Sales Management Study Notes PDF

1. Introduction to a Sales Management 1.1 Definition and Objectives “Sales Management is the overall management of sales and it refers to only a specialised application of the process of management as a whole.” - E.F.L. Brech “It is the planni...

1. Introduction to a Sales Management 1.1 Definition and Objectives “Sales Management is the overall management of sales and it refers to only a specialised application of the process of management as a whole.” - E.F.L. Brech “It is the planning, direction and control of personal selling, including recruiting, selecting, equipping, assigning, routing, supervising, paying and motivating, as these tasks; apply to the personal sales force.” - American Marketing Association Implications of the definition 1) It is a subsystem of the Marketing System and the overall Management. 2) It is the backbone of Marketing Management. 3) Sales bring in revenue and generate profits, essential for survival of firm. 4) It is the end result of all Marketing efforts. 5) It is a basis for production planning. 6) It involves the human element which helps in convincing, persuading and translating a marketing plan to marketing performance. Objectives of Sales Management/ Functions 1) Establishing a distribution setup/ network (Hub and Spoke system – Coca Cola)/ Explain types of distribution strategies – Intensive/ Exclusive/ Selected. 2) Minimisation of Sales (Marketing Research - Anticipate Research – Production, Blue Ocean Strategy (Capture untapped market first, then saturated markets – C.K. Prahlad) 3) Maximisation of Profit (Maximise Sales – Profit increases) 4) Increase of market share (Penetration Strategies/ Diversification of markets increases market share/ Sprinkler and the Waterfall Approach) 5) Ensuring equity to shareholders and corporate social responsibility (Suppliers, employees, customers, government officials, environment, people in general) 1.2 Sales Management Process 1) Formulation of strategic Sales Management Programme (SWOT and PEST Analysis) 2) Implementation (Organisation = Man-Machine System, Right person at right place, philosophies, ideologies) 3) Evaluation and control Study Material Dr. Shilpi A. Lokre  1.3 Difference Sales Management and Marketing Management SELLING MARKETING 1. Emphasis on product. Emphasis on consumer needs and wants. 2. Company manufactures the product first Company first determines customer’s needs and then decides to sell it. and wants and then decides what to produce and how to deliver a product to satisfy these wants. 3. Selling is Sales – Volume oriented. Marketing is profit-oriented. 4. Planning is short term-oriented, in terms Planning is long term-oriented, in terms of new of today’s products and markets. products, tomorrow’s markets and future growth. 5. Stress the needs of a seller. Stress the needs and wants of a buyer. 6. Views business as a goods producing Views business as a consumer satisfying process process. 7. Emphasis on staying with existing Emphasis on innovation providing better value technology and reducing costs. to customers. 8. Different departments work as highly All departments work in an integrated manner, separate water-tight compartments. the purpose being the generation of consumer satisfaction. 9. Costs determine price. Consumers determine price. 10. Selling views customers as a last link in Marketing views customers as the very business. beginning of a business. 1.4 Importance of Sales Management Emerging trends in Sales Management 1) Customer Orientation (All activities focus around the customer) 2) Relationship Selling (After sales services/ maintaining customers/ customer service desks) 3) Technology (Direct access to manufacturers - toll free numbers/UPC/EDI) 4) Global and Ethical issues (Conformity with laws and culture, legislations, eg- McDonald’s, Abide by FEMA -Foreign Exchange Management Act/ GATT - General Agreements on Trade and Tariff/ Patents/ Copyrights) 5) Diversity (Demographics, culture) 6) New Setting Methods (Online Selling/ Tele-selling/ Catalogue Selling) 2. Sales and Research Planning 2.1 Introduction to Sales Research Study Material Dr. Shilpi A. Lokre Steps in Sales Research I) Locating and Defining the Problem 1) First sign of a problem is a department from the normal functions. 2) Typical problems in a sales department maybe i. Declining Sales ii. Rising Expenses iii. Decreasing Profits iv. Increase in Customer Grievances 3) A clear definition means that the problem should neither be narrowly or broadly defined rather it should be precisely defined. II) Designing the Research project 1) Developing a hypothesis – A hypothesis is an informed guess or an assumption about a certain problem or a set of circumstances. An assumption gives direction to the sales research process but it may or may not be used. A hypothesis gives direction to the research. 