieving
salespeople. Professional development measures for assessing sales force performance include
professional selling skills, professional knowledge, and personal characteristics.

Establish different types of sales goals and objectives, and develop the sales plan.
After establishing long-run sales goals, the sales manager can focus on the shorter-run, more
quantifiable targets, called sales objectives that should be aligned to the company's goals and
objectives. For example, these goals may be to become the most service-oriented sales force in
the industry or to increase profitability on sales by 10 percent. If these sales goals and objectives
are not communicated to salespeople, they can become little more than "wish lists" without the
organizational commitment needed for achievement. In essence, the sales plan provides the
detailed "road map" showing how to achieve sales goals and objectives.

It includes four major parts: (1) situation analysis, (2) opportunities and problems, (3) action
programs, and (4) performance evaluation systems.

Set sales force performance standards.

Performance standards are planned achievement levels the sales organization expects to reach at
progressive intervals throughout the year. Ideally, they should be agreements between
subordinates and superiors as to what level of performance is to be acceptable in some future
period, and they should be formalized based on the detailed job description for the sales
subordinate. In setting performance standards for the sales force, managers need to consider
efforts expended as well as results obtained. Business-to-business sales may require several
months of intense sales efforts before the prospective buyer makes a final decision. Thus, where
there's a time lag between effort and tangible results, sales managers must use qualitative, as well
as quantitative, measures in setting sales performance standards.

Describe the procedure for marketing costs and profitability analyses.

Sales analysis, whether by territory, sales rep, product line, or customer, involves five major
steps: (1) specify the purpose of the analysis, (2) identify functional cost centers, (3) convert
natural expenses into functional costs, (4) allocate functional costs to segments, and (5)
determine the profit contribution of segments.

Allocate resources and efforts through sales quotas.

There are four types of sales quotas: sales volume, financial, activity, and combination. The
rationale to use a specific type of sales quota is largely based on the quantitative and qualitative
sales goals a salesperson is expected to achieve in a given time frame.

Three variants of volumes quotas are dollar-based sales quotas, unit volume quotas, and point
quotas. Two categories of financial quotas are expense quotas and profit quotas. Activity quotas
are measured by factors such as the number of prospects called on, number of demonstrations
made, number of displays set up, and number of new accounts established.
Combination quotas are used when management wants to control the performance of both the
selling and non-selling activities of the sales force. These quotas generally use points as a
common measuring tool to overcome the difficulty of evaluating the different units used across
quotas.

List the major steps in the sales force performance evaluation monitoring system (PEMS).

An effective performance evaluation monitoring system (PEMS) has three stages: performance
planning, performance appraisal, and performance review. Specific steps in the performance
measurement and evaluation process include (a) establish sales goals and objectives, (b) develop
the sales plan, (c) set performance standards, (d) allocate resources and sales force efforts in
implementing the sales plan, and (e) evaluate sales force performance and implement corrective
actions, if needed.

Provide feedback and evaluation, and improve sales force performance.

Four widely used evaluation techniques are descriptive statements, graphic rating scales,
behaviorally anchored rating scales (BARS), and management by objectives (MBO). Descriptive
statements about a salesperson may be short responses to a series of specific criteria such as job
knowledge, territorial management, customer relations, personal qualities, or sales results. Two
commonly employed devices in graphic rating scales are "semantic differential" and Likert-type
scales. The semantic differential uses bipolar adjective extremes to anchor several scale
segments. Likert-type scales provide descriptive anchors under each segment of the scale.

BARS, which concentrates on measuring behaviors key to performance that the individual
salesperson can control, includes four basic steps: (a) identify critical incidents, (b) refine critical
incidents into performance dimensions, (c) rate the effectiveness of the described behaviors, and
(d) select a set of incidents as behavioral anchors for the performance dimension. MBO involves
mutual goal setting by the sales manager and the sales representative, who jointly agree on the
salesperson's specific goals or performance targets for the coming period.
 Traditional performance evaluation systems have limitations including the halo effect, central
tendency, varying evaluation standards, psychological resistance to negative evaluations, recent
performance bias, no outcome focus, inadequate sampling of job activities, political concerns,
fear of reprisal, interpersonal bias, questionable personality traits, and the influence of special
organizational use. Prompt evaluation feedback should be provided to salespeople, so they can
take measures to enhance their performance by improving selling skills and ultimately their sales
performance through sales training programs.

