Sales Management

SALES MANAGEMENT & PERSONAL SELLING
SALES DEPARTMENTS have responsibility to their

Organizations – for obtaining sales volumes, providing profit
contributions &
continuous business growth.
Customers – (wholesalers, retailers or users) expect them to
supply easily saleable products & services, backed
by supporting services & assurance that these are
wise investments in the competitive market place.
Society – looks to them to assure delivery of goods at prices
that users are willing to pay & these products are
not potentially damaging to the environment.
EVOLUTION OF THE SALES DEPARTMENT

• PRIOR TO INDUSTRIAL REVOLUTION
Small Scale Enterprises-generally supervised by single
owner.
Selling mainly to nearby customers. Orders obtained easily.
Selling / Marketing handled on part-time basis.
Chief problem was to get enough production.
• AFTER INDUSTRIAL REVOLUTION

Industrial Revolution began in 1760 in England & shortly
after in US.
Newly built factories manufactured huge quantities of all
kinds of goods.
Large capital invested in solving problems of land, buildings
& machinery as well as hiring large numbers of workers.
Business adopted Corporate form of Organization – large
scale manufacturing enterprises.
First-hand administration became difficult leading to
authority delegation and separate functional departments.
Continued operation of enterprises demanded great
expansions in sales coverage – increasingly necessary to find
& sell to new markets.
Teaching notes of Vijay Bhandari. Email: vb73@hotmail.com

Sales departments set up after activation of manufacturing &

financial departments.
• ADVENT OF SPECIALIZED SALES DEPARTMENTS

o Sales departments solved organization problems of
market expansion.
o Communication with customers received next attention.
o At first goods were sold to retailers, who sold them
directly to consumers.
o Large retailers began to purchase for resale to other
retailers ultimately evolving into wholesale institutions.
Addition of middlemen to channel of distribution
complicated problem of market expansion.
o Marketing activities conducted by manufacturer’s sales
department grew in importance. Tasks such as
Advertising, Sales Promotion became increasingly
complex. New departments for carrying out specialized
tasks and also involving sales departments and
middlemen fragmented the marketing operations.
o However Sales Departments continue to have
underlying responsibility to make sales happen and it is
the income-producing division of business.
SALES MANAGEMENT
Originally referred to direction of Sales Force Personnel

For some time it took broader meaning – in addition to
management of personal selling it included management of all
marketing activities including advertising, sales promotion,
marketing research, physical distribution, pricing & product
merchandising. In time business adopting academic practice came
to use the term MARKETING MANAGEMENT rather than Sales
Management.
AMA DEFINITION

AMA ultimately agreed SALES MANAGEMENT meant “the

planning, direction and control of personal selling, including
recruiting, selecting, equipping, assigning, routing, supervising,
paying and motivating as these tasks apply to the personal sales
force.”
OTHER RESPONSIBILITIES
Sales Managers are also responsible for –

Organizing the sales effort both within and outside the
company
Participating in preparation of information critical to key

marketing decisions –
budgeting
quotas
territories
Participate in decisions on
products
marketing channels & distribution policies
advertising & other promotion
pricing
OBJECTIVES OF SALES MANAGEMENT

• Sales Volume
• Contribution to Profits
• Continuing Growth
Objectives are translated into more specific goals, that the

company has a reasonable chance of reaching. During the planning
sales executives provide estimates on market & sales potentials,
the capabilities of the sales force and the middlemen etc.

SALES MANAGEMENT & FINANCIAL RESULTS
Sales – Cost of Sales = Gross Margin

Gross Margin – Expenses = Net Profit
Sales, Gross Margin & Expenses are affected by the caliber &
performance of the sales management and these are major
determinants of the Net Profits
SALES EXECUTIVE AS A COORDINATOR
• Organization & Coordination
Coordination of different order getting methods under
one Head
Generally democratic administration – all subordinates
consulted
Subordinates & Superiors able to visualize
circumstances of decisions
• Planning & Coordination
Coordination of marketing objectives and draft plans
that achieve desired results at optimum cost
Determine the relative amounts of elements like
personal selling, advertising in the Marketing Program
to equate their marginal effectiveness
Help in finalizing a marketing program, which is
appropriate for market conditions & reflects
contribution of the sales force
• Coordination with other elements in the Marketing
Program
Personal selling efforts must be coordinated with
advertising, display & other promotional efforts for
desired results
Advertising may prove uneconomical unless sales force
capitalizes on the interest aroused
If advertising & personal selling tell the same story the
impact is magnified manifold

Sales force should ensure proper timing and

coordination for
point of purchase (POP) displays in retail stores
couponing , sampling or discount efforts at dealer end
• Coordination with Distribution Network
Gaining Product Distribution (specially for new
products)
Persuade middlemen to associate with product’s
distribution
Present convincing arguments of its salability & hence
to stock
New products face Distributor lethargy & Dealer
indifference
Obtaining Dealer Identification
Advertising dealers – local advertisements, store signs,
obtaining shelf-space, permissions for merchandising,
directional & POP displays in self-service retail stores
and coordinating timing with campaigns
Reconciling Business Goals
Sharing business information and leads
Special market survey reports
Fair and impartial dealings with all outlets
Sharing Promotional Risks
Consent to share at time of selection
Generally better appreciated in exclusive / selective
marketing tie-ups
• Coordination & Implementation of Overall Marketing
Strategy
Problems in coordination occur in timing and sequence
of execution of various phases. Activities to be
coordinated are
Advertising
Sales Calls
Publicity releases
Availabiliy of product

SALES MANAGEMENT & CONTROL
• Sizing up the Situation

Reviewing personal selling objectives – present, past &
future
Appraise short-term & long-term objectives relative to
plans, policies & procedures
Correct weaknesses in plans, policies & procedures
• Setting Quantitative Performance Standards

Continual experimentation, never precise
Appropriate if they contribute to personal selling
efficiency
Expressed as ranges of acceptable performance –
human variation
• Gathering & Processing Data on actual performance

Information collection and its cost should be less than
its worth
Changes in executives, policies etc may change
usefulness
Savings are possible by eliminating multiple sources
and changing intervals of information gathering &
processing
Timely reporting of variations with suggested action to
concerned unit
Electronic data processing makes it easier if properly
designed
• Evaluating Performance
Differences in territorial / other conditions make it
difficult to compare individual performances
Comparing actual with standard explains each
individual performance

Departure from standards classified into controllable &

uncontrollable
• Action to correct controllable variation

Take steps to move individual’s performance in the
direction of standards by one of the three forms:
Direction – pointing out more effective ways
Guidance – providing additional instructions /
training
Restraint – procedures & practices aimed at
keeping results within bounds
• Adjusting for uncontrollable variation

Adjusting sales plans and policies
Adjustment of standards to attainable levels
SALES CONTROL – INFORMAL & FORMAL
• Informal Control
Effective sales executives have “Fingers on the pulse
of the business”
The larger the organization and higher up the executive
the harder it becomes to use “fingertip” control
• Formal Control & Written Sales Policies

Sales policies in writing
Limits within which action is to take place are specified

Complex problems – less chance everyone will know

what to do in every circumstance
Written policies ensure substantial uniformity of action
both among different persons handling same problem
and same person handling the problem at different
times
• Policy Formulation & Review

Written policies allow sales executives to spend more
time for handling policy exceptions
If they encounter enough exceptions of similar nature, a
new policy is formulated and put in writing
Policies evolve through study & evaluation of tangible
information
Become appropriate & good through successive
revisions
• Formal Control over Sales Volume

Sales or Market forecast serves as a standard for
evaluating sales performance
Between forecasts sales executives monitor industry
sales trends, competitor activities & market-share
percentages
• Budgetary Control
Formal control requires setting up budgetary controls &
setting up sales territories
Represents extension of control over sales volume to
control over margins & expenses and hence over profits
SALES CONTROL & ORGANIZATION

• Decentralization limited by caliber & experience of
executives
• Leads to greater control by executives lower in hierarchy

• Improves speed of initiating corrective action
SALES RELATED MARKETING POLICIES

Sales related marketing policies impact on the functions &
operation of the sales department. They delineate guidelines within
which the effort to reach personal selling objectives is made.
Sales executives role may be
– to just administer the policies determined by top management
– to bear sole responsibility for determining policies – subject
to top management approval.
PRODUCT POLICIES – WHAT TO SELL

The products a company sells determine its basic nature.
Product policies are guides to making product decisions.
They derive from Product Objectives.
PRODUCT LINE POLICY

Concerned with the width of a Product Line.
Short Line – handles only part of the line. e.g. Cornflakes. Greater
risk and product specialization enables achieving low unit costs
hence greater profitability.
Full Line – handles all or most of the items in the product line. e.g.
all Breakfast cereals. Risk is divided over many products.
• Changes in Product Offerings
All items should be re-appraised at regular intervals to
continue, add or drop.
• Reappraising the Product Line & line simplification

Each item is compared with similar and competing items in

other manufacturer’s lines.
Generally an item is not retained in a product line if it does
not meet profitability standards or shows no indications of
meeting them.
• Reappraising the Product Line & line diversification
Reappraisals are made relative to growth objectives. These
objectives get restricted in mature or dying markets. Action is
required to add products or product lines.
• Ideas for new products
Sales department identifies unsatisfied needs in its day-to-day
contacts with customers & prospects.
Production & R&D departments come with ideas for
improvements in existing products or new products.
Other sources are lists of inventions, government patents etc.
• Appraisal of proposed new products
Criteria for appraising are – nature & size of likely markets,
competition, legal implications, profitability, utilization of
sales force capabilities.
PRODUCT DESIGN POLICY

• Frequency of Design Change.
• Extent to which designs should be prevented from
copying
PRODUCT QUALITY & SERVICE POLICY

High-quality products require less service and low-quality products
more service.
Product quality is a matter of characteristics built into the product,
which a customer can judge only after purchasing the product.
A liberal service policy helps to reduce customer’s reluctance to
buy a product.