2) Research Instruments i. Questionnaire (20-25 questions, logical sequencing, mostly close-ended questions) ii. Technological Devices 1. Tachistoscope (for advertising research) 2. Galvanometer (skin sensory research) 3. GPS with a camera (how many hoardings you go through) 4. Audiometers (which channel is viewed, how many times channel changed) III) Collecting Data 1) Secondary Data- i. Internal Sources 1. Daily/weekly/monthly/annual sales reports 2. Accounting information a. Profit and loss account b. Balance sheet 3. Competitor’s information - gathered by the company’s sales force. 4. Bulletins and journals published by the company. ii. External Sources 1. Trade Association Reports 2. Industry Publications 3. Government data bases (census reports) 4. Stock Market Reports 5. World Bank Reports 6. Internet sources 7. Professional Associations 8. United Nations Agencies Study Material Dr. Shilpi A. Lokre  9. Private magazines and publications iii. Primary Data 1. Observations 2. Surveys a. Telephonic b. Online c. Mail Surveys d. Personal Interviews 3. Sampling IV) Interpreting Research Findings V) Reporting 2.2 Methods and process of Sales Research “The process of estimating the relevant events of the future based on the analysis of their past and present behaviour.” “Business Forecasting refers to the statistical analysis of the past and current movement in the given time series so as to obtain clues about the future pattern of those movements.” Implications- 1) Forecasting relates to past and present events. 2) It is a projection into the future. 3) Accuracy of Forecasts depends upon the reliability of data. 4) It defines the probability of happening of future events. 5) It may require statistical tools, mathematical tools. Steps in Sale Forecasting 1) Estimating Current Demand (Industry) Eg- Industry demand for toothpaste = No. of families using toothpaste x Average no. of packets of toothpaste purchased per annum. Current Demand Potential for the industry as a whole is the maximum amount of sales that might be available to all the countries in the industry under a given level of industry marketing efforts and given environmental conditions. 2) Estimating Future Demand (Industry) Estimation of future demand is much more difficult than estimation of current demand because changes in the environmental factor affect demand over a period of time. Study Material Dr. Shilpi A. Lokre  Eg- Future demand of toothpaste can be measured by estimation of population, level of income and shift in buying habits of people. Such exercises are usually undertaken by Marketing Research Firms (Fleming Gulf). 3) Forecasting Company Sales Company sales is the expected level of company sales based on a chosen marketing pan and assumed marketing environment. After forecasting industry demand, individual companies forecast their market share in it. 𝐶𝑜𝑚𝑝𝑎𝑛𝑦 𝑆𝑎𝑙𝑒𝑠 Market Share = 𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑦 𝑆𝑎𝑙𝑒𝑠 𝑥 100 4) Setting Sales Quota a. Sales quota is a sales goal for a product line, a company division or a sales representative. b. Company quotas are set for company representatives to be achieved during a prescribed period. c. Sales quotas are set in term of monetary value, unit volume or product type. 2 ways of setting a Quota 1) Top Down Approach Sales Country Territory Representative 2) Bottom Up Approach Sales Territory Country Representative Quota Setting 1) High Quota School (Unrealistic, unachievable targets for aggressive sales) 2) Moderate quota School (Achievable and moderate targets) 3) Variable Quota School (Depends on efficiency of sales person, incentives vary) Sales Forecasting Methods 1) Historical Analogy Method This is a system which was suggested by Roslow. In this method, forecast in regard to a particular phenomenon is based on some analogists condition elsewhere in the past. 2) Survey Method Study Material Dr. Shilpi A. Lokre  3) Opinion Poll Opinions of experts are taken and then incorporated. 4) Business Barometers Eg- Sensex, Nifty They are basically the indicators of the health of the market. It senses the market pressure. 