Apply twenty-first century sales force performance appraisal methods

.
Current developments in the area of sales force performance appraisals include 360-degree
performance perspectives, performance appraisals of team selling, and performance review
ranking systems. Just as in evaluating individual sales force members, team performance
evaluation involves selecting the relevant performance criteria and employing appropriate
appraisal methods.
The 360-degree performance appraisal process systematically elicits information on a
salesperson's skills, abilities, and behaviors from various individuals with whom the salesperson
is in ongoing contact ?all internal and external constituents, including the sales manager, sales
team peers, sales subordinates, other departmental coworkers, purchasing managers, and
accounts payable managers. Also included is a self-assessment, thus providing appraisal from
many different perspectives.

Performance review ranking entails sales managers evaluating each of their salespeople by
ranking them using multiple performance dimensions and then placing them in different
performance categories using a scale (e.g., A _ excellent performance, B _ above-average
performance, C _ average performance, D _ satisfactory performance, and E _ sub-par
performance).
8.3. Methods for Performance Appraisals

Every sales manager and sales supervisor appraises the performance of the salesmen under his
charge. It is unfortunate that the importance of organized appraisal is not recognized by many
sales executives; some believe in accurate appraisal as it is not possible because of the nature of
sales job and good many variables influence his performance; still, there are others who dismiss
the idea on the count that such an appraisal is purely subjective and superficial and unsupported
by facts and colored by personal whims and fancies of the appraiser.

However, in spite of these problems of judging the salesman‘s performance, reliable methods of
evaluation can be developed to provide sound appraisal of salesman‘s work. The principal
methods of evaluating such performance can be of two types namely, qualitative and
quantitative.

The qualitative methods are:

1. Personal observation by sales executives.

2. Merit rating.

3. Customer opinion of salesmen.

On the other hand, the quantitative methods are:

1. Analysis of sales records and reports.

2. Comparison of salesman‘s performance with quota.

3. Ratio analysis.

4. Profit and loss statement.

A. Qualitative methods:

1. Personal observation by the sales executives:

Personal observation of sales performance of sales-force by sales supervisors, branch and district
sales managers, sales manager and other, sales executive staff is used in appraising the
salesmen‘s effectiveness.

This method involves casual, informal impressions by the sales executives in their day-to-day
contacts with the salesmen in the office and the field. As it appears superficial, many sales
managers feel that there should be extensive and continuous appraisal.

Appraisal begins with sales supervisors who work closely in the field with small group of
salesmen. Here, the sales supervisor appraises sales performance of each one with a view to
detect the possible selling weaknesses to bring about refinement in the due course.

Branch sales managers do undertake appraisal work with a view to recognize the good
performance on the basis of which they can decide on employee up-gradation and transfer.

Regional or divisional sales managers appraise the salesmen to make long-range plans,
strengthen marketing organization and boost operations. Sales staff at headquarters appraises
sales-force to determine the effectiveness of recruitment, selection, training and control of
salesmen.

2. Merit rating:

Another reliable method of measuring the sales aptitudes and performance is merit rating. Rating
are made of each salesman by his superior who completes a rating form containing series of traits
and accomplishments on the basis of which a salesman is rated.

A numerical scale ranging from ‗high‘ to ‗low‘ is used by the rates in rating each characteristic
of a salesman. These characteristics are determined by the nature of selling task.
However, the most common traits are industry, dependability, loyalty, cooperativeness, initiative,
judgment, knowledge of product company sales task. Therefore, separate forms are used for
salesmen engaged in different types of sales jobs.

Merit-ratings are fruitfully employed by sales managers to record the progress of salesmen as a
guide in determining promotions, demotions, transfers, counsels, compensation, and recruitment,
selection, training and to boost the morale of sales-force by considering their performance.

3. Customer opinion of salesmen:

Sales managers and supervisors get regular comments on salesmen under their charge through
their personal contacts with consumers and dealers. The relationship of a salesman with
consumers, dealers, architects, contractors, purchasing agents and the like has deeper bearing on
his sales performance.

Usually, those salesmen who work well with others, command respect and friendship of
customers and is credited with superior performance. Customer opinion of salesman is usually a
reflection of the personality and personal service of the individual.

