Sales Management & Sales Promotion

SALES MANAGEMENT & SALES PROMOTION
Anant Dhuri
SALES MANAGEMENT & SALES PROMOTION 50 marks
Course Content 1. Sales Organization and its evaluation - Job and role of Sales Management in Organizations, The Selling functions The importance of systems selling in contemporary environment, selling of services as opposed to selling of tangible products selling process. 2. Sales management Planning Sales Management Information Systems, Sales Management Planning Forecasting, Sales Budgeting and Planning quotas 3. Manpower Planning for the sales organization for and development of sales organization 4. Recruitment, selection, training, and development of sales Personnel. 5. Time and Territory Management Territory Planning, establishing and revising territories, bases of territory design, methods of territory design including computer models, assigning sales people to territories route planning and territory coverage. Sales incentives and sales compensation, Sales Force Performance evaluation and control 6. Identify the roles of consumer and trade promotion activities in terms of differences, characteristics and application 7. Sales promotion strategies to integrate below the line promotion into the communication mix. process of researching, planning and setting goals, to measure and test the effectiveness of 8. Planning and designing sales promotion Programme with specific reference to sales contests, trade-in discounts, coupons etc.
Reference Text 1. 2. 3. 4. Sales management Still , Cundiff & Govani Prentice Hall India Professional Sales Management Anderson , Hair & Bush Tata McGraw Hill Management of sales force Stanton & Spiro McGraw Hill International Sales Management Futrell 6th edition Thomson South western
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Chapter 1 SALES ORGANIZATION AND ITS EVALUATION - JOB AND ROLE OF SALES MANAGEMENT IN ORGANIZATIONS, THE SELLING FUNCTIONS THE IMPORTANCE OF SYSTEMS SELLING IN CONTEMPORARY ENVIRONMENT, SELLING OF SERVICES AS OPPOSED TO SELLING OF TANGIBLE PRODUCTS SELLING PROCESS
A) SALES ORGANIZATION AND ITS EVALUATION Overview Owing to intense global competition, slow growth in markets and different customer expectations, sales organizations have to reengineer their organization structures and streamline their processes. An inefficient organization structure can frustrate top managers as it may result in strategic plans going astray due to absence of clearly defined responsibilities and reporting relationships. Developing customer-centric organizations, building strong relationships within and outside the organization, modifying the traditional top-down hierarchical structure and introducing cross-functional teams are some steps companies are taking to improve their efficiency and profitability. The organizational structure should fulfill the purpose for which it has been designed. The role of a sales organization is to achieve company objectives, streamline reporting relationships, facilitate effective coordination and control and develop an efficient sales force structure to ensure effective selling strategy. Designing the sales organization plays a crucial role in a company's overall success. One must consider the influence of external and internal factors while designing a sales organization. External factors include the markets targeted and the technology prevailing in the target market. Internal factors influencing the design of a sales organization include the company objectives, the size of the sales force, core competence of the company, compensation system, reporting relationships, etc. Based on the span of control, authority, hierarchical levels and departmentalization, four basic organization structures are possible. These are formal and informal structure, centralized and decentralized structure, vertical and horizontal structure and line and staff organization structure. To efficiently serve the ever-changing needs of customers in the best possible manner, a company can have a productbased, geographic-based, customer-based or a combination-based sales force structure. The type of customers, the market size and its potential, the type of industry in which the company is operating, level of sales desired, size of the sales force and the width and depth of the product mix are some factors that influence the decision on the type of sales force structure to be adopted. Sales culture plays an important role in the success of a sales organization. Sales culture is a collective impression of the values, attitudes and personality of top management in an organization. It pervades down to the lower levels of hierarchy over time. Sales culture has a significant influence on sales force activities and attitudes. The various components that make up sales culture include symbols, language, ceremonies, rites and rituals, role models, tales and stories, and values and beliefs. The strength and direction or fit of the sales culture also play a crucial role in developing a sound sales organization. Effective sales executives insist upon sound organization. They recognize that the sales organization must achieve both qualitative and quantitative personal selling objectives. Over the long haul, it must achieve qualitative objectives those concerning personal sellings expected contributions to achievement of overall company objectives. In the short run, it must attain the quantitative personal selling objectives not only sales volume but other objectives related to profit(such as keeping selling expenses within certain limits) and to competitive position(such as attaining given market shares).achieving short-run quantitative personal selling objectives precedes attainment of the long-run qualitative personal selling objectives. The effective sales executive looks upon the sales organization both with respect to here and now and to the future. but the sales organization makes its major contribution in the present and the near term-recognizing this, the effective sales executive builds both sales-minded less and profit-mindedness into the sales organization. A sales organization is both an orienting point for cooperative endeavor and a structure of human relationships. It is group of individuals striving jointly to reach qualitative and quantitative objectives, and bearing informal and formal relations to one another. Implicit in the concept of a sales organization is formal relations to one another. implicit in the concept of a sales organization is the notion that individual members cooperate to attain ends. The sales organization is not an end in itself but rather the vehicle by which individuals achieve given ends. Existence of a sales organization implies the existence of patterns of relationship among subgroups and individuals established for purposes of facilitating accomplishment of the groups aims. Organization defects often trace to lack of attention given to sale organization during the early existence of a company. When setting up business, management is more concerned with financing and non-marketing problems. Executives of new enterprises consider organization, but most often these
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relate to no marketing activities. In manufacturing, for example, as products are improved, production quantities increased, new products added, and production processes developed, the manufacturing organization is adapted to changed situations. Similar alterations in the sales organization are frequently neglected or postponed. The organizations in many companies evolve without regard for changing conditions. The basic setup designed when the company was new remains, despite, for example, changes in selling style and size of sales force. The sales organization, after all, is the vehicle through which personal-selling strategy is implemented. A well designed sales organization, like a well designed automobile, accomplishes more, and more economically, than does one that is an artifact. The sales organization should be adjusted to fit-ideally, to anticipate changing situations. Shifts in marketing, in competition, and in other business factors calls for changes in the sales organization. The ideal sales organization has a built in adaptability allowing it to respond appropriately in fluid and diverse marketing environments. Definition The sales organization is an organizational unit within Logistics. The basic sales and distribution structure is defined using sales organizations. An organization of individuals either working together for the marketing of products and services manufactured by an enterprise or for products that are procured by the firm for the purpose of reselling A sales organization defines duties, roles, rights, and responsibilities of sales people engaged in selling activities meant for the effective execution of the sales function. Use The sales organization represents the selling unit in the legal sense. It is responsible for example for product liability and other rights of recourse; customer deliveries; business partner contacts; and direct mailing campaigns. It also helps you to offset business operations internally. Different components use the sales organization object: 1) G/L accounting (for account determination) 2) Controlling (where the sales organization is used as a characteristic in profitability and market segment analysis) 3) Quality management in shipping. Purposes of Sales Organization To permit the development of specialists To assure that all necessary activities are performed To achieve coordination or balance To define authority To economize on execution time Setting Up a Sales Organization Defining Objectives Determination of Activities and their Volume of Performance Grouping activities into positions Assignment of Personnel to positions Provisions for coordination and control Basic Types of Sales Organizational Structures 1) Lines Sales Organization 2) Line and Staff Sales Organization 3) Functional Type of Sales Organization Schemes for Dividing the Line Authority in the Sales Organization 1) Geographic Division of Line Authority 2) Product Division of Line Authority 3) Customer Division of Line Authority 4) Marketing Channel Division of Line Authority Types of sales organizations 1) Product based 2) Customer based 3) Geography based 4) Line and staff 5) Functional 6) Vertical and horizontal 7) Hybrid
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Product based organization
Sales Manager
Asst sales mgr Division 1 Computers
Asst Mgr Division 2 Software products
Asst Mgr Sale Division 3 Training programs
Advantages Focused attention on each product Sales peoples improvement because of the learning curve effect Salespeople do not have to know many products Disadvantages Your two salespeople may go to the same organization for selling different products May not be suitable when product margin is very low 2) Customer based organization
GM Sales Sales mgr Banking Sales mgr Manufacturing Sales Mgr Insurance
Advantages Each customer looked after very well One sales person can do cross selling Disadvantages A salesman has to know all the products of his organization No salesman can be located in a branch if not enough customers 3) Geography based organization
GM Sales Sales mgr South Sales mgr Central Sales Mgr West
Advantages Economies of cross selling can be achieved Disadvantages Every salesperson has to know all the products of the company 4) Line and staff GM Sales
Sales mgr Mgr training

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Mgr Promotions
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Advantages The sales department works like a self sufficient unit Disadvantages The organization as a whole may loose on economies of scale or have the disadvantages of decentralization 5) Functional organization
Director sales
Manager Sales supervision
Manager dealers
Manager Installation and services
Advantages The sales person gets the support from the expert departments Disadvantages The salesperson is loaded with the responsibility of coordination 6) Vertical organization
Chief of sales executives Regional mgr Sales supervisor
Sales person Advantages Suitable for large organizations enabling easy span of control Disadvantages Long decision / communication line 7) Horizontal organization
Sales chief
Sales people East
Sales people West
Sales people north
Advantages Short line of decision / communication line Disadvantages Span of control may become unmanageable
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8) Hybrid Mix of Product Geography Customer Functional
9 Steps to Building a Winning Sales Organization Step 1: Do nothing Do nothing. When you first arrive on the scene of a sales office in distress, don't do anything. Take the time to understand your organization's situation, gather information about the people involved, and. Step 2: Analyze your problem(s) Analyze your problems. Since many salespeople play "follow the leader," you've got to ask yourself which salespeople do your less experienced salespeople look up to? And, what kind of example are these "leaders" setting? You can get peak performance out of average producers if you can get average producers to emulate the success habits demonstrated by a leading salesperson. Step 3: Find your success role model In sports, when a player assumes more of a leadership role on a team, it's called "stepping up." Hopefully, you already have a few players capable of stepping up. If so, talk to them. Help them see the importance of their success example, and ask them to share more of their knowledge and experience with less experienced salespeople. Step 4: Don't tolerate mediocre sales performance You've got to decide - you won't tolerate mediocre sales performance. Far too often, poorly performing salespeople are allowed to continue their lackluster ways. A manager may not want to face the hassle of recruiting a replacement, or the manager may want to avoid confrontation. This is a big mistake. A successful sales manager doesn't tie the ship to a poor performer's anchor. Instead, successful managers take a "hands-on" role with more performers by providing the coaching and training the poor performer needs to improve performance. Your objective is to bring those that are lagging behind to what I call "the intersection of choice." By that, I mean poor performers must make a decision themselves to either a) recommit themselves to perform the necessary behaviors and activities, or b) leave the company immediately. Step 5: Install performance standards Install performance standards. You've got to communicate your expectations. So raise the BAR on everybody with standards that consist of Behavior, Activity and Results. A behavior standard, for example, could be to arrive in the office every morning before 8 a.m. An activity standard could be to make a minimum of 25 telephone prospecting calls every day. A result standard could be that a sales rep with seven to nine months sales experience must sell a minimum of $50,000 per month. On results standards, I recommend you set two standards. One, a lower "keep your job" standard. Salespeople who fall below the minimum standard for a three-month period are placed on probation. If sales don't pick up in the next quarter, that person must be "de-hired." Another standard performance, is of course, a higher sales quota. Step 6: De-hire those below minimum standards De-hire those below minimum standards. Your salespeople will be wondering, "do you really mean it?" The first person you de-hire will send a loud and clear message - performance standards will be enforced. If you don't enforce them, your standards are meaningless. Step 7: Coach, coach, and coach some more
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Coach, coach, and coach some more. Don't be a "desk jockey". Get out and work with your salespeople. If the only way to grow your people and your business. Step 8: Cultivate a better "quality of life" Cultivate a better "Quality of Life." Have more fun. We instituted a series of contests that got everybody focused on a team goal. For example, if we hit our office goal, salespeople who achieved their individual standards earned a round of golf with the others. Then there were blitzes where everyone would pair up and make a bunch of sales calls into two sales territories to generate leads. The salespeople who received the leads had to repay the group with a comedic skit. It was amazing to me how creative some of the skits were! The result: average sales per salesperson doubled, and turnover was reduced by 45 percent. Step 9: Know what each salesperson wants Know what each salesperson wants. Every person has his or her own personal motivators. Your job is to find out what they are and help the salesperson toward achievement. Sit down with each salesperson one-on-one. Try to learn something about each of them: what are their goals with your company and beyond? What is their past like? How can you help them be, have, and do more?
SALES ORGANIZATION EVALUATION Understand what to focus on, in order to get the best results. 1) How mature is your sales organisation? 2) How many leads are converted into deals? 3) Do you have the most effective systems and processes in place to support and drive the level of sales you expect? Measure effective performance and distinguish criteria for measurement. Along those lines, examine behaviors that lead to predictable results, and your pipeline. In addition, guide your people toward spending their time, energy, and talent in the best possible ways. 4) Do you have the right personnel in leadership positions that can execute your goals? You cannot make a wiser investment than to know you have the right people in frontline management positions. Measure the skills and talents of managers to determine if they can recruit, interview, drive performance, coach & develop skills, motivate, and mentor. 5) Do we have the right talent in the right positions? Figure out whether you need hunters, farmers, consultants or ambassadors and whether your people are in the right roles given their talent. Assess if partnering or creating teams will increase sales to maximize the utilization of your talent. 6) What is the next key action to take that will maximize the performance of my sales organization? By thoroughly evaluating your people, strategy, and processes, you can save money and time by maximizing your capabilities.
B) JOB AND ROLE OF SALES MANAGEMENT IN ORGANIZATIONS Definition of Sales Management The Definitions Committee of the American Marketing Association stated that Sales Management meant: 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. Sales management is a business discipline which is focused on the practical application of sales techniques and the management of a firm's sales operations. It is an important business function as net sales through the sale of products and servicess and resulting profit drive most commercial business. These are also typically the goals and performance indicators of sales management. Sales manager is the typical title of someone whose role is sales management. The role typically involves sales planning, human resources, talent development, leadership and control of resources such as organisational assets. 1) Sales planning Sales planning involves strategy, setting profit-based sales targets, quotas, sales forecasting, demand management and the writing and execution of a sales plan. A sales plan is a strategic document that outlines the business targets, resources and sales activities. It typically follows the lead of the marketing plan, strategic planning and the business plan with more specific detail on how the objectives can be achieved through the actual sale of products and services. 2) Recruitment of Sales Staff
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The three recruitment tasks used in sales management are Job analysis; Job description and Job qualifications. Job analysis is performed to specify the certain tasks that a salesperson would be responsible for on a daily basis. It should identify what activities are deemed as being vital to the success of the company. Any person associated with the sales organization or the human resources department could carry out the analysis as well as an outside specialist (Spiro, pp.134). The person that is responsible for completing a job analysis should have an in-depth comprehension of the daily activities of the salespeople. This job analysis is then written in an explicit manner as a job description. The general information consists of: 1. Title of job 2. Organizational relationship 3. Types of products and services sold 4. Types of customers called on 5. Duties and responsibilities related to the job 6. Job demands 7. Hiring specifications An effective job description will identify compensation plans, size of workload, and the salespeoples duties. It is also primarily responsible for hiring tools such as application forms and psychological tests. The most difficult part of this process would be the determination of job qualifications. A reason for this difficulty is because hiring affects a companys competitive advantage in the market as well as the amount of revenue.[6] Additionally, there should be a set of hiring attributes that is associated with each sales job that is within a company. If an individual does not excel in their assigned territory, it could be due to external factors relating to that persons environment. Let it be noted that a company should be careful not to submit to discrimination in regards to employment. A number of qualifications (ethnic background, age, etc.) cannot be used in the selection process of hiring. 3) Sales reporting The sales reporting includes the key performance indicators of the sales force. The Key Performance Indicators indicate whether or not the sales process is being operated effectively and achieves the results as set forth in sales planning. It should enable the sales managers to take timely corrective action deviate from projected values. It also allows senior management to evaluate the sales manager. More "results related" than "process related" are information regarding the sales funnel and the hit rate. Sales reporting can provide metrics for sales management compensation. Rewarding the best managers without accurate and reliable sales reports is not objective. Also, sales reports are made for internal use for top management. If other divisions compensation plan depends on final results, it is needed to present results of sales departments work to other departments. Finally, sales reports are required for investors, partners and government, so the sales management system should have advanced reporting capabilities to satisfy the needs of different stakeholders. Objectives of Sales Management From companys point of view, the three general objectives of sales management are: Sales volume and value Contribution to profit Continuing growth. Sales management alone cannot achieve these, but it is the most important department on which the top management has to depend to realise these objectives. The Importance of Sales Management Sales management s at once a challenging profession for the individuals and a vital function for the organisation. Without sales management, selling would be an uncontrolled and a laissez faire activity and any result that would be achieved, would be by default and not by design. Sales management causes sales to happen by design. Without sales management performing efficiently, the marketing strategies will fail to deliver the results. In todays competitive world efficient and effective sales management is sine qua non for survival. All successful organisation have very strong sales management department. Role of Sales Management 1) Selling and achievement of target sales volume/value and market share consistently and on long-term basis. In addition, planning management of major accounts and managing them as well. 2) Co-ordination and implementation of overall marketing policy. 3) Creating a sales organisation. 4) Recruiting and training of sales officers. 5) Manpower planning, team building and motivation. 6) Job description, job evaluation, appraisal, increment, promotion and transfer of sales officers. 7) Compensation policy for sales officers including travel allowance, and working hours.
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8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21) 22) 23) 24)
Keeping personnel records of sales Officers Planning and preparation of annual sales budget. Preparation of annual sales task for individuals. Creating and maintaining suitable sales and distribution channels and managing channel conflict. Creating and managing sales territories. Sales meeting of sales officers. Dealer / distributor / major buyers meetings. Cost control, debtor (accounts receivables) control and control of all selling expenses. Gathering market intelligence and information. Particularly about competition and give feedback to the marketing department and to the top management. Generation of sales MIS. Feedback to marketing department on price points. Roll out of new products in coordination with marketing department. Coordination and liaison with other departments. Being in touch with competition, government bodies, trade associations etc. Developing sales promotional schemes along with marketing department and executing the same. Managing distribution of stocks and stock control and logistics, in general. Setting tasks, target, KRAs and controlling.
C) THE SELLING FUNCTIONS Complementary to the buying function is the selling function. In fact, one cannot exist without the other. Thus, for every purchase, there is a corresponding sale and vice-versa. These two marketing functions have been commonly described as functions of exchange.1. Selling is more than an economic activity. It is basic to a free society for it helps the economy grow. It does not only involve the offering of products to consumers. Rather, it is much more than that. For indeed, it revolves around three S''s, namely: service, satisfaction, and self-interest. Every time a product is offered for sale in the market, a service is made available for the benefit of the consumers, that is, the benefit and advantage of being able to use the product. Where the product is able to fill in a need or a want, satisfaction is obtained by the consumer. In the end, the seller is able to serve his own self-interest, that is, more sales and more profits for him. Selling, defined Selling may be defined as the "personal or impersonal process of assisting or persuading a prospective customer to purchase a product or service, or to act favorably upon an idea that has commercial significance to the seller. " This definition, it will be noted, has such a broad connotation as to include advertising, publicity and public relation activities, sales promotion, as well as personal selling. Selling and Marketing The difference between selling and marketing is more than semantic. This is because while selling focuses attention on the needs of the sellers and is thus preoccupied with the seller''s need to convert his product or service into cash, on the other hand, marketing is concerned with the needs of the buyer and as such is responsible for providing him with satisfying goods. It should also be noted that while selling is inherent to marketing, nevertheless, it is merely a part thereof. Dynamic selling occupies a high position in modern business operations. Effective selling makes possible high output of production. A good deal of the sales efforts is done through personal selling.
D) THE IMPORTANCE OF SYSTEMS SELLING IN CONTEMPORARY ENVIRONMENT Systems selling What does it mean as opposed to product selling? Selling of main and supplementary products so that the customer gets a solution under one roof (from one seller only) to solve his problem / need. Sales strategy in which interlocking goods and well integrated services are offered in place of isolated and independent items. Selling a complete solution to a problem or need rather than one or more of the component parts, for example, a swimming pool manufacturer might also sell landscaping, filtration equipment, pool chemicals, etc Why is it important in the new (contemporary) environment? 1) Buying individual components of the system from individual sellers is time consuming 2) Compatibility issues 3) Pointing fingers by individual vendors to each other if the combination does not work 4) Ever increasing competition has made quick response to consumer need as a tool for survival (System Integrators-SI)
E) SELLING OF SERVICES AS OPPOSED TO SELLING OF TANGIBLE PRODUCTS

