Sales and Distribution

Management
Sales and Distribution Strategy
Sales involves delivery and transfer of ownership of the
product or service to the customer
t forms the beginning of the latter part of the supply
chain post manufacture
Sales constitutes the direct and most intimate contact of
the firm makes with its customers
Sales is responsible for the fulfillment of the promise
made to the customer by its predecessor function-
marketing
While marketing is responsible for creation of a
customer, sales and after sales service are responsible
for servicing and retention of the customers
Areas of Sales Management
Responsibilities
Forecasting of aggregate and product wise
sales, using past data and incorporating current
and future trends
Designing and managing the sales workforce to
meet the forecast and build long term relations
with associates
Decide on critical aspects of sales policy
including pricing, credit terms to customers and
settlement of claims
To closely liaise with After Sales service to
present a united customer care front to
associates and consumers
Role of Sales Management
The larger concept of marketing is the creation, servicing
and retention of customers and markets
This comprises identifying customer wants, designing
and developing products/services to meet these wants
Designing products, deciding initial pricing,building
awareness, persuasion-role of marketing function
Sales role-Actual delivery of products/services to the
customer maximizing convenience and ensuring
satisfaction
Finally fulfilling the promise made to the customer
through sincere and effective after sales service
Role of Sales Management
Marketing covers want identification and
development of appropriate
products/services
Sales involves transfer of ownership and
possession to the customer in exchange
for the price she pays
Retention of the customer takes place in
the after sales and customer service part
of the larger marketing chain
Role of Sales Management
Effective transfer of possession and ownership
to the customer
This has to be done in the right place, right time
and the right manner
Choice of channel members, deciding the terms
of engagement with channel partners, Sales
promotion and merchandising are key
responsibilities
Effective liaising with Marketing and
manufacturing are essential ingredients for
successful selling
Role of Sales Management
Timely and accurate information on gross sales and by
product, studying current sales trends and projecting
future trends are important responsibility elements
Sales has to be the secondary/tertiary sales which
represents consumer off take and not as is usually the
case reflect primary i.e. "push sales
Sales constitutes the first point contact with primary and
secondary customers
mage of a company and its business prospects are
critically impacted by the attitude and the performance of
the sales force
Managing the sales force
Three fundamental issues: the right organization, the
right sales force and the right evaluation and
compensation system
Key to sales force organization is the level of
aggregation over product lines and choice of
geographical coverage
Most ndian companies have common sales force for all
product categories. A few like Philips have segmented
sales force viz. audio and video products have separate
sales force
Deciding the mix between specialized segmental skills
and the cost benefit analysis to justify the decision is key
to sales force organization
Sales force strength and
organization
No of persons required at various levels and positions is
decided based on geographical coverage and intensity
of coverage of channel outlets (Break bulk, distributor
and retail)
Benchmarking with key competitors is useful for new
sales force as well as updating existing sales force
Back office and infrastructural support are key inputs in
determining the sales force composition
Establishing performance standards, being "best in the
class should be the objective
Qualification should include aptitude as well as attitudinal
requirements. Learning curve inputs also vital
Compensation and ncentive
Systems
Compensation should be competitive both externally and
internally. n ndia "in hand is relevant
An effective incentive system sets aggressive but
achievable and transparent targets (most ndian
companies fail here)
Should reflect business priorities, be simple and easy to
administer
Supporting requirements are reliable forecasts and
rational budgeting
Most important- focus to be on secondary i.e.
consumer saIes and not primary i.e. Invoice numbers
Managing the Sales Force
Deploy according to desired territorial configuration: ensure
adequate coverage breadth wise and depth wise
Continuous interaction with all channel members to be ensured.