The salesman, who instructs the buyers in the operation of the product, makes prompt
adjustments, helps customers in getting good delivery and service is well treated by the
customers.

Similarly, a salesman who gives dealer sales assistance, merchandising and management advice
has the favorable opinion. A good customer and dealer opinion is a mark of his success and a bad
opinion is a sure sign of poor performance.

B. Quantitative methods:

1. Analysis of sales records and reports:

Controlling the individual salesman‘s performance by sales managers and sales supervisors
begins with the sales call report. Information from the call report is summarized on a salesman‘s
weekly and monthly sales record files in the sales office.
These summary records give condensed account of his sales, commission, travel expenses,
number of calls, loss of working day, new accounts opened, performance in relation to quota, of
products sold and other facts about his activities.

With these salient facts of a salesman‘s performance in the summary records a sales manager or
the supervisor can make a weekly and monthly analysis of a salesman‘s progress and take
prompt corrective action. Any deviation from a normal performance can be quickly noted and
called to attention of the salesman concerned.

The deviation can be analyzed and plans be made for personal supervision to bring the
salesman‘s performance back to normalcy. It also shows outstanding performance of some
salesmen so that recognition can be given to those who deserve it.

Such analysis is not only needed for control but for future planning of operations and designing
the programs. A caution is to be exercised here in that salesman‘s effectiveness should not be
based entirely on the analysis of the sales reports and records because, there are many other
factors which influence sales- performance which are not revealed by sales reports and records
alone.

2. Comparison of salesmen’s performance with quotas:

One of the most common methods of appraising the salesmen is comparing present and past
salesmen‘s performance with quotas or standards of accomplishment established for sales
volume, profit, expenses and the activities. Sales quotas are set by management after due
consultation with the salesman, for each salesman‘s territory for a specific period. Each salesman
is judged on the basis of his performance in relation to his quota.

Though separate quotas may be established for sales volume, sales expenses, gross-profit and
activities, the most popular is sales volume quota expressed in terms of so many units or rupees
for a specific period.
Such a figure spelled out is arrived on the basis of a detailed analysis of market potential, past
sales performance estimates by salesmen and dealers, new products or product of product
improvements, advertising, competition, the ability of salesman, judgment of sales executive and
the prevailing economic conditions.

Such a sales quota can be for all the products in a line or for individual product or group of
products, for an area say, branch or district or a region, for a specific period ranging from a
month to a year or for individual customer or a group of customers and for a call or sale.

On the basis of comparison, the sales executives appraise the effectiveness of each salesman and
take necessary action.

3. Ratio analysis:

Certain ratios are much helpful in measuring sales performance in analyzing sales reports and
records that the sales office has. Take the example of sales expenses ratio. This ratio establishes
the relationship between the sales expenses and the sales volume.

If annual sales are say Rs. 2,00,000 and sales expenses are Rs. 5,000, then the expenses ratio will
be 40 per cent (Rs. 5, 00 /Rs. 2.00,000) x 100 .

Taking the specific conditions prevailing in each sales territory such norms can be fixed and the
actual can be compared with these norms and deviations can be analyzed for taking necessary
corrective action. This being an expenses ratio, it is dangerous for a salesman to exceed this ratio
or percentage. Similarly, sales performance can be appraised on the basis of sales profit ratio.

This ratio speaks of the rate of profitability in terms of profits. Say, a firm has an estimated sales
of Rs. 1,00,000 and a profit of Rs. 15,000, then the sales profit ratio will be 15 percent (Rs. 15,
00 /Rs. 1.00,000) x 100 .If this 1, 00,000 figure is accepted as norm for sales-man‘s performance,
every salesman should reach this and cross it as income ratio.

Such ratios can be: stores displays to total retail accounts served, a ratio of direct mail programs
to the total accounts or a ratio of time spent in stores to total selling time, in case of missionary
salesmen.
In case of new business, this ratio can be of new accounts to total accounts. Through ratio
analysis is not fully used in appraising sales effectiveness, it can be a valuable guide if one uses
it in cross-verification way.

4. Profit and loss statement analysis:

It is a recognized fact that ability to sell at a profit is a clear indication of excellence of sales
performance. A salesman‘s profit performance is measured by profit and loss statements for his
sales territory.