GUARANTEE POLICY
It is a protection for the customer and is used as a sales promotion
device.
DISTRIBUTION POLICIES – WHO TO SELL

Important determinants of the sales force functions. Decision on
number of outlets at each distribution level affects the size and
nature of sales organization and the scope of its activities.
POLICIES ON MARKETING CHANNELS

Companies consider and use number of different marketing
channels for selling their products. Decisions on marketing
channels are required to be made
- at the time of the initial organization of the enterprise
- at the time of reappraising the effectiveness of the marketing
channels
- when making additions to the product line.
Channels are chosen to obtain the optimum combination of profit

factors. The most profitable combination of the following three
factors should be sought over short-term and long-term:
• Sakes volume potential
• Comparative distribution costs
• Net profit possibilities
POLICIES ON DISTRIBUTION INTENSITY

At each level of distribution decisions are made on the desired
number of outlets.
Decide first upon policy to be followed at the distribution level
nearest to the final buyer as same decisions must be applied at
other levels.
• Mass Distribution

Aim is to get maximum sales exposure by securing

distribution through all those outlets from where users may
expect to purchase the product.
Used in distributing consumer convenience items.
Often manufacturers using this policy require several
marketing channels.
• Selective Distribution
Selecting only those outlets which can best serve the interests
of the manufacturer – generally attempting to make every
outlet a profit contributor.
Criteria relating to size of orders, volume of purchases,
profitability, type of operation & location are specified to
make selections.
• Exclusive Agency Distribution

The manufacturer makes a written or oral agreement with a
middleman in each market area to distribute the company’s
product or products in that area through that middleman only
PRICING POLICIES
All sales executives are responsible for implementing the pricing
policies. Sales personnel are the company employees most directly
involved in persuading customers to accept the products at the
prices asked.
POLICY ON PRICING RELATIVE TO THE

COMPETITION
• Meeting the Competition
• Pricing above the Competition
• Pricing under the Competition
POLICY ON PRICING RELATIVE TO THE COSTS

• Full-Cost Pricing
• Promotion Pricing
• Contribution Pricing
POLICY ON UNIFORMITY OF PRICES TO DIFFERENT

BUYERS
POLICY ON LIST PRICING
POLICY ON DISCOUNTS
• Trade Discounts
• Quantity Discounts
GEOGRAPHICAL PRICING POLICIES

• FOB Pricing
• Delivered Pricing
POLICY ON PRICE LEADERSHIP
PRODUCT LINE PRICING POLICY
COMPETITIVE BIDDING POLICY
MARKET POTENTIAL
A market potential is an estimate of the maximum possible sales
opportunities present in the market and open to all sellers of a good
or service during a stated future period.

SALES POTENTIAL
A sales potential is an estimate of the maximum sales opportunities
present in the market open to a specified company selling a good
or service during a stated future period.
SALES FORECAST
A sales forecast is an estimate of sales in a future period under a
particular marketing program and an assumed set of economic &
other factors outside the unit for which the forecast is made.
It may be for a single product or a for an entire product line.

It may be for the entire marketing are or any sub-division of it.
Such forecasts are short-term or operating forecasts.
(Long-range forecasts are used for planning production capacity &
long-run financial planning)
STEPS IN ANALYZING MARKET POTENTIAL

1. Market Identification
Who buys the product?
Who uses it?
Who are the prospective buyers / users?
Use internal records or field research and define

characteristics.
2. Market Motivation
Detect why customers buy and why potential customers
might buy the product. Besides estimating market potential
they assist in deciding:
• How best to present the product to potential buyers?
• The relative effectiveness of different selling appeals.
• The relative appropriateness of various promotional
methods.
3. Analysis of Market Potential

Analysis makes use of market factors (it is a market

feature or characteristic related to the product’s
demand). 2-steps process:
• Select the market factor(s) associated with the product’s
demand.
• Eliminate those segments that do not contain
prospective buyers.
MARKET INDEXES
A numerical expression indicating the degree to which one or more
market factors associated with a given product’s demand is present
in a given market segment – usually a given geographical market
segment.
Examples – population as a % of national total; age; income;
Usually expressed in relative terms like percentages. Can be
further refined into sub-indexes.
SALES POTENTIAL & SALES FORECASTING
• Sales potential of a specified company are derived from
market potentials after analysis of market-share relationships
& adjustments for changes in companies’ & competitors’
selling strategies & practices.
• A companies’ sales potential & forecast is usually not
identical – in most cases potential being larger than forecast.
Many reasons are possible:
o Insufficient production capacity
o Not developed distributive network
o Limited financial resources
o More profit oriented – seek to maximize profit not sales
• Sales forecast indicates how much a company with a given
amount of resources can sell if it implements a particular
marketing program
SALES FORECASTING METHODS

A sales forecasting method is a procedure for estimating how much

of a given product or product-line can be sold if a given marketing
program is implemented.
No method is foolproof – each is subject to some error.
Good companies use a least 2 different methods to arrive at an
acceptable forecast.
1. Jury of Executive Opinion

High-ranking executives estimate probable sales.
An average estimate is calculated.
The Delphi Technique
Rand Corp developed technique for predicting future:
Members of jury are chosen for their expertise.
Panel responds to series of questionnaires in which one
questionnaire is used to produce the next.
Thus information available to some is disseminated to
all enabling them to forecast on all available
information.
2. Poll of Sales Force Opinion
Individual sales personnel forecast for their territories.
Individual forecasts are combined & modified by
management.
Easy to break down according to products, territories,
customers, middlemen & sales force.
Serves as best method to get alternative estimate for
cross checking.
3. Projection of Past Sales
Simple methods apply different kinds of multipliers –
e.g. same as LY; adding set % to LY; moving average
of past periods.
Time-Series Analysis
Statistical procedure for studying historical sales data –
involves isolating & measuring 4 main types of sales
variation:
Long-term trends

Cyclical changes
Seasonal variations
Irregular fluctuations
Practical application is mainly in making long-range
forecasts.
Exponential Smoothing
Another statistical technique, t is a type of moving
average that represents a weighted sum of all past
numbers in a time series, with the heaviest weight
placed on the most recent data.
Evaluation of Past Sales Projection methods
Key limitation lies in the assumption that past sales
history is the sole factor influencing future sales. The
accuracy largely depends on how close the company is
to saturation point.
Past sales projection methods are best used as check
forecasts.
4. Survey of Customers’ Buying Plans
Ask customers about their future buying plans.
Works best in Industrial marketing where:
Potential market consists of small number of
customers / prospects
Substantial sales are made to individual accounts
Manufacturer sells directly to users
Customers are concentrated in few geographical areas.
5. Regression Analysis
Statistical process determines & measures the
association between company sales & other variables.
It involves fitting an equation to explain sales
fluctuations in terms of related & presumably casual
variables, substituting for these variables values
considered likely during the period to be forecasted and
solving the equation to arrive at the sales figure.

Where sales are influenced by two or more independent

variables acting together, multiple Regression Analysis
techniques are used.
Evaluation of Regression Analysis for sales forecasting

If high coefficients of correlation exist between
company sales and independent variables the
forecasting problem is simplified specially if the
variables lead the company sales.
6. Econometric Model Building & Simulation
This approach uses an equation or system of equations
to represent a set of relationships among sales and
different demand-determining independent variables.
An econometric model unlike a regression analysis

model is based upon an underlying theory about
relationships among a set of variables & parameters are
estimated by statistical analysis of past data.
Econometric model building seems a nearly ideal way

to forecast sales – it considers interaction of
independent variables that bear logical & measurable
relationship to sales and it uses regression analysis
techniques to quantify these relationships. However
they are best used to forecast Industry sales because
number of independent variables affecting an individual
company’s sales are more numerous & more difficult to
measure than those determining the sales of an
Industry.
CONVERTING INDUSTRY FORECAST TO COMPANY
SALES FORECAST
Many companies use an econometric model to forecast Industry
sales and then apply the company’s market-share % to the industry
forecast to arrive at a first estimate of the company’s forecasted
sales.

In two of the above methods – poll of sales force opinion and

projecting of past sales – it is normal to skip the industry sales
forecast and forecast company sales directly.
Deriving company sales forecast from an industry forecast requires

an appraisal of the company strengths & weaknesses and its
marketing programs against those of competitors. The result is an
expected market share hat results in a forecast of company sales.
DERIVATION OF A SALES VOLUME OBJECTIVE

A sales forecast contains the estimate of sales tied to a proposed
marketing program and assumes a set of economic & other forces
outside the unit for which the forecast is made.
A sales volume objective for the coming period is the desired

outcome of sales forecasting procedure. A sales forecast estimate
does not necessarily become the sales volume objective.
Adjustments are necessary when the Company alters its marketing
program or changes occur in competitor’s marketing strategies.
The sales volume objective should be consistent with

management’s profit aspirations and the company’s marketing
capabilities. It must be attainable at costs low enough to reach net
profit objective and the company’s marketing forces (i.e. its sales
force, the advertising program, the dealer organization etc.) must
be capable of achieving the objective set.
EVALUATION OF FORECASTS
• Examine the assumptions on which it is based
• Ask what would be the effect of removing or changing the
assumption
• Has sufficient account has been taken of competitor situation
& strategies

• Has account been taken of any new competitive products
Accuracy of the forecast should be evaluated as the forecast period

advances. Differences of actual results against forecast should be
explained and adjustments made for the remainder period.
SALES BUDGET
• Blueprint for making profitable sales.
• WHO is going to sell HOW MUCH of WHAT during the
OPERATING PERIOD & to WHICH CUSTOMERS or
CLASSES of TRADE.
• Sales Volume, Selling Expenses & Net Profits.
PURPOSES OF THE SALES BUDGET

• MECHANISM OF CONTROL
Completed budget is a composite of sales, expense and profit
goals for various sales units – which serve as a yardstick
against which progress is measured.
Comparison of achievements is done against relevant
breakdowns of the budget. Measured for
- Individual Sales Personnel
- Sales Regions
- Products
- Marketing Channels
- Customers
• INSTRUMENT OF PLANNING

Sales Forecast shows where it is possible for business to go.

