Introduction to Sales Management : MEANING: Sales Management- is the attainment of sales force goals in an effective and efficient manner

through planning, staffing, training, leading, and controlling organizational resources (Futrell1998) Managing a sales force involves recruiting, hiring, training, supervising, compensating salespeople, motivating them to become problem solvers, and providing the proper planning and backup support so they can perform their jobs properly. Definition: Systematic process involving: (1) formulation of sales strategy through development of account management policies, sales force compensation policies, sales revenue forecasts, and sales plan, (2) implementation of sales strategy through selecting, training, motivating, and supporting the sales force, setting sales revenue targets, and (3) sales force management through development and implementation of sales performance, monitoring, and evaluation methods, and analysis of associated behavioral patterns and costs. Sales is one of the most crucial functions of an organization. It is the principal, and often, the only revenue generating function in the organization. Sales has formed an important part of business throughout history and will continue to do so. A constant evolution has been witnessed in the sales function from the early Stone Age, through the Iron ages and the Middle Ages to sales in the twenty-first century. The evolution of the sales concept can also be studied in terms of seven generations. In addition to helping an organization achieve its business goals, the selling function performs various other roles such as enhancing knowledge pertaining to the internal and external environments, developing positive relationships with customers, suppliers and distributors, and negotiating with customers to sell the company's products profitably. Despite the crucial role the selling function plays in the growth of an organization, sales has a rather negative image associated with it. This can be attributed more to the misconceptions in the minds of the people rather than actual knowledge of the profession. The major objectives of a sales organization are to increase sales volume, contribute to profits, and attain long-term growth. For an organization to be successful, it is essential to integrate the sales and marketing functions so that coordination of activities can be achieved. SALES MANAGEMENT 1.1 Introduction Sales management as the term implies means management of sales. Often it is considered synonymous with the management of personal sales. It involves an understanding of the effort that goes into the management of the sales force and the various processes of sales. Sales management initially was meant to be the direction of sales force personnel. Later the term took on a broader significance apart from personal selling and the term sales management included managing of all the sales related activities including below the

line advertising, sales promotion, physical distribution, pricing and product merchandising. 1.2 Marketing Approaches Marketing is defined by the American Marketing Association [AMA] as "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large." Marketing deals with the company orientation towards the market place. It deals with mainly four concepts namely the production concept', product concept, marketing concept and the selling concept. 1.2.1 Production concept The production concept founded on the belief that the customers favor those products that are highly available and affordable to them. So the concept assumes that the cheap products are sold well and relies on the improved production and distribution activities. Companies try to attain profits by exploiting economies of scale. Improved production and distribution are emphasized rather than the quality or features of the product/service. This concept is also known as the manufacturing concept. This type of strategy for a business works well in the developing countries where the demand is more than the supply. 1.2.2 Product concept Product concept relies on the assumption that the customers buy those products that offer the most quality, performance, and innovative features. This concept suggests that the quality of the product is an important factor in the customer buying process and customers would always prefer to buy products of superior quality.

1.2.3 Selling Concept This concept relies on the assumption that We need to compel the customer to buy the product, so the customer will buy the product only if the company aggressively promotes/sells their products/ services. This concept believes that customer is usually inert and would not buy the product/service if the choice is left to them. So the company would push its products/services towards the customers and push them to buy. Hence a strong network of sales force is created for this purpose and they convince the customers to buy the products/services through advertising and personal selling. This kind of approach worked well with products/ services like insurance, vacuum cleaners, water purifiers, and various other household items etc. 1.2.4 Marketing concept The marketing concept underlines the following principles:-

1) Identify the needs and wants of the customer 2) Design the products and services to fulfill the same 3) Use various promotion techniques to communicate the benefits of the product 4) Realizing the profit by satisfying customer needs over a long term The marketing concept then is the management belief that customers will long those products that they need and what and that the key task of the management is to identify customer needs and wants and design products accordingly. 1.3.1 Good Selling Process Good Marketing makes sales easy. However, even when the marketing process is good, the sales process needs to be handled carefully. Good selling implies:1) Identifying the right customer 2) Communicating the product benefits to the customers and 3) Exchange of goods/ services for money Sales are the culmination of all the marketing efforts and in a nut shell, it is the exchange of good and services, for money. It may be said that marketing is all the activities conducted to prepare for sales. Sales are all the activities required to close the deal. Clearly customers will buy those products which they need and also where the perceived value of the product is greater than the selling price of the product. The task of marketing is to enhance the value proposition in the minds of the customer and increase the perceived value. It would be ideal if the customers came and demanded the product/ service. However the customers may not do so because of several reasons such as:1) He/ She doesnt know that the product is available 2) May not know where the product is available 3) And have no idea of whom to contact

4) Have no clear idea of the value proposition and the benefits 5) May not be clear of the utility of the product in solving his / her problem The sales force then plays an important role such as:1) To reach out to the customer and inform him/ her about the product benefits 2) Make the product easily available to the customer 1.3.2 Sales Approaches Two possible approaches by which the sales would take place can be classified as follows:1.3.2.1 Direct sales approach may be:1) Selling to offices- (for examples, Office Automation Products) 2) Selling to Industries- (business to business B2B) 3) Door-to-door selling 1.3.2.2 In-Direct sales approach 1) Company to retailer to customer 2) Company to wholesaler and then to retailer to customer 3) Company to wholesaler to distributor and then to retailer to customer An attempt is made to introduce these various sales approaches, but the following text is primarily focused on personal selling. The issues of channel management/ indirect sales approaches are also covered in the course work of Distribution& Logistics and Supply Chain Management. 1.3.3 Types of Personal Sales Personal sales can be classified into broad areas like:1) Office sales 2) Industrial/ Institutional sales (In some countries like India there is significant difference in the approaches to

be followed for Industrial/ Institutional sales and the government sales) 3) Door-to-door sales The kind of sales strategy to be adopted is the function of the product / service, the market, buying process, and the competition. 1.5.1 Personal selling Vs Other Promotional tools Let us now understand how the personal communication differs from other tools such as advertising, public relations, sales promotion and internet based promotion. We shall also understand the situations in which the personal selling would be preferred over other promotion tools and finally we shall discuss the disadvantages of the personal selling. Personal selling is preferred in cases where the customer cannot be reached or communicated easily about the company product / services by other means, such as the rural areas where the television or internet is not available. Secondly in the cases where the target group might be a CEO of a company or a head of the institution, such customers cannot be communicated easily with other tools as compared to personal selling. 1.7 Sales Management Model The 1st step describing the personal selling function deals with understanding the job activities and the sales process involved in personal selling The 2nd step Defining the strategic role of sales function will deal with the corporate, business and marketing level strategic decisions which typically provide guidelines within which the sales manager and salespeople must operate. The 3rd step Designing the sales organization deals with the importance of designing an effective sales organization which is necessary to implement the strategies successfully. The 4th step Developing the sales force highlights the importance of right recruitment and selection methods and the need for proper training of the sales force personnel The 5th step Directing the sales force presents that hiring the best people for sales is one thing and directing their efforts to meet the sales organization goals and objectives is another. Sales managers spend a great deal of time in motivating, supervising and leading members of the sales force.

The 6th step Determining sales force effectiveness and performance deals with monitoring the progress of sales force to determine the effectiveness and performance. Developing forecasts, assigning quotas and budgets provides necessary information for the performance evaluation.

2.2 Marketing Strategy

Marketing strategy can be thought of as all the activities performed to use the companys limited resources to achieve the objectives marketing and sales and attain competitive advantage. The first step includes identifying the product/ service. The product/ service is developed as per the company goals and the market needs. After identifying the product/ service, the next step is analyzing the market. This is where we begin to identify the customer for the product/service. 2.2.1 Segmentation and Target Marketing Market segmentation is defined as the process of dividing the heterogeneous market into homogeneous sub-units. If we take the population of a country say India, it would be around 123 crores. For a consumer product lets say the tooth paste, the market is huge. However, the entire population would not be looking for the same type of features in the toothpaste. So we need to convert this heterogeneous group into homogeneous sub groups. Let us say, we can divide the entire population into two categories, with one category preferring ayurvedic/herbal toothpaste and the other category preferring nonayurvedic toothpaste. This categorization will give an idea of the market segment which prefers your toothpaste. The need for segmentation is that the marketer is clear about where to compete and place the product/ service. There are different bases for segmentation, namely:a) Customer-based Segmentation b) Product-based segmentation and c) Competition based segmentation Generally there are two important factors before selecting the target segment. They are:a) Attractiveness of a market segment and b) The strategic fit between the segment and the firms objectives, resources, and capabilities. Market Research will play an important role in finding the answers to the above two factors.

Once the segmentation has been carried out for the product/service, we can define the strategy using one or a combination of the following approaches:a) Standardization: - In this strategy, the firm maintains the same product, same price and same communication medium to all the segments. e.g.:- Cold drinks will be priced same to either the rich people or the poor people. b) Differentiation: - In this strategy the firm differentiates the product to cater the needs of different segment. The pricing would be different in this case. E.g.:- The Indian Railways differentiates its service into several categories like AC 2-tier, 3-tier, Sleeper and general coaches depending upon the various segment needs. c) Focus: - This is the combination of the above two strategies. In this the basic product remains the same with additional features for various segments to be added at an extra cost. E.g.:- A given model of laptop will be priced same for all segments, but if the segment needs an up-gradation of features it would be done at an added cost. So using the above approaches, we market the product/ service. 2.2.2 Determining Potential Buyer and Buyer group Determining potential buyer is more a marketing task than the function of a sales process. The potential buyers for a product/service can be arrived by market segmentation. The buyer group may be different for the product category and a brand. For example, if we take the cell phone. Every person in the segment is a potential buyer of the cell phone. But the buyers are different for high end mobiles and low end mobiles within the segment. Another example can be thought of as a photo copier. Every office is a potential buyer of a photocopier but when it comes to brand the offices might go for a cheaper brand an expensive brand. This is where the sales team comes into the picture in determining who the potential buyers for the brand are and the products associated with it. The marketing group or the brand management should identify the potential buyers. They ought to give certain marketing inputs in the form of promotions. It helps in creating the awareness of the supplier and the brand to the potential buyer before the sales person contacts the buyer. All these activities are a part of marketing policies and approaches of the firm. The firm also has to provide the support material to the sales people in terms of brochures, literature etc This is where the sales team begins its activities. When the sales team takes their responsibilities the first task is to find the customer, a process which we generally refer as Suspect to Prospect through MAN approach. MAN stands for Money, authority and Need respectively.

Every potential buyer may not be an actual buyer of the product. The potential buyer cannot purchase the product if he doesnt have the money, authority and the need. It is written in this order because it is easier to identify whether the person is having the money followed by whether he has the authority to buy and finally whether he has the need to buy, it. Sales team needs to know how to assess whether the potential buyer has the money, authority and need. One cannot just ask the potential buyer whether he/she has the money. So, some parameters such as education, occupation, family status etc. needs to be analyzed to arrive at a conclusion whether the potential customer has the money to buy the product. Similarly, the salesperson has to assess whether the potential buyer has the authority to buy the product/ service and does he/she have the need for the same. Marketing would do this job at a macro level and sales would do this job at the micro level. Marketing identifies the target segment or potential buyers of the product/ service but at the level of individual potential buyers it the task of sales person to identify the needs and wants of the individual potential buyer. 2.3 Sales Approach Once the sales team identifies the prospect, its time to decide on the sales approach. The first step in the sales process is the pre-approach. Pre-approach would include the attire, presentation material, fixing an appointment and deciding what to do in the appointment like opening remarks etc. The objective of the pre-approach is the often data collection, knowing more about your prospect, the team involved in buying the product, the customer history and so on. The sales team will always be able to sell better if they talk customer needs and not the features of the product/ service. This is referred to as term FABing which means converting features to attributes and attributes to benefits. 2.3.1 Typical Purchasing process Most of the customers do not buy a product unless there is a need for it. The problem is that the customer often does not know what he/she needs. So in the first step of purchasing process one has to identify what the problem or need is. In the second step Evaluation of options the customer would look for various competitive products or solutions for his problem. There might be a different criteria used by different customers. Some of them might be:a) Price: - Many customers use price as the differentiation criteria. Customers might go for a cheaper product rather than a costly one. This is seen more often in developing countries and less in developed countries. In this the sales person may be actively negotiating for a better price or give some discounts. Discounts

play a major role in the successful closing of sale. But the sales person should have a clear idea of what could be the maximum discount allowed by the company for the product/service. Some customers go on with the higher price products or some may buy the medium priced products. The choice would depend on the customer mindset.

b) Quality: - Here the customer would be preferring the best quality product and does not mind paying a little more. Quality might be different for different customers. For the customer, Quality may be associated with long life of the product, more features, best designs, better after sales service, and so on. Most of the customers associate quality with the brand. It is the role of the sales person to know what the customer means by a quality product and carry on with the sales process. In the third step the purchasing decision will be taken by the customer. The role of a sales person is to make the purchasing process hassle free and convenient. And the final step Implementation and Evaluation deals with the installation of the product and evaluating the value. If the customer evaluation is positive it would lead to another sale in the future.