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What is service? Service is defined as any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Tangible products/Goods vs services - Services differ from goods because of 4 I s: 1) Intangibility Cannot be easily displayed Cannot be patented Intangibility (Marketing strategy) Provide tangible clues Stimulate word of mouth Use personal sources (Endorsement) Use post purchase communication (for repeat purchase) 2) Inconsistency Standardization hard to achieve Hard to set up quality control Can predict quality or determine it only after service is performed
Inconsistency (Marketing strategy) Stress standardization and performance Focus on employee training program so that everybody delivers standard quality Consider licensing and other form of credential requirements (ISO 9000) 3) Inseparability Services cannot be separated from the provider Courier one haircut!!! Harder to mass produce as human beings are involved in delivering Less efficient than goods production
Inseparability (Marketing strategy) The people in the provider organization come in contact with the consumer Employees appearance and behavior become important Needs strong training program, incentives and supervision 4) Inventory Cannot be inventoried Value can be short lived Capacity is finite Time period may be limited
Inventory (Marketing strategies) Predict fluctuation in demand and manage demand (Advance booking) Rainy season discount on hotels at hill stations Happy hours at internets Manage capacity to balance supply and demand, British Airways India-London Size of aircrafts Salesman vs. service person In goods selling, these are the only two people from the company who come in contact with the customer. Service person is called when there is some problem. Whose entry is easy at the customers place? Service person because there is already a problem existing (Air Condition for working) To make customers acceptance easy a salesperson should be like a service person, who solves problems of the customer Why is selling a service so different from selling a product? In some ways, the principles should be the same. The objective is to get the prospect to agree that the way to solve their problem is to use your product or service. But there are some differences between a product and a service (apart from being able to drop a product on the prospect's foot!), which require different sales techniques: 1) The element of trust: It's never possible to know exactly what will be received until the service has been given
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The sales person as part of the service: The product sales person can never be part of his or her product. The product has its own dimensions and specifications which are self-contained and unique. But a sales person selling a service is often part of the 'package' - especially if it is you, selling your own service. A service can't be stored: You can't make it in advance and stock it for selling later. And each time you deliver a service, it's going to be slightly different.
So, how can you make the process of selling a service that much more effective. Here's a few quick ideas for you to experiment with, adapt and adopt: 1) Use credentials and testimonials: These can be concrete evidence that your service has worked for other people. And if your existing satisfied customers don't volunteer testimonials, ask for them. You'll seldom get a refusal. 2) Don't be vague about your service: A service is by nature a series of promises until the benefits have been delivered. So make your promises as concrete as possible. Paint a 'Word Picture' . Sell both 'Promise and Proof'. (There are articles on each of these in the Archive). Be very, very clear about what you are offering. 3) Give free samples: If you like, this Web Site offers free samples in the form of advice, which are useful enough to convince some people (you, hopefully!) that our consultancy is worth hiring. But be careful not to give too much away, or you'll have nothing to sell. Most of the advice on this site can be made much more effective by using our consultancy to guide your business through the process of improving its selling and marketing. End of sales plug! 4) Make your service different: Product manufacturers try to make their products different from their competitors. It's even more important to show how your service offers something different. And make sure that the differences are ones which are important to the prospect. Read the Archive article on 'Selling Benefits'. 5) Don't sell your time: If you are selling a time-based service, try not to sell it on the basis of so many hours worked. Sell it on so much per solution or project. This way, you remove the fear barrier that you might be trying to spin the project out. And you'll be offering a firm outcome for a fixed price. Sure, that's not always possible, but try to make this type of offer to new prospects. Existing customers may trust you enough to buy on a time-based proposal. 6) Think of your service as a product: This may seem a contradiction, after saying that a service is different in important ways. But many of the solid sales principles apply equally to a service as to a product. When you are reading about sales and marketing methods which seem to apply more to a product, try to adapt them to selling your service. Often, they will work equally well. Almost all service-oriented businesses share certain things in common that make them different than companies that mainly produce products, and these affect your marketing approach. 1) Services are typically tailored to the particular customer. You can't mass produce services as easily as you can physical products. An audit report for the Frogs R Us amphibian retailer can't be used for any other company. So the effort the service provider puts into developing the end product can't easily be used to spin off other similar products. This affects the marketing of the service. 2) Most services are personally linked. Customers who buy services typically buy the skills, competence and attention of a particular person. If that person leaves one company and goes to another, his or her customers will often follow--because their loyalty is to the individual, not the company. This happens in brokerage houses, hair salons and upscale restaurants all the time. Service businesses are difficult to sell because they're typically ownerdependent, with little in the way of capital equipment (like manufacturers have). 3) Most services are also time-intensive. In addition to expertise, what service providers mostly sell is time, and they typically bill using an hourly rate (as opposed to the per widget or per chicken-serving rate). You often make appointments to get your services rendered. For a service provider, time is literally money: If an hour passes unbilled, it's lost income, never to be recouped. Unique Circumstances If your business is primarily a service provider, you have to approach marketing with some special sensitivities: Service businesses depend on satisfied clients more than other businesses. When you're marketing your services, you can't simply drop a product on your prospect's desk. It isn't easy to invite your prospect to compare your products with those of your competitor either. So you have to market with a "satisfied client" list; they represent the best example of the quality of your service.
F) SELLING PROCESS Selling process is the process under which the salesman: identifies and locates the prospect, separates the suspects from prospects, approaches them and makes a sales presentation Handles their objections and closes a sale.
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Subsequently he should follow-up with the customer to reinforce the buying behaviour. Types of selling process: 1) Prospecting 2) Pre-approach 3) Approach 4) Presentation and demonstration 5) Proposal 6) Handling objections / Negotiation 7) Closing 8) Follow up 1) Prospecting Process of identifying potential buyers (have need, will to buy and power to buy). Methods of prospecting Acquaintance (satisfied customers) references Cold calling Centre of influence method references from opinion leaders. Personal observation method Direct mail or telephone method Company record old/lost/current customers Newspapers (tenders) Too late? Retailers Trade fairs, Exhibitions Pre - approach Research Likes, dislikes Needs, preferences Habits, nature, behavior Economic and social status Process of qualification of prospect (Prospect is qualified if he will buy within the stipulated current time period) Approach Prospect and salesman come in contact with each other face to face 1st Call Make or break call Objectives To get the attention of the prospect, understand his requirements Critical requirement A powerful opening statement & Listening Keys to successful approach Prior appointment (Role play) Two options technique Confidence, professionalism, command over the information about the product, Formal business attire Make prospect feel relaxed Respect the views of the prospect, no arguments Patience (if no sale happens in that visit) Presentation and demonstration Seeing is believing Increases customers confidence in the product Offer the product for handling Sell benefits not the features Proposal Complete in all respects Technical configuration Price Terms and conditions Payment, Warranty, After sales service Tackling objections Objections are not hurdles
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8) 9)
They are opportunities No objection, no interest, NO SALE Opportunity for trial close
Handling objections Role Play (Your price is high) Get full basket from the prospect Trial close Answer the objection Negotiate / Trade the offers The close Customer signs the purchase order Summery close What else we need to do to get your order today? Options close How many should I book for you? When will you like to have delivery? Will you pay by cash or cheque? Which color would you go for, red or blue?
10) Follow up Process the purchase order in the office Coordinate for timely delivery Coordinate installation and acceptance Collect payment
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Chapter 2 SALES MANAGEMENT PLANNING SALES MANAGEMENT INFORMATION SYSTEMS, SALES MANAGEMENT PLANNING FORECASTING, SALES BUDGETING AND PLANNING QUOTAS
A) SALES MANAGEMENT PLANNING There are three primary sections to the Sales Plan: 1) Understand Your Sales Objectives 2) Develop Your Action Plans 3) Delegate Territory Plans 4) Delegate Key Account Plans 5) Measure and Report Your Results Section 1: Understand Your Sales Objectives 1. Identify the Sales objectives: Objective of this section: To present an overview of your company's sales objectives as they are defined in your objectives. This introductory section of your Sales Plan requires you to identify the specific overall sales objectives as reflected in the annual business plan. The purpose of this exercise is to ensure that you clearly understand the sales requirements of the business plan on a quarterly basis and the company's overall business planning objectives. The template that is on the next page is a generic table that should be modified and filled in to reflect the specific definitions of your own products. This particular template defines the quarterly sales objectives for four products in terms of sales revenue, units and market share. In fact, you may have just one product and additional objectives that you monitor. Hints: Be as inclusive of additional categories as possible rather than exclusive and limiting. This is a table that should be widely communicated among your individual Sales Representatives so add any comments and notes that would be helpful. 2.0 Identify the other sales objectives in the business plan Objective of this section: In addition to the sales revenue, sales units and market share percentages that you have outlined above, you should clearly define any specific objectives of the company's business plan that relate directly to sales performance or sales tactics that will be required from you and your Sales Representatives this year. Examples of company level objectives whose success relies on Sales could be... a specific sales penetration plan for a specific market segment. a specific sales plan to expand the customer base the introduction of a new sales channel into the market. the introduction of a new business partner into the sales channels. the adoption of a new sales strategy such as "Treat High, Treat Early". The question that needs to be answered here is... Are their new company wide strategies that rely on the successful execution of your Sales Representatives? Describe briefly any additional primary business plan objectives that rely directly on the successful performance of the Sales Department during this year. Hints: Be as inclusive as possible in this listing since it gives you a strong indicator of the type of strategies and longerterm initiatives that the company is planning to execute. As the year develops, these objectives should be added to and modified as senior management develops new strategic initiatives. We recommend that this table be updated at the beginning of each quarter. This is a table that should be widely communicated among your individual Sales Representatives so add any comments and notes that would be helpful. 3.0 Summarize the existing sales performance Objective of this section: To present the sales data that identifies: 1) The historical sales performance during the past one to three years depending on the specific performance criteria, and... 2) The current sales performance.
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This intent of this section is to help understand the current perspective of the sales and market share performance of the company. Outlined below are a number of trend graphs that need to be completed by you as part of the pre planning process. The information displayed in these graphs should set the stage that will enable you to set this year's objectives. What you are doing here is to show the data that firmly establishes the sales performance baselines. During the year, you will monitor performance against this baseline and, of course, against this year's objectives.
As a sales manager, you may encounter challenges that seem impossible. But a well-devised plan of action may position your company to reach its goals. You can make a chart that reflects your levels of distribution, sales, customer retention and market share. To obtain consistent results, you may have to perform a variety of tasks, such as expanding your sales force, providing additional training and familiarizing them with the Instructions 1) Set a sales goal for your organization. Include goals that you can measure, such as a revenue target or number of units to be sold. Make a sales plan that serves as a road map for reaching your goal. 2) Design a marketing strategy to help reach your goal. Review the past performance for your company's advertising and marketing initiatives to find the campaigns that delivered the best results. Choose methods such as broadcast, print and web advertising or telemarketing to reach new customers. 3) Communicate your sales goals to senior management as well as your sales representatives. Inform your sales force of the company's marketing strategy and promotional methods for identifying potential customers. 4) Reinforce your sales representatives' knowledge about your product or service. Provide training sessions on effective customer presentation and follow-up skills. 5) Determine if a larger sales force might equate to greater results. If so, hire additional sales representatives to help meet your goals. 6) Meet with your sales representatives to discuss their results. Have a mandatory meeting on Mondays, for example, or during a time that is convenient for all attendees. Review the sales results in relation to your sales goals. Provide advice, motivational tips and rewards that encourage your sales representatives to succeed. 5 Tips for Sales Management Planning Tip One Allocate time in your schedule to plan. Commit yourself and block out time in your diary or calendar to planning. This may be every day, week and/or month. Whichever the case you must write in down in the schedule you use for your appointments so you dont use the time for something else. Tip Two Get your team involved in the planning. Your team should take part of some of your planning, as they may have to contribute to the goals you want to set. Get them involved as they will provide excellent ideas and they will take ownership of the plan ensuring its success. Tip Three Change the way you think about planning. Dont consider planning as a task you must undertake as a sales manager. You should consider it as a chance to think about issues, opportunities, staff and other areas in a creative way. If you consider it to be a mandatory task your chances of successful planning will be limited. Tip Four Set yourself and/or team some goals. A plan is only as good as the goals you set. Make the goals SMART (Specific, Measurable, Attainable, Relevant and Timeframe), as it will give them more substance. Tip Five Break down your goals into action plans. I have found that a 90-day action plan is a great way to help people achieve their goals. It allows the sales manager to write down the tasks required to complete the goal but also specify the due dates. B) SALES MANAGEMENT INFORMATION SYSTEMS Introduction Tactical information systems are designed to support recurrent decision making situations this means that the information requirements can be determined ahead of time. This allows for reports to be produced regularly and in predetermined format(s). Generally aimed at operating and control levels of the organization, this precludes that they are being prepared by top level management. Example of the type of recurrent decisions supported by these reports include: daily call report, expense statement etc. Online retrieval is achieved through invoking programmes which incorporate the routines necessary to retrieve the data and the predetermined formats for presenting it. Situations that cannot be anticipated or call for information that is not anticipated require the production of unscheduled reports sometimes referred to as ad hoc reports. What is Sales Management Information System? To achieve the sales goals set by senior management, the sales manager must make tactical decisions about shape of sales territories
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allocation of sales staff to territories what product to push which customers to contact incentive schemes which market segments to emphasise and with what products. In addition, they must also monitor the sales effort and make changes to the tactics in response to changes in the market. Importance of Data To be useful, the various information systems must be integratedthe factor that best relates the various systems is data. A tactical information system is constructed around a common core of data collected because of its potential use to the area that collects it and also because this data is a resource for the entire organization. Data is often organized in a database; since the database receives inquiries from all over the organization, it acts as a centre for the network of information flows. Not all data is maintained in a database some information is needed only within the department that collects it. Reports 1) Daily Report - This is a very vital tool for any organization. As the salespeople are mostly in the market, it is very difficult to actually see them working. Thus daily report helps in informing the company about the customers met by each rep on that particular day and the business transacted. Daily Report: A Sample - Name of sales rep - Employee code number - Date - Market worked during the day - Names of customers met - Products for which met - Orders taken during the day - Special column for competitors activity during the day. 2) 3) Weekly Reports Tour Programme - This report informs the company about the customers and towns to be covered during the given campaign. This report is sent to the immediate boss by every sales rep in advance or prepared together with the boss. It informs the sales manager about the day-to-day working and the division of target for that period. The tour plan also indicates the various expenses that are likely to be incurred by the sales rep and the various programmes that might be conducted for the promotion of the product in a particular market. On conformation from the sales manager, the sales rep goes ahead with the work. Thus the travel expense statement depends upon the tour plan submitted. Monthly Performance Review: Frequency : Monthly/Quarterly/Annual performance at office by Sales Rep. Guidelines Each sales rep to report personally to the branch office once in a month to review the following: o Previous tour cycle date wise o Plan for next tour cycle to be sent one week before reporting o Managers to ensure complete availability for each sales rep.
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C) FORECASTING Introduction Sales forecasting is a difficult area of management. Most managers believe they are good at forecasting. However, forecasts made usually turn out to be wrong! Marketers argue about whether sales forecasting is a science or an art. The short answer is that it is a bit of both. Reasons for undertaking sales forecasts Businesses are forced to look well ahead in order to plan their investments, launch new products, decide when to close or withdraw products and so on. The sales forecasting process is a critical one for most businesses. Key decisions that are derived from a sales forecast include: - Employment levels required - Promotional mix
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- Investment in production capacity