Budgeting process determines ways & means for business to
get form WHERE IT IS to WHERE IT WANTS TO GO.
Calculate expenses of converting forecasted sales into actual
sales.
Formulate sales plan so that sales volume & net profit
objectives are reached.
FORM & CONTENT

• The completed sales budget is a statement of projected sales
revenues & selling expenses.
• Summary of Sales Volume – both in value & units.
Budgeted figures are readily adjustable for price changes.
• Budget Section of Planned Sales – Total Unit Sales of each
product, Unit Sales by sales territory (&/ or region), Unit
Sales by quarters or months, Unit Sales by Class of Account
(or type of marketing channel)
• Estimating Budgeted Selling Expenses.
- OPTIMUM not Maximum Net Profit is short-run
objective. Profit maximization is the objective over
the long run.
- Other considerations like necessity for providing
“business building” customer services and for
scheduling calls on prospective “new accounts”
make profit optimization the short-run goal. Some
selling expenses would not be incurred if
management did not look beyond the current
budgetary period.
- Both immediate- and long-run sales plans are taken
into account for estimating selling expense items
included in the sales budget.
- Sales management expresses plan for forthcoming
period in terms of required activities.

- Then sales management 1) estimates the volume of

performance of the activity and 2) multiplies that
volume by the cost of performing a measurable unit
of the activity.
- Using standard costs based on actual past average
costs adjusted for standard performance by a
standard employee under standard conditions.
- In absence of standard costs some companies
employ average cost per unit sold. This may or may
not be adjusted for changes in competition, business
conditions, inflation etc.
- Expense estimates in the budget have greater
accuracy if historical unit costs are used to calculate
individual selling expense items.
BUDGETARY PROCEDURE
• Company budgetary procedure starts with the sales budget.
• Planning Styles and Budgetary Procedures Top-Down –
Bottom-Up
• Tendency in top-down organizations is for subordinates to
accept objectives passed down by superiors.
• Experts recommend bottom-up style as much as possible as
participation in planning maximizes benefits from sales
budgeting.
• Steps in actual Budgetary Procedure
- Lowest level in budgetary process is profit center.
Each district Sales Manager estimates district sales
volumes & expenses for the coming period and
contribution to overhead.
- District budgets are submitted to the divisional /
regional office where they are all added together and
included in the divisional / regional budget.

- Divisional budgets are submitted to the product

sales manager or regional budgets to the sales
manager.
- At the end of the chain the top sales executive
compiles a company-wide sales budget.
- Meanwhile staff departments in marketing have
been making their budgets for the activities planned
by them for the sales department during the year.
- The top marketing executive adds the sales
department budget and the staff department
budgets to his own budget to present the total sales
revenues, selling and other marketing expenses for
the company.
- Each management level submits their budget for
approval to the next higher level along with a
detailed description of their unit’s plan for the
coming period as support and justification.
- At each step an effort is made to reduce the detail to
be passed upward so that the final budget is
relatively simple and uncomplicated.
- The approved budget, with changes necessitated due
to changes in the company budget and with
corrected details added back, is distributed in the
organization in a process exactly the reverse of that
used in preparation.
IMPORTANT ISSUES IN THE BUDGETARY PROCESS
• Handling Competition for available funds within the
Marketing Division.
• In the bottom-up planning procedure each subordinate has
already prepared sales objectives, estimate of expenses, thus
simplifying the task of dividing up the same at lower levels.
• Selling the sales budget to Top Management.
• Using the Budget for Control purposes.

- Individual items in the budget serve as “quotas” or

“standards”.
- Each level of management compares performance
against standards.
- Each sales manager receives monthly or even weekly
budget progress reports.
This shows the actual sales and expenses for the week,
month to date and year to date; budgeted sales and
expenses and the difference between the two.
- If variance is due to poor performance – the concerned
person is advised how to bring performance in line.
- If variance is due to changed conditions – the budget is
revised to reflect the change.
• Flexibility in Budgeting
- If sales budget estimates are consistently or frequently
in error then more time should be spent in budgetary
planning.
- Some companies use budgetary procedures without
definite sales forecasts due to difficulty in getting
accurate forecasts. Budgets can be prepared on the basis
of assumed low-level and high-level sales. Efficiency of
the selling effort can be measured even if there is wide
variation in actual & expected sales volumes.
- If competitors initiate actions not foreseen at the time of
making the budget funds must be allocated to
counteract them.
- A realistic attitude toward the dynamic nature of the
market is part of effective sales budgeting.

QUOTAS
Quotas are quantitative objectives assigned to sales organization
units – such as individual sales persons, sales districts.
Sometimes they are also set for middlemen like agents, dealers &
wholesalers.
Standards for appraising selling effectiveness – Quotas specify:

- desired performance levels for sales volume
- budgeted items like expenses, gross margin, net profit &
return on investment
- selling- and non-selling-related activities
- or some combination of these items.
All quotas have a time dimension – they quantify what

managements expect within a given period.
OBJECTIVES IN USING QUOTAS

• To provide Quantitative Performance Standards
A well designed quota system with proper sales analysis
helps in assuring that bad performance in selling one product
in a territory is not hidden by good showings in other
products.
• To obtain tighter Sales & Expense Control

Some companies reimburse expenses only up to certain % of
sales volume.

Others appraise sales personnel on their ability to stay within

specified limits of expenses.
• To motivate Desired Performance

Quotas should be attainable goals so that they can inspire the
sales personnel to achieve.
Motivation also declines if quotas are too easily achieved.
• To use in connection with Sales Contests

“Performance against quotas” is main basis for giving awards
in sales contests.
Adjustments are made for differences
- in territories (coverage difficulty & competitive position)
- among sales personnel (experience with the company & in
the territory)
REASONS FOR NOT USING SALES QUOTAS

• In certain industrial goods categories viz. capital equipment it
is difficult to obtain accurate sales estimates; thus quotas are
on subjective judgment.
• Inordinate expenditure of time & money to estimate sales
estimates.
• Product is in short supply.
QUOTAS, THE SALES FORECAST AND THE SALES

BUDGET
A sales forecast is a sales estimate tied to a marketing program and
assuming certain environmental factors.
A sales volume objective is decided, then expenses to achieve this

are determined and net profit contributions are calculated in the
sales budget.

Management decides how much sales volume should come from

each territory, what expense should be incurred and consequently
what profit contribution should be produced by the territory. Lastly
management determines quantitative objectives i.e. quotas for
individual sales personnel, units of sales department & customers
or distribution outlets.
TYPES OF QUOTAS
• Sales Volume Quotas
How much for what period.
Set for individual sales personnel or other units of sales
organization.
Set for geographical areas, product lines or marketing
channels.
Quotas become more effective - the smaller the selling unit;
for individual products rather than product lines; and for
shorter periods rather than longer.
• Value Sales Volume Quotas
These are set for broad product lines where there are
complications in setting unit quotas; where prices are not
established; or where sales personnel have discretion to cut
prices.
• Unit Sales Volume Quotas
Useful in situations of frequent price changes or narrow
product ranges with stable but high prices.
• Point Sales Volume Quotas
Used where it is desirable for the sales volumes to be
achieved in full range of product lines. If only value quotas
are set then tendency is to achieve these by concentrating
only on easy to sell products (perhaps lower contribution
ones).
BUDGET QUOTAS
To control expenses, gross margin or net profit.

Makes clear that sales personnel job is something more than just
obtaining sales volume.
• Expense Quotas
Used in combination with sales volume quotas as
supplemental standards for keeping expenses in line with
sales volume indirectly controlling gross margin & net profit
contributions.
Financial incentive is given to sales personnel to control
expenses by tying performance to compensation plan or
offering expense bonuses.
• Gross Margin or Net Profit Quotas

Gross margin or net profit quotas emphasize margin & profit
contributions indirectly controlling sales expenses.
Sales personnel operate more efficiently if they recognize
that sales volume increases, expense reductions are important
only if margins & profits result.
Ideal for product lines containing both low & high margin
items.
ACTIVITY QUOTAS
To control how sales personnel allocate their time & efforts
amongst different activities – these need to be pre-defined – then
setting performance frequencies.
Activity quotas are generally set for non-selling activities e.g.:
• Total sales call on particular classes of customers.
• Calls on new prospects – number of new accounts opened.
• Missionary calls, number of demonstrations, placement &
erection of displays.
• Making collections.
COMBINATION AND OTHER POINT SYSTEM QUOTAS

Combination quotas control both selling & non-selling activities.

To overcome difficulty of using different units of measurement

performances are computed as percentages or points.
Each activity or aspect of the sales job s weighted according to
management’s evaluation of its importance.
Combination quotas summarize overall performance in a single
measure.
QUOTA-SETTING PROCEDURES
• Sales Volume Quotas derived from territorial sales
potentials
Appropriate when territory sales potential is determined in
conjunction with territorial design or when bottom-up
planning & forecasting procedures are used.
• Sales Volume Quotas derived from total market estimates

Used as a top-down approach where neither statistics nor
sales force estimate of territorial sales potentials are
available.
Management breaks down company sales estimate into
territorial sales estimates on the basis of indices and
adjustment is made for environmental factors and personnel
effectiveness either at only territory level OR convert sales
estimate to company volume quota and break it down
territory wise and make adjustments both at company &
territory level.
• Sales Volume Quotas based on past sales experience alone

It is a crude method of applying a uniform percentage
increase to past year’s sales or the average sales of past few
years.
Implies carry forward of past mistakes.
• Sales Volume Quotas based on executive judgment alone

Justified in cases where there is no past data such as for new

products.
• Sales Volume Quotas related to compensation plan

Based on Salary & Commission or straight Commission
plans of compensation to the sales force.
• Letting sales personnel set their own sales volume quotas

Usually done when management has no information and it is
assumed sales force personnel are the best judge of the sales
potential in their territory.
ADMINISTERING THE QUOTA SYSTEM
• Accurate, Fair & Attainable Quotas
• Securing & Maintaining Sales Personnel’s Acceptance of
Quotas
- Participation by Sales Personnel in Quota Setting –
leads to understanding and acceptance of fairness
- Keeping Sales Personnel informed – of progress related
to quotas.
- Need for continuous managerial control – arrangements
for gathering & analyzing performance statistics with
minimum delay on monthly / weekly basis.