5) Time Series Analysis Going into past events, analysing and predicting the future. Eg- Onions 6) Regression Analysis 7) Econometric Models 8) Input Output Analysis Relationship between the input and output variables Types of Sales Forecasts 1) Space level sales forecasts a. World b. Nation c. Region d. Territory e. Customer Segments 2) Product level sales forecasts a. Total Sales b. Industry Sales c. Company Sales d. Product Line Sales e. Product Item Sales 3) Time level Forecasts a. Short Term b. Intermediate c. Long Term 2.4 Sales Planning- Meaning, Types, Process, Components & Requisites “ Sales Planning is the work of setting up objectives for selling activities, determining and scheduling the steps needed to achieve these objectives.” - American Marketing Association Study Material Dr. Shilpi A. Lokre “ Sales Planning may be defined as the managerial task of determining the future course of sales action preceded by an analysis of the past and project of the future events, culminating in a written document referred to as a sales plan which spells out in terms of time and resources, a systematic and integrated operational programme, so as to facilitate achievement of sales objective.” - Johnson and Shewing Implications Planning is for- 1) Determining the size of the sales force. 2) Determining the quality of the sales force. 3) Designing the sales organization. 4) Designing the sales territory. 5) Determining recruitment and training needs. 6) Determining compensation to employees. 7) Determining performance appraisal techniques. 8) Developing of feedback mechanism. 9) Managing channel relationships. 10) Coordination with other marketing department. Sales strategies/ Plans 1) Hard vs soft strategy. 2) Win-win strategy. 3) Relationship strategy (Hospitality industry) 4) Client-centred strategy (Khambete and a landing connects to the U.S. ally Intel Data line, duplicates in Austin mile Subway, Puma) 5) Instance service strategy (ATMs, Petrol Pumps) Components of a Sales Plan 1) Objectives a. To achieve targets b. To skim the market c. Short time/ long term d. Penetrate market e. Forecast f. Analysing 2) Sales Policies a. Exchange Policies b. Refund Policy c. No return Policy d. Harsh/ 3) Sales Programmes (ADHOC plan) a. Short duration Study Material Dr. Shilpi A. Lokre  b. ADHOC Plan 4) Sales Procedures a. Systematic, step by step plan of action b. Calling up customer – fixing appointment – demonstration – listening to customers needs – closure of sales – after sales service 5) Sales Forecast It is a prediction. 6) Sales Budget 7) Sales Strategies Master Plan for backup. Sales Planning Process Scamming the Environment Setting Sales Objectives Evaluating various alternatives Selecting the Best Alternative Formulating Sales Budget Formulating Support Plans Approval by Top Management Implementation of Sales Plans Evaluation & Review Types of Sales Plans 1) Sales Plan on the basis of Market (Geographical features, terrain/ topography, climate) 2) Sales Plan on the basis of Customers (Taste, preferences, spending patterns in different regions) 3) Sales Plan on the basis of Types of products (According to taste and preferences of different regions) 4) Sales Plan on the basis of Time Period (Serial Entrepreneurs) Study Material Dr. Shilpi A. Lokre 2.5 Sales Budget Budgetary Control The establishments of budgets relating to the responsibilities of the executives to the requirement of the policy and the continuous comparisons of actual results with budgeted results, either to secure by individual action, the objective of the policy or to provide a basis for its revision. Sales Budget A sales budget consists of estimates of probable sales of unit sales and expenses for obtaining them. A sales budget is related to the forecasting of sales and estimation of selling expenses. A sales budget is a programme designed for a stipulated time period that highlights the selling expenses, anticipates sales – quantitatively and in value terms. Implications 1) Stipulated time frame - A specific time period is set. - A budget could be fortnightly/ monthly/ quarterly/ six monthly or annually. 2) Sales Volume - The quantities to be sold. - The quantities to be sold at different time periods in the stipulated time frames. - The sales personnel who would handle sales (quality and size) - Demarcating their respecting sales territories (force). - Determining the perspective buyers. 3) Selling Expenses - Fixed Expenses: Salaries, rent, insurance - Performance related Expenses: Commissions, incentives, bonus, rewards, awards - Activity related Expenses: Communication and Travel. Factors to be considered while preparing a Sales Budget 1) Past sales figures and trends 2) Salesmen’s estimates 3) Plant capacity 4) General trade prospects 5) Orders in hand 6) Proposed expansion 7) Proposed discontinuation 8) Sessional fluctuations 9) Potential markets 10) Availability of resources, finances 11) Nature and degree of competition Study Material Dr. Shilpi A. Lokre  12) Distribution costs 13) Promotional expenditure 14) Government controls and regulations 15) Political climate Significance of Sales Budget 1) It serves as a yardstick to measure performance and progress of a company (performance of people/product/territory) 2) It helps to identify areas in which the company needs to strengthen or improve its performance. 