Partnership is the focus
Role of senior and top management crucial. Every senior/top person
to make sales visits. Helps to be in touch with market realities
Sales persons whereabouts to be continuously monitored. Regular
sales visit and performance reports a must
Training both class room and on the job to be a continuous and
evolving initiative. Mentorship to be institutionalized
Regular periodic transfers between marketing, sales and after sales
service personnel helps to improve integration and versatility
between the three arms of the larger marketing function
Sales Strategy-choice among
several options
Relationship strategy aims at developing a
holistic partnership with all those involved in the
buying decision e.g. computers and industrial
marketing
Double win strategy ensures outcomes for both
buyer and seller, requires empathizing from
both, is essential part of any selling strategy
Heroic sales strategy involves money back, free
replacement and persistent after sales contact.
Most successful in maximizing loyalty and
retention
Customer centric instead of product centric
strategy shifts emphasis towards customer and
Methods of Selling
Selling through channel partners(distributors and
dealers)
Direct selling which bypasses channel
associates works for some products(personal
care,household-Avon,Amway, Eureka Forbes)
Sales through large retail chains in house
brands (Wal-Mart, Home Depot)
Mail order sales(Sears), telemarketing of
services increasingly popular-to be questioned
in terms of appropriateness(standardized, low
involvement products eligible)
Channel Management and
Channel strategy
Distribution channels have different members
each forming a link in the chain between
company and customer
We start with Carrying and Forwarding agents
who "break bulk
Distributors, wholesalers and retailers form the
rest of the chain in that order(they are all primary
customers) not final customers
Most channel members operate on
remuneration of fixed costs plus variable
margins on goods sold or moved
Channel strategy decisions
Channel selection first step: no of factors include
market factors, competitors, intermediary
availability and product factors
Market factors include customer preference for
place of purchase viz. supermarket,
departmental store, neighborhood outlet
Geography is important(rural customers in ndia
prefer centralized selling locations,whereas
urban prefer to shop closer to home
Sometimes new entrants can choose locations
overlooked by incumbents (Wal-Mart rural
Arkansas while incumbents preferred big cities)
Some Channel Definitions
Distributors are bulk buyers and sellers of company
products/services. Perform all functions of primary customers viz.
bulk storage, retailer servicing and participation in sales promotion
Wholesalers sometime synonymous with distributors but at others
one step down the logistic chain handling sub territory of larger
distributor area
Agents/brokers are channel partners who do not take title to
company's goods but act as intermediaries between seller and
customers (primary or secondary) resorted to in initial stages of
establishing post manufacturing supply chain
Retailers are the last link in the supply chain, interface with the
consumer/customer and are responsible for creating and
maintaining the firm's image with them.
Channel selection criteria
Most firms initially go for established channel members already
partnering big players like H.L.L or Nestle
Timex Watches decided to go in for enlightened, aggressive
newcomers and this paid off handsomely
Stage in product life cycle important. n initial stages risk with
newcomers preferred. Later choice with company either veterans or
more new comers
High tech products like info. Hardware requires substantial company
support through trained personnel. Low tech products in personal
care, personal ware can do with fewer company support personnel
Low value products can be sold through wholesalers and general
retailers. However high value products including appliances, white
goods require focused retailing and excellent after sales service
infrastructure
n all cases close contact with ultimate customers is a must.
Companies ignore this basic wisdom at their peril.
Roles/responsibilities of channel
members
Carrying &forwarding agents maintain company stock
and move it to distributors/wholesalers. nvoicing to
primary customers from C.F.As
Wholesalers/distributors carry their own stocks and
service retailers. Adequate territory coverage is their
responsibility
Retailers stock, display and sell to their customers. Key
requirement is accurate and timely reporting of stocks
based on which alone reliable records of demand can be
built
Retailers should also do the best in selling, and building
rapport and goodwill with customers and in advising
them and guiding with their best interests and the
company's as well in mind
Company responsibility to channel
members
Channel members should not be loaded with excess inventory which
will cause resentment and lower their commitment
Every channel member should be given appropriate mix of product-
fast moving, medium and slow moving.