Some Important Terms in Selling 1) Market Potential (Market Demand) : It s an estimate of the maximum possible sales opportunities present in a potential market segment and open to all the sellers during a stated future period. Sales Potential: It/s an estimate of the maximum possible sales opportunities present n a potential market segment for specified company. 2) Sales Forecast: It is usually a term used for a short term projection of sales in rupee value or in units under a particular marketing programme and an assumed set of economic and other factors outside the control of the company. 3) Sales Budget: It s usually the companys forecast n rupee value and numbers purely on accounting and financial basis for the purpose of preparing the annual budget of the company for the financial year, which also takes into account the allocation of funds to such marketing factors as selling expenses, advertising and sales promotional budget etc. Sales Potential or Market Demand Function The market demand function can be explained by a mathematical formula: QD= F (P, I, Po, T), where, QD = Quantity demanded F = Mathematical way of expressing functional relationship P = Price of the product I = Consumer income Po = Price of other goods and services (substitute products and complementary products) T = Consumer preference Difference Between Sales Potential and Sales Forecasting: The estimates for sales potential indicates how much a company could sell if it had all the necessary resources and desired to use them. The sales forecast indicates how much a company with a given amount of resources can sell fit implements a particular marketing strategy. Usually sales potential works out higher than sales forecast because: constraints of production capacity, inadequate distribution, financial resource crunch, other elements like operational lacunae, risk factors, and Attrition of employees. Importance of Sales Forecasting The success of a business enterprise largely depends on how well sales forecasting has been done because, besides affecting the intrinsic sales management performance it also determines: Supply chain management effectiveness (Value chain management programmes Sales forecast can be in rupee terms or in units or both and it can be for customer, sales territory, regional, divisional and national level as well as on short-term or long-term. The forecasting Process:
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Types of forecasting There are two major types of forecasting, which can be broadly described as macro and micro: Macro forecasting is concerned with forecasting markets in total. This is about determining the existing level of Market Demand and considering what will happen to market demand in the future. Micro forecasting is concerned with detailed unit sales forecasts. This is about determining a products market share in a particular industry and considering what will happen to that market share in the future. The selection of which type of forecasting to use depends on several factors: 1) The degree of accuracy required if the decisions that are to be made on the basis of the sales forecast have high risks attached to them, then it stands to reason that the forecast should be prepared as accurately as possible. However, this involves more cost 2) The availability of data and information - in some markets there is a wealth of available sales information (e.g. clothing retail, food retailing, holidays); in others it is hard to find reliable, up-to-date information 3) The time horizon that the sales forecast is intended to cover. For example, are we forecasting next weeks sales, or are we trying to forecast what will happen to the overall size of the market in the next five years? 4) The position of the products in its life cycle. For example, for products at the introductory stage of the product life cycle, less sales data and information may be available than for products at the maturity stage when time series can be a useful forecasting method. Methods of Sales Forecast or Sales Budget Qualitative method 1) Top down setting of target on a presumed growth rate necessary to achieve The management has prerogative. The management may have compulsions. Management has higher and / or deeper understanding of what is possible and the opportunities that are likely to come. Management can see the big picture. But, They tend to neglect the practical details. They are mostly arrogant and opinionated. They are used to high handed behaviour. 2) Bottom up approach on what the field sales persons consider achievable - The field salesmen and the sales department have much better knowledge than anyone else of the market and what can be sold there. - They have greater knowledge of the degree of competition. - They are able to have microscopic view of the market. - The aggregate of the parts is likely to be more precise and accurate figure than the broken down task of a macro figure created at upper level. - Targets set by the salesmen are sacrosanct to them and they are committed to them and have much better chance of being achieved. But, They have no knowledge of the bigger task/picture/strategy and new product development and so on. 3) Expert committee (Jury) assessment They are knowledgeable people. They are senior people who can take a much more global view. They have better depth of understanding. They are strategist. But, they have poor field knowledge. They are not responsible for delivering. 4) The Delphi technique As applied to sales and marketing, a panel of experts is supposed to be responding to a sequence of questionnaires in which the responses of one questionnaire are used to produce the next questionnaire. None of the members know who the others are and what are their individual views. The facilitator makes available fresh views to all the members and after several rounds a composite view agreed upon by all emerges. 5) Historical analogy This is used for forecasting the demand for a product or service for which there is no past demand data. So the marketing personnel may use the historical analogy between an old similar product and the new one and derive the demand for the new product. 6) Survey of Customers requirements for business to business sales - This is a very common method in industrial marketing as well as in durable marketing. - It is an inexpensive method which has an additional benefit of a commitment from the customer. - In a way, it is the best projection possible. - However, all customers cannot really be accurate about their requirements. Most often, companies use this as a supporting data.
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Quantitative Methods: 1) Test marketing The results from a test market are extrapolated to make a prediction of the future sales. Usually a few limited markets are chosen which are representative and a product is launched with local shop display and promotion. The sales obtained from these controlled exercises can be used to project sales for the whole country. 2) Time series analysis: a) Trend projections (Additive and CAGR) b) Nave method c) Free hand or graphic method d) Moving average method e) Line of best fit or method of least squares f) Exponential smoothing 3) Market factor indices method: 1. Regression Analysis and 2. Econometric models
CREATING THE SALES FORECAST FOR A PRODUCT 1) The first stage in creating the sales forecast is to estimate Market Demand. Definition: Market Demand for a product is the total volume that would be bought by a defined customer group, in a defined geographical area, in a defined time period, in a given marketing environment. This is sometimes referred to as the Market Demand Curve. Using the definition above, market demand can be defined as: Defined Customer Group: Defined Geographical Area: Defined Time Period: Defined Marketing Environment:
2) Stage two in the forecast is to estimate Company Demand Company demand is the companys share of market demand. This can be expressed as a formula: Company Demand = Market Demand v Companys Market Share A companys share of market demand depends on how its products, services, prices, brands and so on are perceived relative to the competitors. All other things being equal, the companys market share will depend on the size and effectiveness of its marketing spending relative to competitors. 3) Step Three is then to develop the Sales Forecast The Sales Forecast is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment. Note that the Sales Forecast is not necessarily the same as a sales target or a sales budget. A sales target (or goal) is set for the sales force as a way of defining and encouraging sales effort. Sales targets are often set some way higher than estimated sales to stretch the efforts of the sales force. A sales budget is a more conservative estimate of the expected volume of sales. It is primarily used for making current purchasing, production and cash-flow decisions. Sales budgets need to take into account the risks involved in sales forecasting. They are, therefore, generally set lower than the sales forecast. Obtaining information on existing market demand As a starting point for estimating market demand, a company needs to know the actual industry sales taking place in the market. This involves identifying its competitors and estimating their sales. An industry trade association will often collect and publish (sometime only to members) total industry sales, although rarely listing individual company sales separately. By using this information, each company can evaluate its performance against the whole market. This is an important piece of analysis. Say, for example, that Company A has sales that are rising at 10% per year. However, it finds out that overall industry sales are rising by 15% per year. This must mean that Company A is losing market share its relative standing in the industry.
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Another way to estimate sales is to buy reports from a marketing research firm such as AC Neilsen, Mintel etc. These are usually good sources of information for consumer markets where retail sales can be tracked in great detail at the point of sale. Such sources are less useful in industrial markets which usually rely on distributors. Estimating Future Demand So far we have identified how a company can determine the current position: Current Company Demand = Current Market Demand x Current Market Share How can future market demand and company demand be forecast? Very few products or services lend themselves to easy forecasting . These tend to involve a product whose absolute level or trend of sales is fairly constant and where competition is either non-existent (e.g. monopolies such as public utilities) or stable (pure oligopolies). In most markets, total demand and company demand are not stable which makes good sales forecasting a critical success factor. A common method of preparing a sales forecast has three stages: 1) Prepare a macroeconomic forecast what will happen to overall economic activity in the relevant economies in which a product is to be sold. 2) Prepare an industry sales forecast what will happen to overall sales in an industry based on the issues that influence the macroeconomic forecast; 3) Prepare a company sales forecast based on what management expect to happen to the companys market share Sales forecasts can be based on three types of information: (1) What customers say about their intentions to continue buying products in the industry (2) What customers are actually doing in the market (3) What customers have done in the past in the market There are many market research businesses that undertake surveys of customer intentions and sell this information to businesses that need the data for sales forecasting purposes. The value of a customer intention survey increases when there are a relatively small number of customers, the cost of reaching them is small, and they have clear intentions. An alternative way of measuring customer intentions is to sample the opinions of the sales force or to consult industry experts Time Series Analysis Many businesses prepare their sales forecast on the basis of past sales. Time series analysis involves breaking past sales down into four components: 1) The trend: are sales growing, flat-lining or in decline? 2) Seasonal or cyclical factors. Sales are affected by swings in general economic activity (e.g. increases in the disposable income of consumers may lead to increase in sales for products in a particular industry). Seasonal and cyclical factors occur in a regular pattern; 3) Erratic events; these include strikes, fashion fads, war scares and other disturbances to the market which need to be isolated from past sales data in order to be able to identify the more normal pattern of sales 4) Responses: the results of particular measures that have been taken to increase sales (e.g. a major new advertising campaign) Using time series analysis to prepare an effective sales forecast requires management to: Smooth out the erratic factors (e.g. by using a moving average) Adjust for seasonal variation Identify and estimate the effect of specific marketing responses D) SALES BUDGETING AND PLANNING QUOTAS SALES PLANNING QUOTAS Sales Planning Quotas (SQ) are goals set by a comp. for its marketing unit for a certain period of time. Marketing unit may be regions, territory, branch, salesperson, a distribution or a dealer. SQ can be set on sales unit, expenses, profit margin, activity, customer satisfaction combination. Annual sales quota for each marketing unit can be -broken down to quarterly/monthly.
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Objectives of Quota are like: 1) Making available performance standard: It act as a tool to measure performance of sales person, act as a goal/target setter. Performance Std. set against which actual performance is compared to evaluate salespersons performance. 2) Controlling performance: By selling quotas for special activities, sales volume &selling expenses. The SM (sales manager) controls the performance. For e.g.:-10 calls per day/5 calls of business customers indirectly monitors/controls the activities of sales person by setting quotas. Can keep an eye on wasteful expenditure on customer (travelling, lodging, entertainment & meals) company reimburses sales expenses only up to 0.5% of sales limit expenses? Control over reporting &can influence sales performance. 3) Motivating people: Sales quotas are set by motivating sales people by money. performance is recognized by awards/rewards like trips abroad. This financial compensation/ rewards are called incentives. The incentives are linked with quotas which are made achievable for sales person. So that he puts in extra effort to achieve his quota. 4) Identifying strength &weakness: Actual performance compound respective quotas of difference territories & salespersons, The SM can identify successful &unsuccessful performance. Analysis of causes of poor performance may reveal training program needs improvement, better product quality required to meet customer needs & positioning strategy. Types of Quota I) Sales Volume: 1) Rs. sales volume:- many product easier to manage (HUL) 2) Unit Sales volume: - Sets sales volume in units. E.g. machinery/ milk/ petrol. 3) Point sales volume: - When company wants to make profit will target. Sales Volume quota sales person, distributor, retailer based on geographic area/ product for a specific period. Point sales volume:- product which are more profit for the company will receive more profitable for the company will receive more points.. II) Financial Quota: Gross- margin/profit ---Gross margin quota is decided by cost of goods sold from sales volume. Cost of goods sold selling expenses-cost of goods manufacturing= gross margin. (No control on manufacturing cost) by sales person. Expense quota: Companies control over in cost of selling (travelling) control over expenses along with sales volume quota, SO that selling expenses are kept in line. E.g. Pantaloon -Garv se kaho Hum kanjus hai III) Activity Quota: Direct sales person to carry out job related activity. - Defining important activity - Finding out time required for carrying out activity - Deciding priority given to carry out activity. - Deciding quota/ frequency for important activity. IV) Combination quota: Selling activity &non-selling activities, uses point as common measure to overcome the problem of difference measures used by various quotas discussed earlier. Methods for setting Quotas 1) Territory potential 2) Part sales expenses 3) Total marketing estimates 4) Executives judgment 5) Salespeoples estimates 6) Compensation plan
SALES BUDGET What do you mean by Sales Budget? Estimates of expected volume of sales and selling expense are known as sales budget. The sales volume of sales budget is based on sales forecast. Sales Budget- Slightly lower than the Sales forecast to avoid excessive.
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Sale Budget =>Product wise quantities =>Territory wise quantities =>Customer wise & sales Person wise sales volume. PURPOSE OF Sales Budget: 1) Planning:- Profit Planning based expected sales less cost of achieving the sales. SB includes sales goals, strategy & action plan + cost of expected plan is based in sales quota; production; territory; customer & selling price. 2) Co-ordination:- SB is finalized by coordination with marketing +Finance +Product +HR. Coordination @ all angles by all departments to achieve similar goals. 3) Control:- Tool for evaluation of pert. SB is defined term of sales volume & selling expenses standard of pert against actual performance. Yearly Budget. Broken =>Quarterly--=>Monthly Methods used for deciding sales expense budget. 1. % of sales method 2. Executive judgment 3. Objective and task method Sales budget process 1) REVIEW SITUATION: sales management reviews past, present, and future (budget period) past helps to actual reference, present future helps to under changing marketing environment and expected reference. 2) COMMUNICATION: sales management communication in writing to all field office regarding formats, guidelines, assists and time about all three budgets. 3) Subordinates budgets: first time field sales managers prepares sales budget for their respective sales territory and submits it to reporting manages and upwards to national sales manager who prepares the companies proposed sales budget by combining the received budget. 4) Approval of the sales budget: In consultation with marketing head; National sales manager prepares 2/3 alternative proposals of sales budget and make presentation to top management. 5) Other department: Final sales budget is given to other department to prepare are their budget and Approval sales budget is broken down into each sales territory quarterly and monthly. A/cs department prepares cash budget and profit budget based on sales revenue information given by sales department and expenses budget given by other departments.
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Chapter 3 MANPOWER PLANNING FOR THE SALES ORGANIZATION FOR AND DEVELOPMENT OF SALES ORGANIZATION
Management of Salesforce Sales force is directly responsible for generating sales revenue. General management areas: 1) Establish Salesforce objectives Similar to other promotional objectives Demand oriented or image oriented. Major objective is persuasion, converting consumer interest into sales. Sales objectives; expected to accomplish within a certain period of time. Give direction and purpose and act as a standard for evaluation. Set for total salesforce and each individual salesperson. Can be $s, units sold, market share to achieve, for individual salespersons, also include ave. order size, ave. # of sales/time period, and ratio orders/calls. 2) Organizing the Salesforce In-house vs. independent agents (manufacturer's sales agents). Organize by: Geography (simplest, but not suitable if product(s) are complex or customers require specialized knowledge) Customer: Different buyers have different needs Product: Specific knowledge re: products is needed Size. Marginal analysis, or determine how many sales calls/year are needed for an organization to effectively serve its customers and divide this total by the average # of sales calls that a person makes annually. Also use subjective judgement. 3) Recruiting and Selecting Salespeople Need to establish a set of required qualifications before beginning to recruit. Prepare a job description that lists specific tasks the salesperson should perform and analyze traits of the successful salespeople within the organization. May use assessment centers--intense training environment that places candidates in realistic problem settings in which they give priorities to their activities, make and act on decisions. Recruitment should be a continual activity aimed at reaching the best applicants. Applicants that most match the demographics of the target market. 4) Training Sales Personnel Use formal programs, or Informal on-the-job training. Can be complex or simple. Training should focus on: the company products selling techniques. Aimed at new hires and experienced personnel. Can be held in the field, educational institutions or company facilities. 5) Compensating Sales People To attract, motivate and retain sales people that facilitate and encourage good treatment of the customers. Need to understand personalities of sales people. Strive for proper balance of freedom, income and incentives. Need to determine the best level of compensation required, and the best method of calculating it. Straight salary straight commission (selling insurance)--single percentage of sales or sliding rate Combination plan 6) Motivating Sales People Need a systematic approach, must also satisfy non-financial needs: Job security Working Conditions Opportunities to succeed
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Sales contests increase sales. Symbolic awards--plaques, rings etc. Can also use negative motivational methods for under performers. Due to burn out--even the best need motivating!! Ongoing process...keep reps. hungry Need a motivational program. Spend time with reps, personal attention!! Take interest in them and the sales goals Compensation packet that rewards quality salesmanship and extra effort Recognition of extra effort of sales force Make sure SR feel important Keep SR informed of company activities Make certain reps. believe in the company Goals must be realistic and achievable and changeable Determine what they want and give it to them Controlling and Evaluating Salesforce performance