3) It serves as an indicator to control the expenses associated with sales activity. 4) It helps in comparing actual and budget performance, locating variances and take corrective measures. 5) It helps planners to frame policies and provide a platform to establish ways and means to get the business where they want to. 6) It provides vital statistics to allocate resources in an effective manner. 7) It is a major management tool for coordinating activities for all functional areas of business. 3. Sales Organisation 3.1 Meaning It is a structural body through which the functions of sales management are carried out. Sales organizations are structural entities. They are designed to execute sales plans and goals. These structures define precise goals and responsibilities for each person, group, section, department, division and the entire organization. It is a structural framework specifying the authority responsibility relationship. It is a structure or an organization which consists of people oriented to achieve quantitative and qualitative goals. 3.2 Principles of Organisation 1) Span of control 2) Unity of command 3) Hierarchy of authority 4) Stability and continuity 5) Coordination and integration 6) Objectivity 7) Specialization Study Material Dr. Shilpi A. Lokre  8) Equity 9) Stability of tenure 10) Innovation 3.3 Organisation Structures – Types I) Line Organisation Mr XYZ (President Sales) Mr LMN (Asst. Vice President Sales) Mr PQR (Sales Manager) Sales Representatives (5 Nos) 1) The CEO does the decision-making. 2) The CEO has all the authority over the sales. 3) Small firms have such a structure. 4) It is a people-centric organization. 5) One-man show is the buzzword of this organization. 6) Decisions are faster. 7) Overhead costs are lower. 8) Daily fire-fighting operations by executives or representatives as they do not have time to plan. II) Line and staff organization (Organisation design by function) 1) This design helps in specialization. 2) This is less expensive than the other designs 3) Line authority means that the people in management positions have formal authority to direct and control immediate sub-ordinates. 4) Staff authority is narrower and includes the right to advice, recommend and council. 5) Firms need special expertise to sell and require special activities like sales planning, recruitment and trading, advertising, sales promotion and marketing research. 6) The line people generate sale and the staff provides ancillary (support) services. III) Organisation Design by Product 1) Adopted by companies with a diversified product portfolio. Study Material Dr. Shilpi A. Lokre 2) These organisations are specifically designed on the basis of products so that specialised sales people are appointed for each product line. 3) Many companies in the high-tech sales market adopt such an organisation. 4) These organisations are expensive to design because there are varied departments which are headed key experts. 5) The advantage of this design is that close attention to each product and product portfolio is given. 6) The sales person can master the product information. 7) Interference of other functions is avoided 8) Operational costs are very high. IV) Organisation Design by Territiry/ Geographical Specialisation 1) Every sales person is assigned a specific territory for making sales calls. 2) Travel time is limited. 3) Sales force maintains close contact with customers. 4) Quality of customer service is better as fewer customers have to be served. 5) Minimum conflict amongst sales people as their areas are clearly demarcated. 6) Demand for each area can be identified and necessary product modifications can be done. 7) Varied marketing strategies and sales analysis can be done for different areas. 8) Recruitment of personnel can be done on the basis of requirement of that particular area. V) Organisation design by Customers 1) The design is more customer-centric and successful when the customers are being geographically concentrated. 2) The structure is based on customer profitability. 3) Such organisations have a varied service delivery mix for each customer segment. 4) Each sales person sells the entire product mix to the same customer segment. 5) This type of organisation is advisable when the nature and type of customers differ. 