Progressive and cost conscious companies prepare income statement for each salesman‘s
territory giving the details of net sales, cost of goods sold, gross profit, operating expenses and
the net profit.

Depending on the individual company procedures, either gross profit or net profit and other
related expenses are analyzed and salesman‘s effectiveness is determined in the back-ground of
standards so set. This profit and loss statement method of evaluating salesman‘s performance has
its own limitations.

Neither gross profit nor net profit gives a totally accurate picture of salesman‘s performance. It is
quite possible that the two salesmen selling the same articles may give different profits; this may
be due to the differences in territory size, demand pattern, nature of products sold, nature of
accounts dealt with, market potential, caliber of outlets, economic conditions and so on.
Therefore, one is to be careful while using this as a yardstick to measure the efficiency of the
sales-force at the command of the company.
8.4. Rules for Performance Appraisals

Seven Rules for Performance Appraisals

Here are seven rules to carrying out performance appraisals:

 Have a positional agreement for the employee: Instead of a job description, has a
positional agreement for the employee's job position that includes their responsibilities
and how their performance will be measured.

The performance appraisal can then be designed to match up with the responsibilities and
the key measurements in the positional agreement. The employee will have a good
expectation of what is required for the job and it will be easier for the manager to make
judgments on their performance.
 Have a vision for the employee's development: A leader does two things well. They
enroll and inspire others to follow them. You as the leader need to have an inspiring
vision and understand how the employee will potentially contribute to that vision.

Understand for yourself what a high level of performance for the position would be and
set the standards.

 Have formal performance evaluation every six months: In his book, First Break All
the Rules, Marcus Buckingham lists 12 questions that that the most talented and best
performing employees need from the workplace. One of the 12 questions in the list is "In
the last six months, has someone reviewed my progress?" Another point is that "How
much do I get paid?" was not even on the list.

To summarize, it is more important for the best employees to have their performance
reviewed at least every six months over how much they get compensated.

 Have employees develop their own goals for each six month period: Most of the time
performance appraisals are much too subjective to the opinions of the supervisor. An
employee will not understand how their performance is perceived unless they receive
constant feedback.

However, if the employee is allowed the opportunity to set their own goals, they will
know exactly where they stand on their evaluation and they will also take more
ownership of their performance.

 Match evaluation criteria to culture and values of company: What is the main reason
that employees often get terminated? Often it is not because the employee cannot do the
responsibilities of the job, but it is rather their behavior or attitude that creates problems.

A strong definition of the culture of the company combined with a performance appraisal
that requires employees to set goals in improving the culture of the company will go a
long way in building a superior employee base.
  Have employee evaluate themselves against their own goals: At the end of the six
months the employee now has the opportunity to evaluate themselves against their own
goals. The key is that these are their own goals. The employee will commit more to their
own goal because of the added incentive of maintaining their integrity.

 Coach, and not dictate the employee to better performance: After the performance
appraisal is completed and evaluated at the end of the six month period, the manager also
will provide feedback to the employee on their perception of how well they met their
goals.

This conversation is an excellent time for the manager to coach the employee and ask,
what support do you need from me to meet your goal? Instead of a manager feeling like
they are delivering bad news in a performance review session, he or she can feel that they
are now encouraging their employees to improve themselves.

One of the most valued assets in your company is the sales people that work for you.
The performance appraisal is an excellent way to attract and keep your top employees for a long
time.
 CHAPTER NINE

PROFESSIONAL SELLING PROCESS

9.1. Sales process/ the dynamics of selling

This portion of the course enables learners to equip the necessary skill and knowledge to conduct
sales.
9.1.2. Introduction
Sales people perform many activities which can be broadly grouped selling activities, and none
selling activities. The selling activities consist of the various steps of the selling process. The
non-selling include preparation of sales reports, collecting payments, obtaining market
information, travelling and waiting to see customers.

There is no magic formula to make a sale. However, it is widely believed that if a sales person
follows the steps shown in figure 9.1, the chance of success is greatly improved. The steps or the
phases may not occur in the same sequence or order that is shown. Customers may raise
objections during a sales presentation and trial close may be attempted after the presentation, if
the customer‘s interest is high. Similarly, the customer may or may not start the negotiation, after
a presentation.