Rely on information from call reports, customer feedback and invoices. Performance is determined by objectives. May compare with predetermined performance standards or with other sales people working under similar conditions.
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Chapter 4 RECRUITMENT, SELECTION, TRAINING, AND DEVELOPMENT OF SALES PERSONNEL
A) RECRUITMENT OF SALES PERSONNEL Hiring Process Planning for recruitment: Analysis of annual turnover sales manpower forecast Long term and short term hiring objectives No and type of sales people required (S.P.A) S.P.A (identify Qualification and exp of applicants) = JD Strategic Position Analysis: Systematic procedure Skills and ability required to perform sales job Turnover Average% of sales force / period of time Career prospects Poor working conditions Inferior supervision Perceived / low compensation, promotions Reassignment of territory Retirement Job Analysis: Gathering and organisation of information concerning the Tasks, Duties and Responsibilities of specific jobs JA = JD + JS Job Qualification and JD: Job Qualification PAKS to perform job successfully JD Written document Title of the job Title of the jobs immediate supervisor General responsibility as job summary Major job duties Minor job responsibilities Reporting relationship and chain of command Minimum qualification required for smooth conduct of job Source of Recruitment 1. Internal sources Lateral and upward moves (Tele line, staff-line) Lateral one territory to another Upward higher positions in an org. (employee pressure groups) Incumbent knowledge about market, product and competition Interns and cooperative students Interns - Work Part-time basis on the job training while studying Co-operative Take break and work full time Employee referral programmes Incentive programmes Candidates from customers, suppliers or competitor firms 2. External sources Other industry sources Candidates from customers, suppliers or competitor firms Hire war Organisational loyalty/ Ethical? Prospective salesperson can sell to you Educational institutions & campus recruitments Selecting from a captive source Cost or recruitment low Advertising Large number of unqualified application Most ads are dull looking no creativity
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Employment agencies Traditional method of recruitment Govt exchange Captive database H.R Consultant Walk-ins Unsolicited applications Networking N/W among family members, friends & acquaintances Potential candidate loop Web sources Naukri.com, monster.com
B) SELECTION OF SALES PERSONNEL Database from recruitment stage Hire or no hire decision Process that determines whether or not an applicant meets the qualification for the specific job and selects the applicant who is most likely to perform well in a job 1. Factors affecting selection process: Applicant factors selling aptitude, education training, physical, mental and socialization qualities Organisation Policy matters- business scenario 2. Selection Procedure Application forms:Standard application form Help mngr to prepare for interviews Job hoppings reasons Screening of application Interview call letter Personal Interviews: GD &PI Gain insight into mental abilities and personality Checks aggressiveness, empathy, sociability for sales job Structured Situational, job knowledge, salespersons requirement Unstructured Stress In-basket exercise (problems, messages & reports) Reference check: Job experience and college degrees Creates opinion about the applicants aptitude towards job Physical examination: Sales require stamina and physical ability Physical and Medical tests Psychological tests: Intelligence test mental ability Aptitude test learning skills & reasoning level (Training) Personality test Ability to adapt and adjust, interpersonal relationships, motivational interests Determination of terms of services: Compensation pattern, Traveling allowance, medical allowance, leaves, housing facilities Appointment: Terms and condition of service signed by appointing authority
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Initial orientation: Origin and growth of the firm Policies, procedures and regulations governing the job Socialisation Introduction to the work environment, territory and to the job 1. Anticipatory stage - Realistic Job Preview (RJP) 2. Encounter stage 3. Settling in stage Employee mentoring
C) TRAINING OF SALES PERSONNEL Proper training can prepare salespeople to meet with customer expectations. New salespeople spend a few weeks to several months in training. Companies view sales training important for protecting their investments in their Salesforce Sales Training Process consists of: Assessing sales training needs Designing and executing sales training programs Evaluating and reinforcing sales training programs Assessing Sales Training needs Sales training needs are assessed both for Newly hired sales trainees, and Experienced / existing salespeople Methods used for assessing training needs are: First level sales managers observation Survey of salesforce and field sales managers Customer survey Performance testing of salespersons Job description statements Salesforce audit (as a part of marketing audit) Designing and Executing Sales Training Programme For this, sales manager takes five decisions, called: ACMEE: Aim, Content, Methods, Execution, Evaluation First three words and organisational decisions relate to designing of sales training Examples of Aims / Objectives of sales training: Increase sales, profits, or both Increase sales productivity Improve customer relations Prepare new salespeople for assignment to territories Content of Training Programme Content for new sales trainees is broader. It includes: Company knowledge Product knowledge Customer knowledge Competitor knowledge Selling skills / sales techniques Examples of specific content for experienced salespersons are: New product knowledge Introduce change in sales organisation Negotiating skills Content depends on the aims of training programme Sales Training Methods Selection of suitable methods for a training programme depends upon the topic and audience. Training methods are grouped into five categories: 1) Class room / Conference training 2) Behavioural learning / Simulations
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3) 4) 5)
Online training Absorption training On-the-job training
D) DEVELOPMENT OF SALES PERSONNEL
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Chapter 5 TIME AND TERRITORY MANAGEMENT TERRITORY PLANNING, ESTABLISHING AND REVISING TERRITORIES, BASES OF TERRITORY DESIGN, METHODS OF TERRITORY DESIGN INCLUDING COMPUTER MODELS, ASSIGNING SALES PEOPLE TO TERRITORIES ROUTE PLANNING AND TERRITORY COVERAGE. SALES INCENTIVES AND SALES COMPENSATION, SALES FORCE PERFORMANCE EVALUATION AND CONTROL
A) TIME AND TERRITORY MANAGEMENT T&T is driven by your goals. Four categories for time management in sales: 1. planning and preparation 2. travel and waiting 3. face-to-face selling 4. non-selling activities (paperwork, sales meetings, customer training) Reasons Companies Develop and Use Sales Territories To obtain thorough coverage of the market. To establish each salesperson's responsibilities. To evaluate performance. To improve customer relations. To reduce sales expense. To allow better matching of salesperson to customers needs. To benefit both salespeople and the company. Account Analysis Drives T&T Management Account analysis differs from market analysis. How? Time management is most effective when it is well planned. Planning involves: analyze accounts know where you are going and why schedule as far in advance as possible use telephone as much as possible, but dont undervalue face time review thorough records determine BEST time to visit people have contingency plans confirm meetings before getting on the plane or in the car Territory management knowing which customers/clients/opportunities of a certain target, vertical, or niche are in the territory scheduling days, weeks and time in the territory by the geography of the territory forecasting where the business will come from within the territory to meet plan making the best use of time with opportunities/accounts that are mostly likely to produce revenue leveraging the best accounts in the territory Time management: scheduling - in the calendar - time to hunt/prospect for new business each day scheduling meetings and calls AROUND the hunting time assuring that meetings in specific geographies are combined on the same day(s) prioritizing tasks as A's (must be done today), B's (should be done today) and C's (could be done another day). Remaining faithful, disciplined, focused and consistent to the calendar/plan and task list Identifying tasks (like CRM entry, call reports, etc.) that get procrastinated (left off, put-off, forgotten, incomplete) and scheduling time for them in the calendar. Elements of Time and Territory Management for the Salesperson
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Travel: -
route calls to reduce travel time always make appointments use your lunch time (and dinner if possible) use waiting time for paperwork, calls, e-mails,/ reschedule if waiting too long
Face-to-Face: see the right person prepare carefully - know your purpose - over prepare send materials in advance get right to the purpose - dont waste time listen and take notes qualify early contact multiple contacts in company in one trip Non-Selling Activities: keep office routine to a minimum - do outside of prime selling time dont stop after a sale or string of bad luck keep coffee-breaks, office talk, personal business to minimum watch customer service - manage your relationships with internal people (office staff, customer service people,..) - you WILL need these people to jump through hoops for you while you are on the road - make sure they want to help you On field tips: Buy, train yourself, and use a good time management system (paper or electronic) Manage both personal and professional life with same system Have letters ready and sent immediately following meetings confirming what was agreed to Always get back to people within hours if possible - regardless of the time of day Use hotels to their fullest e-mail access in room - check and respond at night - what else are you going to do? Voice-mail - same use hotel faxes, copy services, when needed use rooms in hotels for meetings to save time - in and out choose your hotels wisely (e.g., one with services you need, Courtyard Marriott always a good choice) Keep all receipts organized and file claims as soon as possible Track your time on activities (treat it like a competition with yourself) Track your success and failure rates Be prepared for ANYTHING (e.g., weather, cancellations, bigger than expected meetings, .)
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B) TERRITORY PLANNING The process of territory management consists of a logical sequence of events as follows: . Map your territory. . Define your measures of success. . Define your territory management objectives. . Plan actions to deliver critical activities. . Carry out those actions in the most efficient way. . Assess your results and change your plans and activities to improve those results. The skills of territory management include: . Knowing your territory. . Assessing the relative importance of activities. . Planning to maximise time in front of customers. . Prioritising responses to events and re-planning activities. Making the right decisions, using personal judgement. . Using your tap-top efficiently and managing customer information. . Networking to spot new business opportunities and competitor threats. . Managing internal departments and your organisations staff in the most effective way. The Territory Management Process 1) Map the territory- Use internal information, competitor information and other territory related information to create a map of the territory and the locations of customers, intermediaries, and prospects. 2) Define measures of success for the territory - In order to successfully pan and manage a territory, you need to know what you are trying to achieve, i.e. what your success measures are. 3) Define territory management objectives - Define key objectives (e.g. business defence), and the specific results that you are required to achieve. These may include such things as re-contracting XYZ Company at premium prices or gaining a new piece of business. 4) Identify critical activities - As outlined above, the results you are Looking to achieve may well involve you in a number of activities, such as organising a process audit, arranging meetings with key customer contacts, and Liaising with internal specialist personnel. 5) Create plans to deliver - Having determined those activities that are required to achieve specific results, these need to be scheduled using annual, quarterly, monthly and weekly plans. 6) Initiate plan - Once completed the plans need to be implemented. Factors to be Taken into Account Different types of accounts require different call frequencies Prospecting needs to run alongside visits to existing accounts Different accounts have different ordering patterns Most businesses have peaks and troughs Unpredictable Events Complaints which need urgent attention Highly valuable orders which need extra attention Unexpected requests from new business Planning is Essential Time spent in the field selling is the most expensive form of promotion Often over 40% of time is spent on waiting and traveling The sales person needs to be sure the chosen accounts and market segment are all covered Annual Territory Review Look for ways to increase sales profitability and reduce selling costs Increase sales opportunities with less travel time Ensure controlled regular coverage of the territory NINE STEP PLAN 1) Identify each existing and potential account the sale person needs to call on 2) Assign to each account a call frequency 3) Check the physical workload against capacity and adjust 4) Locate every account on a large scale map, identify different type of accounts with different coloured pins
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5)
6) 7) 8) 9)
Divide the territory into a equal number of calls (not accounts) a. Divide territory into five segments if it is a weekly call cycle b. Divide territory into four segments if it is a monthly call cycle sub-divide each segment into five Within each of the sectors, group the calls into workloads i.e. the number and type of calls capable of being called on in one working day Ensuring a sufficient time is left for prospecting for new business of this is a key element of the job description Run the proposed plan for one or two months to discover what adjustments need to be made Review the call plan at least annually, ideally every half year
C) ESTABLISHING AND REVISING TERRITORIES To attract salespeople, you have to create the right environment, a company that meets their needs and allows them to prosper. If you fail to provide the right working environment, they will leave for the greener pastures of another firm, maybe even a competitor. Although compensation is important, there is more to maintaining a winning sales team than providing the opportunity to make a good living. The most important step to building the right stable and attracting the best sales talent is to create concrete territories. Company owners succumb to a number of myths regarding territories, including, the belief that territories make salespeople inefficient and lazy; if we keep our network wide open, everybody will be motivated to pursue every prospect. There are several problems with this myth, including loss of accountability (if an account is lost, no one is held responsible). Also, non-cooperation among sales reps is a possible result. There was a one-year period in my former company where we had two groups of sales reps calling on the same target market. The animosity created between the warring groups of salespeople was counter-productive. Some staff actually locked their desk drawers, the result of paranoia that other reps would steal their leads. Defining territories facilitates cooperation and creates a collaborative environment that improves productivity and enhances sales. Lastly, animosity among prospects may occur. Without territories, all of your reps will call on the same most promising prospects, creating distrust and animosity among potential clients. Another misconception involves the belief that if a sales rep has an outstanding month, then assign new prospects and hot leads to those who fell behind in their quotas, a process often referred to as planned earnings. If one of your racehorses wins too many races, you'll limit his opportunity to win in the future and put your money behind a horse that isn't doing well. Another myth involves the mentality that a business is too small for territories, and a market is so big that sales reps will never cross paths. This line of reasoning assumes a firm will never grow. When we had five people in the entire company, I never imagined we'd grow to a staff of 180. Your best people will go after the best prizes, and their paths will cross. Territories are important. They provide accountability, promote entrepreneurial spirit and reduce turnover. Competition eats away at your accounts, and internal competition creates a hostile corporate environment. If you are trying to establish territories for the first time, you will experience two conflicting issues-the ease of administration of territories and the difficulty of making the change. Whether you are creating territories geographically or by industry SIC code, the successful establishment of territories follows several rules. Each territory must contain enough business prospects to allow a sales rep to earn a good living. Moreover, in any territory plan, the overriding rule to protect a rep's secured area is to make them responsible for any development within their defined territory. What do you do when a rep from another territory has an existing relationship with a decision-maker or architect associated with a project in another rep's assigned territory?Maintain your territory plan, and suggest that the two reps work together on projects, splitting or sharing the commission. It's not a management mandate, but merely a suggestion. Most reps will prefer this route because they'll know that working with each other (and splitting commissions) is a twoway street. This informal policy builds cooperation among the reps and maintains the objectives of your territory plan-to assign responsibility and accountability. In developing a territory plan, the primary goal is to maximize sales and push accountability down to the sales rep's level. For many companies, using geography is the easiest way to implement a successful plan. The ideal geography-based plan should comply with a couple of conditions. The geographical area should be contiguous to make it easier for the rep to cover, translating into less travel time and more time with prospects and clients. If possible, reps should live in their assigned territories. Although not an absolute requirement, it makes sense. The more familiar they are with their territory,
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the better they will know it, and the better the results. A territory plan based upon a specific industry is implemented when the requirements of an industry are so specialized that it makes sense to have one rep assigned to the niche on a fulltime basis. An example is the federal government, which has unique purchasing needs and requires specialized sales skills. A company with multiple sites may be assigned as a territory to a specific sales rep. This makes sense when the account has multiple sites; decisions are centralized, and the client is willing to enter a buying agreement for future purchases. Outside of the sales compensation plan, the creation of secured territories (islands of responsibility, accountability and ownership) is the most important step to attracting (and keeping) the best sales talent. Territories are a first step; there are other sales management methods that need to be applied to create an efficient, highly-desirable sales environment. These will be discussed in a future issue of S&VC.
D) BASES OF TERRITORY DESIGN Sales Territory Configuration of current and potential accounts for which responsibility has been assigned to a particular sales representative. A sales territory is composed of a group of customers or a geographic area assigned to a salesperson. Territory Management Planning, implementation, and control of sales persons activities with the goal of realizing the sales and profit potentials of their assigned territories. Establishing objectives, estimating resources and designing strategies to achieve stated objectives Who is responsible for territorial development? Development of sales territories is usually the responsibility of the sales manager overseeing the larger sales units within the organization. He/She must possess variety of skills. Sales territory design Breaking down a firms customer base so that accounts can be well serviced by individual salespersons Several territories are usually combined into district, several districts to a region, several regions to a zone, and a number of zones into the national market place. Reasons for establishing Territories To obtain thorough coverage of the market. To establish a salespersons responsibility. To evaluate performance. To improve customer relations. To reduce sales expense. To allow better matching of salesperson to customer. To benefit salespeople and the company. Customer related benefits Provide excellent service: Greater satisfaction Provide intensive market coverage Salesperson benefits Foster enthusiasm Facilitate performance evaluation Rewards Managerial benefits Enhances control Reduces expenses Reasons for not developing Territories The company may be too small. Management may not want to take the time, or have the know-how.
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Personal friendship may be the basis for attracting customers. High technology selling