PROMOTIONAL STRATEGY / PROMOTIONAL MIX –
To STIMULATE SALES companies resort to a variety of

Activities:
• Improving their products
• Increasing their services
• Extending their channels

• Reducing their prices
• PROMOTION activities – i.e.

DIRECTING PERSUASIVE COMMUNICATIONS TO
THE BUYERS
Promotional activities are generally classified into FOUR sub-

activities:
1. ADVERTISING –
Any PAID form of NON-PERSONAL presentation &
promotion of ideas, goods & services by an IDENTIFIED
SPONSOR.
2. PERSONAL SELLING –
ORAL presentation in a CONVERSATION with one or more
prospective purchasers for the purpose of making sales.
3. SALES PROMOTION –
Those marketing activities, other than ADVERTISING,
PERSONAL SELLING & PUBLICITY, that stimulate
consumer purchasing and dealer effectiveness – such as
displays, shows & exhibitions, demonstrations & various
NON-RECURRENT selling efforts not in the ordinary
routine.
4. PUBLICITY –
NON-PERSONAL stimulation of demand for a product by
PLANTING commercially significant NEWS about it in a
PUBLISHED MEDIUM or obtaining FAVORABLE

PRESENTATION of it on RADIO, TV or STAGE that is

NOT PAID FOR by the sponsor.
PERSONAL SELLING OBJECTIVES
QUALITATIVE
These are long term and concern the contributions expected

from Personal Selling to achieve long-term Company
objectives. Generally carried over from one promotional
program period to the next & so on. Based on sales policies &
personal selling strategies and their role in the total
PROMOTIONAL PROGRAM.
Some examples:
1. To do the entire selling job. (No other elements in the
promotional mix)
2. To service the existing accounts. (Contacts with & orders
from current customers)
3. To search out & obtain new customers.
4. To secure & maintain customers co-operation in stocking &
promoting the product line.
5. To keep customers informed on changes in the product line.
6. To assist customers in selling the product line. (Missionary
Selling)
7. To provide technical advice & assistance to customers.
8. To carry out the training of middlemen’s sales personnel.
9. To provide management advice & assistance to middlemen.
10. To collect & report market information to Company.

QUANTITATIVE
These are short term and adjusted from one promotional

period to another.
SALES VOLUME is the key Quantitative objective.
Other quantitative objectives derive from the Sales Volume

objective and examples of these are:
1. To capture & retain a certain market share.
2. To obtain sales volume and ensure profitability by selling
“OPTIMUM MIX” of Company products.
3. To get certain numbers of new customers of given types.
4. To keep expenses within set limits.
5. To secure targeted % of certain accounts business.
PERSONAL SELLING
Along with other marketing elements like, Pricing, Advertising,
Product Development & Research, Marketing Channels &
Distribution
PERSONAL SELLING is one of the means of implementing

Marketing Programs
SALESMANSHIP

One of the skills used in Personal Selling
“ is the art of successfully persuading prospects or customers

to buy products or services from which they can derive suitable
benefits, thereby increasing their total satisfactions.”
Both Personal Selling & Advertising make use of salesmanship

techniques. Advertising, often described as “salesmanship in
print” utilizes non-personal presentations, which are generally
less flexible than those made by sales personnel, who can
identify differences among buyers and make presentations
according to individual peculiarities.
CATEGORIES OF SALES POSITIONS
Group A (Service Selling)

1. Inside Order Taker – Counter salespersons
2. Delivery Salesperson – Delivers products e.g. Milkmen
3. Route or Merchandising Salesperson – Order Taker in field
e.g. Soaps, Spices
4. Missionary – Only build goodwill & educate customers e.g.
Pharmaceutical
5. Technical Salesperson – Consultant / Providing technical
knowledge e.g. Engineering
Group B (Developmental Selling)

1. Creative Salesperson of Tangibles – Vacuum Cleaners,
Automobiles, Encyclopedias
2. Creative Salesperson of Intangibles – Insurance, Advertising
Group C (Developmental Selling but requiring unusual

creativity)
1. Political / Indirect / Back-Door Salesperson – High Value
based on contacts, entertainment

2. Salesperson engaged in Multiple Sales – Presentations to

several individuals / committees – Only one can say YES but
all can say NO e.g. Account Executive in Ad Agency
THEORIES OF SELLING
1. AIDAS Theory of Selling

Attention
Interest
Desire
Action
Satisfaction
2. “Right Set of Circumstances” Theory of Selling

Situation-Response Theory holds that the particular
circumstances prevailing in a given selling situation
cause the prospect to respond in a predictable way.
3. “Buying Formula” Theory of Selling
Adequacy Adequacy
⇑ ⇑
Need or  Product &/or  Trade Name  Purchase 
Satisfaction
Problem Services
⇓ ⇓
Pleasant Pleasant
Feelings Feelings

4. Behavioral Equation Theory
B=PxDxKxV
Where
B = response or the internal response tendency i.e. act
of purchasing a brand or patronizing a Supplier
P = predisposition or the inward response tendency i.e.
force of habit
D = present drive level (amount of motivation)
K = “incentive potential” i.e. value of the product or its
potential satisfaction to the buyer
V = intensity of all cues: triggering, product or
informational
PROSPECTING
Efficient organization & thorough planning of work are the
earmarks of above-average Salespersons.
• They arrange travel & call schedules to economize on time
spent en route and distance traveled
• They make appointments to avoid prolonged waiting for
callbacks
• They do not waste time trying to sell to people who cannot or
will not buy

The planning work, which is essential in eliminating calls on

non-buyers is called PROSPECTING.
STEPS IN PROSPECTING
• Formulating Prospect Definitions – Identifying
characteristics of profitable accounts should be recognizable
from information appearing in Directories or Lists.
• Searching out Potential Accounts – Comb different sources
like directories of all kinds, credit lists, membership lists,
news & notes in trade papers & business magazines. Another
important source is customer leads.
• Qualifying Prospects & determining probable
requirements – Last resort to qualify could be a personal
visit.
• Relating company products to each Prospect’s
requirements.
SALES RESISTANCE
• OBSTACLES TO SALES
Not sales objections - Real or apparent reasons for not
buying.
If obstacle can be circumvented – say providing loans in case
of finance shortage – present the solution.
• SALES OBJECTIONS
Never good reasons for failing to complete the sale – but
divert attention from the presentation.
Sincere objections trace to incompleteness, inaccuracy or
vagueness of the sales presentation. They are overcome by
patient & thorough explanations.
CLOSING SALES

Indirect Close – attempt to get order without asking for it – by

asking prospect to state a preference for say model, color delivery
requirement etc.
Salesperson needs effective persuasion to close the sale – Ask

for the Order.
Refusal may indicate prospect’s need for additional information or
clarification of some point. Provide this and try another close.
KINDS OF COMPETITIVE SETTINGS
1. Pure Competition
No single buyer or seller is large enough to affect the
product’s total demand or supply.
All sellers’ products are identical, so buyers indifferent
from whom they buy.
No artificial restraints or control of prices.
All buyers are always informed about all sellers’ prices.
2. Monopolistic Competition
There may be a large number of sellers of a generic
kind of product but each seller’s brand is in some way
differentiated from every other brand (at least in final
buyer’s mind).
Most ultimate consumers are not fully informed about
the offerings of the competing sellers.
Sellers differentiate their offerings through
individualizing one or several components of overall
marketing strategy. Advertising and personal selling are
the critical elements in implementing such an overall
marketing strategy.
3. Oligopolistic Competition

Number of competitors is small enough that they are

individually identified and it is difficult for new
competitors to enter the market.
Each competitor is large enough and has a substantial
market share that changes in its overall marketing
strategy has repercussions on the others.
The successful firms keep growing and the less
successful fail or disappear through mergers.
Personal selling strategy plays important roles in
building & maintaining dealer cooperation, servicing
the distribution network and in gathering information
on competitor activities.
Advertising and personal selling are the critical
elements in implementing overall marketing strategy.
4. No Direct Competition
Monopolistic companies on long term basis and
companies marketing new products in the initial
pioneering stages have no direct competition.
Both vie with sellers in other industries to attract
customers.
Both must initiate and stimulate primary demand
through promotional strategies.
COMPANY’S COMPETITIVE POSTURE

A company’s competitive posture is shaped by the
• Competitive Setting
• Overall Marketing Strategy
• Effectiveness of Strategy Implementation
PERSONAL SELLING STRATEGY
Sales-related marketing policies provide guidelines for making
decisions in personal-selling strategy on the kinds and sizes of
sales force required.

Qualitative and quantitative personal-selling objectives vary with

the kind of competitive setting and concern the nature of
contribution management expects from personal selling towards
long-term company objectives and achievement of short-term
volume objectives.
Qualitative objectives and long-term company objectives

influence the nature of the sales job (i.e. the kind of sales
personnel needed).
Quantitative objectives on the other hand impact more upon

the size of the sales force more than upon the nature of the
sales job.
DETERMINING THE KIND OF SALES PERSONNEL

• Product Market Analysis
• Analysis of Salesperson’s Role in Securing Orders
• Choice of Basic Selling Style
1. Trade Selling
2. Missionary Selling
3. Technical Selling
4. New-Business Selling
DETERMINING THE SIZE OF THE SALES FORCE

• Work Load Method
• Sales Potential Method
• Incremental Method
INDIVIDUALIZING SELLING STRATEGIES TO

CUSTOMERS
The acid test of appropriateness of personal-selling strategy comes

when particular sales people interact with particular customers.