These are the four steps in a typical purchasing process for every sale. The level of activities involved in each step differs for different types of sales like direct and indirect sales. For instance more activities might be involved in the first step (recognition of needs) for an industrial sale while compared to door-to-door sale. It is very important to know the kinds of activities involved in each of the steps for different types of sales. 2.3.2 Essential Activities of Sales Process The sales process can be categorized into four main activities. Interest creation activities, pre purchase activities, purchase activities and post activities. To convert the suspect to a prospect, each and every activity is important and needs to be performed successfully. These activities aim at serving customer better. The process is called sales process cycle. Every sale has some essential activities to be performed by the sales team. Let us understand those activities with the help of the following chart. 2.3.2.1 Interest Creation Activities The first activity is interest creation. Once a potential customer is identified, he/she needs to be educated about the product/service you are offering. It is the job of the sales person to be prepared with the necessary literature, brochures and or presentations. If the product is a technical in nature, the aim of the sales person should be in explaining the benefits of the product to the customer and not its technical features. In this activity, creating awareness about the brand or product should be the

main aim than pushing for sales. The sales person needs to understand the customer in this phase and identify his/her problem and provide the necessary information documents which the customer may request. Various promotional techniques can be used for interest creation. Some of the ways in which companies create interest in the product/service would be:-

period like 1 month. During this time the customer can evaluate the product and then buy it. This is usually prevalent in firms selling software products.

firms selling products like soaps, shampoo, toothpaste etc.

they are satisfied in case of high value product like automobiles. s Pleasure) implies that girls are entitled to same freedom as men and driving the scooter is symbol of freedom and liberty. 2.3.2.2 Pre-purchase Activities Having created interest in the brand/ product in the first activity, it is time for moving on to the next activity by the sales person. In this process we assume that the customer is actively considering various product offerings and comparing them. This activity aims at describing the product or service features to the extent possible. Much emphasis is laid on demonstrating the capabilities of the company and or the product. Here, the sales person takes on an active role in assessing the customer needs and helping them in problem solving. 2.3.2.3 Purchase Activities Having presented a solution to the customer problems, it is time for the sales person to push for closing. Here a lot of activities happen both, from the sales persons end and the customers end. Sales persons role lies in negotiating, bidding, finalizing the terms and condition of the sale. The customer evaluates various proposals, negotiates and finalizes the payment. It is not necessarily required that the same person or company who initiated the pre-purchase activities would be involved in purchase activities. Some of the processes may be outsourced to other agents. Advantages of Outsourced selling (Partner, reseller & distributor)

negotiating skills, the chance of closing a sale is high. e financial and selling risk of the firm is reduced.

-stop solution for all customer requirements. If your company is good in manufacturing microphones/headsets only, then you can take the help of the distributor who would be dealing with the computer products. The chance of your product sale is higher when the customer comes for purchasing a computer/laptop and buys your key board as an accessory. ase, company cant increase the sales force to sell the products and fire them when demand decreases. So, in peak demand season the distributors can help in selling your products/service to the customers. Disadvantages of Outsourced selling (Partner, reseller & distributor)

which territories should be assigned. The company may not be able to force the reseller to follow its sales strategies. cannot be controlled like personal sales team of the company. Companies may not be able to keep track of the reseller performance in selling the goods/services. Reseller may be interested in his own profit and may encourage the customer to buy other products as he/she may receives more share/profit/commission by selling other products. 2.3.2.4 Post-purchase Activities The post purchase activity begins after successful closure of the sale. This phase includes delivery of the product/ service, installation (if required), providing more information about the features and finally collecting the payment. This phase can also include after-sales service. The primary objective of this phase is to win customer loyalty so that he/she would be a regular customer of the brand/product. As discussed earlier, some functions in this stage like providing information, delivery of product and installation can be done by the company itself or with the help of a reseller. After sales service plays an important role in creating the customer loyalty. It can be as simple as addressing the customer problem on the telephone line or may be a personally visiting the customer premises to resolve an issue. In B2B deals, postpurchase activities can include installing the product or service and then providing training for the uses of the product/service of the company until they understand the new product/service. 3.2 Personal Selling as a marketing communication tool

Definition: Personal selling can be viewed as a marketing communication tool that involves a one-to-one communication, which can happen in the form of face-to-face communication, over the telephone line, through video conferencing or by an email. 3.2.1 Personal selling vs. other communication tools

Personal selling is different from other marketing tools such as advertising, sales promotions etc. Advertising is a communication tool which targets many consumers simultaneously. Unlike advertising, personal selling is targeted at an individual prospect and develops the relationship. Advertising aims at a group and is non personal where the communication primarily relies on the media. AMA defines sales promotion as Media and non-media marketing communication employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improves product availability. The major difference between sales promotion and personal selling is that the latter is a non-personal way of communicating with the customer. 3.2.2 Advantages and disadvantages of personal selling Every communication tool serves the purpose of the companys objective to increase its sales. However, in doing so, some communication tools work better than others for the business. Each and every tool like personal selling, advertising, sales promotions etc have their advantages and disadvantages. Advantages of Personal Selling a) Flexibility in delivering the message If the customer doesnt understand the message conveyed by the sales representative, then the message can be modifies and conveyed to the customer again. Since a sales representative interacts with one potential customer at a time the messages can be tailored and delivered as per the customer needs. This flexibility is not available in advertising which happens through the television, newspapers, magazines, window displays etc.

b) Efficient way of communication Personal sales is a two way communication process which allows for the efficient dialogue between the customer and the sales representative. It would be easy to know whether the customer has really understood the communicated message about the product/ service. The feedback would be immediate by the customer in personal selling, which would helps the sales representative to know whether the sales approach is working or not change the approach accordingly. In other promotional tools like advertising which rely on one way communication, would not guarantee that the customers have understood the communicated message.

c) Building long term relationships Being a two-way & one-to-one communication, personal selling certainly has an added advantage over other communication tools in building long lasting relationships of customer. d) Better access to various target segments

Not all the target groups can be reached with advertising, sales promotions, and public relations. In such cases personal selling would help to reach out to the customer and inform about the product/ service. For instance if the company deals with B2B markets or with the CEO of a company, personal selling would be a better communication tool than advertising or sales promotion. In B2B markets, the sales process involves a lot of communication time and hence a high level of two way interaction is required making the personal sales a practical communication tool. e) Complex information delivery In personal selling, greater amount of complex information like technical features of the product can be conveyed easily in comparison to other communication tools. Since numerous meetings can happen between the customer and the sales representative, there is ample time available to explaining all the features of the product. Disadvantages of Personal Selling a) High costs per sale Personal selling cant be applied to all the products even though it might be efficient in building the long lasting relationship with the customer. Cost per sale plays an important role in deciding the personal selling as a communication tool by the companies. Personal selling would be applied if the cost per sale is justified like Insurance products, loan products, credit card sales, personal banking products, high value kitchen appliances like dish washers, water purifiers, chimneys etc., in which the benefits from the customer to the company are more than the costs that are incurred for the sale to happen. Low value products can not be dependent on personal selling unless it is a repeat purchase by the customer and long-term profit is justified for the cost incurred.

b) Misunderstanding by the customer Many people prefer to buy the product/service from a store rather than buying it from a sales representative who visits home. These customers might have experienced the aggressive behaviour of sales people in the past and may be determined not to buy any product from them. Customer might lose trust on the sales people due to this aggressive behaviour, Hence, it is the responsibility of the sales people to focus in making the customer happy rather than pushing aggressively for the sale. Personal selling generally involves six steps as described below:a) Pre-approach activities b) Approach activities c) Presentation

d) Objection handling e) Closing the deal f) Follow up The above mentioned steps are just a general way of understanding and the number of steps may vary from company to company. Lets understand these in detail. 3.3.1 Pre-approach activities This includes all the activities a sales representative would perform before actually meeting the prospect. These activities may include the following:ut the product/ service which is to be sold ct like name, family background, income status, employment, credit history etc me to meet the customer

re to be presented to the prospect and keeping sufficient manuals/ technical documents The level of activity depends upon the type of customer or market. If the sales are for the B2B market, then sales representative needs to have all the necessary documents which clearly explain all the technical details or benefits about the product/ service. If the sales are for the high value products like loan products, then knowing the credit history of the prospect is an important task. Knowing the right time, place and approach will be important if he/she is selling to top-level corporate like CEO of a company. Often people encounter sales representatives who come to sell the product/ services without even knowing the complete benefits or technical details. It is the job of the sales representative to clearly know the benefits or details of the product and also the about the company which they work for. We already studied in the previous unit that the actual closing of the sale may not be necessarily handled by companys sales representative. The sales process may be outsourced where the reseller will sell you the product/ service. In such cases the reseller must have a clear idea about the company for which he/she is selling the product/ service.

3.3.2 Approach activities After identifying the prospect and gathering necessary information, it is time to interact. It is said that the first impression would last longer and is critical for any future meetings. The aim of the sales representative should be in gaining attention of the customer and stimulate his interest in the product/ service. Opening remarks would play a major role interest creation. Sales representative start introducing his/her name and the company which they represent. Later on, they proceed with the product/ service which the sales representative have in to offer. Interest can be created by citing product benefits, giving

referrals, repeated calling etc. In B2B markets, if you are the sales representative selling a workstation to the IT firm, a single meeting wouldnt be enough in getting to the presentation stage, so repeated calling would be required. It is the aim of the sales representative to create enough interest to transit to the presentation stage. In brief the task of a sales representative in this stage can be summed up as following:-

ce more information about the prospect

3.3.3 Presentation activities This is the stage where the sales representative will work to his level best to convert the prospect to a customer. The desire for the product/ service needs to be created by handling the presentation carefully. So this is a critical stage and if the presentation is not done effectively, the prospect might not be interested in listening to the presentation. We need to set the environment in the first few minutes of the presentation and get a positive impression. Often when we walk into an office for presentation, the prospect would be busy in middle of some work, so its very important to get his attention in the first few minutes. Just as people often judge the book by its cover, in the same way looking at the sales representative people decide sometimes whether to entertain the presentation or not. Attire and grooming of the sales representative like clothing and grooming are very important. It is important to deal with a positive attitude while making the presentations. If you are dealing with PowerPoint slides, then there are some general guidelines which you have to follow in making the slides. We shall discuss more about this stage in subsequent units. Finally, to sum up, the important activities that you as a sales representative would perform in the presentation stage are as follows:for gaining the attention of the prospect those who didnt buy this product/ service are suffering and so on hen state the reason for the same. For instance, if you want to know the number of staff or the type of customers handled by the prospect, then provide a reason for the same. really listening to what you say in the presentation In most of the cases, presentation stage would is not said to be successfully completed if the objections that arise from the prospect side are not handled properly. So in the next stage we understand about the objection handling.

3.3.4 Objection Handling Handling sales objections is as important as making a good presentation for the

prospect. Objection handling is about handling the objections of the prospect when he/she says no the product/ service stating a reason. The prospect may say no, due to some of the following reasons:products in the industry ticular feature of the product/ service

first meeting itself mation on the product/ service to be satisfied It is the job of the sales representative to know the exact reason for the objection and handle it carefully. Prevention is better than cure, it makes sense in this context as it is better to handle the presentation well, before discussions lead to the above mentioned objections by the prospect. So it is important that the sales representative have a check-list of the possible objections which can arise during the presentation. It is also important that the companies provide the checklist and train its sales persons in handling situations when the objections arise. Sometimes even a well trained sales person might go wrong in handling the objections as he/she might lose temper or may be for some other reason. So it is very important to know the ways in which the objections can be handled. Darryl Davis in his book How to be a power agent in real estate describes Ten Commandments of handling objections. Some of them are as follows:be looked as an opportunity to increase your skill set in handling them. As Warren Buffet who is the greatest investor and one of the richest persons in this world says in his autobiography, success is a terrible teacher, because you only learn from your failures for the objection. your presentation.

So objections should be thought of as an opportunity in gaining more attention of the prospect and should be handled carefully. After the objections are handled properly there should a smooth transition into the next stage closing the deal 3.3.5 Closing the deal After successful presentation and effective objection handling it is time for the sales representative to close the deal by obtaining a purchase commitment from the customer. Various closing techniques can be employed by the sales representative in requesting an order for the product/ service. Sales representative must know the right time for closing the deal during the presentation. If closing technique is used at an appropriate time during the presentation, an objection may arise from the prospect. Sales representative can know the right time by observing the prospect carefully and

looking for some buying signals from prospect such as:-

service

aying with the company order form and a pen of payment and any installments provided.

The list can include many more items and it is the job of the sales representative to know the right time for closing the deal. After identifying the right time, we can apply some of the closing techniques as described by Ralph W Jackson and Robert D Hisrich in their book sales and sales management". Some of them are as follows:entation. Once some buying signals are identified, the sales representative should attempt a trial close and see if a positive response is received from the prospect. If a positive response is received then he can go for closing the deal. If he is selling a car to the customer, the trial close can be Would you be interested in buying a Maruti Alto or Zen. If the prospect says any one of them, you can proceed with the actual closing and discussing the terms and payment methods of the product. an order: This includes directly or indirectly requesting the prospect to make the purchase. buy is already made by the customer and proceeds to close the deal. For example he can say Having found the product/ service to be beneficial, when would you like it to be delivered? -of-benefits close: Here the sales representative summarize the benefits of the product/ service and then go for the sale. -account close: This includes describing the advantages and disadvantages of the product/ service by putting them side by side in a T-table format. This form can help the prospect easily understand about the product/ service. be given a one-time special offer on the product/ service such as We would like to offer a 15 percent discount if you place an order for the product/ service today. If you are interested in various other closing techniques, you may refer to the books listed in references and suggested readings. Various problems might arise during closing, such as the sales representative having no idea of how many times does he/she have to attempt a closing technique. Another problematic situation would be a No from the customer after using a closing technique. After using a trial close, if you find the prospect is not giving enough response or says no, then try to use another trial close. There isnt any fixed number but another two to three times can be reasonable after the first trail close. This wouldnt offend the prospect if it is done professionally. Most of the sales wouldnt happen in the first closing, especially if it is for B2B markets. So, maintaining a calm and positive attitude would work for the sales representative in

closing the deal. After closing the deal, the next activity in the personal sale would be follow-up after the sale.