Objectives and criterion for Territory formation Determine optimum number of territories to be formed and their configurations. (There should not be lack of coverage/ dont make account base fragmented) Territories should differing potentials Coverage should be effective and efficient Analyze workload and nature of job Type of product Territory Design Process
Select basic control units 1. Area States Counties Cities and zip-code areas Metropolitan statistical areas Trading areas Sales Potential Split customer base according to sales potential Estimate sales potential What sales potential will be appropriate for the average salesperson? This average sales potential is divided into the organizations overall sales potential to arrive at the number of territories needed. Servicing Requirements Servicing requirements of current and prospective future accounts. A B C category and establish sales frequencies. Analyze sales peoples work loads Workload is the quantity of work expected from sales personnel. Three of the main influences on workload involve the nature of the job, intensity of market coverage, and type of products sold. It considers individual account potentials and servicing requirements in creating territories
E) METHODS OF TERRITORY DESIGN INCLUDING COMPUTER MODELS 1. Build up method 2. Breakdown method - Determining the number of territories by dividing projected average sales per salesperson into an overall sales forecast. 3. Incremental method - Establishing additional territories as long as the marginal profit generated by the territories exceeds the cost of servicing them. Steps to consider when determining a firms basic territories 1. Forecast sales and determine sales potentials. 2. Determine the sales volume needed for each territory. 3. Determine the number of territories. 4. Tentatively establish territories. 5. Determine the number of accounts for each territory.
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6. Finalize the territories, and draw the boundary lines.
F) ASSIGNING SALES PEOPLE TO TERRITORIES ROUTE PLANNING AND TERRITORY COVERAGE Assigning territories Some salespeople can handle large territories and the travel associated with them; some cant. Some territories require experienced salespeople; some are best for new people. Some people want to live in metropolitan areas; others prefer territories with smaller cities. Assign each salesperson to that territory where the peoples relative contribution to the companys profits will be highest. Territory Management cycle
Account load: number of actual and potential customers assigned to a given sales person Account potential: share of an accounts business that the firm can expect to attract. Routing: Establishing the sequence of locations a salesperson will visit. Scheduling: Sequence of appointments or unannounced visits for maximum contact time
Routing After establishing sales territories sales personnel must be routed. Length of visits to customer Frequency Objective should be minimize travel time and maximize frequency. Territorial coverage of Areas of sales management organization The organisation of territories consists primarily in assigning the various geographic areas established through territoriallayout planning to the individuals who are to be responsible for their coverage. The organization of territorial coverage consists in getting the salesman to understand and accept the concept of planned territorial coverage and teaching him how to use the permanent route plan. It is usually necessary for the field sales manager to extend considerable effort in achieving such understanding and acceptance. The benefits derived from effective territory coverage are as follows. 1. Improvement of Customer Relation. 2. Consistent results will come only with systematic and methodical work. 3. Expenses of the company will be lower and controlled. 4. Selling will become more profitable. 5. The most important is job satisfaction. Using the Telephone for Territorial Coverage 1. Sales generating Selling regular orders to smaller accounts. Selling specials, such as offering price discounts on an individual product. Developing leads and qualifying prospects. 2. Order processing
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Ordering through the warehouse. Gathering credit information. Checking if shipments have been made. 3. Customer service Handling complaints. Answering questions. Most people can benefit from adopting the following practices: Satisfying part of the service needs of accounts by telephone. Assigning smaller accounts to telephone selling. Doing prospecting, market data gathering, and call scheduling by telephone. Carefully scheduling visits to distant accounts, replacing some with telephone calls.
G) SALES INCENTIVES AND SALES COMPENSATION Compensation for Sales Personnel Notwithstanding the fact that both Maslow and Herzbergs theories suggest that money has limited or only basic ability to motivate, compensation plan is essential part of total motivational programme of sales personnel. In overpopulated and low job opportunity countries like ours, money still plays an important motivational role. A good sales personnel compensation plan has three motivational roles: 1. Provide a living wage, 2. Adjust pay level to performance and thereby relate job performance and rewards, and 3. Provide a mechanism for demonstrating congruency between attaining company goals and individual goals. In a country like India, where the job opportunities are limited and number of aspirants for a job is disproportionately high, the usual western assumption that money matters less than other motivational inputs is only partially valid. The employers are perfectly aware of this situation and hence, they tailor compensation plan to suit the accepted social standard needs and their own goals and cost concern. Consequently the compensation plan widely used in the developed nations for sales personnel is not entirely applicable. Thus, many of the compensation plans given in the western text books are not exactly valid n our country. The primary difference between the developed nations and us seems to be n the concept of fixed and variable (incentive) remuneration forming the total wage package for sales personnel. In our country, the remuneration (usually called salary) for the sales force is largely on fixed amount basis for the usual mass merchandised product categories. However, in industrial goods category or other professional products categories fixed salary plus incentive on actual sales achieved beyond a datum level is not unusual. In most of the developed world the usual two-stage compensation plan work on 60:40 to 80:20 ratio between fixed and variable wages on a normative sales achievement. It is usual that beyond the normative sales achievement the rate of incentive keeps on increasing. This pushes the sales force to work harder to achieve beyond the normative level. However, n our country, the normative level may or may not be specified. Usually the budgeted sales level would be normative. Requirement of a Good Sales Compensation Plan 1) It provides a living wage. 2) It does not conflict with other motivational plans. (such as the feeling of being a member of a team) 3) The plan is fair it does not penalise sales personnel for factors beyond their control. 4) It is easy for sales personnel to understand. 5) The plan adjusts pay to changes in performance 6) The plan is economical to administer. 7) The plan helps in attaining the objectives of the sales organisation. Factors influencing the design of compensation plan Financial ability of the firm to pay -additional increments Pull strategies -Sales people order taker -Sales person order giver -Demand x Supply New product launches -Push strategy Nature of the product -B2B, B2C
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Devising a Sales Compensation Plan 1) Define the sales jobs and evaluate the positions. Decide the grades. 2) Consider the companys general compensation structure. 3) Consider compensation patterns in the industry and location this is followed in our country very often. 4) Work out compensation levels for different grades of sales personnel. 5) Provide for the various compensation elements: a. A fixed salary. b. A variable element c. Perquisites d. Reimbursement of expenses 6) Special company needs and problems one plan is not equally applicable for all companies. 7) Implement the plan and provide for follow up. Types of compensation plan Compensation Financial Reward - Non financial Reward Salary - Deposable income = (Salary tax) Spendable income (take-home) = (Deposable savings) (Current spending) Non-financial compensation Higher order needs
Straight Salary Plan Straight salary plan this includes: - (1/10) Basic fixed salary - House rent allowance - Leave travel assistance - Employees provident fund - Group Insurance - (6/10)Gratuity - (7/10) Reimbursement of medical expenses up to a limit. Year-end bonus standard as governed by bonus payment act and hence not an incentive. - Reimbursement of telephone, conveyance, travelling and entertainment expenses. - (10/10) Year-end performance increment and/or promotion. Straight salary plan advantages and disadvantages - Simple to administer and does not yield to manoeuvring. Supervision and control are important. - Salespersons have stable income and thus average performers have great psychological motivation to work hard no one wants to lose a job in our country. - End of the year performance appraisal and increments do take care of rewarding performance. - Disincentive for high performers. Straight-commission plan: The assumption is that the sales volume s the best productivity measure, and can, therefore, be used as the sole measure. In our country, it is rarely used. However, in some of the new innovative products and services requiring direct personal selling, this method is used and the sales person works almost like an entrepreneur. The title of the goods remains with the company and the sales person gets a commission and has to cover all his own expenses. The sales person is entitled to build his/her own team. Combination of salary-and-incentive plan: - Sales organisations engaged in selling industrial goods, office services, scientific and R&D products do use this plan. - All (or most of) the elements of straight salary plan are applicable here excepting that the basic is divided between a fixed part and a variable part. On a normative target, a sales person is expected to receive an amount equal to what a straight salary plan gives. - The normative target is usually fixed on a monthly basis; sometimes it can be on quarterly basis too.
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The normative target can be quantitative sales or value sales. The rate of incentive is usually higher for every slab and can be either on progressive basis or on total achievement. The incentive is usually disbursed after the final payment collection. This helps in keeping a tight control on debtors as disincentive is usually built-in into the plan for un-extinguished debtors. Advantages and disadvantages: 1. Drives sales force to better performance. 2. High performers earn good remuneration and continue to perform well. 3. Application of the plan is a complex process. 4. All sales territories do not have the same potential and hence the earning can vary widely. This causes dissatisfaction. 5. Sometimes sales management may be arbitrary in judgement causing demoralisation. 6. In industrial sales, a sales person may not achieve any sales in a particular month, reducing his income to 60%. In our country, this certainly causes great hardship.
Example 1: 1. Basic straight (fixed only) salary: Rs.l0,000/2. Normative quantity: 100 units 3. Fixed and variable to be broken into 75:25 ratio and therefore, for 75 units the minimum compensation s Rs.7.500/4. To work out a plan so that on achieving 100 units the sales person earns Rs.lO,000/- gross. # Example 2: An example: Building a disincentive for uncollected payment: Acceptable debtor period: 30 days Assume that the debt s 60 days old. The incentive will be reduced by 5% for every 15 days beyond 30 days old debt.# Types of Compensation Plans in India However, irrespective of the compensation plan applied, most of the progressive organisations in the FMCG or durable category do run schemes for sales personnel. Usually such schemes offer foreign holiday trip or a lump sum payment on achieving the target figure. These are ad hoc and not applied every year. They are highly motivational for the period of the scheme, but usually results into dumping causing lower sales in the following period and high levels of accounts receivable.
H) SALES FORCE PERFORMANCE EVALUATION AND CONTROL Types of Judgment for evaluating Sales Performance 1. Relative method (overall performance) Compare performance with other - Rank order from Best - Worst Group evaluation - Top three-middle bracket- lower set 2. Absolute method (specific performance) Performance measured in sales volume, market share / revenue 3. Trait based (personal traits) Decisiveness, reliability, energy, loyalty Descriptive 4. Outcome based (result of selling process) amount of sales, no of product/units/volumes profitability, cost/ sales MBO 5. Behaviour based (behaviour) Product knowledge, presentation qlty, closing ability, service performed, number of active accounts, relationship no. of calls/day no of working days/period of time Performance rating 1. Rating forms 2. Forced choice scales (Inventory of adjectives for evaluation) 3. Behavioural Observation scale (significant job incidents)
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4. Call Report periodic accounts (time prospecting, demonstration & follow-up) 5. Silent Call Monitoring Scores - Greeting - Ascerting customer needs and demands - Courtesy - Communication and listening skills 6. Weekly activity Report Performance appraisal conduction 1. Primary evaluator - Immediate supervisor 2. Self-appraisal - Sales person
EVALUATING AND CONTROLLING THE PERFORMANCE OF SALESPEOPLE One of the most important responsibilities of sales managers is to evaluate the performance of their salespeople. However, performance evaluation process is time-consuming. It is also a difficult process, particularly for the sales manager who has to tell poor-performing salespersons how and why their performance is not up to the expectations. We shall first look at the purposes or objectives of evaluating the salesforce performance, and thereafter, discuss the procedure and different methods of salesforce evaluation. Purposes of Salesforce Performance Evaluation and Control The basic objective of the performance evaluation of salespersons is to determine how these salespersons have performed. The outcome of salesforce performance review can be used for other salesforce management purposes like: To improve the salespersons performance by identifying the causes of unsatisfactory performance. To decide the increment in pay and incentive payment based on the actual performance of the salesperson. To identify the salespeople who may be promoted. To determine the training needs of the individual salesperson and the entire salesforce. To identify the salespersons whose services may be terminated, after giving adequate chances for improvement. To motivate salespeople through adequate recognition and reward for good performance. To find out their strengths and weaknesses. The salespersons performance appraisal should be carefully developed and implemented in order to make available different types of information that are needed for several purposes mentioned above. For example, if the purpose of performance evaluation is to identify salespersons for promotion to the first level of sales management positions (such as district or branch sales managers), then the performance evaluation should focus on those criteria that are relevant to the effectiveness as a sales manager. This should be done in addition to the current performance as a salesperson. The same points that are mentioned above are also applicable when we talk about the importance and the objectives of performance evaluation of salespeople. Procedure for Evaluating and Controlling Salesforce Performance The steps involved in the procedure or system of salesforce evaluation and control are presented in
Step 1: Set policies on performance evaluation and control Before evaluating the performance, the company management should establish the basic policies. Several studies have generated information on general policies followed by most sales organisations. Some of these policies are as follows:
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1. Frequency of evaluation. Many sales organisations evaluate salespeoples performance once a year, although some firms conduct evaluations six-monthly or quarterly1 and a few firms evaluate salespeoples performance monthly or weekly. 2. Who conducts evaluation? Most salespersons performance evaluations are conducted by the field sales manager (that is, a district or branch manager) who supervises the salespersons. In some firms, in addition, the boss of the field sales manager is also involved in the salespersons performance evaluation. 3. Over 25 per cent of companies use an increasingly popular assessment technique, known as 360-degree feedback, involving multiple raters, including sales managers, internal and external customers, team members (in team selling situations), and salespeople. In other words, it involves getting evaluative feedback from an employee, his or her peers. Subordinates, superiors, and customers. 4. Management by objectives (MBO) In sorne companies, the sales manager and the salesperson discuss and agree on the salespersons specific objectives or goals. They also develop an action plan for the achievement of the objectives or performance standards. 5. Involvement of salespeople in setting their performance standards or quotas increases their commitment and responsibility. The sales manager and the salesperson review actual performance against objectives periodically and take corrective actions. Sources of information Most firms use several sources of information in evaluating the salespeople performance. The most important source is sales report, which includes work plans (or call plans), call reports, expense reports, newbusiness reports, lost business reports, local business and economic condition reports. In addition, computer printouts, supervisory calls, prospect and customer files, customer letters and complaints, customer surveys, and peer feedback are some of the common sources of information. Some other policies, such as bases of evaluation and review of salesforce performance will be covered when we discuss step 2 and step 5 respectively of figure. Step 2. Decide the bases of salespersons performance evaluation Before deciding on bases or criteria for performance evaluation of salespeople, a sales organisation should decide whether it will give importance to (a) outcome (or results)-based viewpoint, (h) behaviour (or activity/effort)-based viewpoint, or (c) both outcome and behaviour-based measures, when evaluating salespeoples performance. Once this general category, out of the three alternatives, is selected, the company can then select the specific criteria or bases for evaluating salespeople. Outcome/result based viewpoint: This perspective concentrates on the salespersons results with little direction or supervision by the sales manager. Outcome or output bases use quantitative criteria, and therefore, they minimise biases and subjectivity of evaluators. They are also relatively easy to measure. For examples sales volume achieved and number of orders received. However, since this viewpoint considers results only, it may not give an equal base to compare the performance of one salesperson with that of another salesperson. This is because the salesperson who is assigned a high sales potential territory can achieve the sales goals or quotas easily, compared to another salesperson whose territory sales potential is average or low and therefore, finds it difficult to achieve the sales quotas. Another reason may be the difference in competitors efforts in different territories. Due to such uncontrollable factors, salespersons results-based performance may get affected. Behaviour/activity effort based viewpoint: This perspective focuses on the salespersons behaviour and characteristics, with substantial direction and supervision of the first level sales manager. it uses both quantitative criteria (like number of calls made per day) and qualitative criteria (like product knowledge and customer relations) for evaluating the salespersons performance. The likely consequences of giving more importance to behaviour-based (as compared to outcome-based) viewpoint are mentioned below: The more customer-oriented, team-oriented, and professionally competent salespeople will be. The more committed to the company salespeople will be. The more likely salespeople will accept authority, participate in decision-making, and welcome management performance reviews. The more innovative and supportive the culture is likely to be. The better salespeople will perform on both selling and non-selling activities. The better salespeople will perform on outcome performance criteria (like achieving sales volume quotas). The better the sales organisation will perform on sales organisation effectiveness criteria (such as, sales volume, profitability, and customer satisfaction). The greater salespeoples job satisfaction will be. Step 3: Establish Performance Standards Performance standards are also called sales goals, targets, sales quotas, sales objectives
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Performance standards for quantitative results are related to the companys sales volume or market share goals Performance standards for efforts I behavioural criteria are difficult to set For this, companies do time and duty analysis or use executive judgement Performance standards should not be too high or too low After establishing standards, salespeople must be informed