From the composite of all such interactions evolves the company’s

achievement of its personal-selling objectives.
WORK LOAD METHOD – 6 STEPS
1. Classify customers, both present & prospective, into sales

volume potential categories. (it should be possible to
distinguish the selling effort required for each class.) Assume
there are 880 present & prospective customers in the
following classes:
• Class A Large Customers 150 accounts
• Class B Medium Customers 220 accounts
• Class C Small Customers 510 accounts
2. Decide on the length of time per sales call and desired call
frequencies on each class:
• Class A: 60 minutes/call x 52 calls/year = 52
hours/year
• Class B: 30 minutes/call x 24 calls/year = 12
hours/year
• Class A: 15 minutes/call x 12 calls/year = 3
hours/year

3. Calculate the total work load involved in covering the entire

market:
• Class A: 150 accounts x 52 calls/year = 7800 hours
• Class B: 220 accounts x 24 calls/year = 2640 hours
• Class A: 510 accounts x 12 calls/year = 1530 hours
TOTAL 11970 hours
4. Determine the total work time available per salesperson

Assume 4 weeks are allowed for holidays, sickness etc:
40 hours/week x 48 weeks = 1920 hours/week
5. Divide the work time available per salesperson by task:

• Selling Tasks 45% 864 hours
• Non-selling Tasks 30% 576 hours
• Traveling 25% 480 hours
TOTAL 100% 1920 hours
6. Calculate the total number of salespeople needed:

11970 hours / 864 hours = 14 salespeople needed
Assumptions:
1. All salespersons should have equal workloads.
2. Disregards profit as a consideration.
3. Optimum length and frequencies of sales call depends on
many factors besides sales volume or sales volume potential
– as has been considered here.
4. All salespeople utilize their time with equal efficiency.

NATURE OF SALES MANAGEMENT POSITIONS
SALES MANAGER DISTRICT SALES

MANAGER
Reporting to Vice President Sales Manager
(Marketing)
Job Objectives Maximize sales volume Maximize sales volume
by effective in the sales district as
development & per established sales
execution of sales programs & policies
programs & policies within limits of sales
for all products sold by budget
the Division
Duties & 1. Sales Program 1. Supervision of
Responsibilities 2. Organization Sales Personnel
3. Sales Force 2. Control
Management 3. Administration
4. Internal & 4. Communications
External
Relations
5. Communications
6. Control
Performance 1. Sales value & 1. District sales
Criteria volume exceed value & volume
budgets exceed budgets
2. Profit 2. District expenses
contribution is as are below
per plan budgeted amounts
3. Sales plans are in 3. Profit
writing & contributions of
acceptable to District,
marketing Warehouse etc.
management are as per plans
4. Turnover of Sales 4. Turnover of
Personnel are District Sales

within Personnel are

satisfactory limits within satisfactory
limits
FUNCTIONS OF SALES EXECUTIVES
1. Administrative Skills for handling Sales Personnel – personal

selling experience is desirable.
2. Operating functions like sales force management, handling

relationships with other departments and with trade &
customers, communicating & coordinating with marketing,
reporting to superiors and selling to some customer accounts.
3. Planning functions include setting personal selling goals,

developing sales programs, formulating sales policies &
personal selling strategies and establishing plans for
implementation; designing & shaping the sales organization
while providing leadership; and taking responsibility for
achieving goals & controlling activities & expenses.
4. Relative emphasis on Operating and / or Planning functions

depends on (1)the types of products, (2)the size of the
company and (3)the type of supervision.
QUALITIES OF EFFECTIVE SALES EXECUTIVES
1. Ability to define the position’s exact functions & duties in

relation to the goals the company should expect to attain.
2. Ability to select and train capable subordinates and
willingness to delegate sufficient authority to enable them to
carry out assigned tasks with minimum supervision.
3. Ability to utilize time efficiently.
4. Ability to allocate sufficient time for thinking and planning.

5. Ability to exercise skilled leadership.
RELATIONSHIP WITH TOP MANAGEMENT
• Harmonizing personal goals with company goals and if

necessary reconcile them through interaction with top
management.
• Accept responsibility for all activities related to their
positions but avoid becoming indispensable by delegating
authority and training their own replacements.
• Qualified problem solvers and decision makers requiring
minimum close supervision by top management.
• Keep top management informed on important decisions,
department plans and accomplishments. Communicate their
thinking about the market.
RELATIONSHIP WITH MANAGERS OF OTHER

MARKETING ACTIVITIES
• RELATIONS WITH PRODUCT MANAGEMENT

Product planning and formulation of Product Policies
• RELATIONS WITH PROMOTION MANAGEMENT

Key source of market knowledge – contribute to formulating
promotional policies and plans.
Strategic position in implementing promotional plans –

coordinating the activities of sales personnel, distributors &
dealers.
• RELATIONS WITH PRICING MANAGEMENT

Compared to other company executives they have much
clearer ideas of the prices final buyers are willing to pay.

Once pricing policy is established its implementation is the

sales executive’s responsibility – as sales department has the
closest relationship with the market.
• RELATIONS WITH DISTRIBUTION MANAGEMENT

Selection of distribution channel sets the pattern of sales
force operations – nature of their jobs, number of sales
persons, need for supervision.
THE SALES ORGANIZATION

The sales organization is the vehicle for implementing Personal
Selling strategy.
It should be adjusted to fit – ideally to anticipate – changing
situations.
It should have in-built adaptability to respond appropriately to
marketing conditions.
PURPOSES OF SALES ORGANIZATIONS

• To permit the development of specialists – assignment of
responsibility and delegation of authority.
• To assure all necessary activities are performed – formal
responsibility for carrying out activities becomes necessary
with growth to avoid forgetting.
• To achieve coordination or balance – gain synergistic effects
of team-work – reconciliation of personal goals to
organizational goals.
• To define authority
- line (power to require execution of orders);
- staff (power to suggest methods to those holding line
authority); or
- functional (enables specialists to enforce their
directives in their particular areas).

• To economize on executive time – delegation of authority to

subordinate levels. Effective coordination limits number of
subordinates to proper “span of control”.
SETTING UP A SALES ORGANIZATION

Most problems of sales organization are problems of
reorganization. It is appropriate to approach organization problems
as though a completely new organization were being built. Five
major steps in setting up sales organization are :
1. Defining the Objectives.
• Qualitative – Achieve Sales Volumes, Make Profits,
Long-term Growth
• Quantitative – Assigned specific definite Operating
Goals
2. Delineating the necessary activities.
• Determining all necessary activities
• Estimating their volume of performance
3. Grouping activities into “jobs” or “positions”.
• Activities are classified and grouped so that closely
related tasks are assigned to the same positions
• Activities of crucial importance to sales success are
assigned high up
• Groups of related jobs are brought together to form
departmental sub-divisions
4. Assigning personnel to positions.
• General positions can be filled by many people
(suitably qualified or trained)
• Planners prefer to have individuals grow into jobs
rather than modify job specifications to suit individuals
having unique talents and abilities
5. Providing for coordination and control.
• Sales executives must have adequate time for
coordinating efforts of those reporting to them

• Formal instruments of control are necessary to improve

effectiveness of sales executives. Some of the important
formal instruments are:
• WRITTEN JOB DESCRIPTION
- reporting relationships, job objectives, duties &
responsibilities and performance measurements
- provide clear picture of roles in the sales
organization
- useful for employee selection and basis for
training
- yardsticks for appraising self-performance
• ORGANIZATIONAL CHART
- shows formal relations among different positions
- reduces confusion about individual’s role
• ORGANIZATIONAL MANUAL
- contains company & department organizational
charts
- write-up of job-descriptions & specifications
- summaries of major company & department
objectives and policies
BASIC TYPES OF SALES ORGANIZATIONAL

STRUCTURES
LINE SALES ORGANIZATION

General
Manager
Sales
Manager
Assistant Assistant Assistant Assistant
Sales Sales Sales Sales
Manager Manager Manager Manager
Division 1 Division 2 Division 3 Office
Salespeople Salespeople Salespeople Office

Staff
LINE & STAFF SALES ORGANIZATION

President
Advertisin General Marketin
g Manager Sales g
Manager Research
Manager
Director Director Assistant Assistant Sales
Sales Sales General to General Promotion
Training Personnel Sales Sales Manager
Manager Manager
District
Sales
Manager
s
Branch
Sales
Manager
Sales
Personnel
FUNCTIONAL SALES ORGANIZATION

General
Sales
Manager
Installation Sales Sales Sales Dealer &
& Service Training Supervisio Promotio Distributor
Manager Manager n Manager n Relations
Manager Manager
Salesman Salesma Salesman Salesman Salesman
n
COMMITTEE SALES ORGANIZATION

It is a method of organizing only the executive group for planning

and policy formulation while leaving the actual operations,
implementation of plans & policies to individual executives.
FIELD ORGANIZATION OF THE SALES DEPARTMENT

The field organization consists of all employees of the sales
department who work away from the home office. The two main
purposes of the field organization are:
1. to facilitate the selling task
2. to improve the chances that salespeople will achieve their
goals.
CENTRALIZATION VERSUS DECENTRALIZATION

With growth the advantages of decentralized sales force
management increasingly outweigh the costs. These advantages
are:
1. More intensive cultivation of the market
2. More effective control, improved supervision & increased
sales productivity
3. Improved customer service
4. Reduced need for and costs of territorial break-in time due to
local recruitment
5. Improved sales force morale – closer contacts with
executives & lesser traveling
6. Lower travel expenses
7. Built-in management development program – Branch &
District offices provide realistic training and serve as proving
grounds for future sales executives.
DIVIDING LINE AUTHORITY IN SALES

ORGANIZATION
• Geographic Division of Line Authority

General
Sales

Manager
Director Director Director Eastern Central Western
Sales Training Advertisin Division Division Division
Analysis & Sales g & Sales Sales Sales Sales
Personne Promotion Manager Manager Manager
l
Branch Branch Branch
Sales Sales Sales
Manager Manager Manager
Salesme Salesme Salesmen
n n
• Product Division of Line Authority

General
Sales
Manager
Director Director Director Sales Sales Sales
Sales Training Advertisin Manager Manager Manager
Analysis & Sales g & Sales Product 1 Product 2 Product 3
Personne Promotion
l
Sales Sales Sales
Personne Personne Personnel
l Product l Product Product 3
1 2
• Customer Division of Line Authority

General
Sales
Manager
Sales Training Advertisin Manager Manager Manage
Analysis & Sales g & Sales Lumber Constructio Mining
Personne Promotion Industry n Industry Industr

l
Branch Branch Sales Branch
Sales Manager Sales
Manager Manage
Salesme Salesmen` Salesme
n
• Marketing Channel Division of Line Authority