3.3.6 Follow-up activities If you are a sales representative, your duty doesnt finish once the deal is closed and the order is received by the customer. It is your job to ensure that the customer is fully satisfied with the product/ service. If there are any problems faced by the customer, it has to be resolved by identifying it and referring to the right team in the company. We face such problems a lot when we deal with technical products. You might have promised certain features of the products and those features might be interpreted differently by the technical team in the company. As a result, some of the features wouldnt be made as per the customer requirement, resulting in low customer satisfaction levels. It is your duty as a sales representative to ensure that these problems are resolved and make sure the customer is satisfied. It is very important to understand that customer satisfaction is very important, because it has direct effect on loyalty and trust. Low customer satisfaction levels may make it difficult for you to have future sales possibilities and repeated business. Companies do know the value of a customer when he/she is lost. In most of the businesses, making a sale to a new customer is a costly affair when compared to making the sale for an existing customer. So the follow up techniques plays an important role in maintaining the relationship between the customer and the company. Repeated calling to know how the products/ services have benefited the customer would work in keeping up the relationship. During these calls, you can describe the new products/ services launched by your company and try to get a sales opportunity. Lets understand with an example, some of the important follow-up activities that can be associated after closing the sale. If you are selling a software product to the telecom company, like a billing management software which would help in managing the bills of the subscribers, various follow up activities may include as follows:in the required number of systems Making a call to find out how comfortable are the employees with the product technical problems arise in future any problems and try to describe about any new products/ services launched NEGOTIATION PROCESS 7.1 Introduction In the previous unit we have understood activities that are performed to ensure a successful presentation. We have discussed the pre-presentation activities, various guidelines for making presentation and the process of effective presentation. Having achieved the objective of presentation and successfully handling the objections, it is time for the sales representative to negotiate and close the deal effectively. Once the

customers are satisfied they would like to negotiate the price and other features like warranty period, after sales services, discount on add-on products and so on. So, negotiations are the part and parcel of the sales process before getting an order. During the negotiation process the customer will like to have the best price for the product/ service. The customers are always intelligent enough to know that the price quoted by the sales representative can always be negotiable. Negotiations will happen until both the customer and the sales representative negotiations comes to an equilibrium point. It is always important to understand that the customer will try to negotiate the price to such an extent that there would be no profit left for the product/service sold. It is the skill of the sales representative to successfully negotiate the deal such that a profitable relationship can be built both for the company and the customer. So, let us now understand the negotiation skills a sales representative must possess to successfully handle the deal. After negotiations, sales representative will use closing techniques to close the deal and make an agreement of the sale. 7.2 Negotiation defined

After the sales representative knows that the customer is willing to make the purchase but has some concern related to price or features then he/she will enter into a negotiation process. 7.2.1 Definitions of negotiation Lets start this section by identifying by defining the term Negotiation. Negotiation can be thought of as a process between two or more parties to arrive at a mutually beneficial agreement or relationship. Various other definitions given by some of the scholars include as follows:-

parties working together to arrive at a mutually acceptable resolution of one or more issues, such as a commercial transaction, a contract, or a deal of any sort.

more parties who consider they need to be jointly involved in an outcome, but who initially have different objectives, seek by the use of argument and persuasion to resolve their differences in order to achieve a mutually acceptable solution. 7.2.2 Principles of negotiation Flower (1996) describes that there are seven principles to any form of negotiation. Lets look at them in detail:a) Negotiation is the process which will require both the parties to reach to a desired outcome. Both the parties show some common interests in either the subject matter or in the negotiation context, which shall hold them in the negotiation process. For e.g. If

you are selling a technical software such as anti-virus to the company, then your objective might be to sell as many copies as possible with a reasonable profit margin and the customer objective might be to get the copies at the least cost possible. Here both the customer and the sales representative objective are to get best value from the deal. This holds them in the negotiation process. b) The discussion in negotiation process will normally start off with different objectives which will initially prevent the achievement of the outcome. For example, in the previous example, the customer who is buying the anti-virus product might say he will be interested to take 50 copies if the discount is 30 percent. But the sales representative might say the maximum discount he will consider giving is 15 percent. So, here both the parties started off with different objectives which dont allow them to come to a conclusion easily. c) At least initially, both the parties will opt for negotiation as a satisfactory way of resolving the differences rather than forcing to them to abide by the agreements. For example, when the sales representative says the maximum discount he can give is 15 percent and the customer is expecting a 30 percent. Then both the parties will proceed to negotiate further rather than the sales representatives forcing themselves to give the 30 percent discount or the customer buying the product for a 15 percent discount. d) There is a belief in negotiation that each party can persuade the other to change his/her stand on the original position. As stated in the previous principle, both the parties initially look for the negotiations. As per this principle, the customer will believe that he can get more discount than 15 percent from the sales representative and the sales representation will proceed with a belief that he can persuade the customer to buy the product at reasonable profit margin to the company. e) The next principle states both the parties feels that there is still some hope left even if there ideal outcomes are unattainable. For example, if the sales person feels that the customer is not going to place the order at 15 percent discount at any cost, then there can still be some hope left that the customer will buy the product at 15 percent if the benefits of the product are explained once again to the customer.

f) The next principle states that there is no point to participate in the negotiation process if one party is having influence or power which is real or assumed over the other party which is completely powerless. For example, if the customer whom you are selling the antivirus product is your elite or No.1 profitable customer in the past for your company, then there is no point in arguing much and sticking to your 15 percent. It would be better to increase your discount rate may be to 20-25 percent and proceed the negotiations. On the other way, if your antivirus product is the No.1 in the market and is the only antivirus which can cater to the needs of the customer, then you shall have the power or influence during the negotiation process. In this case, you can just stick to your 15 percent or may just give a little consideration and increase the discount to 17 or 18 percent. g) The final principle states that the negation process is carried mostly by human

element with verbal interactions. Hence, the negotiation is strongly influenced by the emotions and attitudes rather than the facts in the each partys arguments. This is where the negotiation skills come into play a lot. The sales representative must understand that he can still win a better deal even if the customer is adamant by using his/her negotiation skills.

7.3.2 Negotiation process Let us understand in this how the negotiation process will proceed in general. Flower (1996) described the pattern which is followed by most of the effective negotiations. Lets understand the pattern in detail:a) Both the parties lay down their issues and decide what they are willing to negotiate in the process. b) After the issues are set out then one of the party will set the claim which will be responded by the other party. Here both the parties will define their initial positions. c) Then there would be the discussion in order to test the initial positions of both the parties. d) During this discussion both the parties try to explore all other possible outcomes. e) After analyzing all the possible alternatives, formal proposals are made which will be discussed and modified f) After several modifications, the proposal will be treated as final and then an agreement will be made. This agreement phase can be thought of as the postnegotiation process

7.3.3 Post-Negotiation process After the negotiation process the sales representative will use the closing technique to close the deal and prepare the agreement between the parties. It is always better to have the final proposal which is agreed by both the parties to be presented in a written format. This printed document is also known as service-level-agreements (SLAs). Some of the issues have to be taken care of so that the agreement may not lead to an implementation failure. Those issues or concerns include:-

igher authority hasnt been missed out for informing about the agreement

stated in the agreement i.e. ETA (Estimated time of arrival), number of employees working on the project, type of resources used, etc.

contract 7.4 Closing Techniques A close refers to end the process and in sale it means to end the selling process after the negotiations are completed. The main objective of the closing technique is to successfully close effectively and get an agreement signed between the parties. Most of the times customer might show some resistance to make the decisions fast enough, hence closing technique serve the purpose of helping or assisting the customer to make the decision quickly and close the sale. It is the skill set of the sales representative to know when and what closing techniques are to be used. There are many closing techniques which can be applied depending upon the situation in the presentation process. A sales representative may use a single or multiple closing techniques to effectively close the deal. We have already learnt about some of the closing techniques in the 3 rd unit Personal Selling, lets now look at some more closing techniques which are given in the website changingminds.org:a) 1-2-3 close: In this closing technique the sales representative will try to summarize the benefits of the product in a sentence with three items. For example This product is hassle-free, faster and efficient in removing viruses from your computer or this service is the cheaper, reliable and has a plenty of features than the competitors. In this closing technique the main aim is to give a great impetus to the customer to feel that the product/service is the best in the market. This type of closing technique is used widely in the sale of low value products where the sales process may take place within a day. For larger sales where the discussions run over weeks, this might not be the only technique used. b) Adjournment close: This type of closing technique assumes that the customer will not be able to make the decision right away and will require some time. So here you will ask the customer to take his/her own time in making the decision and you will adjourn the meeting to follow up on some other day. This closing technique is ideal when:-

with his/her higher authorities d or when the funds are low purchase. During the time given to customer he/she may do an analysis of other competitors product/services and will return to you leader and provide the best service c) Affordable close: This type of closing technique is used when you know that the

price of the product is way too high for the customer pocket and you need to do something to reduce the price or offer some other alternatives. This type of closing technique is used very common in both the door-to-door sale and the institutional or industrial sale. Some of the situations in which you may use this technique are:t have budget to buy the software or hardware, then you may give an option to the customer that the software need not be purchased fully but can be taken as a service, paying rent for every month or quarter while using. This is a wide trend which is used now a days and the concept is known as software-as-a-service. customer in making the payment through some loans or in easy-monthlyinstallments. Always try to find out the best installments or loan facility which doesnt make the customer to go in debt and will not be able to make the timely payments. the price is justified because the maintenance cost is very low. Try to make the customer feel that the price is affordable for long term usage d) Alternative close: This type of closing technique is used when you have a feeling that the customer is willing to make the purchase and then you may present some alternatives which the customer can choose according to his preference. For example, if you are selling the laptops then you may ask the customer would you like the laptop to have a 2 GB Ram or 3GB RAM? or Would you like to have the Intel i3 processor or i5 processor? and so on. This can make the customer to make the decision faster and close the deal. e) Assumptive close: In this closing technique the sales representative will assume that the customer has already made the decision and the next step is to take the order. For example, the customer may be asked Where do you want the product to be delivered to the head office or at your branch office? or Will one year license be enough for your product? and so on. This technique is closely related to the alternative close and often used along with it during the sale. f) Best time close: In this closing technique the sales representative will explain the customer how this is the best time to make the purchase. Some of the statements used in this technique are:-

ra one year free onsite service

apartment These are some of the closing techniques which might help you in different situations in the sales process. For more closing techniques you may look at the website address given in the reference section. Many-a-times negotiations and closing techniques go

hand in hand to close the deal effectively. If the closing technique is not working then the sales representative might negotiate the price or other features and will try again for closing the sale using an appropriate technique.

9.5 Recruitment and Selection

The objective of recruitment and selection process is to select the right candidate for the required job description. There are many ways in performing the recruitment process depending upon the nature of job description. In this section we shall understand about the key parameters the recruiter should be looking at in the recruitment and selection process. 9.5.1 The recruitment process One of the activities of recruitment process is to select the candidates and short list them for the interview. The list of candidates can come from many sources. In broad the sources are referred to:a) Internal Sources: Identifying employees within the company who can take care of job. Here the employees from various departments may shift into the department where the vacancies are available or a promotion will be given within the same department and fill the vacancy.

b) External Sources:

Here the candidates will be selected from outside the company i.e. who are not currently working with the organization. Companies might advertise in newspapers, job portals, magazines etc to attract the talent available. Most of the times companies go to well known reputed educational institutes to get the list of candidates who are eligible for the section process. A successful recruitment process enables the highly talented list of candidates who could be employees of the organization. Recruitment process should be done carefully in short-listing the candidates for the selection process. Selection process should be done in such a way that the candidates skill set is matching with the required skill set as mentioned by the job description activity. There can be various parameters which the recruitment process would look at before short-listing the candidates such as the family background, employment history, educational qualifications, hobbies and interests. All these factors play important role in judging the candidate for the suitability for the job. 9.5.2 The Selection process The preliminary interview is done as a process to filter out the candidates who do not fit

the job description. Application form should be designed in such a way that it captures the necessary information which is required to evaluate the candidate across the skill set required by the job description. For sales representatives, attitude, communication skills and analytical skills are very important; hence the testing phase should be prepared so that it captures these skills. The testing phase can be just an interview or can have a written test and a group discussion. After the test has been completed, the candidates will be short-listed according to their performance for an interview round. During the interview much emphasis should be given in the attitude of the candidate rather than the skills. Two basic ways in which the interview can take place are:a) In a comfortable mode, where the recruiter would bring the atmosphere to the comfort level of the candidate and then start observing the behaviour of the candidate. b) In a stressed mode, where the recruiter would put the candidate under a lot of stress by asking a lot of questions and then observe the candidates reactions. Doing an interview in these two ways is important in order to judge the candidate for sales job as the sales representative would have to encounter both the serene and pressure environment while making the sale. Previous work experiences and references should be cross checked before selecting the candidate for the job. Physical examination is important to ensure the candidate is in good state of health as he/she requires traveling during the sales job. Finally after all the selection process and the candidate qualifies for it he/she will be given the employment offer which describes the nature of work, job title, salary, any contract period etc.

UNIT 10 TRAINING THE SALES FORCE

10.2.1 Sales Training Process

The 1st step sales training need assessment deals with identifying the necessary skills, attitudes, perceptions and behaviours of the sales representatives. The 2nd step deals with setting up the training objectives i.e. the necessary measurable outcome of the training program. The 3rd step deals with identifying various alternatives to conduct the training. The 4th step deals with the design part of the training program which involves identifying the training program period and modules and the necessary skills to be imparted, logistics arrangements etc. The 5th step performing the sales training is the actual implementation of the sales training program which deals with the way how the training is conducted and the methodologies adopted by the trainer in imparting the necessary skill set. Once the entire training process is completed, follow-up and evaluation dealing with analyzing the quality of training program held and the benefit received by the candidates and the organization need to be conducted. We shall learn more about the individual steps in the training process in subsequent sections in this unit.