Step 4: Compare Actual Performance with Standards Salespersons actual performance is measured and compared with the performance standards For this, sales managers use different methods or forms: Graphic rating scales Ranking Behaviourally anchored rating scale (BARS) Management by Objectives (MBO) Descriptive statements Companies combine some of the above methods for an effective evaluation system Step 5: Review Performance Evaluation with Salespeople Performance review I appraisal session is conducted, after evaluation of the salespersons performance Sales manager should first review high I good ratings, and then review other ratings Both should decide objectives / goals and action plan for future period After the review, sales manager should write about performance evaluation & objectives for the future Guidelines for reviewing performance of salespersons First discuss performance standards I criteria I bases Ask the salesperson to review his performance Sales manager presents his views Establish mutual agreement on the performance Step 6: Decide Sales Management Actions and Control Many companies combine this step with the previous step i.e. performance review During performance review meeting with salesperson, sales manager does the following: Identifies the problem areas. e.g. Sales quotas not achieved Finds causes. e.g. less sales calls, poor market coverage, or superior performance of competitors Decides sales management actions e.g. train salesperson, redesign territories, or review companys sales I marketing strategies If a salespersons performance is good, he / she should be rewarded and recognised
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Chapter 6 IDENTIFY THE ROLES OF CONSUMER AND TRADE PROMOTION ACTIVITIES IN TERMS OF DIFFERENCES, CHARACTERISTICS AND APPLICATION
Consumer promotions are targeted towards end consumers. Tools include samples, coupons, cash refunds, price packs, premiums, advertising specialties, patronage rewards, point-of-purchase displays and demonstrations, and contests, sweepstakes and games. On the other hand, a trade promotion is directed to the retailer and/or wholesaler. The point of a trade promotion is to persuade resellers to carry a brand, give it shelf space, promote and push it. Tools used for consumer promotions can also be used as trade promotions. In addition, manufacturers will do things like offering discounts off list price, advertising allowances and display allowances as trade promotion tools.
CONSUMER PROMOTION Consumer Promotion is a set of actions directed at stimulating sales by influencing the end customer. One of the best ways of ensuring effectiveness and stimulating sales is to use a well thought out and solid approach that responds to all aspects of the task at hand. It's important to remember that in today's conditions of intense competition and a market saturated with identical goods and services, companies must be original and memorable to potential customers. We are able to offer non-standard and high-tech solutions for any good or service. Our company's mission when it comes to Consumer Promotion is to take an individually oriented approach to the good or service, designing and implementing detailed BTL techniques to make a strong impression on the end customer. Meeting Client Demands Consumer Promotion allows you to achieve a significant increase in turnover, market share, and profit by accomplishing the following things: 1) Increasing consumer familiarity with the product and product recognisability 2) Stimulating sales 3) Increasing product demand 4) Getting consumers to switch from the competition to the promoted brand 5) Being effective by conducting promotions in a diverse group of points of purchase (in chains and non-chains, open markets, clubs, restaurants and bars, train and bus stations, airports, fitness and business centers, and other places people go to relax and spend time). Basic Types of Consumer Promotions: Consumer contest with prizes Price-off deals Purchase price refunds Coupons Samples Premiums or gifts o with pack premium o reusable containers o free-in-the-mail premium o self-liquidating premium Reward plan on purchases Free trials Product warranties Cross promotions Point-of-Purchase display and demonstrations Main types of Consumer Promotions: 1. Tastings This method is most often used in the food segment. The customer can try the product before deciding whether to buy it. Tastings are especially recommended for the market launch of new brands or when expanding the product line within a single brand. 2. Sampling This technique involves familiarizing the target audience with the product by distributing samples. This method is most effective when combined with the distribution of informational advertising materials about the promoted product. Sampling is recommended for stimulating sales, reclaiming customer interest and, when necessary, encouraging
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customers to switch from a competing brand, as well as for informing customers of changes in the product's formula and for launching new products. 3. Gift with Purchase/Drawings One of the most widely used types of POS promotions. Uses gifts to motivate the consumer to purchase a particular product. Gifts with purchase/drawings are recommended for new product launches, product repositioning, and seasonal sales or other price reductions. The particularities of the promoted product and the clients goals are taken into careful consideration in the development of these campaigns. 4. Consultations Promoters work to inform the target audience about the product, its specific characteristics, and main advantages. This method is recommended for promoting complex products and services or those possessing special, unique traits. Non-Standard Techniques Flash Mob: The appearance of promoters in places where the target audience congregates who attract attention due to their unusual appearance or actions. Sales Animation: Organizing special activities for the target audience; involving the TA in a game. Check points for consumer promotion (SP) Increase consumption and usage Incidental aims Slow moving Fast moving Regularise sales fluctuations Seasonal recession Clear stock Specific pack size, specific market To help launch a new product Meet competitor's strategy Build good will Improve product visibility Encourage trade
TRADE PROMOTION In business and marketing, trade refers to the relationship between manufacturers and retailers. Trade Promotion refers to marketing activities that are executed in retail between these two partners. Trade Promotion is a marketing technique aimed at increasing demand for products in retail stores based on special pricing, display fixtures, demonstrations, valueadded bonuses, no-obligation gifts, and more. Trade Promotions can offer several benefits to businesses. Retail stores can be an extremely competitive environment; trade promotions can help companies differentiate their products from the competition. Companies can utilize Trade Promotions to increase product visibility and brand awareness with consumers. Trade Promotions can also increase a products consumption rate, or the average quantity of a product used by consumers in a given time period. Furthermore, effective Trade Promotions can enlarge a products market segment penetration, or the products total sales in proportion to the categorys competition. Moreover, companies use Trade Promotions to improve distribution of their product(s) at retailers and strengthen relationships with retailers. Lastly, Trade Promotions can be leveraged to introduce new product launches into retail stores. A trade sales promotion is targeted at resellerswholesalers and retailerswho distribute manufacturers' products to the ultimate consumers. The objectives of sales promotions aimed at the trade are different from those directed at consumers. In general, trade sales promotions hope to accomplish four goals: 1) Develop in-store merchandising support, as strong support at the retail store level is the key to closing the loop between the customer and the sale. 2) Control inventory by increasing or depleting inventory levels, thus helping to eliminate seasonal peaks and valleys. 3) Expand or improve distribution by opening up new sales areas (trade promotions are also sometimes used to distribute a new size of the product). 4) Generate excitement about the product among those responsible for selling it. Some of the most common forms of trade promotionsprofiled belowinclude point-of-purchase displays, trade shows, sales meetings, sales contests, push money, deal loaders, and promotional allowances.
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Types of Trade Promotions 1. In-store displays - In-store displays are promotional fixtures in retail stores. Variations of in-store displays include Point-of-Sale Displays, which are located near cash registers to encourage impulse buying; Floor Stickers, or advertisements for products on the aisle of a store; Feature Displays, which can be located at the end of an aisle to draw attention to a product; and Special Racks, or manipulation of a store shelf to make more space available for a product or bring attention to the promoted product. In-store Displays can be perceived as more visually appealing to consumers than product alone on a retail shelf. 2. Temporary Price Reductions (TPR) - (TPR) are either directly or indirectly lower the cost per unit of a product. Examples include cents off promotions, where manufactures or retailers temporarily reduce the price of a product, and Bonus Pack promotions which offer extra product for free. Consumers benefit from either paying a lower price on a product or getting more of a product for less money. 3. Coupons - Coupons offer instantly redeemable savings on certain products. Coupons can be featured on In-Store Displays, on their own, or on the product. Coupons instantly reduce the price of a product, making it more desirable to consumers. Coupons can have both advantages and disadvantages. Coupons create brand awareness. The consumer sees the brand name on the coupon even when the coupon is not redeemed. Coupons, also, encourage consumers to purchase brands on the next trip to the store. The disadvantages that come along with using a coupon are: Reduced revenues Mass-Cutting Counterfeiting Misredemptions 4. Contest and sweepstakes - Contests normally require the participant to perform some type of activity. The winner is selected based on who performs best or provides the most correct answers. No purchase is required to enter a sweepstakes. Consumers can enter as many times as they wish, although it is permissible for firms to restrict customers to one entry per visit to the store or some other location. The problems with Contest and Sweepstakes are the cost, consumer indifference and clutter. 5. Rebates - Rebates offer money back to the consumer. Unlike coupons, rebates cannot be used immediately, but instead must be mailed to the products manufacturer. Consumers benefit from the lower price, while companies benefit because not every consumer will redeem the offer. 6. Premiums - Premiums incentivize consumers to purchase a product with a tangible benefit, such as a no-obligations gift. Premiums make the product offer more valuable to consumers by including a related product for no additional cost. 7. Sampling - Sampling allows consumers to try the product either in-store or via free samples before buying it. This can reduce consumers apprehension about buying a new product or introduce them to a product they were unfamiliar with before. 8. POINT-OF-PURCHASE (POP) DISPLAYS. Manufacturers provide point-of-purchase (POP) display units free to retailers in order to promote a particular brand or group of products. The forms of POP displays include special racks, display cartons, banners, signs, price cards, and mechanical product dispensers. Probably the most effective way to ensure that a reseller will use a POP display is to design it so that it will generate sales for the retailer. High product visibility is the basic goal of POP displays. In industries such as the grocery field where a shopper spends about three-tenths of a second viewing a product, anything increasing product visibility is valuable. POP displays also provide or remind consumers about important decision information, such as the product's name, appearance, and sizes. The theme of the POP display should coordinate with the theme used in ads and by salespeople. 9. TRADE SHOWS. Thousands of manufacturers display their wares and take orders at trade shows. In fact, companies spend over $9 billion yearly on these shows. Trade shows provide a major opportunity to write orders for products. They also provide a chance to demonstrate products, disseminate information, answer questions, and be compared directly to competitors. Related to trade shows, but on a smaller scale, are sales meetings sponsored by manufacturers or wholesalers. Whereas trade shows are open to all potential customers, sales meetings are targeted toward the company's sales force and/or independent sales agents. These meetings are usually conducted regionally and directed by sales managers. The meetings may be used to motivate sales agents, to explain the product or the promotional campaign, or simply to answer questions. For resellers and salespeople, sales contests can also be an effective motivation. Typically, a prize is awarded to the organization or person who exceeds a quota by the largest percentage. 10. PUSH MONEY. Similarly, push money (PM)also known as spiffsis an extra payment given to sales-people for meeting a specified sales goal. For example, a manufacturer of refrigerators might pay a $30 bonus for each unit of model A, and a $20 bonus for each unit of model B, sold between March 1 and September 1. At the end of that period, the salesperson would send evidence of these sales to the manufacturer and receive a check in return. Although some people see push money as akin to bribery, many manufacturers offer it. 11. DEAL LOADERS. A deal loader is a premium given by a manufacturer to a retailer for ordering a certain quantity of product. Two types of deal loaders are most typical. The first is a buying loader, which is a gift given for making a
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specified order size. The second is a display loader, which means the display is given to the retailer after the campaign. For instance, General Electric may have a display containing appliances as part of a special program. When the program is over, the retailer receives all the appliances on the display if a specified order size was achieved. 12. TRADE DEALS. Trade deals are special price concessions superseding, for a limited time, the normal purchasing discounts given to the trade. Trade deals include a group of tactics having a common themeto encourage sellers to specially promote a product. The marketer might receive special displays, larger-than-usual orders, superior in-store locations, or greater advertising effort. In exchange, the retailer might receive special allowances, discounts, goods, or money. In many industries, trade deals are the primary expectation for retail support, and the marketing funds spent in this area are considerable. There are two main types of trade deals: buying allowances and advertising/display allowances. 13. BUYING ALLOWANCES. A buying allowance is a bonus paid by a manufacturer to a reseller when a certain amount of product is purchased during a specific time period. For example, a reseller who purchases at least 15 cases of product might receive a buying allowance of $6.00 off per case, while a purchase of at least 20 cases would result in $7.00 off per case, and so forth. The payment may take the form of a check or a reduction in the face value of an invoice. In order to take advantage of a buying allowance, some retailers engage in "forward buying." In essence, they order more merchandise than is needed during the deal period, then store the extra merchandise to sell later at regular prices. This assumes that the savings gained through the buying allowance is greater than the cost of warehousing and transporting the extra merchandise. Some marketers try to discourage forward buying, since it reduces profit margins and tends to create cyclical peaks and troughs in demand for the product. The slotting allowance is a controversial form of buying allowance. Slotting allowances are fees retailers charge manufacturers for each space or slot on the shelf or in the warehouse that new products will occupy. The controversy stems from the fact that in many instances this allowance amounts to little more than paying a bribe to the retailer to convince them to carry your company's products. But many marketers are willing to pay extra to bring their products to the attention of consumers who are pressed for time in the store. Slotting allowances sometimes buy marketers prime spaces on retail shelves, at eye level or near the end of aisles. The final type of buying allowance is a free goods allowance. In this case, the manufacturer offers a certain amount of product to wholesalers or retailers at no cost if they purchase a stated amount of the same or a different product. The allowance takes the form of free merchandise rather than money. 14. ADVERTISING ALLOWANCES. An advertising allowance is a dividend paid by a marketer to a reseller for advertising their product. The money can only be used to purchase advertisingfor example, to print flyers or run ads in a local newspaper. But some resellers take advantage of the system, so many manufacturers require verification. A display allowance is the final form of trade promotional allowance. Some manufacturers pay retailers extra to highlight their display from the many available every week. The payment can take the form of cash or goods. Retailers must furnish written certification of compliance with the terms of the contract before they are paid. Retailers are most likely to select displays that yield high volume and are easy to assemble.
Trade sales promotion techniques 1) Trade allowances: short term incentive offered to induce a retailer to stock up on a product. 2) Dealer loader: An incentive given to induce a retailer to purchase and display a product. 3) Trade contest: A contest to reward retailers that sell the most product. 4) Point-of-purchase displays: Used to create the urge of "impulse" buying and selling your product on the spot. 5) Training programs: dealer employees are trained in selling the product. 6) Push money: also known as "spliffs". An extra commission paid to retail employees to push products. Trade discounts (also called functional discounts): These are payments to distribution channel members for performing some function . Issues in trade promotions Several issues cause such lack of profitability. Some potential problems associated with trade promotions programs are costs, the potential impact on small manufacturers, and the tendency to rely too much on trade promotions to move merchandise. 1. Lack of accurate and timely information - Trade promotion decisions are often rushed and based on sub-par data. While Sales and Marketing managers are surrounded by promotion information, questions on retail commitment and product forecast accuracy can hinder the process. Multiple data sources and conflicting needs from various departments further complicate the issue. 2. Inability to plan promotions based on analytics - Historical trade promotion data should be analyzed in order to continually improve trade promotions. If a company does not utilize processes and systems that measure trade promotion performance, future trade promotion executions could be less effective than if theyd been planned using past analytical information.
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3. Ineffective organization and partner integration - Lack of integration both internally and with external partners can hinder trade promotion success. Key elements of organizational integration include standardized metrics, regular information sharing, cross-functional department collaboration, and collaborative processes4. Integration with retail partners is important to executing promotions successfully, as well as maintain strong relationships with retailers over time. 4. Lack of appropriate Key Performance Indicators (KPI) - KPIs tell manufacturers and retailers how trade promotions performed relative to their pre-determined objectives. A lack of understanding on what trade promotion data to measure and how to measure performance can hinder the overall process. Manufacturers and retailers will not know what made a promotion effective or ineffective unless they have predetermined data points to measure and analyze.
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Chapter 7 SALES PROMOTION STRATEGIES TO INTEGRATE BELOW THE LINE PROMOTION INTO THE COMMUNICATION MIX. PROCESS OF RESEARCHING, PLANNING AND SETTING GOALS, TO MEASURE AND TEST THE EFFECTIVENESS OF