General
Sales
Manager
Sales Training Advertisin Manager Manager Manage
Analysis & Sales g & Sales Wholesal Institutiona Export
Personne Promotion e Sales l Sales Sales
l
Branch Branch Branch
Sales Sales Sales
Manager Manager Manage
Salesmen Salesmen Salesme
SALES FORCE MANAGEMENT

Special kind of personnel management due to following features:
• No close and constant supervision
• Work away from coworkers & immediate superiors
• Freer rein – plan & control own activities
• Visit office infrequently – most direction by phone & mail

• Away from home & family for extended periods

• Success or failure depends on prospect’s & customer’s
actions
• Disheartening rebuffs & order turndowns require
salespersons to repress normal responses & to suppress
natural tendency to become discouraged
INITIAL STEPS OF SALES FORCE MANAGEMENT

1. SALES JOB ANALYSIS
Assembling and analyzing factual information on specific
jobs.
Listing of activities to be performed.
2. SALES JOB DESCRIPTION

It is the output of sales job analysis covering
- job objectives
- component duties & responsibilities
- performance criteria
- reporting relationships.
3. PREPARATION OF SALES JOB SPECIFICATIONS

Focus on the duties & responsibilities portion of the job
description
Determine qualifications needed to perform the job
satisfactorily:
- which ones all new recruits should possess –
personality characteristics & qualifications
- and which ones will be provided through training.
RECRUITING & SELECTING SALES PERSONNEL

1. Evaluate the sources from which sales personnel with good
potentials are available.

2. Tap the identified resources and build a supply of prospective

sales personnel.
3. Select those who have the highest probability of success.
ORGANIZATION FOR RECRUITING & SELECTION

Can be handled by the following departments in a company:
- Sales department (if it has a personnel staff function
under the Sales Manager)
- Company Personnel Manager (if sales force size is
small)
- Personnel Dept handles some aspects of recruitment &
screening activities and the Sales Dept to handle other
aspects and to make the hiring decision.
1. THE PRE-RECRUITING RESERVOIR

This is a file of individuals who can be recruited when
needed. Names are collected from volunteer walk-ins,
references etc. and may have gone through a pre-interview
evaluation. File should be regularly updated.
2. SOURCES OF SALES FORCE RECRUITS

• RECRUITING SOURCE EVALUATION
Analysis of each source should be done to reveal how
many were recruited and ratio of success to failures.
• SOURCES WITHIN THE COMPANY

1.)Individuals recommended by Company Sales
Personnel
2.)Recommendation of Company Executives
3.)Internal Transfers from
- Non-selling section of sales department
- Other departments

• SOURCES OUTSIDE THE COMPANY

1.)Direct Unsolicited Applications – Walk-in or
Write-in
2.)Employment Agencies
3.)Salespeople making calls on the Company –
Purchase Director
4.)Employees of Customers – with prior approval
5.)Sales Executives Clubs – placement Services
6.)Sales Force of non-competing Companies
7.)Sales Force of competing Companies – require
minimal training
8.)Educational Institutions – specially where
educational qualification is required
9.)Older persons
3. THE RECRUITING EFFORT

Differs mainly in respect of the source of recruits and the
recruiting method.
Determined by selling style appropriate for the companies
products & customers.
• PERSONAL RECRUITING
1.)College Recruiting – Company-wide campus
interviewing.
2.)Recruiting Direct-to-Consumer sales personnel
3.)Recruiting Consultants
• INDIRECT RECRUITING
Newspaper advertisements
- Classified Ads (Situations wanted & Situations Vacant)
- Display Ads
• RECRUITING BROCHURES
- Outlining sales career opportunities to applicants
- Prospective candidates contacted through centers of
influence – i.e. people occupying positions where they

regularly meet people who have high potential as

possible sales people and who are often seeking jobs.
SELECTING SALES PERSONNEL

Simple one-step – informal personal interview.
Complex multi-step systems - incorporating diverse mechanisms.
• PRE-INTERVIEW SCREENING & PRELIMINARY

INTERVIEW
It is the lowest cost step for eliminating obviously
unqualified applicants.
• FORMAL APPLICATION FORM

Serves as a central record for all pertinent information
collected during the selection process. Can also be considered
as a standard written interview.
Objective Scoring of Personal History Items. The total profile
rather than any single item determines the predictive value.
• THE INTERVIEW
Most widely used and sometimes the only step in the
selection system.
1.)Who should do the interviewing?
2.)How many interviews?
3.)Interviewing the Spouse – mainly to find acceptance of
frequent over-night travel and being away for long
periods.
4.)Interviewing Techniques
- Patterned interview
- Non-directive interview
- Interaction (Stress) interview
- Rating Scales – to bring in objectivity.
• REFERENCES

- Present or former employers

- Former customers
- Reputable citizens
- Mutual Acquaintances
• CREDIT CHECKS
• PSYCHOLOGICAL TESTS
Validation of Tests – it measures what it purports to measure.
Basis for evaluation of Tests – reliability, objectivity, cost,
etc.
Types of Tests
1.)Tests of ability – intelligence; aptitude.
2.)Tests of habitual characteristics – attitude;
personal.
3.)Interest Tests – basically assumes related to
motivation.
4.)Achievement Tests – how much one knows
about subject.
PHYSICAL EXAMINATIONS
SALES TRAINING PROGRAMS
Building a sales training program requires 5 major decisions:
A AIM
C CONTENT
M METHODS
E EXECUTION
E EVALUATION

• DEFINING TRAINING AIMS

Defining specific training aims – training needs to e
identified.
IDENTIFYING INITIAL TRAINING NEEDS

Requires analysis of 3 main factors:
1.)Job Specifications.
2.)Trainee’s background and experience.
3.)Sales-related marketing policies of the company.
IDENTIFYING CONTINUING TRAINING NEEDS

Identification of specific training needs of experienced
personnel.
Mainly arise due to:
1.)Basic changes in products & markets.
2.)Sales-related marketing policies, procedures &
organization.
3.)Changes in sales personnel – specially their productivity.
• DECIDING TRAINING CONTENT

Product Data
Sales Technique
Markets
Company Information
• SELECTING TRAINING METHODS

The Lecture
The Personal Conference
Demonstrations
Role Playing
Case Discussion
Impromptu Discussion
Gaming
On-the-Job Training

Programmed Learning
Correspondence Courses
• ORGANIZING THE SALES TRAINING

(EXECUTION)
PHILOSOPHIES OF SALES TRAINING

- Conditioned-Response
- Insight-Response
Who will be the Trainees?
Who will do the Training?

- Initial Sales Training
- Continuing Sales Training
- Sales Training Staff
- Training the Sales Trainers
- Outside Experts
When will the Training take place?

- Timing group versus Individual Training
- Timing Initial Sales Training Programs
- Timing Continuous Sales Training Programs
Where will the Training site be?
Instructional Materials & Training Aids:

- Manuals
- Other Printed Materials
- Training Aids
- Advance Assignments
• EVALUATING SALES TRAINING PROGRAMS

SALES TERRITORY CONCEPT
A Sales Territory is operationally defined as a grouping of

customers and prospects assigned to an individual salesperson. The
main criteria being that they can be called upon conveniently &
economically by the individual salesperson concerned.
Many refer to sales territories as geographic areas. In some

companies and in some peculiar selling situations geographically
defined territories are meaningless:
- E.g. where technical selling style is predominant –
salespersons because of their specializations are assigned
entire classes of customers regardless of their location;
- Small companies and companies introducing new products;
- Salespeople selling to personal acquaintances;
- Localized markets such as when selling real estate &
property insurance, investment securities & even
automobiles.

In most marketing situations it is advantageous to “assign” sales

personnel to territories in consideration of customer’s service
requirements and costs of providing service.
Establishing of Sales Territories:
• Facilitates matching selling efforts with sales opportunities

• Lends direction to planning & control of sales operations
• Allows accumulation of knowledge on company’s strengths
& weaknesses in serving different markets
HOUSE ACCOUNTS
An account not assigned to any individual salesperson but handled

by sales executives or home office personnel. They are:
- Extremely large customers who demand to deal with H.O.
- Responsible for significant shares of company’s total
business
REASONS FOR ESTABLISHING OR REVISING SALES

TERRITORIES
1. PROVIDING PROPER MARKET COVERAGE
2. CONTROLLING SELLING EXPENSES
3. ASSISTING IN EVALUATING SALES PERSONNEL
4. CONTRIBUTING TO SALES FORCE MORALE
5. AIDING IN COORDINATING PERSONNEL SELLING

& ADVERTISING

PROCEDURES FOR SETTING UP OR REVISING SALES

TERRITORIES
1. SELECTING A BASIC GEOGRAPHICAL CONTROL
UNIT
Counties (Districts)
Zip Code Areas
Cities
Metropolitan Statistical Areas (Metropolitan Regions)
Trading Areas
States
2. DETERMINING SALES POTENTIAL IN EACH
CONTROL UNIT
3. COMBINING CONTROL UNITS INTO TENTATIVE
TERRITORIES
- by combining contiguous control areas
- each resulting territory containing approximately the
same sales potential.
Based on how much % of the total sales potential the average

sales person should realize number of sales personnel units &
therefore number of territories is decided.
TERRITORY SHAPES
The shape of the territory affects selling expenses & ease of
sales coverage.
3 shapes are generally used:
• Wedge
Appropriate for territories containing both urban &
non-urban areas.
It radiates out from a densely populated urban center.
• Circle
Appropriate when accounts & prospects are evenly
distributed throughout the area.
Sales person assigned is based near the center.