The sales process is recommended set of phases or steps that works better than any other process
in certain situation. The sales process refers to a sequential series of actions by the sales person
that leads towards the customers taking a desired action and ends with a follow up ensuring
purchase satisfaction. Although, many factors may influence how sales person caries a
presentation in any one situation, there is logical, sequential series of actions that, if followed
will increases of making sale.
Let us discuss each of the steps:

Figure1 the personal selling process

9.2. Prospecting- life blood of selling

A prospect is an individual, family, or an organization that needs the product or the service a
sales person is selling and also has the ability to buy. A prospect is not the same with the sales
lead or a lead. Rather a sales lead generates of a person or a business firm that is a probable a
prospect. Once it is found that the sales lead wants the product and has the ability to buy, the
sales lead becomes a prospect or a potential customer. Prospecting is the first step in the selling
process. A prospect is a qualified person or business that has the potential to buy your product or
service.

Prospecting is the life blood of sales because it identifies potential customers. There are two
reasons that a sales person must look constantly for new products:
• To increase sales
•To replace customers those are lost over time A prospect should not be confused with lead. The
name of a person who might be a prospect is referred to as a lead. A lead can also be referred as
a suspect, indicating the person or business is suspected of being a prospect. Once the lead has
been qualified, the leads become a prospect. You can ask seven (7) questions to determine if an
individual or business is a qualified prospect.
c) Does this individual or business need my product or services?
2) Does this individual or business perceive a need or problem that may be satisfied by goods
or services?
 3) Does the individual or business have a sincere desire to fulfill this need or solve this
problem?

4). Can this person‘s or business‘s desire to fulfill needs or solve problems be converted in to
a belief that my product is needed?

5) Does this individual or business have the financial resources to pay?

6) Does the individual have the authority to buy?

7) will this potential prospect‘s purchase large enough to be profitable?

It is an important activity for succeeding in today‘s competitive environment. To increase or
even maintain sales volume, particularly if the sales from existing customers is stagnating or
declining, a company must continuously prospect for new customers. Earlier most organizations
had left it to their sales people to find leads. Know more companies are taking the responsibility
of searching and qualifying the leads. This enables sales persons to use their expensive time on
selling activities. Organizations can generate leads (or obtain names and addresses of probable
prospects) in number of ways.
Table 2: sources of prospecting
9.2.1. Prospecting method
The actual method in which a sales person obtains prospects may vary. But the most popular
methods are the cold canvas method; the endless- chain method, exhibition and demonstration
method direct mail method, center- of- influence method, telephone prospecting method,
telemarketing method, and observation method.
(a) cold-canvas method:
This prospecting method is based on the law-of-averages. For example, if past experience reveals
that one person out of ten(10) will buy a product, then fifty (50) sales calls could result in five
sales. Thus the sales person contacts as many leads as possible recognizing that a certain
percentage of people approached will buy.

(b) Endless-chain referral method:

After every sale (or contact with a person), the sales person ask the customers for a list of several
friends who might also be interested in the product. The sales person then approaches these
prospects, attempts to sell them and also asks them for names of potential prospects. The endless
chain is used widely in the sale of services such as insurance, health, education…etc.
(c) Exhibitions and demonstrations method:
This method of prospecting frequently occurs at trade shows and other types of special-interest
gatherings. Many times, related firms will sponsor a booth at such shows and staff with one or
more sales person. As people walk at to the booth to examine the products, sales people has only
a few minute to quality leads and get their names and addresses to later contact them at their
homes or offices for demonstrations.

(d) Center-of-influence
Center-of-influence involves finding and cultivating people in a community or territory who will
help find prospects. They typically have a particular position that gives them some influence
over other people, as well as information that allows the sales person to identify good prospects.
(e) Direct mail method
Direct mail is sometimes effectively used to contact individuals and businesses. Direct mail
advertisements have the advantages of contacting large number of people spread across an
extending geographical are at a relatively low cost compared to using sales people. People who
request more information from the company subsequently can be contacted by a sales person.
(f) Telephone prospecting method
This method of prospecting is used to contact a large number of prospects across a vast area is
less costly than a canvassing sales force, although this method is usually more costly than mail
outs. This person-to-person contact afforded by the telephone allows for interactions between the
lead and the callers, which enables a lead to be qualified or rejected quickly.