What are sales promotion? Sales promotion is commonly referred to as Below the Line promotion. The terms 'below-the-line' promotion or communications refers to forms of non-media communication, even non-media advertising. Below-the-line promotions are becoming increasingly important within the communications mix of many companies, not only those involved in fmcg products, but also for industrial goods. Sales promotion is one of the four aspects of communication/promotional mix. (The other three parts of the promotional mix are advertising, personal selling, and publicity/public relations.) Media and non-media marketing communication are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability. Examples include contests, coupons, freebies, loss leaders, point of purchase displays, premiums, prizes, product samples, and rebates Sales promotions can be directed at either the customer, sales staff, or distribution channel members (such as retailers). Sales promotions targeted at the consumer are called consumer sales promotions. Sales promotions targeted at retailers and wholesale are called trade sales promotions. Some sale promotions, particularly ones with unusual methods or BTL activities, are considered gimmicks by many. Sales promotion includes several communications activities that attempt to provide added value or incentives to consumers, wholesalers, retailers, or other organizational customers to stimulate immediate sales. These efforts can attempt to stimulate product interest, trial, or purchase. Examples of devices used in sales promotion include coupons, samples, premiums, point-of-purchase (POP) displays, contests, rebates, and sweepstakes. Sales promotions are marketing strategies companies use chiefly to increase sales temporarily to gain sales volume and market share. They are occasionally used to clear out year-end inventory before new models arrive in showrooms as is often done in the automobile industry. Sales promotions are also used as a competitive strategy to undercut competition by offering a lower price or other incentive. Although sales promotions usually produce sales volume over and above what is typically the case, they do not build brand identity and loyalty. Sales promotion is any initiative undertaken by an organisation to promote an increase in sales, usage or trial of a product or service (i.e. initiatives that are not covered by the other elements of the marketing communications or promotions mix). Sales promotions are varied. Below the line sales promotion Below the line sales promotions are short-term incentives, largely aimed at consumers. With the increasing pressure on the marketing team to achieve communication objectives more efficiently in a limited budget, there has been a need to find out more effective and cost efficient ways to communicate with the target markets. This has led to a shift from the regular media based advertising. A definition of below-the-line sales promotion given by Hugh Davidson: 'An immediate or delayed incentive to purchase, expressed in cash or in kind, and having only a short term or temporary duration'. Often they are original and creative, and hence a comprehensive list of all available techniques is virtually impossible (since original sales promotions are launched daily!). Here are some examples of popular sales promotions activities: a) Buy-One-Get-One-Free (BOGOF) - which is an example of a self-liquidating promotion. For example if a loaf of bread is priced at $1, and cost 10 cents to manufacture, if you sell two for $1, you are still in profit - especially if there is a corresponding increase in sales. This is known as a PREMIUM sales promotion tactic. b) Customer Relationship Management (CRM) incentives such as bonus points or money off coupons. There are many examples of CRM, from banks to supermarkets. c) New media - Websites and mobile phones that support a sales promotion. For example, in the United Kingdom, Nestle printed individual codes on KIT-KAT packaging, whereby a consumer would enter the code into a dynamic website to see if they had won a prize. Consumers could also text codes via their mobile phones to the same effect. d) Merchandising additions such as dump bins, point-of-sale materials and product demonstrations. e) Free gifts e.g. Subway gave away a card with six spaces for stickers with each sandwich purchase. Once the card was full the consumer was given a free sandwich. The gift with purchase is a very common promotional technique. It is also known as a premium promotion in that the customer gets something in addition to the main purchase. This type of promotion is widely used for: - Subscription-based products (e.g. magazines)
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- Consumer luxuries (e.g. perfumes) f) Discounted prices e.g. Budget airline such as EasyJet and Ryanair, e-mail their customers with the latest low-price deals once new flights are released, or additional destinations are announced. Price promotions are also commonly known as price discounting These offer either (1) a discount to the normal selling price of a product, or (2) more of the product at the normal price. Increased sales gained from price promotions are at the expense of a loss in profit so these promotions must be used with care. A producer must also guard against the possible negative effect of discounting on a brands reputation g) Joint promotions between brands owned by a company, or with another company's brands. For example fast food restaurants often run sales promotions where toys, relating to a specific movie release, are given away with promoted meals. h) Free samples (aka. sampling) e.g. tasting of food and drink at sampling points in supermarkets. For example Red Bull (a caffeinated fizzy drink) was given away to potential consumers at supermarkets, in high streets and at petrol stations (by a promotions team). i) Vouchers and coupons, often seen in newspapers and magazines, on packs. Coupons are another, very versatile, way of offering a discount. Consider the following examples of the use of coupons: - On a pack to encourage repeat purchase - In coupon books sent out in newspapers allowing customers to redeem the coupon at a retailer - A cut-out coupon as part of an advert - On the back of till receipts The key objective with a coupon promotion is to maximise the redemption rate this is the proportion of customers actually using the coupon. One problem with coupons is that they may simply encourage customers to buy what they would have bought anyway. Another problem occurs when retailers do not hold sufficient stocks of the promoted product causing customer disappointment. Use of coupon promotions is, therefore, often best for new products or perhaps to encourage sales of existing products that are slowing down. j) Competitions and prize draws, in newspapers, magazines, on the TV and radio, on The Internet, and on packs. k) Cause-related and fair-trade products that raise money for charities, and the less well off farmers and producers, are becoming more popular. l) Finance deals - for example, 0% finance over 3 years on selected vehicles. m) Money refunds Here, a customer receives a money refund after submitting a proof of purchase to the manufacturer. These schemes are often viewed with some suspicion by customers particularly if the method of obtaining a refund looks unusual or onerous. n) Frequent user / loyalty incentives - Repeat purchases may be stimulated by frequent user incentives. Perhaps the best examples of this are the many frequent flyer or user schemes used by airlines, train companies, car hire companies etc. o) Point-of-sale displays - Research into customer buying behaviour in retail stores suggests that a significant proportion of purchases results from promotions that customers see in the store. Attractive, informative and wellpositioned point-of-sale displays are, therefore, very important part of the sales promotional activity in retail outlets. Many of the examples above are focused upon consumers. Don't forget that promotions can be aimed at wholesales and distributors as well. These are known as Trade Sales Promotions. Examples here might include joint promotions between a manufacturer and a distributor, sales promotion leaflets and other materials (such as T-shirts), and incentives for distributor sales people and their retail clients. Some interesting examples of BTL promotion Most of the big brands are following the suit of BTL promotion because of rising prices of media based promotion, advertising clutter and increased impulse purchasing. Some of the interesting examples are: Most of the educational institutes like career launcher, Times and PT are holding informative workshops and free tests for students which give a direct interaction of these institutes with the target customer and hence a suitable platform to sell themselves. Ring tones and music videos on cell phones are helping the entertainment industry to promote for a music video or a movie for dirt-cheap rate as compared to media promotion.
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Various companies sponsor sport events to promote their brand, but nowadays media companies like Hindustan Times are holding weekly events through out the country in which companies can put up their stalls, display banners and posters and arrange for some fun activities. These events give the companies a platform at very low price to promote their brand and increase visibility among target consumer. These companies also give discount coupons to winners in the games, which in turn boost the sales of the products and ensure that first time users try these products as well. Pepsi organized an inter school cricket event for 425 schools across 14 cities which did wonders for the company by promoting the brand amongst the right target customer for almost no cost. Most of the pharmacy companies do BTL promotion by getting shelf space through doctors to display their products or by giving away free calcium tablets again through doctors, knowing that for a patient a personal advise from a doctor would hold more value as compared to a commercial advertisement. Another interesting BTL promotion was by NIKE, an athlete dressed up in Nike sportswear could be seen jogging on an elevated treadmill for the whole day on National Highway 8, Delhi. BTL promotions are gaining popularity among all big companies nowadays considering their effectiveness because of the "individual customer promotion" at a price, which is much lesser than the normal media promotions.
Sales Promotion Strategies Sales are the lifeblood of a business, without sales there would be no business in the first place; therefore it is very important that if a business wants to succeed, it should have a sales promotion strategy in mind. The primary objective of a sales promotion is to improve a company's sales by predicting and modifying your target customer's purchasing behavior and patterns. Sales promotion is very important as it not only helps to boost sales but it also helps a business to draw new customers while at the same time retaining older ones. There are a variety of sales promotional strategies that a business can use to increase their sales, however it is important that we first understand what a sales promotion strategy actually is and why it is so important. A sales promotion strategy is an activity that is designed to help boost the sales of a product or service. This can be done through an advertising campaign, public relation activities, a free sampling campaign, a free gift campaign, a trading stamps campaign, through demonstrations and exhibitions, through prize giving competitions, through temporary price cuts, and through door-to-door sales, telemarketing, personal sales letters, and emails. The importance of a sales promotion strategy cannot be underestimated. This is because a sales promotion strategy is important to a business boosting its sales. When developing a sales promotion strategy for your business, it is important that you keep the following points in mind. Consumer attitudes and buying patterns Your brand strategy Your competitive strategy Your advertising strategy And other external factors that can influence your products availability and pricing. PLANNING & SETTING GOALS Sales promotion goals vary depending on the product or service being promoted. Some common goals are to increase sales or awareness, remind customers about a product or service, introduce a new use for a product or service and change customers attitude/opinion. Using a combination of goals is useful depending on the research a company gathers initially regarding their market. The most important thing is to select a goal that is measurable; otherwise, its hard to gauge the effectiveness of a promotional campaign. Sales Promotion Planning Successful promotion campaigns don't happen by chance. To realize goals, promotional products programs must be carefully planned, taking into consideration the audience, budget and, of course, the ultimate result to be gained. 1) Define a specific objective. 2) Whether the goal is to increase traffic at a trade show exhibit or to boost sales with current clients, the first step in any campaign is to clarify the purpose of the program. 3) Determine a workable distribution plan to a targeted audience. 4) Distribution of a promotional product is as important as the item itself. Research shows that a carefully executed distribution plan significantly increases the effectiveness of promotional products. For example, a pre-show mailing to a select audience delivers more trade show traffic and qualified leads than simply distributing items to passerby at the show. 5) Create a central theme. 6) Linking a recognizable logo and color to all aspects of a campaign, from promotional products to sales sheets to product packaging, helps create an instantly recognizable image.
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7) Develop a message to support the theme. 8) Supporting a campaign's theme with a message helps to solidify a company's name, service or products in the target audience's mind. For instance, to promote its services to small businesses, a bank created the theme "Are you tired of being treated like a small fish?" and sent fish-related products to its prospects along with promotional literature. 9) Select a promotional product that bears a natural relationship to your profession or communications theme. 10) A good example is a company that developed a magic motif for its conference at Disney World. Attendees received magic-related products to tie in with the theme "Experience the magic at Disney." 11) Don't pick an item based solely on uniqueness, price or perceived value. 12) Don't fall prey to the latest trends or fads. The most effective promotional products are used in a cohesive, wellplanned campaign DEVELOPING A SALES PROMOTION PLAN 1.CURRENT SITUATION - SALES -sales volume -sales dollars -market share -strengths/ weaknesses -key success factors [ if any ] 2. Current Situation - MARKET ANALYSIS -market definition -market size -market segmentation -industry structure and strategic groupings -competition and market share -competitors'strengths/ weaknesses -market trends 3. Current Situation - Consumer Analysis -nature of the buying decision -participants -demographics -psychographics -buyer motivation and expectation 4. OBJECTIVES OF THE SALES PROMOTION PROGRAM corporate SALES objectives financial objective marketing objectives long term objectives 5. CURRENT ANALYSIS -COMPETITION *PRODUCT/ MARKET SHARE *PRODUCT / MARKET POSITIONING Types of Sales Promotion Strategies There are three types of sales promotion strategies: 1) A push strategy - A push strategy engrosses the intermediary channel members to push the product through the distribution channels to end consumers through promotions. Companies promote the services or products though the resellers who in turn promote it to another buyer or to the end customer. These are the people who carry the brand though out the channel to reach the end consumers. Buy-back guarantees, contests, discounts, premiums, and free trials are some of the tactics that were employed in push strategy. 2) A pull strategy - In pull strategy, consumer requests the products and pulls it through the distribution channel. The company concentrates on its marketing communications efforts on end consumers in the wish that it kindles interest and demand for the product at the end-user level. The tactics that includes in this strategy are coupons, cash refunds, loyalty programs, and premiums etc. 3) A combination of the two A 'push' sales promotion strategy involves 'pushing' distributors and retailers to sell your products and services to the consumer by offering various kinds of promotions and personal selling efforts. What happens here is that a company promotes their product/services to a reseller who in turn promotes it to another reseller or to the consumer. The basic objective of this strategy is to persuade retailers, wholesalers and distributors to carry your brand, give it shelf space, promote it by advertising, and ultimately 'push' it forward to the consumer. Typical push sales promotion strategies include; buy-back guarantees, free trials, contests, discounts, and specialty advertising items.
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A 'pull' sales promotion strategy focuses more on the consumer instead of the reseller or distributor. This strategy involves getting the consumer to 'pull' or purchase the product/services directly from the company itself. This strategy targets its marketing efforts directly on the consumers with the hope that it will stimulate interest and demand for the product. This pull strategy is often used when distributors are reluctant to carry or distribute a product. Typical pull sales promotion strategies include; samples, coupons, cash refunds or rebates, loyalty programs and rewards, contests, sweepstakes, games, and point-of-purchase displays. A 'combination' sales promotion strategy is just that; it is a combination of a push and a pull strategy. It focuses both on the distributor as well as the consumers, targeting both parties directly. It offers consumer incentives side by side with dealer discounts. Impact of Sales Promotions on When, What, and How Much to Buy Determine whether the sales increase occurring during a promotion period is "incremental" or "borrowed" by decomposing the sales "bump" during the promotion period into three components: sales increase due to (1) brand switching, (2) purchase acceleration, and (3) stockpiling. Method The impact of sales promotions on consumer decisions of when, what, and how much to buy is modeled. These consumer decisions in turn determine the overall sales of a brand. An elasticity analysis is then performed to decompose the increase in overall sales of a brand into the three components mentioned above. The models are estimated and validated using scanner data for ground caffeinated coffee. Audience Although technical details of this report will appeal to quantitative modelers, the overall approach and the substantive results should be of interest to marketing managers. Main Points A sales promotion can affect at least three different decisions: (1) when consumers buy, (2) what brand is bought, and (3) how much is bought. The combined effect of these three decisions, summed across consumers, gives us the total sales of a brand in a week. But simply looking at the total sales increase during a promotion period does not tell us whether the promotion has generated incremental sales or has simply borrowed future sales. To address this question, we need to decompose the total sales increase during a promotion period into, say, x percent increase due to switching, y percent due to acceleration, and z percent due to stockpiling. For example, consider two hypothetical cases: Case 1: x=80%, y=15%, z=5% Case2: x=5%, y=10%, z=85% In case 1, the majority of sales increase is due to brand switching, whereas in case 2 most of the sales increase can be attributed to stockpiling. It is then easy to say that the promotion is more effective in the first case. However, in order to make such conclusions, we need a method which can empirically derive the values of x, y, and z. This paper presents such a method. Conceptually the method is simple. We first develop models of purchase time (when to buy), brand choice (what to buy), and purchase quantity (how much to buy). These models explicitly incorporate competition, and differences in consumer purchasing patterns (e.g., the probability of choosing a brand decreases if the competitive brands are on promotion). For any given week, these models give us the probability of buying the product, probability of choosing a brand given that a purchase is made, and the expected purchase quantity of the product category. We then represent the total sales of a brand as a product of these three components. This gives us the total elasticity of brand sales as the sum of the elasticities of choice, timing, and quantity components. Since elasticity tells us what percent increase is expected (in total brand sales, choice, timing, or quantity) due to a 1 percent increase in promotion, the above formulation allows us to decompose the sales bump into the percentage increase due to switching, time acceleration, and stockpiling. In other words, it gives us the value of x, y, and z. The models are estimated on scanner data for ground caffeinated coffee. Results and Implications The results show that promotional variables (feature, display, price cut) play a strong role in consumer brand choice decisions. The effect of these variables is limited on purchase time and purchase quantity decisions. Specifically, of the total sales increase due to promotion, more than 84 percent is accounted for by brand switching, 14 percent or less by purchase time acceleration, and less than 2 percent by stockpiling. This indicates that promotions for this product are