• Clover Leaf
Desirable when accounts are located randomly.
Each cloverleaf area is best designed if it can be
covered in a week.
Home base is near the center.
4. ADJUSTING FOR COVERAGE DIFFICULTIES AND
REDISTRICTING TENTATIVE TERRITORIES
To remove unrealistic assumption that geographical control
units have similar characteristics.
Large cities have greater sales potential than states requiring
lesser coverage time at lower expense.
Differences in coverage difficulty represent differences in
workloads.
Control units are taken away from difficult to cover
territories and added to easily covered territories.
Total workload in any territory must not exceed the
MAXIMUM DESIRABLE WORKLOAD.
Ultimately territories defined have varying amounts of sales
potential and different-sized workloads.
Optimum territorial arrangement is reached when
incremental sales for marginal selling expense is equated in
all territories.
STEPS FOR REDISTRICTING TERRITORIES
1.)Determine number, location and size of
customers and prospects in each tentative
territory.
2.)Estimate time required for each sales call.
3.)Determine length of time between calls, i.e. time
required to travel from one customer to the next.
4.)Decide call frequencies.
5.)Calculate the number of calls possible within a
given period.
6.)Adjust the number of calls possible during a
given period by the desired call frequencies for
different classes of customers and prospects.

7.)Finally check out the adjusted territories with

sales personnel who work or who have worked
in each area and make further adjustments as
required.
DECIDING ASSIGNMENT OF SALES PERSONNEL TO

TERRITORIES
In territorial planning implicit assumption is that all sales persons
are average.
Sales personnel vary in ability, initiative & effectiveness as well as
in physical condition & energy.
Reasonable & desirable workload for each sales person can differ.
Effectiveness can also vary with the territory assigned.
In assigning sales personnel to territories, management seeks the
most profitable alignment of SELLING EFFORT to SALES
OPPORTUNITY.
The principle is to “ Assign each sales person to the particular
territory where his/her relative contribution to profit is highest.”
ILLUSTRATION OF ASSIGNING SALES PERSONNEL TO

TERRITORIES
1. Assignment of Sales Personnel to Territories of Equal
Potential
Territory Potential Salesperson Ability Predicted Contribution
Assigned Index Sales (25% of
Sales)
A 500,00 1 1.0 500,00 125,000
0 0
B 500,00 2 0.8 400,00 100,000
0 0
C 500,00 3 0.7 350,00 87,500
0 0
Total 1,500,00 1,250,00 312,500
0 0

2. Assignment of Sales Personnel to Territories containing

Sales Potentials proportionate to Salesperson’s abilities
Sales)
A 600,00 1 1.0 600,00 150,000
0 0
B 480,00 2 0.8 384,00 96,000
0 0
C 420,00 3 0.7 294,00 73,500
0 0
Total 1,500,00 1,278,00 319,500
0 0
3. Assignment of Sales Personnel according to ability to

Territories containing different Sales Potentials
Sales)
A 1,000,00 1 1.0 1,000,00 250,000
0 0
B 300,00 2 0.8 240,00 60,000
0 0
C 200,00 3 0.7 140,00 35,000
0 0
Total 1,500,00 1,380,00 345,000
0 0
4. Assignment of Sales Personnel to Territories where

Ability Indexes vary with the Assignment.
Sales)
A 600,00 2 0.9 540,00 135,000
0 0

B 480,00 1 1.0 480,00 120,000

0 0
C 420,00 3 0.7 294,00 73,500
0 0
Total 1,500,00 1,314,00 328,500
0 0
ROUTING AND SCHEDULING SALES PERSONNEL

• Maintain lines of communication
• Optimize sales coverage
Detailed information is required on
- the numbers & locations of customers
- the means & methods of transportation connecting
customer concentrations
- trading area boundaries arising out of natural travel
barriers
• Minimize wasted time
- Backtracking, travel time & non-selling time is reduced
NOTE: A sales person has a different route each time he travels in

a territory if he has to achieve the desired call frequencies and to
incorporate calls on new prospects.
Routing Scheduling & Control

Call reports are compared with route & call schedules.

MOTIVATION
Motivation is goal-directed behavior to achieve
NEEDS – lack of something that reaching a goal could satisfy
DESIRES – positive ardor or strength of feeling
Aspects affecting quality of salesperson’s job and why additional

motivation is necessary:
• Inherent nature of Sales Job
- Succession of ups & downs
- Interaction with pleasant & courteous people on one
extreme to unpleasant & rude people
- Working time as well as after-work hours away from
home – missing out on family life.
• Salesperson’s boundary position & Role Conflicts
- Conflict of Identification – Customer or Company?
- Advocacy Conflict – Identifies with & advocates
customer’s position to other groups in Company
- Conflict in interests of customer & company versus
own interests of earning based on selling as much as
possible.
• Tendency towards Apathy
- Dealing with same customers in same territory over
years leads to losing interest & enthusiasm
- Familiarity on both sides leads to incomplete use of
effective techniques.
• Maintaining a group identity
- Working alone most of the time – team spirit is weak
- Participating in a cooperative endeavor requires
motivation & working conditions to promote group
feeling for achieving group performance standards.
NEED GRATIFICATION & MOTIVATION

• All human activity - including salesperson’s behavior – is
directed towards satisfying certain needs.

• Different patterns of behavior arise out of different sets of

needs.
• Particular persons behave according to the nature of their
fulfilled & unfulfilled needs.
• PRIMARY NEEDS
- Inborn and fulfillment is basic to life itself
- Physiological needs like food, water, rest, sleep, air etc.
- Until these are satisfied others have little motivational
influence.
• SECONDARY NEEDS
- Arise from individual’s interaction with the
environment
- Develop with maturity
- Include safety & security; belonging & social relations;
self-esteem & self-respect.
1. HIERARCHY OF HUMAN NEEDS – As Visualized by

A.H. Maslow
Self-Actualization Needs
Esteem Needs
Belonging & Social Relations Needs
Safety & Security Needs
Basic Physiological Needs
2. MOTIVATION HYGIENE THEORY – Fredrick Herzberg

Basic Premise – Job Dissatisfaction is not the opposite of Job

Satisfaction
Deficiency in fulfilling Hygiene needs cause job Dissatisfaction
WHEREAS fulfilling Hygiene needs does not lead to Job
Satisfaction but in reaching a “Neutral Point” – Fair Day’s Work.
At the “fair Day’s work” point the individual is ready for influence
by motivation factors.
MOTIVATION FACTORS
Nature of Work itself
Achievement
Growth Potential
Recognition
Responsibility
Advancement
HYGIENE FACTORS
Interpersonal Relations – Peers, Supervisors & Subordinates
Company Policy
Job Security
Work Conditions
Salary
Personal Life
ACHIEVEMENT- MOTIVATION THEORY – David

McClelland

If a person spends enough time thinking about

- doing his job better,
- accomplishing something unusual or important or
- advancing his career
such a person has a high need for achievement.
Such individuals
1. Like problem situations in which they take personal
responsibility for finding solutions.
2. Tend to set achievable goals (reasonable possibility of
reaching)
3. Want feedback on how they are doing.
These individuals are Self-Motivated & continually strive to

improve their performance.
McClelland and his co-investigators used Thematic

Apperception Test (TAT) to identify such individuals for
targeting for selection as salespersons.
EXPECTANCY MODEL – Vroom

Perceived
___ Performance-
Rewards/_
I Punishments
I
I Relationship
I
I I
Perceived I
I
__ Effort-Performance_ I
I
I Relationship I I
I

I I I I
I I I I
Individual Individual Individual Organizational
Needs (Goals) Behavior Performance Rewards
I (Effort) Punishments
I I
I I
I___________________RECYCLING______________________I
INTERDEPENDENCE & MOTIVATION

In the formal Organization Plan each salesperson reports to
someone. Theoretically the superior has the authority (the formal
right to require action of others) to require the sales person to take
action, which is equated with power (the ability to get things
done), and the salesperson is obligated to carry out the superior’s
orders.
In practice on many occasions there is a little problem in having

orders & directions put into effect. It depends on upon the
relationship between the salesperson & the superior.
A wholly dependent salesperson accepts the superior’s exercise of

authority as fully appropriate – leading to almost blind obedience.
On the other extreme they are equally interdependent like friends
and authority is meaningless.
The usual situation is of partial dependence and the salesperson

regards the superior’s exercise of authority as appropriate in some
circumstances and not in others. Each salesperson has a “zone of
acceptance” over which he accepts direction from the superior and
each superior has a similar zone over which he honors requests
from the salesperson.

Within their respective zones also the salesperson & the superior
exhibit a degree of acceptance, which varies according to the exact
circumstances. Through effective supervision the superior satisfies
many of the salespersons needs and in turn gets better cooperation
from them in striving for organizational goals.
MOTIVATION & LEADERSHIP

Effective sales executives are leaders of sales personnel – earning
voluntary cooperation and motivating them individually & as a
group to reach departmental goals:
• Setting good example
• Treat salespersons fairly in respect of assignments,
promotions & pay
• Commend good work and discuss shortfalls privately
• Consultative approach to changes.
MOTIVATION & COMMUNICATION

Good communication is essential to maintain good morale and
high productivity. It means free discussion of problems & freedom
of expression.
• Interpersonal Contact
• Motivational Interviews
• Written Communications
UNIONIZATION OF SALES PERSONNEL

Little progress as it is difficult to develop strong group
identification.

REQUIREMENTS OF A GOOD SALES COMPENSATION

PLAN
1. Provides a living wage preferably a secure income
2. Does not conflict with motivational program – belonging to a
team
3. Fair – does not penalize for factors beyond the salespersons
control
4. Easy for sales personnel to understand
5. Adjusts pay to changes in performance
6. Economical to administer
7. Helps to attain objectives of the sales organization.
DEVISING A SALES COMPENSATION PLAN

1. Define the Sales Job
2. Consider the Company’s General Compensation
Structure
- Use Job Evaluation systems to compare with different
jobs
- Job Evaluation procedure is not scientific but judgment
based
- Ranking / Ordering of jobs without considering
individuals doing it
- Purpose to arrive at fair compensation relationship
amongst jobs.
- Job Evaluation Methods:
(i) Simple Ranking – only overall appraisal

(ii)
Classification or Grading – based on job
responsibility, skills required, supervision
given & received, exposure to unfavorable /
hazardous working conditions. All jobs in
same class or grade have same base
compensation.
(iii) Point System – establishing & defining
factors common to most jobs e.g. mental &
physical skills, responsibility, supervision
given & received, personality required,
minimum education required etc. Each factor
is given minimum & maximum points, the
ranges depending on the relative importance
of the factors. Appraised factor scores are
combined into total point values for each job.
Different bands of point scores signify
different compensation classes.
(iv) Factor Comparison Method – resembles point
system but uses a scheme of ranking & cross-
comparisons. Generally evaluated in value
terms.
- Job Evaluations are made whenever decisions are made
about the relative worth of jobs – sometimes informally
- Many sales executives feel sales personnel
compensation levels should be based on the external
demand & supply factors.
3. Consider Compensation Patterns in Community &
Industry
(i) What compensation systems are being used?
(ii) What is the average compensation for similar
positions?
(iii) How are other companies deciding their
compensation plans?
(iv) What are the pros & cons of departing from
the industry or community patterns?