(g) Telemarketing
Telemarketing is a marketing communication system using telecommunication technology and
trained personnel to conduct planned, measurable marketing activities directed at targeted group
of customers.
(h) Observation method
Is finding prospects by constantly watching what happens in the sales area. Office furniture,
computers, and copier sales persons look for a new business construction in their territories. No
matter what prospecting method is used, it is always important to keep your eyes and ears open
for information on what needs your products.

9.2.2. Criteria use in selecting prospecting method

Sales person should choose prospecting method that fit the specific need of his/her firm. It is not
advisable to copy another company‘s prospecting method regardless of its success and similarity.

Generally, there is no one optimal mode of prospecting. Because, since different sales persons
faces and struggles with different needs and situations; they can be successful by selecting either
method which is suitable to them. But a sales person should concentrate on high potential
prospect first and on low-potential for latter calls. Like many other components of the selling
process, prospecting methods should be chosen in light of the major factors defining particular
selling situations. There is no one optimal prospecting mode to fit all situations.

Generalization can be made, however, regarding the criteria used in choosing an optimal
prospecting method for a particular selling situation. These criteria used to develop the best
prospecting method are:
1) Customize or choose prospecting method that fits specific needs of your firm. Do not copy
another company‘s method.

2) Concentrate on high potential customers first and leave prospects of lower potential for latter
calls.

3) Always call back on prospects, who did not buy with new products, do not restrict yourself to
present customers. A business may not have purchased your present products because they did
not fit present needs; however, a new product may be exactly what they need.

9.3. Pre-approach
The pre-approach generally includes two tasks: information gathering in depth about the
prospect, and planning the sales call on the prospects.
Information gathering: The sales person needs to collect as much information as possible about
the prospect. The prospect‘s business, its products and services, purchasing practices, location of
plants, names and background of people who make buying decisions, purchasing orientations
and practices, the major problems or issues faced by the prospect and the industry in which it is
operating , and soon. The source of obtaining information about the prospect include the internet
or online information services, trade magazines, industrial directories, chamber of commerce,
annual reports of companies, existing customers and suppliers, and government publications.
Planning the sales call The sales person should then do the planning, before approaching the
customers. This consists of setting objectives for the sales calls, planning the sales strategy.
Setting call objectives- this includes gathering information about the needs from the prospect,
understanding buying-orientation and practices, checking merchandise and marketing reorder
from the existing distributors. The sales person must set an objective for each of the sales calls.
Planning the sales strategy – it consists of finding out when (date and time) and whom
(purchase executive or administrative officer) to approach by phone call, followed by personal
visit. It includes a personal judgment about which of company‘s products best meet the
customer‘s needs. And also tentative planning for presenting the specific product features and
benefits.
It should be understood that the tentative planning of the strategy that is made at this stage may
have to be changed later on after gaining the information based on the actual call made by the
sales person. This type of modification to selling objectives or planning is called adaptive
selling.

Sales person always deal with multicultural customers in domestic as well as international
markets. Because, sales people can change their sales presentations, sales messages or behavior
for different customers and different selling situations, personal selling is referred to as adaptive
selling.
9.4. Approach
After collecting the prospect‘s name and other relevant information, as mention earlier in pr-
approach, the next step is to make an appointment to see the prospect. This is called the
approach. The approach (or meeting the buyer for the first time) takes a few minutes of call, but
it can make or break a sale. When a sales person meets a potential customer for the first time, the
first impression should be favorable. The first or initial impression of sales person is based on
his/her appearance (for example, wearing the similar to what the buyer wear), the attitude and the
opening line.

9.4.1. Approaching techniques

Depending on the situation, a sales person can decide on what the method or techniques to be
used to approach the prospect. The commonly used approaching techniques are:
i. Introductory approach:
The sales person states his/her name and the company‘s name proceed by a friendly and smiling,
and a firm hand shake. But this approach is less powerful to capture the interest of the prospects.
ii. Premium approach:
Premium approaching technique refers to the approaching of customers through whom a sales
person approaches his/her prospects by giving something that have value to them without any
payment. And this free offer aims at creation of relationship with prospects.
iii. Product approach:
Under this approaching technique, the sales person places the product to the counter or on the
hands of the customer and say nothing about it. This technique is useful if the product is new,
unique, or colorful. During which (or while they handle the product, prospects make analysis of
the product.

iv. Show-man-ship approach:

A sales person, who uses this technique, approaches his/her prospected customers by doing
something un-usual to capture the interest of prospects. A great care should take when the sales
person made the show. The show must be based on that can surprise the targeted audiences and
also should not conflict with their beliefs, attitude, interest, life styles and mood.

v. Question approach:

A sales person asks a question to start two way communications or to make the prospect curious
about the product or service.