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very effective in drawing consumers from competitive brands. On the other hand, promotions have a limited success in making consumers buy early. Although feature and display have some impact on the purchase time decision, price cut and regular price have almost none. This suggests that if consumers are not planning to buy coffee in a given week, they may not go out of their way to check prices or price discounts on coffee brands unless their attention is attracted to them through features or displays. The small effect of promotion on stockpiling can be attributed to three possible phenomena: consumer perceptions that stockpiling coffee may affect its freshness, storage constraints, and high promotion intensity in the marketplace. This suggests that stockpiling will perhaps be a bigger factor for other product categories such as tuna fish (smaller cans) or soap (freshness not important). These results can help managers understand the effectiveness of a sales promotion. The effectiveness of alternative promotional offerings under various competitive scenarios can also be compared to determine the most suitable and effective promotions. EFFECTIVENESS OF SALES PROMOTION A sales promotion is a tool used to get customers to buy a product or try a service. Sales promotions can come in the form of coupons, rebates, sweepstakes, contests, discounted pricing, point-of-purchase displays, trade shows, demonstrations, premiums and sampling. Typically, before a sales promotion is put into action, a company evaluates its market. If a sales promotion is warranted, the company comes up with a clear, measurable objective they'd like to accomplish through the promotion. Criteria for evaluating effectiveness: 1) Goal - Sales promotion goals vary depending on the product or service being promoted. Some common goals are to increase sales or awareness, remind customers about a product or service, introduce a new use for a product or service and change customer's attitude/opinion. Using a combination of goals is useful depending on the research a company gathers initially regarding their market. The most important thing is to select a goal that is measurable; otherwise, it's hard to gauge the effectiveness of a promotional campaign. 2) Inform - A sales promotion constructed to inform customers about a new product might include an advertisement in a local paper explaining the product and inviting customers to visit a Web site for a coupon offer. An activity like this can be measured by tracking the number of people who receive the paper, the number of people who visit the Web site, the number of people who download the coupon and the number of people who actually use the coupon. 3) Remind - Reminding customers about a product or service is just as important as an initial product introduction. Something as simple as setting up an in-store display with coupons or having customers complete a survey to indicate how often they use the product keeps brands fresh in consumers' minds. Information gathered from the survey can expose how often customers use a product, how familiar they are with a product and if they plan to use it more in the future. Couple this with a discount coupon and you can even track the number of people who make a purchase after completing the survey. A follow-up survey can assess things like customer satisfaction and likelihood for a repeat purchase. 4) Sales - Besides just handing out coupons, another great sales promotion technique is price discounting. Whether its 50 percent off, buy-one-get-one-free or taking 10 percent off, reducing cost is a sure way to motivate customers to buy. To track the effectiveness of this type of promotion, sales can be tracked based on the number of units sold and the total sales. You can even track how customers in certain areas buy compared to others. 5) Warnings - Sales promotions are a great way to inform and remind customers about your products. Ultimately, the main objective of these activities is to increase revenue. Weigh the cost of your promotional sales campaign against the total revenue you expect to receive. Consider that many companies are spending up to 60 percent of advertising budgets on sales promotions. Be sure that your promotional campaign is both cost-effective and profitable. Three Steps to Effective Sales Promotions Getting customers to plunk down cash or credit cards remains a painfully slow process in this struggling economy. And that's precisely why it's important--and always will be--to lure potential buyers with promotions. In fact, coming up with attractive promotions has become a bigger deal than ever. When done correctly, promotions get customers out of a holding pattern by giving them an incentive to take action before a limited-time offer expires. Here's what you need to do: 1. Target your effort Promotions can spur purchases by established customers, reel in new customers, draw customers from competitors, get current customers to buy differently, and stimulate business during slow periods. But rarely can one promotion accomplish all of those objectives at once. As a result, you must decide which of the following is most important so that you can target your effort: Do you want customers to purchase more frequently, buy in greater volume, or be attracted to new or different offerings? Do you want to lure new customers into your business? Do you want lapsed customers to give your business another try? Do you want to boost business during slow hours, weekdays or particular seasons?
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After carefully and thoughtfully defining the audience and the change you want your promotion to inspire, ask yourself this question: If you offer a time-limited incentive, is it likely that the customers you've targeted will respond? If so, continue to the next step. 2. Plan your incentive A well-thought-out, properly targeted promotion prompts customers to take action by offering one of these incentives: Price savings, including discounts, coupons or added value offers Samples or trial offers to provide a low-risk way to try new products or services Events or experiences to generate crowds, enthusiasm, sales, publicity As you decide on your incentive, keep these facts in mind: Price offers must be strong enough to compel, but reasonable enough to keep your business out of red ink. Avoid uninspiring 10 to 20 percent discounts, but also avoid very deep discounts unless they promote a loss leader to generate other higher-margin sales, or unless they'll attract valuable new customers into your business. Coupons always make a comeback in penny-pincher markets, which means they're hugely popular these days. Even young consumers and affluent shoppers--groups that traditionally shun coupons--are using them, boosting the typical 1 to 2 percent redemption rate by nearly 20 percent. Printed coupons are still the most widely circulated, but printable coupons, distributed on web sites and via e-mail, provide a terrific way to test price offers with business friends and fans before incurring costs to promote the offer more widely via other media. Samples work in all lines of business to let customers try before buying. The key is to sample products that are so great they'll win raves and repeat business. Online-based businesses need to promote free samples prominently in an effort to attract links, visitors, site registrations and publicity. They can be the start of a prosperous relationship with new customers. Retailers can turn sampling into promotional events. Think of Costco on weekends. Another great example: Este Lauder works with retailers to offer women free mini-makeovers that end with customer photos (against an Este Lauder backdrop). These are then e-mailed to participants for use on their social networking pages. Service businesses would do well to give away mini versions of their offerings. For example, five-minute shoulder massages or one-hour home decorating consultations. Or, for higher-ticket service businesses, samples can take the form of affordable introductory packages that allow prospective customers to wade into the business relationship, gaining trust for the business while also receiving a valuable service. Events and experiences draw customers for celebrations, product launches, special appearances or presentations, and other activities that combine entertainment with brand and product presentations. When hosting an event, make sure to go all out. A half-hearted, poorly attended event is worse than no event at all, so plan, decorate, train your staff and publicize accordingly.
3. Know what you want to achieve Promotions work especially well when consumers are in need of a jolt to take buying action. Just be clear about what you want to achieve. Set the number of sales you want to ring up, dollars you want to bring in, customer names you want to collect, buying patterns you want to change, or any other objective you want your promotion to achieve. Then determine what your desired change will mean financially to your business. By knowing the potential bottom-line impact of your promotion, you'll have the information you need to allocate a promotion budget, dedicate staff time and invest the energy necessary to host a strong promotion that will deliver business-boosting results over the time period it covers. Evaluation of Sales Promotions SP measured Pre, during, Post 1. Pre testing o cost effectiveness of various alternatives o mail survey, field study 2. During (monitoring) o Product movement o Territory wise sale o Outlet wise sales o Competitive moves o Problems encountered 3. Post testing o redemption rate of coupons
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o o o
Sales attained (special packs, self liquidators) cost effectiveness number of entries
Current sales Previous sales = Incremental sales Short purchase cycle means short term effects A coupon with a sample is twice as effective as a coupon alone Hidden cost of promotion High level of inventory with trade competitor rise us their move discount offered become threashold SP for local market are more effective
Sales Promotion Arithmetic (Cost of promotion = Actual price of the gifts + cost of promoting & Promotion < Additional Sales Revenue) Measuring Effect of Sales Promotion on Sales Volume Measuring the effect of a sales promotion is relatively easy but requires careful analysis of sales data before and after the promotion. You will also need to keep track of what other marketing and communication efforts and dollars your firm is undertaking at the same time as the sales promotion. Because sales promotions deal in tangible things, such as redeemed coupons or cash refunds and rebates, you can count those and see how many sales were a result of those promotions. Next, compare those sales figures to those your company had before the promotion to see if the promotion resulted in increased sales. To understand the true effect of the promotion, keep other media expenditures and types the same during the promotion as before. That way you are only measuring the effect of the sales promotion itself. 1. Effectiveness Vs. Goals Deciding whether your promotional campaign was effective depends on what goals were established. This varies by the established strategy at the start of the campaign. For example, if the goal of the campaign was to garner an increase in market share of 2 percentage points and the campaign yielded 3, then the campaign was successful. But, this also has to be examined in light of cost. If the cost of the additional market share was well beyond the budget set aside for the promotional push, then the campaign's effectiveness is mixed. 2. Short- Vs. Long-Term Impact Although an effective sales promotion will increase sales in the short-term, generally there no longer-term impact. For established brands, many customers will wait for the promotion to buy and to take advantage of the lower price. And, for many brands, most buyers were already familiar with the brand before the promotion. The promotion may have done little to attract new buyers or to encourage brand switching. 3. Sales Promotions in Highly Competitive Markets Sales promotions have their place in marketing even though they tend to instill a higher degree of price sensitivity among consumers. For new product introductions in competitive markets where there is a need to familiarize a group of consumers with a new product, sales promotions are a highly effective tool. And, in established competitive markets where gains in market share count for the bragging rights the increased share might offer, sales promotions are also an effective method to increase sales volume.
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Chapter 8 PLANNING AND DESIGNING SALES PROMOTION PROGRAMME WITH SPECIFIC REFERENCE TO SALES CONTESTS, TRADE-IN DISCOUNTS, COUPONS ETC.
Sales promotion is one of the building blocks of the marketing plan along with packaging, advertising, market research, public relations and events planning. Sales promotions involve a finite time period, unlike advertising that can span several years. The impact of sales promotions is, therefore, easier to evaluate than advertising results. At the majority of marketing-savvy companies, in fact, sales promotion budgets are larger than advertising budgets, attesting to the desire for more immediate consumer response and quicker payback on marketing investment. POP Promotions Contribute to Long-Term Brand Building Since sales promotion tools are used for a short time period, marketers can be tempted to "shoot from the hip" and develop ad-hoc promotions in an attempt to quickly move product. This is a dangerous practice that is apt to backfire in the long run. Ill-planned and poorly timed promotions can interrupt the natural consumer product-use cycle, artificially inflate sales volume and even disrupt normal seasonality trends. For example, if a consumer is loading his or her pantry with deeply discounted cat food yet still only has one cat in the house that eats the food, the cat food will not be consumed at a quicker rate. The myopic marketer who is only analyzing the short-term spikes in sales volume during the discounted promotion period will be disappointed by sales performance in the weeks following the promotion when sales trends decline and profit erodes. The more successful POP promotions are those that are developed against a clear set of objectives. In fact, the example cited above for pantry-loading cat food meets the objective of removing a consumer from the market and precludes the purchase of competitive cat food brands. As part of a Pre-planned campaign, this technique is extremely effective when defending against the launch of a competitive brand. The example above illustrates that the sales promotion function has evolved from a quick in-and-out tactical effort to an increasingly pre-planned, long-range strategic campaign. Successful sales promotion programs develop from campaignable, ownable "Big Ideas" that extend over a minimum one-year period and more often, span several years. The promotion becomes intricately entwined with the brand or service by enhancing its image. Think of the airlines' frequent flier programs that have been on-going for several years. Each year, enhancements are added to further entice the frequent flier to remain loyal to a particular airline. At the outset, these programs offered only free airline tickets and upgrades. Now the programs extend to value-added offers for hotels, car rentals, travel packages and even retail goods. Consumer and Trade Promotion Objectives Are Closely Linked Promotion objectives fall under two broad classifications trade promotions and consumer promotions. They share similar end goals but differ as to who is incentivized and how. Trade promotions are targeted at the middlemen those responsible for getting goods and services from a manufacturer into a retail establishment. Trade promotions "push" product into the store, onto the shelf or on display and are therefore termed push strategies. Consumer promotions, on the other hand, are those programs targeted at the end consumer or purchaser. Accordingly, consumer promotions are termed pull strategies since they literally motivate the consumer to "pull" the product off the shelf or display and out of the retail store. In addition to motivating trial, consumer promotions can build demand, build brand awareness, generate an impulse buy and even motivate multiple purchases. Various consumer-directed tactics are employed to encourage this type of buyer action. The list of consumer-directed tactics include coupons, refunds, rebates, sampling and free items to name a few. POP displays serve as a bridge connecting trade and consumer promotions. The most powerful offers are those delivered directly to consumers in the retail environment, that is, at the point of purchase. Well-constructed and attractive display units temporary or permanent pieces showcase products for easy shopping for consumers with coupons in hand. A wooden rack filled with wine bottles and free recipe booklets suggesting which wines complement various foods help consumers plan meals. And if this rack is strategically placed near the meat section, the consumer need not search the store for ingredients. When trade and consumer promotions work in tandem, the push and pull efforts reach a state of equilibrium. The trade incentives ensure that the right products are at the right place at the right time. The consumer incentives deliver motivated buyers to purchase the products. Together, these efforts ultimately deliver against the corporate objectives. HOW TO DESIGN A SALES PROMOTION? Whether you run a small or a large business, promotion is the lifeblood of your sales. You must create and implement creative, cost-effective campaigns to attract customers and close sales. With planning and effective sales campaign strategies, you can prepare to amaze yourself as you raise sales, gain new customers, and move product. 1) What do the customers really want? Identify what your clients want from your product or service, because successful promotions begin with your customers. Come up with a creative campaign that appeals to their needs. For example, if you are planning a fall sales push on your new sweaters, don't build your sales promotion around the pretty colors. Instead, plan a promotion that emphasizes how warm they are, how they will make your customers feel,
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and how confident they can be going back to school or college in these sweaters. People are motivated to buy based on how something makes them feel. Tap that. 2) Make the promotion simple. If you are promoting your sweaters, stick to promoting items that are related to this market sector. For example, as part of your promotion, you may want to reduce your inventory of fall hats. This is fine, as long as the hats and the sweaters can be paired. But it is a bad idea to throw a promotion where you are pushing fall sweaters and winter skis, for example. This will unnecessarily distract your target market. 3) Promote your sale in as many venues as you can. Many business owners are tapping into the networking power of Facebook, Twitter, and other online communities. This is great. But older methods of promotion still work. Consider printing up fliers and posting them where your customers shop, work, go to school and live. Look into the possibility of getting your local radio station down to do a live program, or "remote," at your place of business. Dollar for dollar, radio advertising is still the most effective paid advertising method, according to a 2009 study by the Nielson Research Group. 4) Track the progress of your sales campaign. Determine a sales goal. Decide before the event starts how many units of each product you want to unload. That way if your goal is to sell 350 blue sweaters, 150 orange ones, and so on, you will have a better idea how you want to aim your sales campaign and how to measure its success. It will also be useful during the campaign to know what your goals are because it will help you decide where you place your products, which products you may want to bundle, and so on. If you see that you are falling short in a certain item in terms of sales, you can offer more aggressive pricing on that item to make sure it moves. HOW TO DESIGN A SALES PROMOTION CONTEST? Sales contests have been motivating salespeople for years. Used properly, a fun and interested contest can boost morale and performance in lackluster employees. The effectiveness of your sales contest depends on what motivates your employees. It's always a good idea to ask for suggestions for prizes. Your employees might not be motivated by money but would rather have some flexible work time or other nonmonetary rewards. 1. Set an objective for the contest. Do you want to move clearance items? Sell new products? Increase customers? Make sure that your goals are attainable. 2. Evaluate your goals using the SMART system. Are they Specific? Measurable? Attainable? Realistic? Timely? 3. Design levels of achievement. It's more fun for the employees if there is suspense involved and anyone can win. By setting various levels, you ensure that more people will be motivated to participate. For example, setting goals for most new customers gained and first person to reach a monetary sales level gives more opportunities to win. 4. Designate prizes of different types. Not everyone is motivated by the same thing. Using different prizes for different achievements will give different people goals to strive for. Besides money, prizes can be merchandise (an espresso machine or gift certificates), travel (a weekend someplace close or a trip far away) or special privileges (flex time, extra vacation). 5. Make everyone feel like a winner. Don't just have one or two big prizes that will go to the top people. This leaves the rest of the staff resentful and left out. Have smaller prizes for participants or a group prize like a special lunch to reward everyone who worked to achieve the goals. 6. Track your progress. Have a tracking system where everyone can view the progress toward the goals. Make a large chart and hang it in the employee break room, for example. 7. Set a time limit. Six weeks is a good length for a sales contest, but you can choose any length of time as long as there is a specific start date and an end date that isn't too far away. 8. Keep energy and commitment high by promoting your contest whenever is reasonable, such as at employee meetings, morning coffees and group gatherings.
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Sales Management & Sales Promotion - by Anant Dhuri

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SALES MANAGEMENT & SALES PROMOTION 50 marks

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Product based organization

Asst sales mgr Division 1 Computers

Asst Mgr Division 2 Software products

Asst Mgr Sale Division 3 Training programs

Sales mgr Mgr training

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Manager Sales supervision

Manager Installation and services

Chief of sales executives Regional mgr Sales supervisor

Sales people East

Sales people West

Sales people north

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8) Hybrid Mix of Product Geography Customer Functional

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E) SELLING OF SERVICES AS OPPOSED TO SELLING OF TANGIBLE PRODUCTS

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- Investment in production capacity

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Chapter 4 RECRUITMENT, SELECTION, TRAINING, AND DEVELOPMENT OF SALES PERSONNEL

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Online training Absorption training On-the-job training

D) DEVELOPMENT OF SALES PERSONNEL

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6. Finalize the territories, and draw the boundary lines.

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