10.2.2 Training Program Objectives Training is a continuous process in the employers career. Training might be required whenever a new designation is given in the appraisal system. So having the set of objectives in place for any training program is an important task. Let us now look at some of the common objectives which most of the training programs would try to achieve:10.2.2.1 Imparting Attitude Skills We have already studied in the earlier units about the importance of positive attitude for a sales representative. Sales job is a challenging one which requires positive attitude and continuous self motivation. For a candidate who has passed out from college, imparting attitude skills is a significant task. Apart from positive attitude, there will be a necessity to impart professional behaviour skills as well. Sales representatives may notice other employees advance in their career by shortcuts. It is therefore very important that the training program highlights the importance of hard work. Hence, in brief some of the objectives in imparting the right attitude skills would include:-

the candidates to depend on hard work rather than shortcuts

e. ability to take challenges 10.2.2.2 Notifying organization policies Clear understanding about the organization policies will decimate any future misunderstandings between the employees and the organization. Every training program should make it clear about the organization policies to the employees. In brief, Organization policies may include the following:-

faxes etc. for proper behaviour with employees, smoking regulations etc.

benefits like Insurance, LTA etc. 10.2.2.3 Bestowing organization culture and values It is important that the employees/ candidates who have joined the organization are imparted with the organization culture and values. This is done as an attempt to increase the loyalty towards the organization. During the training programs a lot of importance is given in this activity. The main objective in doing so is to create a sense of feeling that the company is for the employees and the employees are an important asset for the company. The candidate unless is a fresher, might have worked with several companies and will have a mixed feeling of self belonging with the present organization. The previous company might be the competitor of the present organization and he/she might have to compete with their friends to make the sale. So, for a sales representative it is very important that he/she shows a lot of dedication towards the work in the present organization and would overcome any personal relationships in making the sale. Hence, imparting the organization culture and values is very important for the sales representatives. Another important reason for inculcating the organization culture and beliefs is to convey that:-

all the time

10.2.2.4 Understanding the goals and objectives Before getting into any work its is important to understand the goals and objectives of the work. In any training program the goals and objectives should be clearly stated so that the employees can be mentally prepared to face the challenges in the work. For example, if you are the pre-sales representative and if you have been promoted as the sales representative for the Asia Pacific Region, then you should clearly know the objectives of the work and the goal that is to be achieved every quarter. Objective might be to gain some customers in the countries of Asia Pacific region where the presence of company is null. The goal may be to increase the revenue or sales by at least 15% of what it is in the previous quarter. Hence the employees must be given realistic goals and objectives for each training program. For the newly joined candidates, he/she must be explained about the expected objectives from the work and the goals to be achieved. 10.2.2.5 Developing the team working skills The nature of work will vary upon the type of sale you make. In personal selling, the sales representative will be alone most of the times, hence there would be the needs of a team work. But when you come to the industrial/ institutional sales, team work plays a significant role. For example industrial sale can be selling a network platform to the telecommunication company or installing the technical product like servers in the customer company. In such cases, the selling process may involve the sales team, pre-

sales team, technical team, finance team, testing team and many more depending upon the sale. Hence the sales representative should know how to perform in the team and perform and effective sales process. Some of the team working skills include:-

members

Monitoring the performance of the team members and checking for any lag in the action plan

mechanism among the team members It is very important that the coordinator for the team has the leadership qualities to ensure proper functioning of the team in making the sale. 10.2.2.6 Developing the product/ service knowledge The basic requirement to sell a product/ service is to know completely about them. The training program must take care that the entire description and features of the product/ service is conveyed to candidates. The basic thing which the sales representative must know before going for a sale includes:-

e list of competitors and their similar products/ services

s to the customer

In this section we have understood the training objectives and the necessary skill set required by the sales representatives. The following diagram helps in understanding 10.3 Training program implementation and analysis The training objective might be excellent, but the outcome mainly depends upon the way the training process is implemented. The success of many training programs

depends upon the trainer i.e. the source for training. Selecting the best trainer is a challenging task. Let us now examine the various sources available to train the candidates. 10.3.1 Source and type of training The sources for training can be internal and also the external to the firm. It depends upon the availability of the right trainer for the program. If there is no availability of the well qualified internal trainer within the organization, then the HR department may consult an external company who specializes in the training programs. The type of training program for the newly joined candidates depends upon the recruitment process as stated below:ates with work experience relevant to the job description, then only an induction program which is common to all the applicants would be enough

about the job, then a detailed training program would be required explaining about the job the candidate needs to perform

the appraisal system, then the induction program may not be required and the training has to take care of the additional duties that have been assigned to the candidate

demands gaining expertise in the field rather than like a classroom setting, then the best way to train is by on the job training. On the job training involves training the candidate by assigning the actual work in the workplace with the real resources he/she would be using in the job. On the job training has many advantages and disadvantages too. Let us look at some of the advantages as stated below:-

and may not incur the expenses for a good trainer and the logistics. Right from the day1, candidate will be presented with the job to do under the guidance of a supervisor who may be his/her higher authority at the work place

candidates performance in the real test environment throughout the training program. This might be very helpful for the supervisor to known the candidates key strengths and weakness and will be able to provide proper feedback for improvement

ainer is the real candidate who has experienced the nature of work and faced challenges in the past, you as the candidate would get the right feedback that might help you to face the challenging tasks Some of the disadvantages of the on the job training program includes:-

be available all the time, in on the job training program you may have little time spent per day with the supervisor as he/she may not be available all the day to train you since they have to perform their regular daily work.

necessary theoretical knowledge which might be helpful for the candidate in his/her job when faced with unexpected challenges which he has not experienced in the past

like the supervisor all the time when facing with the challenges in the job. It is important to know that the supervisor view point in handling a challenging situation may not be true all the time, hence the candidates have to use their own cognitive abilities to judge the problem and arrive at a solution s type of training might not suitable if the candidates are in larger numbers. A separate training program would be best in such a scenario 10.3.2 Program Design Program design deals with designing the program with necessary content, logistics and feedback mechanisms. Fortunately or unfortunately in most of the training programs the trainees are not involved in the design process. Some of the guidelines while designing the training program includes:ime available be taken into account to improve the current training program

couple of skill set must be imparted in a training program rvals to add on the required skill set, for example have the separate training programs for presales, sales and post sales activities for the sales process

hould have a mechanism for obtaining the feedback from the candidates after their field work 10.3.3 Action Planning Action planning the training program deals with the actual implementation process. Action plan should deal with the program design in a manner to make it interesting and encouraging the participant to learn more from the training program. Some of the guidelines include the following:-

simulations, role plays/ mock sessions etc., whichever is necessary to enhance the training program

approach in handling the training program i.e. understanding the training needs of the candidates from the candidates perspective rather than your own judgments

requirements and only a proper direction in implementation is required e training program i.e. the objections of the candidates are mostly real as they are from the field and have faced it in the past

trainee and the trainer nd while conducting the training program i.e. provide the best trainer even if it cost a little high for the company a trainer who can go off the topic have discussions, bring in the mode of the candidates and then start the topic again. This is very useful in long training programs which may run into weeks or months. dies reveal that candidates learn faster in a better environment take responsibility and challenges, as in good organizations the sales employees take the target as compared to weak organizations where the targets are given

representative uses CRM softwares then training program must use the actual application and handling techniques

the classroom setting i.e. make use of a circular setting which favours group discussions teams with the experienced employees and going on for actual sale process i.e. if you are in a training program for a personal sale then you and the experienced employee can go together and make a sale

10.3.4 Feedback and Follow up Training program should have a proper feedback process to know about how informative the training process is? The feedback mechanism also provides about the necessary changes that are required to be done in order to enhance the training programs in the future. Feedback process may also include the feedback given to the candidates by the trainee. Follow up activities are very important in the training process because of the following reasons:-

might fall back to their own work style

remove such problems

UNIT 11 COMPENSATION AND MOTIVATION OF THE SALES FORCE 11.2 Role of a sales manager The sales for a product or service are carried out by different sales representatives. Hence, a sales manager is required to monitor the growth of sales, achievement target in time, coordinate various sales activities and controlling the staff to perform as expected by the company. Yet another important duty or responsibility of the sales manager is to take care of his employees at all times. Sales monthly involve field work i.e. going to the market place or to the customers and making the sale. Sales job involves less work at the office and more work in the field. Hence the level of interaction between various employees is quite less while compare to other job like software, testing etc. To keep up the team spirit within the company, its important that the sales manager interacts with all the employees socially after the office hours at regular intervals. He should be a boss in office, and a mentor/ philosopher outside office. Most of the sales people run into problems like family or health. A good sales manager should be able to understand the problems which the employees are facing and help in solving

them. In most of the good organizations the sales manager would behave like one of the team members and help in leading the team to reach the targets and demonstrate leadership skills whenever required. Sales manager should also help in facilitating a proper feedback mechanism among employees and keep updating about the situation in their department. Sales manager has to find any training requirements required for the team and help to be provided with the same. The challenging task for the sales manager is to keep up the motivation levels of his employees. As we have already understood sales job is mostly a lonely and challenging job; it requires a lot of self motivation to sustain. Sales manager has to indentify the motivational factors for the employees. Since these factors can be different for different employees identifying the right factor is an important task. In next section we shall learn about various motivational factors such as incentives, awards, recognition etc. and the way they alleviate the motivational levels of sales representatives. Another important task of the sales manager apart from finding out the right motivational factor for the representatives is to find out the various de-motivating factors which are prevailing at the work place. The ultimate objective of the using the motivational factor like incentives, recognitions, awards etc. is to ensure that the sales representatives work with enthusiasm all the times. It is observed that the employees are having enough motivation levels when they join the organization and as the time progresses, due to various de-motivating factors they lose out their enthusiasm to work irrespective of the decent salary structure and incentives. Hence, identifying the de-motivating factors and eradicating them from the work place is an important task of the sales manager. In the subsequent sections we shall understand various de-motivating factors which can lower the enthusiastic levels of the sales representatives. Hence, in brief the role of a sales manager would include the following:-

representatives n the work place or off the work place to ensure that at least minimum level of interaction taken place between the sales representatives

them of sales representative all the time

-motivating factors

11.3 Motivational factors There was a time when employees were not given enough consideration and more emphasis was laid down in the production process. But it was later recognized that companies who retained talented employees have a greater survival rate in the industry and the market place. Employees are not treated as just another component in conducting business, but are considered as the prime resource for every business activity and as an important asset of the organization. Various studies have been done on the fact that success of organization depends upon the satisfaction levels of the employees. In an organization, sales representatives may vary across the spectrum of which satisfy them to keep up the motivational levels. So, in this section let us analyze various motivational factors which are used by the organizations to sustain enough enthusiastic levels among their sales representatives. 11.3.1 Compensation scheme/ package One of the most attractive and encouraging factor for motivation among most of the sales representatives would be the compensation scheme or package there are entitled to receive at the start of the job. Organizations tend to pull in the best talent by offering effective compensation packages. The sales manager has to understand that often compensation is seen as a level of loftiness among the representative within the same hierarchy level. Hence enough care has to be taken in designing the compensation package for the sales representatives. Jackson (1996) described a five step approach in designing a sales compensation package as mentioned below:a) Prepare job descriptions b) Establishing sales and other objectives c) Determine appropriate general categories of compensation d) Develop and pretest the compensation plan e) Implement and evaluate the plan The 1st step preparing job descriptions states that an elaborate job description should be prepared to take care of all the job responsibilities that the sales representative will

perform. Some of the sales representatives may actively involved in selling like the onsite sales manager in the industrial sale and some of the sales representative involve more in a support role like the presales function. After preparing the job descriptions they to be analyzed in terms of difficulty level and the compensations should be planned accordingly. The 2nd step establishing sales and other objectives highlights the importance of measuring the sales targets achieved and also other objective in determining the compensation package. This step clearly states that compensation package should not be prepared based on only the volume of sales made. In fact other objectives like the number of new customers increased the difficulty levels in the sale, the efficiency parameters like the conversion rates etc have to be taken into account. This step highlights the fact that not only the volume but also the effort that has been put in generating the leads have to be taken into account while awarding the compensation package. The 3rd step determine appropriate general categories of compensation states that the compensation packages have to be categorically prepared depending upon several factors like education, experience, skill set required, nature of work etc. This process will help to align the people of similar abilities or skill set receive the same compensation packages thereby eliminating certain level of bias. The 4th step develop and pretest the compensation plan highlights the importance of developing the structure of the compensation package and pretesting it before actual implementation in the organization. Developing the compensation package should take care of the basic package which meets the living expenses of the sales representatives and the variable component should be reasonable enough i.e. at neither too high or too low percentage of the entire compensation. Developing the compensation plan has to take care of the commissions too. The 5th step implement and evaluate the compensation package deals with the actual implementation of the compensation package for the sales representative and monitoring the effect of the compensation package in maintaining the required motivation level and attracting the talented pool to the organization 11.3.2 Role of Incentives Incentives play an important role in keeping up the motivation levels of the employees. Incentives may include yearly bonuses, commission rates based on the individual sales figures and commission rates based on the group or team sales figures, stock options etc. Zoltners (2006) describes that the sales force incentive plans effective the sales people and in turn on the sales force activities followed by customer results and finally the company results. The same can be depicted by the following diagram:-