6) The sales people gain knowledge on customer requirements and become experts in a particular market over a period of time. 7) This design helps in building customer relationships and buyer loyalty. VI) Hybrid design 1) Many organisations that are large in size and have complex product offerings prefer a hybrid design. 2) It is a combination of different designs and adopted by companies with a diversified product range serving extensive markets. Study Material Dr. Shilpi A. Lokre  3.4 Introduction to Sales manager Sales Manager The sales manager is the head and the heart of the sales organisation. He plans, organises, directs activities of the sales department. Qualities of the Sales Manager 1) Physical Qualities a. Good appearance b. Sound health c. Good posture d. Pleasing personality 2) Psychological Qualities a. Agile and alert b. Imagination c. Observation d. Confidence 3) Mental/Intellectual Qualities a. Sound judgement b. Application of knowledge c. Receptiveness d. Ability to guide 4) Emotional Qualities a. Emotionally strong b. Empathetic c. Patient 5) Moral Qualities a. Integrity b. Honesty c. Reliability d. Polite 3.5 Duties and Responsibilities of the Sales Manager Functions of Sales Manager 1) Planning Sales budget, sales target, sales volume, profit targets, forecasting, standards, identifying market segments. 2) Organising - Builds up sales organisation Study Material Dr. Shilpi A. Lokre  - Establishing authority, responsibility, delegation of authority, exacting accountability, creating a man-machine system, defining roles of each individual in the organisation. 3) Staffing Filling vacancy, right person in the right job, compensating the sales force. 4) Motivating Inspiring, persuading, convincing, achievement of goals, incentives, bonuses, positive and negative motivation. 5) Coordination Harmonising, facilitation, listening. 6) Communicating Oral and written, free flow of communication, high standards of communication. 7) Leading/ Directing Setting an example, actuating, supervising, monitoring, achievement of super goal. 8) Controlling Evaluation of performance, feedback, reporting achievement or deviation from standards, corrective measures, timely action. 9) Training and Development Duties and Responsibilities of Sales Manager 1) Determining sales force objectives and goals. 2) Finalising sales force organisation, size, territory and quota. 3) Forecasting and budgeting sales. 4) Recruiting, selecting and training the sales force. 5) Motivating and leading the sales force. 6) Designing compensation plans and control systems. 7) Designing career growth plans. 8) Building relationships and key customers. 4. Sales Force Management 4.1 Staffing the Sales Organisation Recruitment and Selection of Sales Force Study Material Dr. Shilpi A. Lokre  Staffing and Hiring Procedure (Diagram) Stages 1) Anticipatory New employee has different kinds of expectations based on the information available through newspapers, peers, word of mouth. 2) Encounter The new sales person has started working on the job and faces the reality. 3) Settling in The new sales person starts feeling he belongs to the organisation. Job Analysis (Process of obtaining pertinent information about a job) Job Description Job Specifications Job Title Education Job Summary Experience Machine/tools/equipment Physical Effort required Communication Skills Working conditions Emotions Characteristics Hazards Training required Special Demands (Sight, smell, hearing) Recruitment 1) Recruitment is a process of finding and attracting capable applicants for employment. 2) It is a process of generating a pool of qualified candidates for a particular job. 3) It is a process of searching for prospective employees and stimulating and encouraging them to apply for jobs in an organisation. 4) The outcome of recruitment is an application pool which becomes an input for selection. 5) Recruitment techniques do not require much enterprise and are rigorous. Internal Sources of Recruitment 1) Lateral and upward movement Lateral – transfer or job enlargement (line → staff) Upward – seniority vs merit 2) Internship and cooperative students (part-time) 3) Employee Referral programs Recommendations from existing employees Study Material Dr. Shilpi A. Lokre  4) Labour unions 5) Gate hiring (sign boards put up on doors/windows) External Sources of Recruitment 1) Campus Placements 2) Advertising 3) Employee Agencies 4) Walk-ins 5) Web sources (Naukri.com) 6) Deputation (temporary handling of jobs, who are alter then absorbed by the company) Selection Procedure 1) Screening of Applications - Solicited/unsolicited application forms - Referral checks (through reference) - Printed format of description - Covering note (formal letter showing interest) 2) Selection tests - Achievement tests Typing test for the job of a typist – performance