Non moving product should be removed by company at periodic
intervals. Discount schemes do not solve the problem
Company should provide adequate primary and secondary display
to channel members and point of purchase material
Good appraisal and reward system should be put in place to reward
the right partner performance. Non performers should be gradually
weeded out. Long term orientation should be the key to assessing
all channel partners
Frequent and caring interaction with channel partners and prompt
addressal of grievances will help to build and sustain enduring
partnerships as opposed to opportunistic alliances
ndian Distribution Scenario
Traditional role of intermediaries viz. set
up minimal infrastructure and expect
guaranteed returns
Extremely high cost of logistics
Lowest margins in the world
Expectation of extremely low prices from
ndian mass market customers further
pressurizes already low returns
ndian Distribution Scenario
Challenge of working with low product portfolios
and low inventories not acceptable to firms as
well as channel partners
Poorly organized and managed distribution and
retail operations. Company owned and managed
facilities not much better
Continuous pressure on sales force to achieve
unrealistic targets results in equally unrealistic
pressure on channel partners
Prevailing mindsets have to change for both
firms and channel partners
The Sales Organization
Functions include planning, administrative and
executive functions
Planning features forecasting, budgetting and
formulation of sales policy
Administrative function comprises recruitment of
sales force, training, appraisal/reward systems
and control
Executive functions include sales promotion and
selling routine i.e. execution of customer orders\
Objective of the sales organization is to ensure
achievement of the company's sales and profit
targets
Forecasting
Forecasting may be of total product/service
sales or of sub product or individual products or
combinations of all
While forecasting is essentially a prediction of
future sales, it usually is a projection of past
sales incorporating credible trends
Desirable to give more weightage to recent
period sales. At least ten previous periods data
should be taken for reliability.Most ndian firms
ignore these to their cost
Forecasting
For cyclical industries, need to know the length
of the cycle(might change as for ndian auto
industry from 4 yrs up to 1980s to 5 years post
1980s) Amplitude as % change to be measured
Cycles include macro economic cycles, industry
cycles and inventory cycles(most ndian
companies do not include these in their
forecasts
Finally consumer sales to be measured and
forecasted and not sales to channel members as
is unfortunately done
Sales Budgets
Sales budgets are overall sales plans
enumerated in financial terms
The forecast by gross units, product groups and
individual variants to be converted into Re terms
Expenses for promotions and schemes as well
as infrastructure like hoardings and shop
signage to feature
Allowances for spoiled and obsolete product
withdrawals to be included
Targetted levels of overall receivables and
acceptable age of receivables also part of
budget
Sales Budgets
Budgets should be approved by senior sales
executives with their marketing and financial
counterparts and finally approved by top
management
Budgets should be reviewed definitely on a
quarterly basis and preferably on monthly basis
Changes should be minimal but incorporated
into revised budgets after approval by top
management
Sales Policy
Firstly the direct/indirect issue. Do we go
for direct selling? Do we use distributors?
f so how many in various territories and
regions? How many in metros/large cities?
Next to decide the terms of sale including
credit terms and to whom various credit
terms applicable(franchisees, direct and
indirect dealers)
Sales Policy
Deciding minimum infrastructure for channel
partners
ntensity and frequency of coverage by sales
personnel .e. weekly/monthly visits to specific
retail outlets and distributors and CFAs
Warranty policy and ASS infrastructure to be
decided.Training and supervision of Channel
staff for various functions including logistics,
motivation of retailers and handling quality
issues are part of sales policy
Need to involve Marketing and QC personnel in
formulation of relevant aspects of sales policy
where their contribution is critical
Administrative Functions
First step is the selection of sales
personnel. Various sources including
media, placement agencies and
educational/vocational training campuses
have to be tapped
Employee contacts are useful for
experienced personnel. Poaching seems
attractive but is a short term approach
Short term performance initiatives
These are short term inducements to customers to buy
more of the firm's products
These include discount, coupon sales, lucky draws and
contests
These require involvement of Marketing and finance
groups to ensure best synergy of market enhancing and
profit achievement objectives
Problem is that most of these only result in altering the
timing of purchase and do not contribute to increased
sales during the year
Further these contribute to brand dilution and ambiguity
about real pricing points for the brand offering
Some Suggestions
t is better to build brand credibility, offer real value
propositions to customers through relevant
communication and strategic pricing
Associates should be supported through adequate
infrastructure including signage and merchandising
support
Finally associate remuneration should be competitive
and permissive of realistic long term earning prospects
nformation systems and good evaluation/incentive
schemes with a view to build enduring partnerships
should form the keystone of associate formation and
development
Sales Organization Types
Several types based on competitive
specialization of selling orgn.