Fig: Effects of sales incentive plan Hence planning a right incentive system is an important task for the sales manager. Bernardin (2008) explains various incentive pay for performance level of the employees. Let us examine them in detail:a) Bonuses: These are one time payments provided as a reward for the level of work done or objective achieved. This type of incentive system is often used to encourage the sales representative to work much better and harder in future. The sales manager has to understand certain issues when dealing with bonuses such as:created by the bonuses is considered to be positive most of the times

of giving the bonus amount also matters a lot

during the festival season b) Commission plans: Commission is the percentage of total sales amount given to the sales representative for successfully making the sale. Often sales representative participate to push the products/ service for sale which offers them more commission rates. Some of the issues which the sales manager or the organization has to understand before deciding on the commission plans are:on rates should neither be too high or too low when compared with the other similar products

seasonal for most of the sales rates for their living expenses

employees need by providing them with increased commission rates which can later be cut out during the sales season dent upon the team, then the sales manager has to take care that every member in the team works with similar efficiency and effectiveness in the salary component as employees tend to think that why they are penalized for other mistakes

c) Profit or gain share: Companies may share their increased profits or gains for the year or quarter among the employees of the organization. Depending upon the basic pay of the employee the gains can be distributed. Such incentive gives a sense of feeling that the employee is working in a growing organization and he/she has a bright future in the organization. 11.3.3 Non-monetary reward systems Whenever a monetary reward fails, non-monetary reward system may achieve success in sustaining motivation and dedication of the employees towards the work place. Let us understand some of the non monetary rewards as stated below:a) Stock options: The employee stock option is usually a call option which is given as a non cash reward or incentive system. A lot of employee would like to have the stocks instead of the cash rewards like bonuses. There are a lot of advantages in giving the stock options to the employees. Some of the advantages include getting a feel of his/her own company once the stock options are given. Employees tend to work better to generate more sales and in turn increase the value of their company and the stocks. Care should be taken such that all the deserving employees in the group should be given the choice of choosing the cash reward or the stock options. b) Better working conditions: The sales representatives who work well and achieve the targets might be given options to work from home and visit the workplace once or twice in a week to report. Other examples of better working conditions include providing the necessary logistics like better variety of food, increased cabin space, free telephone and internet services at home to a certain limit of usage, free insurance policy, better training facilities etc c) Recognition and awards: Recognition and awards help the sales representatives to gain respect and help in creating a unique identity in the work place. This type of reward works effective for the managerial level employees who dont depend upon the monetary rewards for survival. This system also highlights the mile stones achieved by an individual in his/her career and also encourage fellow employees to achieve it and hence they work much enthusiastically. 11.4 De-motivating factors After learning about the various motivating factors, it is necessary to identify various demotivating factors at the workplace too. However good the motivating factors be, demotivating factors can cause damage to the employee motivation. Some of the demotivating factors include:a) Assigning two employees the same role and tasks when their pay scale vary enormously This is one of the main reasons for reduced productivity of the employees. The employees with less salary might do less work leaving the rest of the task to the one drawing higher salary. This can increase the time of completion or produce

unsatisfactory results and also leads to extension of deadlines. It is good practice to place the employees with same salary structure under the same job description. This trend is highly followed in the call centers. No matter whatever your education background and skill set are, you will be always placed within the group of same salary structure for a particular job. Whenever your performance improves your salary would be increased and you might be assigned various other tasks. This trend is seen quite less when it comes to IT companies who try to get the best talent by awarding varying salary according to the skill set or the educational background. b) Appraisal system failures Whenever the appraisal system fails to perform as per the employee expectations, it leads to the lower satisfaction levels. For example, if the company policies states that a minimum of 10% per year, then the appraisal system has to stick to the policies. If the company profits are decreased due to low demand in the market, this should not be reflected in the appraisal system by decreasing the salary hikes unless there is a situation that company wont be able to survive if the hike percentage is not decreased. The appraisal systems shouldnt be affected just to make the balance sheets to look better. c) Improper or poor facilities Whenever the working conditions are not good the employee may not be motivated enough to work. Working conditions may include the following:-

conditioning, no proper power backup facilities, lack of hygiene conditions etc care of their employees needs at the work place

time you are supposed to get the transport facilitates. If there is no transport facilities available after the regular working hours this might discourage the employee to work overtime and complete the work before deadlines.

12.2 Role of job description in objective settings Job description as discussed earlier units informs the employees about their duties and responsibilities at the work place. One must identify the set of tasks he/she needs to perform according to the job description. Objectives have to be set and employees have to work towards achieving them. In most of the job descriptions the nature of work and various accountability factors will be mentioned. In some of the job descriptions you may find the working conditions also such as extensive travelling, working on the net all

the time, taking continuous phone calls etc. In this section let us understand about the job description which helps in setting the objectives for the employees. Company makes a practice that monitoring and performance evaluation would be on the objectives set according to the job description. Let us now look at the direct and indirect sales force job description or activities they need to perform. 12.2.1 Direct sales force Direct sales force involves mainly a one to one selling scenario. Several tasks need to be performed in order to effectively handle the sales such as:a) Contacting the prospect b) Communicating with the prospect c) Ensuring logistics during the sales process d) Performing after sales service activities e) Building rapport and keep in touch It can be observed that no where the objectives indicated to generate revenues to the organization. It is intrinsically implied that when all the objectives are performed well, it leads to the maximum revenue generation. Hence the main objective of evaluation process should be to identify the efforts rather than the revenues. The main objective is to create demand for the products/ services by performing all the tasks in an efficient and effective way possible. Whenever the sales force doesnt perform well, various factors needs to be analyzed. Less revenue generated need not be exactly due to the inefficiency of the sales force. Various internal and external factors might be responsible for the low revenue generation. Some of the internal and external factors that can be responsible are:-

ge in market dynamics the customer preferences

Marketing division plays with the tools of marketing mix in creating a demand for the product by identifying the right product, place, place and promotion strategies for the target segment. If the marketing department couldnt perform well in identifying and executing the right strategies, then it can be a difficult time for the sales force in generating leads for the product/ service. Hence marketing department can influence

the sales figure considerably. This factor should be analyzed before determining the performance of a sales force. The next factor is change in market dynamics. Market dynamics as discussed by businessdictionary.com states that it is interaction between forces of demand and supply and the pricing signals they generate. In most free or open markets any significant part of market dynamics is beyond the control of any firm or group. Hence it should be understood that the change in market dynamics such as the supply-demand changes may sometimes lead to a decreased sales revenue and the sales force couldnt have fore-fended it by any means. The third factor changes in customer preferences might affect sales revenue. The reason might be due to the presence of many alternatives to the customer. Whenever a product/ service are launched for the first time by your company, it may result in good sales revenue. But in todays world the competitors copy your strategy and introduce similar products/ service leading to the presence of many alternatives. This can happen both in direct and indirect sales. Another reason might be that the customer is offered prefers much better services. For example, if you are the sales representative who sells an ozone purifier and if the customer prefers the RO+ UV+ ozone purifier, then you may not have much to do to convince the customer rather than getting the similar product from your company. The final factor is about the Inefficiency of MIS division within the company. MIS stands for Management Information System which helps the company employees in taking strategic decisions before the start of any product/ service. MIS helps in formulation of marketing strategies. When effective MIS systems are not in place then due to insufficient information generated by such systems might lead to the improper strategy implementations and finally in lesser lead generation by the sales force. Hence we have understood that the sales revenue shouldnt be the only factor for evaluating the sales force performance and external factors have to be analyzed too in order to know the true performance of the sales force. Now let us look at some of the factors that need our attention in indirect sales force monitoring and evaluation process. 12.2.2. Indirect sales force In direct sales, the sales force are not directly employed by your organization but are entitled by a contract to sell your product/ services. Indirect sales force can be resellers, whole sellers, retailers etc. to whom your company sales force sells the product. Lets us now understand some of the factors which needs to be analyzed in making up the conclusion on performance evolution of the sales force who sell the products/ services to the indirect sales force. Some of the factors are:-

The first factor to be analyzed is the availability of stock. There can be many situations where the demand for the product is high and the availability of the product is less. Nothing can be done by the sales force if the manufacturing department doesnt supply with necessary product stock. In such cases the competitor may gain the customer. Hence comparing your sales figures with the competitor doesnt help in correct evaluation of the performance of the sales force. The second factor visibility of stock refers to the efforts made the sales force in shelves making the product/ service visible to the customer. In retailing the products end up in shelfs where the customer will be looking for them. If the product is placed in such a way that it is not at all visible to the customer, it may result in decreased sales figure. Most of the times, the sales force wouldnt be having any control on the way the retailer places your products. Hence such scenarios have to be identified and the sales force must negotiate with the retailer to get better placement of the product in the retail store. Hence this factor should also be analyzed before analyzing the performance evaluation of the sales force. The third factor stock piling in the pipeline is an important factor which the sales manager has to take into account for proper evaluation of the sales force.

Indirect sales force pipeline In the above diagram it can be understood that in indirect sales the company produced goods will reach the distributor through the company sales force. The distributor is known as the primary customer, the retailer as the secondary customer and finally the customer who consumes the product/ service is known as the tertiary customer. The distributor distributes the goods among various retailers who in turn sell the goods to the final customer. In such cases the sales figures are determined by the number of products sold to the distributor. In the start the sales might be less but as time progress the sales figure might improve drastically showing almost double or triple figures in sales volume. This increase might be due to the efficient work done by the sales force and can be used to determine the performance of the sales force. But sometimes the increase in sales might be just due to the piling of the stock. When the products are sold to the distributor they might get piled up at that level and may not move to the retailer due to various reasons. Sometimes the good might get piled up at the retailer in his/her store due to low sales. Hence it is important to analyze these situations before arriving at a conclusion about the sales force performance. Sales

manager has to look at how many products/ services have be sold to the tertiary consumer rather than just looking at the sales to the primary consumer. In some other models of the indirect sales, you might also have the whole-seller within the pipeline. Irrespective of the number of intermediaries in the sales process, the sales figure should be arrived by looking at the sales done to the final customer who consumes the product/ services. 12.3.1. Sales force monitoring guidelines and objectives Sales manager has to be clear about the objectives he/she wants to achieve through the monitoring process. Monitoring process may vary from company to company, but all the monitoring processes have some common guidelines and objectives. Let us look at some of them in the following:a) Dont monitor too closely and frequently Monitoring would be done at regular time intervals by the sales manager. The time interval depends upon the product/ service, the frequency of sales and organization policies. Most of the companies make a habit of reviewing the performance at least once in every quarter. Quarterly reviews would be done and performance sheets will be prepared for every department. We have discussed in earlier units the salary component includes a variable component whose amount is determined by the individual/ team/ department performance. In many companies the quarterly linked pay performance is determined and given once in every quarter. Apart from quarterly reviews, many companies adopt even monthly, weekly or daily reviews. The sales manager might adopt one of the intervals for monitoring and performance evaluation. The guideline for the sales manager here includes not monitoring too closely and frequently. Frequently may be everyday or every week or every month depending upon the business. For example, the sales force for insurance product will be given mostly monthly target such as 20-30 customers per month for each sales representative. In such cases daily monitoring is considered as frequent. Whereas, if the sales representative who sells the mobile connections may be involved with higher targets and hence more sales figures. It would be ideal to monitor the sales daily. Sometimes the sales manager would monitor two times in a day, once in the afternoon and verify the sales figure and might push for better performance by evening if the sales are low. Too close monitoring might result in a decreased motivation levels when the target are not achieved by the sales representatives. Such cases of decreased motivation levels are seen frequent in telephone sales at the call center. Mostly the sales representatives at the call center will be monitored at the end of the day and their performance chart will be prepared and reviewed in the morning next day. Any representative who misses the target by small margin shouldnt be treated as a low performer. Hence too close monitoring should be mostly avoided and the sales manager has to work with the sales force for improvement in the sales process.

b) Identifying the gap in skill set After identifying the low performers in the sales force by monitoring and performance evaluation, the next is to identify the real problem for low performance. One of the main reasons could be lack of skill set required to perform well. In such cases a proper training process should be identified to improve the individual skill set. For example, the sales force in a call center would be evaluated daily for their performance. If the sales representative cannot perform well and the reason for his low performance is poor communication skills, then the sales manager has to work on it and provide proper training. Many a times the communication skills are poor due to the influence of ones mother tongue, hence it has to be worked out and develop a neutral accent which is acceptable by the company need to be developed. If the reason for low performance is lack of attitude and behavioural skills, then the sales manager has to remove him/her from the work force and put into a training program and evaluate his/her performance in the training process. Once the trainer is satisfied about his/her improvement then the sales manager might induct him back into the workforce. Hence, identifying the gaps in skill sets is a very important objective of the monitoring and performance evaluation process. Converting the process to mentoring or training should be the primary objective in such cases. c) Identifying other problems at the work place like poor working conditions, trade conflicts etc. The reason for low performance might be due to several de-motivating factors as discussed in the earlier unit. The sales manager should have to work in identifying such factors and try to remove them. One of the important factors for low performance in direct or indirect sales is trade conflicts. This is a major problem in many companies and the sales manager has to clearly identify them and resolve. The entire region such as city of a country would be divided into different regions for easy monitoring. Every region will be assigned a sales force for selling in that region. As per the company policies, most of the times the sales force are not allowed to get into another region and promote sales activities. Whenever such cases arise where the sales representative of one region entering into another region and sells, it might lead to the higher sales figure for that representative and also the conflicts between the sales representatives who are authorized to sell in that region. This result in the following problems such as:performance evaluation of the sales force

Hence the sales manager has to identify such reasons in the monitoring process and try to resolve them to identify the true performance of the sales force of different regions. The sales manager should identify the points of sale and look for any violation in following the terrestrial jurisdiction by the sales force. 12.3.2 Quantitative and qualitative factors of monitoring To determine the performance of the sales force, sales managers make use both the qualitative and quantitative factors. Most of the time quantitative factors play a major role in deciding the performance of the sales force. There are many reasons why the sales manager prefers the numbers. One of the reasons is that the quantitative factors lead to an unbiased way of performance evaluation process. It should be understood that the evaluation process shouldnt just rely on the quantitative factors and we also need to analyze certain qualitative factors as well in determining the true performance of the sales force. a) Qualitative factors Some of the quantitative factors monitoring and performance evaluation include the following:les

Percentage growth in sales compared to last week, month, quarter, year etc.

b) Qualitative factors Some of the qualitative factors monitoring and performance evaluation include the following:els

etc.

he customer

It is important that both the qualitative and quantitative factors must be analyzed before

making a conclusion about the performance of the sales force. It is observed that the team management skills and better team work would have a direct affect on the performance of the sales force. Hence, let us understand in the final section of the unit about the steps in developing a better team work in the organization. 12.2 Building better team working skills

One of the main success factors in sales is the ability to work in teams. This is a very important skill set especially in industrial and institutional sales. The team working capability posses a lot of advantages which help in improving the performance of the sales force. In brief, let us understand some of the benefits of team work. 12.4.1 Advantages of team work Following are the list of some advantages of a team work for the organization:-

ective decision making ilities in the sales process

increase in motivation levels terms of revenue since the workload would be distributed

12.4.2 Ten step process in building better team working skills Now let us take a look at the steps which will ensure better team working skills among the sales force. They are:a) Clear goals and objectives within the team b) Meaningful appropriate leadership for the team c) Motivation and empowerment d) Facilitating effective communication process within the team

e) Monitoring the team performance on a regular basis f) Taking care of individual development within the team g) Developing the support and trust among team members h) Giving fair rewards and incentives to individuals within the team i) Establishing a sense of belonging and pride of association among the team members j) Regularly identifying problems within the team and resolving them in time This ten step process will help in improving the team working skills and every sales manager should help in developing excellent teams within the organization.