test. - Intelligence test Tests to judge IQ, EQ, GK, English, Numerical – Overall performance. - Personality test Presentability, demeanour, through group discussions, unhide your traits, leadership ability, listening skills, managerial skills. - Personal interview Personality traits are judged. - Physical (fitness) test Endorsements by doctors guaranteeing your health to join the job. - Reference check For authentication. - Offer letter Letter stating terms and conditions (not an appointment letter) - Appointment - Induction Screening of Applications Many companies have their standard application forms which record individual applicants and are easier to assess the candidates. The primary objective of an application is to evaluate information about the applicant’s physical characteristics, family status, educational qualification and employment history. Study Material Dr. Shilpi A. Lokre  Selection Tests These are tests used by many sales organisations aimed at measuring different abilities such as verbal, qualitative and competitive skills. Physical exams are conducted for sales people as a sales job is perceived to be a physically exhausting job which requires stamina and the ability to withstand stress. Personal Interview Sales managers conduct personal interviews to gain an insight into an applicant’s mental abilities and personality, it helps a sales manager assess the candidate’s communication skills, sociality, aggression, empathy and ambition. 4.2 Training and Development Training is a short-term process utilising a systematic and organised procedure by which non-managerial personnel learn technical knowledge for a definite purpose. Areas of Sales Training 1) Knowledge of the Organisation - History - Hierarchy - Various Departments - Mission Statements and Philosophy of the Company - Beliefs and Value System - Channels of Communication - Goals, Policies and Procedures - Written and Unwritten code of conduct 2) Knowledge of Product - Physical aspects - Composition - Manufacturing processes - Benefits - Differential advantage 3) Competitor’s knowledge - Product knowledge - Market programs - Market coverage - Promotional strategies - Sales staff 4) Knowledge about Markets - Nature of Competition - Taste and preferences of customers - Changing trends - Customer buying behaviour/ payment norms - Consumer psychology Study Material Dr. Shilpi A. Lokre  5) Knowledge of self - Ability to handle customers - Ability to make sales calls - Expertise to communicate - Convincing ability - Listening skills 6) Time and Territory - More time with customers (anytime out of the field is costly for sales folks) 7) Legal and ethical issues 8) Technology Benefits of training 1) Increased productivity 2) Boosting of Morale 3) Reduced spoilt work 4) Less re-work 5) Reduced absenteeism 6) Reduced labour turnover 7) Reduction of stress 8) Knowledge upgradation 9) Harmony Types of training 1) Induction 2) On the job program (OJP) 3) Vestibule/simulation training - Recreation of workplace training 4) Role playing 5) Case studies 6) Seminars of conferences 7) Lectures 4.3 Motivation Study Material Dr. Shilpi A. Lokre  Motivation Intrinsic Extrinsic Positive Negative Monetary Monetary Non- Non- monetary monetary Theories 1) Maslow’s need hierarchy theory “A satisfied need can never be a motivator.” a. Psychological needs – food, clothing, shelter b. Security – job security c. Acceptance – love, affection, feeling of belongingness d. Self-esteem – respect, recognition, appreciation e. Self-advancement/actualisation – growth, more responsibility/authority 2) McGregor’s theory X and Y (contrasting theories) Theory X – negative assumptions about people Theory Y – positive perceptions about People 3) Herzberg’s Hygiene theory/ Two Factor theory (Hygiene and motivation factors) Hygiene factors - Congenial work environment - Good relationships with peers /superiors/subordinates - Salary (hefty pay package), financial incentives Motivational factors - Meaningful work - Challenging work - More work - Increased responsibility - Recognition for work - Reward for performance Study Material Dr. Shilpi A. Lokre Process of motivation 1) Motives: Primary energizer of behaviour and explains the reasons of behaviour. Motives are largely subjective and represent the mental picture of a sales person. 2) Behaviour: Comprises a series of activities a sales person does to achieve individual and organisational goals. 