9.5. Presentation
Sales presentation involves a persuasive vocal and visual explanation of a business proposition.
Considering the current importance of relationship selling, it is necessary for a sales person to
understand customer needs and wants first before considering of the method of sales presentation
and developing an effective presentation. Under this the sequence of our discussion will be:
(a) Understanding the buyer‘s needs

(b) Knowing sales presentation methods (strategies)

(c) Developing an effective presentation

(a) Understanding the buyer‘s needs

The best way to understand the buyer‘s (prospect‘s) needs is by asking questions. Based on the
research study, sales people should ask questions in the logical order presented below:
Situational questions: These questions are about the prospect‘s current situation or any facts the
sales person needs. For example, who are involved in buying decision making for this product?
Or are you buying this product for the first time or making a change from the existing supplier?
Problem identification questions: Sales person ask these question to identify or uncover the
customer problems, difficulties, or needs. For instance, have you experienced any problems on
quality or delivery from the existing supplier? Or which parts of existing system create errors?
Problem impact questions: Sales person ask the question to make the buyer release the impact
or consequence of the problem and the need to solve the problem. To illustrate: what impact the
quality and delivery problems will have on your costs and customer satisfaction? Or what impact
the errors in your system has on your customers?
Solution value questions: Sales people ask these questions to help the buyer assess the value or
usefulness of a solution.
Confirmations questions: Sales persons ask these questions to get confirmation from prospects
to hear about the products or services. For instance, if I can show you the proof that our
component supply would reduce the rejection rate to less than 0.5 percent, would you be
interested? Or would you be interested to know how our service minimizes the error in your
system to zero level? It is recommended that sales people ask fewer situational questions and
more questions on problem identification and impact, and solution value.
(b) Knowing sales presentation methods
Sales person must know the various methods (or strategies) used for making for a sales
presentation. These are:
• Stimulus response method,
• Formula method
• Need satisfaction method, and
•consultative selling method
• Stimulus response method It is also called as canned approach, a memorized sales
presentation, or a prepared sales presentation. This method assumes that if sales person makes
the right stimuli (example, sales presentation), he/she can get a favorable response from the
prospect. The sales person does most of the talking. Without knowing the needs of the prospect,
the sales person presents all the features of the product and then asks the prospect to buy the
product.
Stimulus response sales presentation method is used by telemarketing people, door-to-door sales
people, for training new sales people, when the time for sales presentation is short, and the
product is non-technical. However, making the sales presentation to all prospects or giving the
same sales talk is not effective for sophisticated buyers
The major fault in this method is that the sales person does not find out the needs of the prospect
by asking him questions and listening. The sales person talks about product features and benefits,
which may not be important to the buyer.
• Formula method this method is also known as ‗formulated approach‘ or ‗mental states
selling.‘ The sales person assumes that most buyers can be led trough mental states or steps in
the buying process and hence uses a well-known formula. It has four stages: attention, interest,
desire, and action (AIDA).

Attention The sales representative plans the sales talk by first getting the attention of the
prospects by making favorable comments about the prospect or prospect‘s business. The
objective of the first few minutes of the meeting is to put the prospect into a receptive state of
mind. It is always a good strategy for a sales person to make an appointment with the prospect.

Interest The sales person leads the prospect‘s mind to the second stage of gaining an interest. In
other words, the sales person finds out which aspect(s) or factor(s) of the product or service
appeals the prospect.

Desire The objective in this stage is to arouse a strong feeling in the prospect of wanting to have
the product or the service. The sales person continues with the sales presentation and
demonstrates to the prospect of how his/her product or service can solve the buyer‘s problem. In
this process buyers may raise some objections, which need to be answered properly.