UNIT 13 SALES PLANNING

13.2 Sales planning

Sales planning process includes a set of activities that needs to be performed to achieve the goals or objectives of the sales force. It is the duty of the sales manager to create a plan that is well documented and which ensures proper management of logistics, finance, manpower, inventories and purchases. Sales planning document is the single most important document which ensures a proper direction on how to handle the sales functions. Let us now understand the various elements and types of sales planning as described by Mukesh (2006) in the following section. 13.2.1 Elements of sales planning The main elements of sales planning include the following:-

Selling Objectives

Sales Policies

Sales Programme

Elements of Sales Planning

Sales Procedures

Sales Rules

Sales Forecast

Sales Budget

Sales Strategy a) Selling objectives This includes the list of objectives that need to be attained after the completion of the sales planning process. The objectives should be realistic and attainable. For example, if the sales representative is selling insurance products to the customer, a target of 20 to 30 insurance product sales per month is mostly an achievable or realistic target. If the sales planning document sets the objective as 100 insurance products, then it might not be achievable most of the times by many sales representatives. Hence the objectives must be achievable and be completed in time. The objectives may be short term or long term in nature. Short term objection include those that have to be achieved in a quarter or a year and long term may include several years. Some examples of short term objectives include improve the sales figure by 15% as compared to the previous year. Long-term objectives may be to establish the company presence in new countries or continents in the next 2-3 years. Another important objective is to maintain a contact with all the key customers on a weekly or monthly or quarterly basis. Since we have already discussed that attaining a new customer would be costlier than trying to retain the existing customer, it is very important to contact the customer and take his/her feedback or problems on a regular basis. The time period of contact may vary from company to company and from sale to sale. Once the objectives are created its time to look at the overall sales policy. b) Sales Policies

Sales policies provide the guidelines to the sales staff to help them in performing the sales activities. Policies help the sales representatives in achieving their targets. For example, when a sale gets returned by the customer, the refund policy will guide the sales representatives how to deal with the situation effectively, so that the customer will be handled with care rather than getting into an argument. The sales policies also help in clearly identifying the right pricing for the customer depending upon the relationship the customer shares with the company. For example, if the customer is loyal to the company and is doing sales from several years, the policy would inform the sales representative about the maximum discounts that can be given to such customers. We encounter may such cases where the sales representative look at the previous transaction and gives discount to make customers stay loyal to the company in future. For instance, when you renew the existing software like educational software or antivirus for another year, then the sales representative would give you a discounted price most of the times. Hence the policies would help in achieving the targets easily and help the sales representative in handling the day to day sales tasks effectively. After the sales policies lets now look at the next element namely sales programme. c) Sales Programme Sales programme are essential to ensure the sales representative can handle any sales situation which they are entitle to perform. Sales planning should clearly mention the required skill set in handling the sales and the programme appropriate to incur those skills in the sales representative. Sales programme may be necessary whenever the a new product/ service is introduced by the company. Sales programme is also necessary when the sales representatives handle sales from new territories which they havent sold any product/ service in the past. Cross-cultural training would be given most of the times, when the sales include the customers other than the native country. Sales programmes help to develop the necessary skill set in achieving the sales objectives effectively and in given time period. Let us now look at the next element of sales planning namely sales procedures. d) Sales Procedures Sales procedure is the sequence of various activities that need to be performed for different sales functions. The sales procedures vary from sales to sale and from market to market. Sales procedure for a business to consumer sales varies greatly from

business to business sales. The sales procedure may include meeting the customer, explaining the product / service through slides, use closing techniques, take the order and following up. The procedure for B2B sales may indicate to take a complete team from various departments who are the stakeholders in the project to carry out the explanation of the product/ service. The procedure for the B2C sales may indicate that a single representative is enough to handle the task. Even the time intervals for follow-up activities are mentioned which vary for B2B and B2C sales. Let us now look at the next element sales rules. e) Sales Rules Sales rules indicate the set of actions that need to be performed and not performed depending upon the situation. For example, in credit card payments, if the customer is asking for the refund of the late payment fee, then the rule says clearly not to refund if the amount is received after the due date. Hence, the sales staff is not permitted to refund the amount no matter how loyal the customer is with the company. In some cases, refund could be done. For example, when there is some genuine reason for the late payment, such as the due date is on a non-working day for the bank due to festival, curfews or any other natural disasters etc. In such cases the sales staff would refund the amount if the rule mentions to refund the amount. Even in personal sales, the sales representative would be given rules that the maximum discount to be given on the product and the maximum amount of credit that the sales staff can give to the customer to pay the dues. Hence, its the duty of the sales staff to contact the customer within the stipulated timeframe and collect the dues. Let us now look at the next element Sales Forecast. f) Sales Forecast Sales forecast lays the foundation of sales planning and objective setting. Based on the sales forecast the sales manager would know the sales that could be attainable for the coming period (next quarter or year). Various time series analysis tools such as trend estimation, moving average, weighted moving average, exponential smoothing etc may be used to forecast. Forecast can be also done based on the predictions done by the industry experts. Methods can be many but the aim of forecasting is to identify clearly the demand and plan the sales activities to generate more leads to the business. Sales forecast also help in identifying the strategies to gain the market share. If the forecast turns out to be negative i.e. the industry sales are going to dip, then the company may execute their operations effectively to retain the existing customers and attract the new customers. Hence, forecast is a very important element in sales planning and we shall discuss more about this in the coming units.

Now, let us look at the next element Sales Budget. g) Sales Budget Sales budget identifies the necessary expenditure that is occurred in making the sales. The sales budget estimates the revenue based on sales that would be generated and identifies the profit for the organization after subtracting the operation costs of the sales staff. The sales budget would clearly set the standards for the sales team in terms of the expenditure that is permitted to incur upon the sale. For example, when the sales staff goes for selling the product, the maximum expenses that can be incurred would be mentioned and the sales representative has to maintain his travel expenditure and other costs within that limit. Maintaining the operations within the budget becomes a complex task in B2B sales where the sales team had to travel to the customer site many times before the sale happens. Hence the sales manager has to see that the operation costs are under control and provide some mechanisms like video conferencing to reduce the travelling costs. Once the operational costs are under control, attaining the profitable level in sales would be a little easier to achieve. Lets us now discuss the next element sales strategy. h) Sales Strategy Sales strategy involves how the company is going to act in the market place with the products/ services. The market is dynamic and competitive in nature which makes the companies alert all the times with their pricing and position strategies. Positioning the product is very important since in the past many excellent products have failed due to improper positioning. The product/ service which need to be sold have to be properly priced when compared to the competitors. The strategies have to be in place to justify the price if its higher than the other similar products in the market. The sales staffs have to be given proper training before employing any strategy in the market place. If the product/ service price is not changed even when the rivals have dropped their prices, then the sales staff have to make sure that they can explain to the customer clearly about the reason for high price stating any competitive advantages of the product/ service over the rivals. Acting smart and ensuring that the sale is generated is the part of the sales strategy. The company, who can handle the sales strategies in the market place, is likely to be the winner. Hence the sales planning process contains the above discussed elements and helps in attaining the sales objectives in the required time period. Let us now discuss the various types of sales plans that can be created to ensure the sales staff works effectively for the organization at all times. 13.2.2 Types of sales planning

Let us look at various types of sales plans in an organization:a) Sales plan on the basis of market area Whenever the sales are done in the entire country, then the entire region would be divided into several areas depending upon certain characteristics. A simple segregation would be dividing the entire country sales into different states and assigning a head for each state. For example, the in the telecommunication business, the telecom plans varies from state to state and within the state it remains the same. There are some services which are applicable for the entire country too. Even the promotional offers vary from state to state depending upon the nature of the business in these states. Some products in FMCG sector are very strong in south and have a little presence in North and hence the companies may introduce special promotional campaigns which are available only to the northern states to improve leads. Hence the sales plan would vary from region to region. b) Sales plan on the basis of selling functions Sales team performs several functions such as promotions, follow up activities, presales and sales activities etc. Hence the company lays out various sales plans for each activity if necessary. c) Sales plan based on type of customers Most of the companies believe that 80 percent of the business comes from 20 percent of the key customers. Although each and every customer is important to the company, the survival of the company depends on those 20 percent in difficult times. Hence following the same sales plan for all the customers wouldnt be practical since the key customer have to be handled more effectively. Hence the companies may have different sales plan for the key customers. Also the company may have different sales plan for customer depending upon the markets like B2B or B2C. d) Sales plan based on the type of products Every product/ service may not have the same selling activities. Hence having different sales plan is essential to handle the sales effectively. For example, if the company produces technical products, services, FMCG goods etc. it needs to have separate sales plan for the FMCG goods and the technical products and services. e) Sales plan based on the time period There are different sales plan for long term and short term objectives of the company. For example, increasing the sales in the already existing territory and getting sales in

new territories cant have the same sales plan. Acquiring the new territory would be a long term objective where as increasing the sales in existing territory would be a short term objective which would be a 1 year time period. For the both, strategies would be different and the operation costs would be different. Hence having a separate sales plan would be good for both the short term and the long term objectives.

13.3 Role of sales plan for B2B and B2C markets

Sales planning process would be different for B2B and B2C markets most of the times. Hence let us understand the essential activities that need to be performed and monitored in these markets to make the sales profitable to the company. 13.3.1 B2B markets B2B markets deals with the business to business deals where the time management is a critical factor for the customer satisfaction. Since the sales process takes place for months, maintaining the progress in sales is very important. The sales staff has to stick with the timings given by the customer and ensure that all the team members are present at the right time. The sales plan would deal with customers and plan the activities. There is no standardization of activities which can be applied to several customers. Since the requirements differ from customer to customer, the B2B sale plan has to deal with a flexible plan and plan the resources accordingly. Forecasting plays a very important role in preparing a sales plan for B2B customers. The customer health in financial terms is very important and hence the customer business trend is observed time to time. Most of the times the sales are on credit basis with timely payments in regular intervals. Monitoring the forecast of the customer business will give a clear picture of the company future sales. For example, if the company is selling product X to the customer who in turn sells it to the customers as an accessory in his product, and if the customer business in future sees a down trend for the product X then it clearly indicates that the leads in future will take a downturn. In such case the company has to use appropriate sales strategies to sustain in the market place. Let us now look at B2C markets and some of the sales planning activities.

13.3.2 B2C markets B2C markets deals with business to the customer who uses the product/ service for his/ her own benefit. Sales plan in B2C market has to deal with several issues related to the warehousing, distribution channels and retail. Let us look at each one of them in detail:a) Handling warehouse effectively The sales plan has to take care that the stock of goods are ensured at all the times to

handle the demand. Hence the sales plan deals with the right forecasting of the demand and give it to the manufacturing department at regular intervals so that they have the clear picture of how much and when to product the products. Problems may occur when the goods are produced more or less than the required quantities by the market. In case of over production, goods lie in inventories there by adding up the inventory costs. In case of low production, companies may lose the customer to their competitors if the goods are not available. Hence the sales plan has to ensure that the correct information is being supplied to the manufacturing department which meets the demand and supply effectively for the organization. Another important activity which the sales plan has to take care is to plan the warehouse according to the tax structure. For example, in India if the product in a state is not selling well and the stock has been lying idle in the warehouse, then taking the idle stock and selling in adjacent states may incur the tax of that state. Hence double taxation may take place and the profit on the product may go down to such a level where it incur loses to the company. Hence knowing the taxation structure is very important to plan the warehouse accordingly. Having the knowledge about the no tax zones also helps in decreasing the costs. b) Handling distribution channels The sales plan has to ensure that the regular checks are done so that the products may not end up lying in the distribution channel i.e. with the distributors due to less demand. Sales plan has to take care that the goods are distributed in necessary quantities only and are not pushed excessively into the market when the demand is less. Excessive distribution of good may damage the relationship between the distributors and the company. This process is very critical in case of perishable goods like fruits, vegetables etc. If they lie more time in the distribution channels then the chance of them getting sold to the end customer gets decreased. It is the task of the sales plan to ensure that proper checks are done to remove excessive stock of perishable goods from the distribution channel and store them appropriately in inventories and sell them when the demand rises. c) Handling retail stores The sales plan has to ensure that the sales staff visits retail outlet on monthly basis and check for the stock of goods. Products that are lying for more time means that more costs have to be incurred for the shelf space. In organized retail, the shelf space comes at a cost and in case of unorganized retail, excessive stock means the company might enter into credit situation with the retailer as he/she will not be able to pay. More credit in retail may lead to untimely payments and bad relationships. Hence the sales plan has to deal with such situations and ensure that the stock is sold properly and any excessive stock has to be removed from the retailer place. Sales plan also has to ensure that the stocks are made available all the times incase when the demand rises. Retailer interests have to be taken care of and ensuring required supply

will improve the relationships. d) Handling the price changes Since the tax rate may go up in developing countries in small time periods and also issue of inflation, the cost of the product needs to be increased to meet the operating costs and profit margins of the company. Hence the sales plan has to handle any such situations where the price needs to be increased. As on date the government allows 1015 days time to sell the old stock above the MRP. Hence necessary sales activities have to be performed to deal with the price changes in the market place.