3) Goal: Depends on various factors like cultural norms and values, inherited capabilities, experiences and the standards set by the organisation. Fundamentals of a Motivational Program 1) Principles 2) Security 3) Achievement 4) Approval 5) Loyalty 6) Advancement Four Stages through which sales person progresses 1) Exploration stage (22-30 years) a. Unsure about selling as a career b. Uncertain about own skills c. Uncertain about new job d. Financial rewards are best to motivate 2) Establishment stage (30-40 years) a. Settling in the occupation b. Wish to develop the occupation into a successful career c. Gain confidence d. Improvement in performance and work-related skills e. Value recognition from peers and superiors f. Social commitments – marriage 3) Maintenance stage (40-50 years) a. Concerned about position/status and performance level. b. High value for rewards that reflect high status and good performance. c. Desire for financial rewards as there is an increase in financial obligations. 4) Disengagement stage (50 years-above) a. Loss of self-identity b. Psychological withdrawal from the job c. Minimum amount of effort d. Seek to maintain just an acceptable standard of performance e. Spend time in personal development Study Material Dr. Shilpi A. Lokre  f. Low valance for financial incentives 4.4 Compensation Sales Compensation Plans Objectives - Attract quality sales people - Improve productivity level - Optimise sales efforts - Maximise sales and reduce sales expenses - Retain quality man-power and reduce the attrition rate - Portray a better image of the company - Motivate the existing sale force Characteristics of an effective sales compensation plan - The compensation plan should give a fair wage to the sales person - Salary should have fixed component and an additional incentive to maintain an average standard of living - A sound remuneration plan should be based on principles of equity and equality - It should be simple and easy to describe and understand - It should be economical to the company - Sales compensation program should be flexible to fit into the changing environment - A participatory method of compensation should be prepared - The rate of compensation should be based on factors like o Current industry rate for the same job o Nature of sales job o Difficulty in realising the sales o Ability and experience of the sales person 5. Personal Selling 5.1 Meaning and Definition “Personal Selling is an oral presentation in a conversation with one or more prospective purchases for the purpose of making a sale.” - American Marketing Association Study Material Dr. Shilpi A. Lokre Personal Selling consists of contacting prospective buyers personally. Types of Personal Sellers 1) Deliverer- Pizza Hut Delivery Boys 2) Order Taker- Restaurant Waiters 3) Technician – Engineering Services 4) Demand Creator- Insurance Agents 5) Solution Vendor- After sales service 6) Missionary- propagating an Idea/Philosophy 5.1 Process of Personal Selling Pre-sale Preparation Prospecting Pre-approach Approach Presentation and Demonstration Handling Objections Closing the Sale Follow-up Action 1) Pre-sale preparation Familiarity with- - Product - Organisation - Market Conditions - Competitions - Selling practices - Strengths and weaknesses Study Material Dr. Shilpi A. Lokre  2) Prospecting - Identifying prospective buyers - Prospects are those who have the will and the power to buy - Maybe individuals or institutions - Discovering new customer needs - A prospect is qualified if he has the authority, need, ability and eligibility to buy Ways to identify prospects a. Acquaintance reference b. Cold calling (random prospecting) c. Centre of influence method – references are obtained from eminent people d. Personal observation method e. Direct mail f. Telephonic contact g. Company records h. Retailers i. Trade fairs and exhibitions 3) Pre-approach In this stage, the sales person tries to gauge the likes, dislikes, needs and preferences, tastes, habits, behaviour, economic and social status of the prospective customers. 4) Approach This is an opportunity to understand and interact with the prospect. The objective is to get the attention of the prospective customer and persuade him to buy. Methods of approaching a. Direct b. Advanced mail c. Securing an appointment d. Giving gifts – diaries, keychains, pens Keys for successful approach a. Prior appointment b. Timing c. Command (product knowledge) d. Relaxed atmosphere e. Open mindedness f. Courtesies g. Effective presentation h. Follow-up Study Material Dr. Shilpi A. Lokre  Techniques of approaching a. Cashing on brand name or company’s reputation b. Customer benefit approach c. Innovative product d. Premium approach e. Shock approach f. Interactive approach g. Making the prospect feel important 5) Presentation and demonstration Presentation of a product a. Attractive package b. Attractive window display c. Conspicuous placement d. Interiors of the showroom