Action The action, in this stage, means buying action, or closing the sale. • need satisfaction
method Here the sales person starts with ‗understanding the buyer‘s (prospect‘s) needs‘ by
asking situational, problem identification, problem impact, solution value, and confirmation
questions.
Only after clearly understanding or investigating the needs or problems of the buyer, the sales
person gives a written proposal or moves in to sales presentation (or demonstration capability
stage) to show how his/her product can solve the buyer‘s problem better than competitors.

This is done in three ways: features, advantages, and benefits as described below:
Features- the sales person describes characteristics of the product, or market offerings.
Advantage- the sales person describes how the feature can help or give advantage to the
prospect.
Benefits-the sales person then describes how the feature or advantage meet a clear and detailed
need expressed by the prospect. The selling effectiveness of need-satisfaction sales presentation
method is higher.

•Consultative selling method Consultative sales people or sales teams helps customers not only
in solving their problems, or meeting the needs, but also achieve the strategic goals of the
customers. For consultative selling, the requirements are as follows:
1. Sales people should have an in depth knowledge of customer‘s company and industry‘

2. Sales people should prepare the proposal for solving the buyer‘s problems and make the sales
presentation,

3. Sales people should use the selling firm‘s cross functional expertise to provide solution

4. Sales people should build long-term relationship with the customer.

(c) Developing an effective presentation

For developing an effective presentation, the following guidelines would be helpful:

i. Planning- there should be objective determination for each sales call and
presentation.

ii. Use technology-sales person should use the latest technology during sales
presentation.
 iii. Benefit plan-the presentation should be persuasive to create a good image
in the minds of prospects.

iv. Prospect‘s language-the sales person should use the language that is
understood by the prospect.

9.6. Overcoming objections

Sales objections, resistances, or oppositions may typically take place during sales presentation.
Objections should be welcomed because they show that the prospect has some interest, and that
if the objections can be answered satisfactorily, it would result in sales. Two types of objections
or resistances happen: psychological (or hidden), or logical (or practical/real). Psychological or
hidden objections include predetermined ideas or beliefs, preference for established brands,
dislike of making decisions, anxiety or resistance to spend money. Logical or real objections are
tangible such as quicker delivery schedule, high price, product quality, or product availability.
9.7. Methods for handling and overcoming objections
Some of the common methods of handling and overcoming the sales objections are: -ask
questions -turn an objection in to a benefit - Third party certificate when the sales person
expresses doubts about the product quality or performance, the sales person uses some other
customers‘ experiences of using the product as a proof or testimony. -compensation
9.8. Trial close/ closing the sale
Trial close is one of the selling techniques. It checks the attitude, or asks the opinion of the
prospect. Trial close does not ask the decision of the prospect after the sales presentation, after an
objection is answered, or before closing the sale. Some of the trial close examples are as follows:
* examine the product
*ask another person‘s opinion
* becomes friendly
9.9. Follow up and service
Sales people must understand that their job is not over after the order. Successful sales people
follow up a number of related tasks, some of which are called customer service, as described
below:

Check customer order

After getting the customer order, the sales person should go through the same carefully to check
if all details such as delivery period, address of delivery, advance payment(if any) and soon are
mention. If this checking is not done now, later on there may be due to awaiting the information
from the customer.

Plan follow-up visit at the time of delivery the sales person should plan a follow-up call when
the requirement or item is to be delivered. This visit includes checking if the product is received
on time and without damage in transit (if received in damaged condition, to arrange for insurance
formalities), installation (if any), and operating instructions training (if needed). This visit is
important because it will dictate any problems or complaints, which the sales person should
solve to the customer‘s satisfaction. Some buyers suffer from post-purchase anxiety (cognitive
dissonance) about the wisdom of their purchase decision, particularly if there are problems on
high value product or services. The follow-up visit of sales person assures the buyer and reduces
the dissonance.

Account penetration Account penetration means working and contacting people throughout the
account (or customer organization) and discussing about the selling the firm‘s products and
services. The successful account penetration depends on the knowledge of the organization‘s key
people and their buying situations.

Relationship marketing today‘s sales people work to build and maintain long-term, mutually
beneficial partnerships with their key customers. Customers understood that it is much more
expensive to gain new customers than it is to keep existing customers. Effective follow-up and
customer service will help build loyal customers.
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