UNIT 14 SALES ORGANIZATION

14.2 Need for sales organization

Execution of the sales plan largely depends upon the nature of the sales organization. A sales organization is essential to plan sales functions. Sales organization provides a framework to carry out the sales plan in an effective manner. The development of a sales organization is a continuous process which depends upon changing market environment and also on the companys interests. 14.2.1 Need for sales organization Sales organization is essential for many reasons. Some of them include the following:a) Determining span of control From day to day the organization size grows with respect to growing market size and demand. In a small organization there could be a single sales manager who takes care of the entire organization sales and the representatives. But when an organization grows it would be practical for a single sales manager to monitor the entire sales and the representative, hence the sales would be divided based on some segments. Segments can be formed on the basis of area, product or even customers profile. High value customer may be handled by a separate team of sales representatives or the country would be divided into north, south, east and west territories and handled separately by separate sales managers. Hence there is a need for determining the span

of control for the employees in the organization and define which employee is under the control of which manager. Another importance of having a well laid out span of control is to build strong relationships within the organization and establishing proper communication channels. b) Defining the decision making process Sales organization also helps in identifying who can take the decisions related to the sales and the customer accounts. There are two main ways of assigning the power to make decisions regarding the sales and the customer accounts. They are centralized decision making and de-centralized decision making. In a centralized decision making organization, the right to make a decision lies with the top management of the organization. The top management may or may not consult the respective sales team and the managers before taking the decision. For example, for an organization that has twenty branches in the country, but any decision related to the sales and customer accounts in these twenty branches will be taken by the top executives who sit in the head office. This type of centralized decision making organization works well when the size of the company is less. In a decentralized decision making organization, the right to make decision lies with the manager of the individual branch and the manager may or may not take the advice of the top management before making the decision. However any important decision such as setting up a new sales territory will be informed to the executives in the head office, but most of the decisions which need to be taken on a regular basis will solely taken by the manager itself. c) Assigning specialties Sales organization structure determines the tasks and roles for the sales people. A set of activities will be put under a role which the sales representative is expected to specialize. For an entry level, middle level and the top level the set of activities and specialties are defined by the sales organization. For an example, in sales organization the pre-sales executive is responsible for RFP handling, coordinating the team or stakeholders within the company, monitoring the time, checking for the deadlines for submission of proposal and establishing proper communication channels among several team members to carry out the RFP handling process effectively and efficiently. The role of the sales team will be defined by set of activities such as travelling to the client side, interacting with client face-to-face, getting the RFP, submitting the RFP, knowing any issues with the proposal, arranging video/ audio session between the client and organization employees to better understand the clients requirement and finally managing to get the lead for the organization.

Hence the set of activities is known to the employees who join the organization as they will be assigned some specialty. d) Making a career path After the employee or the sales executive is assigned with a set of tasks under the specialization, he/she is expected to master the execution of duties in an effective and efficient manner. Once the employee has excelled in the given specialization, he/she will be promoted to the next level according to the sales organization structure. For example, in many companies when the employee has performed well in the presales role which is mostly done in off-site i.e. in the country where the company is established will be promoted to a sales role where the employee would get the chance to travel to the client location if the client is in another country. All the expenses would be taken care by the organization. e) Motivating the employees Since the career path is well known to all the employees, they try to work hard and with dedication to reach higher levels according to the organization structure. Also in the decentralized organization, due to the increased authority the employees would be motivated enough to work harder and generate leads that match up to company expectations. 14.2.2 Sales organization challenges Sales organization aims at improving the sales operations by defining the span of control and assigning duties and tasks to the employees of the organization. However, each and every sales organization structure may not be appropriate to the organization and may also result in lower productivity in the organization. Hence, there are some challenges for the organization which have to be taken care before selecting a sales organization structure which aims at improving the productivity of the organization. Let us discuss some of the challenges in detail. a) Selecting the appropriate sales organization structure In an organization, the sales organization is a function of mainly two attributes namely:i) Product ii) Selling method : Direct or In-direct selling Same sales organization structure may not be effective for each product or selling method. Hence identifying the right sales organization structure which is effective for the type of product and selling method is a challenging task.

For example, if the product involves an indirect sales method, let us say through retail outlets, having a centralized decision making process may not work effectively in making day to day decisions in sales. Hence the organization structure may require a decentralized system. Also for the non-durable goods which are also called as soft goods, the decisions for sales have to be taken quickly and most of the time the sales representatives or manager at the small division level would take the decisions and then inform to the higher authorities. Here also some level of decentralized organization structure is required. Some organization like IT companies that create services for their clients follow mostly a centralized decision making process. Here the clients would be companies who will invest heavily in acquiring the proprietary softwares and hence any decision regarding the client account would require higher authority permission. For example, if you are going to increase the cost for the software, then the permission would be required from the higher authorities or executives at the head office to implement your decision. Since these sales fall under industrial sales, it would be appropriate to have a decentralized system of decision making where the highly qualified and experienced employees make the decision. For consumer sales, as discussed earlier a decentralized decision making process would be beneficial as the real problems would be faced by the lower level employees at the branch offices and giving the decision making authority to those managers would solve the problems effectively. Sales organization also deals with the reporting structure between the employees of the organization. The same reporting structure may not be applicable for the direct sales and the indirect sales all the time, hence the sales organization structure needs to be different for direct and indirect sales. b) Accommodating the sales management trends The way how the sales are done differ from time to time. As discussed in previous units, the sales of the organization initially focused on the product rather than the customer. Nowadays, the customer has become more important than the product itself. Product is seen just a single factor in making the sales effectively. Most of the sales functions involve in managing the customer relationships with the organization. You can refer to the CRM module to recognize the importance of customer relationships for an organization. Thomas (2009) mentions some of the sales management trends that have occurred in the changing world of sales management. Let us discuss few of them and the way the sales organization structure have to accommodate those trends in the organization. Some of the sales management trends include:i) Individuals

In the changing world of sales management, the productivity for most of the industrial and to some extent in consumer sales depends on more than one sales representative. Hence there is a team which is responsible to handle the sales function. In such a case, the decisions would be appropriate if the entire team advice is not taken into account. In industrial sales, centralized decision making process exists most of the time, but the decision making executive has to take the feedback of the team who are involved in the sales function. Hence, the sales organization structure should be flexible enough to accommodate that change in its structure. Another important issue which the sales organization structure has to address is the span of control. This factor becomes very important and may lead to problems when the team members are from different departments. Since the team members are from different departments, their reporting would be to their respective managers in their departments. For example, an industrial sale may involve the team members from different departments like sales, technical, testing, finance, marketing etc. In such a team the sales manager who is looking after the sale cannot force the technical team or the finance team to do their work within given time frame as he may not have the authority. Hence the sales organization structure has to clearly mention the span of control in such situations. Another important issue is to identity the team manager who can clearly take the entire responsibility. Lack of leadership may result in many fights between several teams who dont want to take the responsibility when the sale fails. The sales team may blame the technical team for giving a solution which the client was not impressed and the technical team may blame the finance team for being the project costs too high and so on. Hence, such situations have to be avoided by creating a proper sales organization structure. ii) Local The same sales organization structure may not work effectively when the company moves from being a local player to a global player. For example, let us assume that a company manufactures consumer goods both durable and non-durable. It also deals with the industrial and Institutional sales with several products and services in its kitty to offer. Such a company may follow an organization structure where the local market may be divided into regions and for each region a sales manager would be appointed. This sales manager might be given the responsibility to handle all the products that the company offers to the customers i.e. let us say, the sales manager of the Southern India is responsible for the sales figure for all the products and services of the company. Now the company plans to move into markets other than the local country where it might be the strong player. During globalization the company may not introduce all the products in the global market and might only introduce only few products/ services which have been a huge success in the local market and hence the organization structure may not be the same. A better sales organization structure would be to divide the products or services and appoint a sales manager responsible to take of only a particular product or service rather than all the products. Since the company is selling

the products or services for the first time in global market, it is appropriate to have the sales managers depending upon the product rather than the regions. This leads to the changes in the sales organization structure.

UNIT 15 SALES FORECAST AND SALES QUOTAS 15.2.1 Importance of sales forecast In the earlier times the demand was more and the supply was less. Hence there was not much need of a sales forecast in the organizations. As the time progressed, due to the industrial revolution the companies were able to manufacture the goods in an economic way for the customers. Due to the decreased costs of operations more and more players have entered into the market to serve the customer needs and wants. During the present times the number of players for almost every business is more and the customers are increasing day by day, creating better opportunities for the industry to expand. More and more companies are increasing their territories through expanding their business operations and business acquisitions. Hence, planning the operations of the company and identifying the right sales and marketing strategies have become an important task for the managers in the organization. Sales forecast would help in better planning for the organizations in future. The following are some of the advantages of a sales forecast for an organization:-

organization in future elp in understanding the business trends from time to time. For example the Health service industry is increasing adopting the CRM system and many hospitals and medical institutions are planning to adopt in future to service the customers in a better way. The increase in sales for the CRM systems would clearly help the CRM software vendors to understand the trend and plan their operation accordingly. eferences. For example, the DVD and CD player sales are increasing but the forecast provides the information that percentage increase in DVD player market is much more than the CD player. This provides the information that most of the customers are going to prefer the DVD player over the CD player and based on this, companies can align their manufacturing department to produce more DVD and less CD players.

percentage increase in sales clearly provides whether the industry is going to maintain their balance sheets in a profitable manner and according to the company objectives.

forecast shows that the market for the net books are increasing and the market for the desktops are decreasing, then the organization can plan to train more sales representatives to sell the net books rather than the desktops. ring the right number of employees in the organization. If the sales forecast informs that the industry is going to witness a high growth rate in next year, then the organization can plan to hire more staff to serve the demand in future. If the sales forecast predicts bad times for the organizations, then the organizations may plan to manage the expenses and the balance sheets.

promising businesses in future, it may invest the right amount for advertising and creating more brand awareness. Hence we have understood that sales forecast helps the organization in many ways. A right sales forecast is very important and the sales forecasting errors may prove fatal for the organization. Let us look at the necessary preparation required to start a better sales forecast and the way to utilize the information provided by it. 15.2.2 Preparing for a sales forecasting process Sales forecast helps the organization in many ways as discussed earlier. In this section we shall understand several issues that have to be analyzed before, during and after the sales forecasting process. Some of the issues are:a) Identifying the data sources: Identifying the data that would be used in forecasting techniques is a challenging task. The data sources can be primary and secondary. Primary data can be collected through the market surveys and the focus groups. This might involve more expenditure as the data collection process is started from scratch. On the other hand, secondary data can be the data other than the organization sources. Economic indicators of the region like population figures, GDP growth rates, stock prices, unemployment rates, growth rate of other related industries who produces supplement products etc can be used as a secondary data for forecasting. The sales history within the organization is often considered as the important data source which is used for forecasting. b) Deciding the frequency of forecasting: It is good to have the right market potential in future. Hence so forecasting every month wouldnt be practical for many organizations due to high costs that are incurred and the manpower spent. Hence the organization has to decide the time period of forecasting and planning accordingly based on the information of the forecast. An ideal time to forecast would be every quarter or half-yearly or yearly. If the market dynamics and the customer base changes very fast then having the quarterly forecast would sound good. If the market is having a constant increase for many years, then a yearly forecast would be better.

c) Choosing the forecasting technique: This is a serious question which every organization would debate before adopting one. John (2005) describes that there are too many forecasting techniques available and there are more than 70 different types of time series techniques for forecasting. However before selecting a forecasting technique the organization has to look at the advantages and purpose of the technique. The company may check whether the forecasting technique served the purpose in the past or else take the recommendations of an industry expert before selecting one. Choosing forecasting techniques by an organization depends upon the variables of interest that they would like to monitor in the forecast i.e. whether the organization wants to know the customer preferences or the sales trends or the market competition and so on. d) Planning your efforts after forecasting: After the forecasting process you would get the information about the regions where the market potential is increasing and decreasing. You will be able to know your strengths and weaknesses and will plan to improve the way the business is conducted. The employees have to match the forecast to the regions of profitability and objectives of the organization. All the regions in the country may not be equally profitable for the organization. The regions which you pick up to invest the efforts of the employees would depend upon the following factors:-

Ability to monitor the regions easily

15.3 Sales forecasting methods

As discussed earlier there are a huge number of forecasting methods and so discussing all of them wouldnt be possible. Hence let us see at some of the commonly used forecasting techniques described by Jackson (2000) who categorized under nonqualitative and qualitative forecasting methods. 15.3.1 Non quantitative forecasting methods Non-quantitative or qualitative methods of forecast are used when the organizations doesnt have sufficient amount of primary or secondary data to measure to conduct the forecast of the variables in interest. Some of the non-quantitative forecasting methods include:a) Jury of executive opinion In this method the organization would ask the senior executive to forecast the sales figures. After getting the figures from several senior executive the average of those

figures are determined. This will remove any errors to an extent. The average figure is considered as the forecast information and the strategies are adopted accordingly. b) Delphi method This method has been extensively used by companies for forecasting in the past and is still used in the present. In this method a group of knowledgeable people is formed where each group member doesnt have any contact or know the other group member. From such a group the forecast is requested from each member of the group. The moderator of the group is responsible to collect the entire replies and collaborate to form a single document mentioning the group estimations of the forecast and the management trends. This document is circulated to all the group members and they are requested for comments. Again the moderator collects those comments and analyzes them and prepares a document with necessary changes and circulates back to the group members for comments. This process repeats until the moderator feels that the majority of the group has reached some consensus. It should be noted that the output may not have a single forecast figure but can have a set of figures which most of the members agree upon. c) Scenario method In this method the assumptions are made for the possible scenarios that would prevail in the industry in future. For each possible scenario the indicators or factors are selected. The behaviour of those indicators or factors in the past is analysed. Based upon the analysis the future business environment is predicted and sales are estimated. For example, for the computer industry the sales of newly launched tablet PCs are to be forecasted. For this the possible future scenarios are predicted such as increase in the speed of the tablet PC making them at par to the laptops or net books, decreased cost of the products, increasing number of players in this business, better technologies to provide all the features which a laptop posses, improved screen resolutions and graphics etc. The effect of these indicators upon the sales is understood and the future sales are predicted under each scenario. 15.3.2 Quantitative forecasting methods Let us now discuss some of the quantitative forecasting methods. These forecasting methods make use of the data and perform certain mathematic calculations and provide the sales forecast. The credibility of the forecast depends upon the quality and quantity of data that is being provided to the method. Some of the methods include:-

a) Time series analysis method Time series analysis involves examining the organizations past or historic data and making the forecast about the future sales. The pattern may be divided among four basic components such as trend, seasonal variation, cyclical effects and erratic changes. Trend analysis aims at observing the past trend in sales figures and predicting

the future sales figure. It is assumed that the trend would continue in future. There are basically three methods to do trend analysis namely percentage change, moving average and curve fitting. The next component, seasonal variation, deals with the changes in sales figures during a particular season in the past. Hence, if the same season runs in future the expected sales figures can be calculated. For example, the sale of Air conditioners is high in summer as compared to winter season. The next component is cyclical effects, which deal with any changes in the sales figures other than the seasonal variation. If a behavior which a repeating every year is observed in the historic data, such changes can be observed in future too. Finally the erratic changes are those which are observed in the sales figure without any pattern or regular time intervals in the historic data. The changes may occur due to market situation like inflation or less raw materials or poor staff etc. b) Regression and correlation analysis Regression analysis is used to find the value of one variable with respect to the changes in another variable. In sales forecasting, the sales forecast can depend upon several variables and regression analysis aims at finding out the degree to which the sales depends upon the other variables. In this context, sales potential is the dependent variable and the other variables are the independent variables. During the regression techniques, we would do a correlation analysis to find out the nature of relationship between the dependent and the independent variables. The range of correlation co-efficient ranges from -1 to +1 where -1 denotes negative relationship and +1 denotes a positive relationship. For example, the improvement in literacy rate indicates that the demand for computer product also increases. Hence the literacy rate which is an independent factor is having a positive correlation with the dependent factor sales potential. For many products or services, the price would show a negative correlation with the sales i.e. increase in price lower the sales figure. If we know the list of independent factors then using a correlation analysis we can identify the nature of relationship and using a suitable regression technique we can identify the sales potential in future. The simplest regression technique is the Linear Regression Analysis. For more information about various forecasting techniques you may refer to the books mentioned in the reference and suggested reading sections.