e. Mannequins f. Presentation of the product with the help of technological devices like slides, pictures, videos Demonstration of a product “Demonstration is showing with proof and example how a product or service benefits the buyer.” - B.R. Cunfield It is an exercise to prove the characteristics of the product It highlights various attribute of the product such as utility, performance, service and quality Presentation describes the product, demonstration gives an opportunity to the prospect to verify the facts before buying 6) Handling Customer Objections - Doubts or disapprovals of the actions of a salesman - Sales resistance 7) Closing the sale - Concluding the deal (positive outcome – success, negative outcome – failure) 8) Follow-up action Study Material Dr. Shilpi A. Lokre Generating Leads Selling begins by locating potential customers. A potential customer or a “ Prospect” is first identified as sales lead, which simply means the salesperson has obtained information to suggest that someone exhibits key characteristics that lends them to being a prospect. A “ Lead” is a person or a group of persons identified as expressing some type of interest in a product or service. Sources of sales leads are Trade shows, referrals, local libraries, contests etc. Overcoming Sales Resistance Prospective customers resist sales because of the vexing behaviour of the Salesperson- 1) Talking about benefits of the product/service too early. 2) Talking too much about self(being pompous) 3) Begging for business 4) Being phony 5) Dishonesty & Manipulation Tips to overcome Sales Resistance Be gentle with the prospect and not pushy. Talk about how the product/ service can satisfy the personal need of the prospect. Engage in Active and Empathic Listening Promise an enduring relationship with prospect Build trust Deliver what is promised Build Credibility Sales Calls : sales calls are usually pre-arranged face to face meeting between a sales person and a customer or prospect for the purpose of generating a sale. Types of Sales Calls Cold Call : is a first time call. It is a process of approaching prospective customers typically via telephone when the prospect is not expecting such an interaction. Study Material Dr. Shilpi A. Lokre  Referral Call : referral call relies on the mention of a mutual third party’s name( a friend, co-worker, a relative). Service Call : it is an invitation to a promotional event such as an exhibition or an open house event. Personalised Call : It is made to a prospect after a letter, card has been sent by the salesperson. 5.9 Personal Selling Skills Problem Solving Skills Negotiation Communicatio Skills n Skills Personal Selling Skills Conflict Listening Management Skills Skills 1) Communication Skills a. Concreteness (precise) b. Conciseness (brief) c. Clarity d. Competitiveness e. Correct f. Courtesy g. Consistent h. Credibility Process of communication Encoder Sender Mesage Channel Reciever Decoder Feedback (Salesperson) 2) Listening skills Study Material Dr. Shilpi A. Lokre  Types a. Active listening b. Passive listening c. Selective listening Process of Listening Attention Filtering Interpretation Rememberance Evaluation Response/Action Commandments of listening a. Stop talking! b. Maintain eye contact c. Empathise with the speaker d. Control your temper e. Avoid distractions f. Be patient g. Show genuine interest h. Be actively involved i. Ask pertinent questions j. Stop talking! 3) Conflict Management Skills Conflict – Disagreement Misunderstanding Difference of opinion Hostility between people Rivalry amongst sales people Conflict may arise because of- - Scarcity of resources - Changes in organisational policies - Stress, tension, hostility and anxiety - Over-aggression Study Material Dr. Shilpi A. Lokre How to overcome conflict? i. Establishment of clear rules ii. Structural rearrangement iii. Creation of special integrators - Problem solving - Smoothening - Compromise - Confrontation - Avoidance 4) Negotiation Skills Process of negotiation Negotiated Gratification of Implementation agreement agreement of Agreement Preparation of Determination of Negotiation Negotiation Issues Overcoming Breakdown Breakdown 5) Problem Solving Seeking of Solutions/ Choosing the nest Definition of a problem Taking Action Alternatives Alternative Study Material Dr. Shilpi A. Lokre 5.10 Value Added Selling Value added selling is a series of creative improvements within the sales process that enhance the customer experience. Salespeople can create value by developing a quality relationship, carefully identifying the customer needs, and then configuring and presenting the best possible product solution. Study Material Dr. Shilpi A. Lokre