Geographical orgn. most common where
all firm's products sold in each region -
assumes demand patterns and associate
capability uniformly spread
Product type sales organization e.g.
pharma cos have medicines, equipment
and supplies organized in separate groups
Sales Organization Types
Orgns. based on customer types viz.
ndustrial, nstitutional and Consumer
categorization. BM, Xerox, Publishing cos
Activity function based including
telemarketing, direct selling, and field
sales- telecom firms follow this approach
Hybrid sales orgns. Large cos evolve into
this form of orgn. over time
Recruitment,training and
compensation of sales force
Recruitment is process of locating,
selecting and employing suitable persons
for the sales force
Matching to positions on the orgn chart
and to job specs is essential
Objective criteria and sound methods of
testing/evaluating ensure good recruitment
Over reliance on criteria such as quantum
of prior experience a pitfall
Recruitment contd.
Reference check on previous employment
experience and performance necessary
Clear statement of expectations from new
employees on conduct and performance a
must
Offer of emoluments and future prospects
to be unambiguous(avoid vague "sky is
the limit promises-nobody believes them
anyway)
Training of Sales force
Training needs flowing from job specs is the
starting point. Understanding customer markets
is critical
Detailed product knowledge mandatory for all
types of offerings. For low tangibility
differentiated offerings(e.g.personal care),
knowledge of emotional satisfiers helps
Knowledge of the market place, competitors,
channel associates and selling practices are
focus areas
nventory management, good logistics practices
and receivables management should be vital
inputs
Training of Sales Force
Frequency, timing and manner of sales visits to
various channel associates is fundamental
training input
Communication skills a priority with emphasis on
receiving and rapport building(listening and
empathising)
Training methods include formal class room
formats, field training, seminars and interaction
with senior/top mgmt
On the job training by superiors combining
concept with practice should co-exist with
general functional and behavioural training
Compensation and Motivation of
Sales Force
Sales compensation through salary,
bonuses and perquisites
Significant part of compensation to be
performance based. Care to be taken to
set realistic, real world targets.
Motivation of Sales Force
Motivation is the driving force based on
positive feelings that produces goal
directed action
t is necessary to reward goal directed
action to ensure repetitive behaviour
towards the goal/goals
The first step obviously is to establish the
right goals
Right Sales Goals-the right
approach
Customer to be the focus always. Creation of
new customers and retention of existing
customers
Primary and Secondary/final customers should
merit equal focus. n fact primary customers are
stakeholders too with their unique set of rightful
expectations
f we short change the primary customer, we are
unlikely to fully meet the expectations of the end
customer
The Sales Goals
The final goal has to be maximizing long term
profits through optimizing the volume/margin
relationship
Channel inventory planning and control is critical
Optimizing accounts receivables is another
critical responsibility and therefore major
performance variable
Critical variable is retail sales which reflect
consumer sales and therefore demand for
company's product/services
Sales goals
Unit of sales needs to be defined properly. For
services like telecom, a unit of standard value
(Rs. x representing a standard offering like
monthly revenue)
For merchandising, and signage joint goals for
sales and marketing should be set
Min. no of inventory turns for each channel
partner should also be a sales goal.