15.4 Planning the sales quota

Setting the sales quotas to the sales representatives is an importance task for the sales manager. Setting the right quota motivates the employees to achieve them and have the bonuses. On the other hand, setting the quotas that are too small or too large to achieve may de-motivate the sales representatives. Hence planning the quotas and assigning them involves several factors. Let us understand such factors in detail. 15.4.1 Factors in setting sales quotas

Planning the sales quotas involves identifying the right quota depending upon several factors and assigning them to the sales representatives. We know that sales representatives of each region or territory may not be assigned the same sales quota. Let us understand the list of factors which help in setting the sales quotas to sales representatives. Some of the factors include:a) Market size and potential For each territory or region the market size and potential must be analysed. The market potential can be known by the forecasting techniques which were discussed earlier. The Once the existing market size is determined, quotas have to be planned accordingly so that the market potential is fully utilized to achieve the maximum productivity levels. It must be remembered most of the times that the sales quotas would be proportional to the size and potential of the market. The quotas would not only depend upon the size and potential because various other factors have to analysed which will be discussed in this section. b) Level of competition Even if the market size and potential is huge, the sales quotas may not be high due to the level of competition. For example, if the potential for the mobile connections in a particular region is 1 million, then you cannot assign quotas to grab that 1 million. Quotas must be realistic in nature taking the account of competition. If there are 5-6 mobile operators then assigning the quotas to generate 30 40 percent of the potential is practical. Again the quotas depend upon another factor current position of the organization in that region. c) Current position of the organization In the previous example, gaining a 30-35 percent market potential is a practical task if the organization is one of the top players in that region. But if the organization is a low level player or an entrant, then getting 10 percent of the potential also would be a huge task. Hence the sales quotas have to be planned accordingly based upon the current position of the organization. d) Skills of the sales person All the employees within the organization may not be able to generate huge number of leads. Hence, setting same quotas for all the employees may not be achievable and may become a de-motivating factor. The sales manager has to plan the quotas according to the skill of the sales manager and may increase it in future. The new employee may need to have a different sales quota while compared to the already existing employee. If the quotas are not achievable, some time should be given by the sales manager to improve the selling skills and help in achieving the sales quota by the sales representative. If required necessary training should also be provided. e) Organization/ market objectives

When an organization expands to new territories or launches new products, it needs to, plan the sales quotas very carefully. When it enters a new territory, the organization objective may be to test the market or to become a leading player. Hence sales quotas have to be planned accordingly with the objectives. If the organization objective is to hold in the market in difficult times, the sales quotas may not be necessary to increase from year to year as the objective of the organization is to generate the same sales each year. Hence, the organization objectives have to be kept in mind by the sales manager before planning the sales quotas to the representatives.

UNIT 16 SALES BUDGETING AND CONTROL

16.2 Sales budgeting concepts

Sales budgeting would be an important task after the sales forecast. Once the sales figure for the next time period are known, the revenue for the organization would be calculated. 16.2.1 Financial concepts in budgeting Various expenses would be taken into account before arriving at the operating profit and the net profit for the next time period. Expenses for an organization would be of two types :-

Direct expenses would include those expenses which are directly involved in the creation of the product or service. Some of the direct expenses would include the material required for the product or resources used by the service, wages of the direct labour i.e. labour involved in creating the product or service, travelling costs of the direct labour etc. On the other hand, indirect expenses include those expenses which are not directly related to the production of goods or services. For example, sales activities, marketing activities, wages of sales representatives etc. fall under the indirect expenses. The revenue can be identified by multiplying the number of units with its cost. After identifying the expenses and revenue and removing the taxes we get the net profit for the organization. One of the primary objectives of sales budgeting is to see that the net profit doesnt go below the organization objectives. For most of the organizations the objective for net profit margin would be at least 10-20 percent. 16.2.2 Issues in sales budgeting There are several issues in budgeting and allocation which needs to be analysed. Sales budgeting are mainly done at the macro level but the actions takes place at the micro level. The top management allocates the budgets and may take the feedback from the local sales managers which again depend upon whether the organization follows a

centralized or decentralized decision making process. There can be many other issues which the sales budgeting process has to look at. Some of them are:a) Establishing the need for budget The budget would be established for different regions depending upon the need. Hence the sales manager should be able to establish the need for budgets. The real activities of the sales process happens at the micro level i.e. at the branch level and the expenses in incurring the sales would be best known by the sales managers at a branch level. The exact need of budget should be established by taking into account for all the expenses such as travel expenses, office rents and bills for electricity, phone lines etc. The budgets should be allocated at the local level by taking the feedback from the sales managers. b) Having multiple views of the sales budget The sales budget created should clearly identify the sales from multiple views such as:-

Having multiple views will help in answering some of the questions about why the sales budgeting is not as per the expectations of the sales forecast. c) Identifying NPAs and planning the events Having created the sales budgeting from multiples views enables the sales manager to identify the NPAs in his region/ territory. In sales we refer Non-performing assets as NPT which stand for Non-performing territories. For example, the overall sales figure for the city is increasing but due to multiple views the sales manager can easily see that one of the territories in his region is showing a down trend in sales figures. Hence necessary action can be taken to improve the sales figure. It is understood in business world that a market leader will work to develop new territories and may leave the territories which are under performing whereas a market follower would safe guard existing underperforming territories and strive for development. The NPA can be the sales representative too if they are not able to attain their sales quotas. Hence sales manager can identify such representative and give necessary training to improve their productive levels. d) Monitoring the forecasted figures to the actual sales Most of the companies divide the yearly forecast figures into monthly sales which could be attained by the sales representatives if they achieve their assigned quotas. But there would be chances that the forecast may go wrong and the quotas set were not realistic. In such cases it is always important to monitor the actual sales figures with the

forecasted sales figures at regular intervals. Sales manager may use the variance analysis technique like ANOVA to check the variance. e) Time interval for monitoring sales budgets The time interval to check for variance and sales budgeting depends upon the sales manager and may be done daily or weekly or monthly or quarterly or half yearly or yearly. However one must understand that too frequent monitoring may result in wastage of time and money on trivial or uncontrollable factors. On the other hand, too loose monitoring process may result in lower performance levels as its the human nature to adopt slackness when the control system is weak Let us now discuss about the control system and its functionality for the sales budgeting process.

16.3 Monitoring and controlling the sales budgeting

Monitoring and controlling the sales budget is an important task to maintain a healthy balance sheets in an organization and meeting the organization objectives. Having an appropriate timeframe for monitoring is very important for the organization. Too frequent monitoring implies wasting time and money on trivial or uncontrollable factors. Whereas too loose monitoring with large time gaps means not taking sufficient care in reviewing the sales budget. This may also lead to poor performance by the sales representatives. In fact, no one likes a job which is not monitored as everyone expects some sort of appreciation after their job done. Recognizing the work of the sales representatives by monitoring their performance will also help in framing the appraisal system. Let us now understand the need of a control system for monitoring and controlling the sales budget.

16.3.1 The need for a sales budgeting control system Sales budget control system is required by the organization for many reasons. Let us now understand them in detail:a) To monitor the performance Monitoring sales budgets implies monitoring the sales figures generated by the employees and checking whether the sales quotas have been achieved. The control system should be able to monitor in regular intervals as it is the natural tendency for humans to adopt slackness. The biggest question is what to monitor? Is it the sales figures or efforts or expenses or direction and so on? In many times the organization would go by the sales figures and revenue generated. Efforts and direction would be left out but to get a holistic picture of the performance of a sales representative every factor must be taken into account. Hence, control system should be able to get a holistic picture of the performance evaluation for the sales representatives. b) Identifying areas of improvement for sales representatives

Control system should identifying the areas of improvement by monitoring the performance of the sales representatives. Once the performance is monitored the control system should be able to find out the necessary skills to be improved and then proper training should be provided to improve those skills set. c) Identifying areas of weakness Control system should be aiming at identifying goals of the organization and improving the organization performance to achieve them. In doing so, many functions within an organization have to be integrated. Control system should be able to identify the cost in generating the required sales figures. If the cost of operations is high then the net profit would be low even if the sales figures are decent. Control system should identify weaknesses in the organization and develop the system where the resources are put to maximum use. For example, if the control system finds out the reason for increased costs for generating a lead is due to the improper communication channels between the marketing and sales department, then making use of CRM in the organization would be the solution to the problem. d) Identifying trends and monitoring competitor activities Control system is required by the organization to identify the market trends. In this competitive world, the preference of the customer changes too frequently and the competitors would be ready to grab the opportunities. Hence it is necessary to have a system to monitor the competitor movements closely and then identify the necessary changes that needs to be done in the strategies of various departments to sustain the competition and achieve required sales. e) Analyzing deviations Many times there would be deviations from the sales objectives. Monitoring and analyzing the deviations would be an important task. For example, the organization may put the sales objective for the branch office 10000 units/ month. The branch office may start with nice figures over 10000 for the first two months but later on from the third month the sales figures take a dip and fall below 10000. The reasons for such deviation should be analysed. There can be many reasons such as:mpetition,

conditioners and refrigerators are high in summer when compared to winter season

e i.e. due to the high attrition rate the required number of sales representatives are not available to generate the expected sales figures.

Such reasons have to be identified. Therefore, a control system may be required by the organization. f) Input for organization strategies Control system helps in provide valuable information in setting the strategies in the right direction to achieve the organization objectives. By identifying the right strengths and weaknesses of the organization, its strategies can be set. For example, if the control system identifies that the organization has good products, but low sales due to high costs over the competitors then necessary marketing activities have to be planned to justify the price and the benefits or else the prices have to be reduced to boost the sales. g) Identifying the losing market share The forecast would be done at the start of the year or required time interval and targets or quotas would be set. Achieving the required quotas may not necessarily mean achieving the organization objectives at all the times. Control system is necessary to monitor the situations not only where the organization has improved its sales but also lost market share too. The objective of the organization may be to serve the maximum number of customers at all times and be the industry leader. Whenever the market is growing too fast, the sales figures should also be increasing. Just performing by the sales quotas would be helpful in being the leader in the market place. Hence, control system is necessary to identify the growth in the industry and adjust the sales quotas accordingly so that the organization can maintain its position in the market place. 16.3.2 The need of variance analysis and control in sales budgets The sales variance according to Ghosh (2005) is the operating profit variance due to sales. It is the difference between the budgeted operating profit and the margin between the actual sales and the standard cost of those sales. Variance analysis acts as a cost controlling mechanism for the organizations. The deviations or irregularities in the operating profits can be analysed by the variance analysis and control systems. The sales variance is of two types namely:eals with the variance in the operating profit which may be more or less than the forecasted operating profit. The reason may be due to the changes in the volume of sales generated by the sales department. The operating profit would be less when the sales figures are less than the forecasted figures and vice-versa. Here, the price of the unit is kept constant for the forecasted sales and the actual sales. : This deals with the variance in operating profit due to the decrease or increase in selling price. Even though the sales quotas are achieved, the sales department may not be able to generate the required operating profit due to the changes done in the selling price when the actual sales have taken place.

Usually in many situations the variance would be due to both the reasons mentioned above. This type of variance is known as mixed variance. The sales budgets have to be controlled in such a manner that the organization objective is achieved with the right variances in place. It is not always practical for the organization to stick to a constant selling price. The price keeps on changing due to the changing environment at the market place. The selling price would be lowered whenever the demand is less or the competitors lower their prices. The variance analysis and control would involve the following points:-

variance is increasing due to the low sales, then organization have to revise their strategies to make sure that the sales figures are improved and thereby creating a lesser variance pportunity the organizations or the sales departments tend to decrease their selling price. Before any such attempt, the variance should be analysed and the affect on the overall balance sheets and profit figures should be estimated. It should be noted that for each penny decrease in selling price the operating profits would be decreased. Hence identifying the right selling price is a challenging task for the organizations. The decrease in selling price should justify the increase in sales figures so that the overall operating profit doesnt decrease for the organization. ariance control with proper strategies: As discussed earlier in this unit, right strategies help the organization to achieve more sales and lesser variances. by improving the organization efficiency: By improving the organization efficiency by making use of CRM products and the right organization structure, the operating costs can be reduced thereby decreasing the variance in the operating profits. This is very important at present times where the prices are kept low due to the competition and the operating profits are to be maintained unaffected. The only way this can be achieved is by decreasing the cost of operations in various departments like marketing, IT, sales etc.