Recommended min 12 for every industry
Min revenue/profit per sq.ft of space should be a
retail target
Regular and reliable reports should be a
fundamental performance requirement
Rewarding Performance as well as
Potential
Rewarding current performance in financial and
non financial measures is intrinsic to motivation
Need to spot & assess and develop potential
through training and award of challenging
assignments is the greater part of motivation
nvolve sales personnel in critical customer
service areas like new product selection, pre
manufacturing logistics. Establish contributions
from sales personnel(feedback they carry from
customers primary and secondary is input)
Role of mentors is very important. Attaining the
position of a mentor could be the ultimate goal of
outstanding performers. Nurturing mentorship
Channel Partner Management
Need to select the right channel partners-new to
the industry,new to business is the best
Clear set of expectations to be communicated at
selection(storage, inventory management,
retailer servicing and support, timely and reliable
information are key
Competitive remuneration with accompanying
rigorous performance standards
nformation about the sales responsibility
domain, competitors and relevant socio,political,
cultural impacters
Channel Partner Management
Providing initial and ongoing training on product,
technologies, logistics practices and nfo
systems critical
Periodic visits to company facilities and
interaction with company personnel over all
relevant functions viz. marketing, manufacturing,
Q.C. and Finance/accounts
Rewards and recognition through channel
partner conferences an important motivating and
enabling device
Most importantly fostering the partner identity in
all channel partners
Company responsibility to channel
members
Channel members should not be loaded with excess inventory which
will cause resentment and lower their commitment
Every channel member should be given appropriate mix of product-
fast moving, medium and slow moving.
Non moving product should be removed by company at periodic
intervals. Discount schemed do not solve the problem
Company should provide adequate primary and secondary display
to channel members and point of purchase material
Good appraisal and reward system should be put in place to reward
the right partner performance. Non performers should be gradually
weeded out. Long term orientation should be the key to assessing
all channel partners
Frequent and caring interaction with channel partners and prompt
addressal of grievances will help to build and sustain enduring
partnerships as opposed to opportunistic alliances
Merchandising
Merchandising is the process of increasing
visibility and appeal of products to increase
saleability
t includes product packaging, placement,
promotion and "special pricing
One other form of merchandising is using the
brand power of one organization to sell products
of another.(sports personalities and
entertainment cos lending their brand names to
various products)
Merchandising
Mostly merchandising focusses on presentation
of products including displays and special
instore storage and packaging(gift bags, racks,
trays), posters, danglers, special
cards/brochures
t also features discount schemes along with the
pricing and packaging features
Outdoor signage and on shop and in shop
signage could also feature as part of
merchandising
Planning and evaluation
Some aspects like signage should be
considered as longer term and should feature as
investment
Others including displays and special packaging
and pricing initiatives would be shorter term and
should be expensed
All expenditure should be justified in terms of
real sales increase(not changing the timing of
purchase by customer as in most festival sales)
Planning and Evaluation
Test marketing and post purchase surveys of
customers should be the basis of evaluation
One tip is that all merchandising should keep the
customer in mind. Need to avoid feeding the
creative instincts or egos of marketing personnel
in the company
Merchandising should be the joint responsibility
of Marketing and Sales sub functions of the
larger Marketing function
Summary
Defining larger Marketing process and Sales sub
process
Areas of Sales responsibility, forecasting, sales
organization, selection, training and retention
issues, compensation, motivation of sales force
Sales strategy, types of selling viz direct selling,
through channel members, mail order, e selling
Sales budgeting, how to develop the budget as
effective planning and control tool
Summary
Essentials of space planning and inventory
management
Channel members types and roles,
selection of channel partners
Mutual expectations of firm and its chnl.
Partners, training, rewards/recognition
Sales goals optimizing the long term
volume/margin combination
Summary
Company responsibility to channel
members including promotional and
information systems support
Merchandising basics, role of company
and channel partners