4. Determine Compensation Level

The company decides what type of sales personnel it wants to
employ for achieving its personal selling objectives and what
should be the average amount of compensation.
5. Provide for various Compensation Elements
Four basic elements:
(i) Fixed element –either salary or drawing
account to provide some stability of income
(ii) Variable element – commission, bonus or
profit-sharing to serve as an incentive
(iii) Element covering Fringe benefits – or
“plus factor” benefits like paid vacations,
sickness & accident benefits, life insurance,
pensions etc.
(iv) Element for Reimbursement of expenses or
payment of expense allowances.
Most companies choose various combinations depending on
their particular selling situation. Proportions of different
elements vary – most however split the fixed to variable
elements on a 60:40 to 80:20 basis.
6. Special Company Needs & Problems
A company can usually construct a plan, which increases
marketing effectiveness to solve specific problems like:
- Emphasizing high margin products
- To obtain large volume orders
- More effort on non-selling activities like more
displays / local advertisements by dealers / retailers
- Focusing on getting new customers
- Controlling traveling & other expenses and making
collections
- Gathering market information & reporting.
7. Consult present Sales Force
8. Reduce tentative Plan to writing & pretest it
Normally pre-testing is done mathematically – usually
computerized re-working on past year/s data.

9. Revise the Plan

10. Implement the Plan & provide for Follow-up
Periodic checkups indicate needs if any for further
adjustments / revisions.
TYPES OF COMPENSATION PLANS

1. Straight Salary Plan
- Fixed sum at regular intervals – total payments for their
services
- Common amongst industrial goods companies; jobs
requiring extensive missionary / educational work; jobs
including servicing and providing technical &
engineering advice; salespersons doing considerable
sales promotion / non-selling work; trade selling order-
taking salespersons
- Provides strong financial control over sales personnel
and management can direct their activities along most
productive lines with minimum opposition.
- Provides stability of income & freedom from financial
uncertainties to the sales personnel
- Since there are no monetary incentives many sales
people end up doing just an average job.
2. Straight Commission Plan
- Sales persons paid according to their productivity –
sales volume is usually considered the best productivity
measure
- Straight commission with sales personnel paying their
own expenses OR company paying their expenses
- Advances may OR may not be paid against earned
commissions
- Progressive or Regressive changes in rates of
commissions as sales volume rises to different levels
- Different commission rates for different products OR
different categories of customers OR during different
selling seasons

- Provides maximum direct monetary incentive to sales

persons to strive for higher volumes
- Means of cost control as sales compensation becomes
virtually a variable expense – except for traveling and
miscellaneous expenses
- Provides little financial control over sales persons
activities – they give secondary importance to non-
selling activities like reporting, new customer
prospecting, sales promotion; avoid selling high-margin
hard-to-sell products; resist reductions or change in
territory etc.
- Costs of checking & auditing are higher
- Efficiency may decline due to uncertainty of income.
3. Combination Salary & Incentive Plan
- These are designed so that sales personnel can have
both the security of stable incomes and the stimulus of
direct financial incentives
- Greater cooperation from the sales force and a morale
booster
- Provides greater flexibility to management for
adjustment to changing conditions
- Clerical costs are higher than in straight salary or
straight commission plans.
USE OF BONUSES
• Bonus is different from commission – it is paid for
accomplishing a specific task.
• Additional financial reward for achieving results
beyond a pre-determined minimum.
• Never used alone but in combination with one of the
three compensation plans.
FRINGE BENEFITS
• Do not bear direct relation to job performance.
• Given to all employees - some of these benefits are
required by law.

• Range from 25 to 50 % of the total sales

compensation package.
• Contribute to safety & security needs and some to
fulfillment of esteem & higher order needs.
MANAGING EXPENSES OF SALES PERSONNEL

• General Expense Ratios
Compensation : Company Sales 0.4 to 8.2 %
Expenses : Company Sales 0.2 to 1.6 %
Total Sales Force Expenses : Company Sales 1.1
to 10.4 %
Expenses : Total Sales Force Expenses 9.3 to 33.3 %
• Sales Expenses – covering traveling, lodging, meals &
entertainment – in most industries varies from 25 % to 50
%.
• Field selling expenses vary by type of pre-dominant
selling style:
- Missionary & Trade selling styles are lower as
entertainment is not involved.
- Technical & New Business require long calls on large
customers as well as entertainment thus making this type
of selling more expensive.
• Degree of formal control over sales expenses varies from
company to company.
Keeping expenses within certain bounds is important on one
hand whereas a degree of liberality is desirable to ensure
sales personnel do not fail to capitalize on market
opportunities due to lack of adequate funds.
REIMBURSEMENT OF SALES EXPENSES

• Sales Personnel pay their own expenses
- Such companies regard the sales personnel as independent
businesspeople.
- Most of them also pay straight commission only.

- No expense records are necessary.

- Compensation levels reflect the fact that sales personnel
pay their own expenses.
- Little management control over their route & call
schedules.
• Reimburse sales personnel for all or part of their
expenses
- When expenses are reimbursable sales management needs
control.
- Reimbursable expenses should be enough to perform
assigned work in expected manner.
- Should take into account customary living standards of
salesperson & customers, with emphasis on the latter.
- Should keep expenses reasonable and should be
economical to administer.
-
METHODS OF CONTROLLING & REIMBURSING SALES
EXPENSES
• Flat Expense Account
• Flexible Expense Account
• Honor System
• Expense Quota
REIMBURSEMENT OF AUTOMOBILE EXPENSES

• Flat Mileage Rates
• Graduated Mileage Rates
• Fixed Periodic Allowance
• Combination Fixed Periodic Allowance & Mileage
Rates
• Runzheimer Plan
SALES MEETINGS
Important for both COMMUNICATION & MOTIVATION

purposes.

Since sales people generally work alone, it is a good idea to hold

periodic group meetings for exchanging information & ideas.
Provide occasions for management to stimulate the group to
improve its performance.
Planning a sales meeting requires 5 major steps:

• A AIMS - Clearly defined objectives –
jokingly called “excuses holding a
meeting”. e.g. :
- New product introduction
- New insights into customer attitudes &
behavior
- Application of proper sales techniques
- New company policies or sales goals requiring
explanation
- Improving quality of sales reports
- Orienting on advertising program &
coordinating tie-in activities
- Increasing effectiveness of time management
- Introducing new services – inventory control.
• C CONTENTS
Agenda – List or outline of things to be considered or
done during a meeting – depends to large extent on the
Aims.
• M METHODS
Local – Short & participative – group discussions best
Regional / National – 2/3 days with wider mix of aims
& contents – hence use a mix of different methods.
• E EXECUTION
- Speakers, Seminar leaders, meeting site & time
- Room & seating arrangements

- Audio-Visual equipment & supplies, provision

of materials, breaks, refreshments etc.
• E EVALUATION
- Whether meeting accomplished its aims
- Feedback for future program planning.
NATIONAL SALES MEETINGS

National meetings can introduce comprehensive marketing / sales
policy changes rapidly & uniformly.
Major executives in the company attend a national sales meeting –
difficult for them to attend a series of decentralized ones.
Sales personnel meet counterparts from other regions & exchange
experiences.
Meeting Head Office personnel leads to better coordination. If
factory is also located at the same place or nearby there is an
opportunity for product training with exposure to manufacturing
details.
The costs of bringing the entire sales force to a central site are
substantial. It is difficult to find convenient time to take off the
entire sales force from the field unless sales are seasonal.
REGIONAL SALES MEETINGS

Head office sales executives & personnel attend the regional sales
meetings – reducing travel costs & loss of selling time.
Focus on unique problems of the region. HO executives learn
about the current problems first hand.
Smaller attendance increases participation per person attending.
Smaller percentage of HO / management participation depreciates
the importance of the meeting in eyes of the sales force and smaller
attendance also not conducive to spirit of contagious enthusiasm.
LOCAL SALES MEETINGS

Weekly or biweekly – last from 15 minutes to couple of hours.

Informally conducted meetings – with each sales person having an

opportunity to pose questions and to state personal views.
Strengthen group identity.
REMOTE CONTROL & TRAVELING SALES MEETINGS

• Closed-circuit television
• Sales meetings by telephone
• Sales meetings at home – essentially by post / written mail
• Traveling sales meetings – where meetings require physical
props – new product demonstration, displays etc. – they can
be done by out-fitting on trucks / trailers / vans etc.
SALES CONTESTS
A Sales Contest is a special selling campaign offering incentives in
the form of cash, prizes or awards beyond those in the
compensation plan.
Purpose is to provide extra incentives to increase sales volume
and / or more profitable sales volume.

Fulfills individual needs for achievement and recognition

(Herzberg’s Motivation-Hygiene theory) or for esteem and self-
actualization (Maslow’s Hierarchy of Needs).
Develops team spirit, boost morale & make personal selling efforts
more productive.
SPECIFIC OBJECTIVES
1. To obtain new customers
2. To obtain larger orders per sales call
3. To push slow-moving items, high-margin goods or new
products.
4. To overcome seasonal sales slump.
5. To sell more profitable mix of products.
6. To improve the performance of distributors’ sales personnel.
7. To promote seasonal merchandise.
8. To obtain more product displays by dealers.
9. To get reorders.
10. To promote special deals to distributors / dealers.
CONTEST FORMATS
• DIRECT
Contest theme describing the specific objective e.g.
- Lets go after new customers
• NOVELTY
Uses a theme, which focuses on a current event e.g.
- Let’s hunt for hidden treasure (new customers)
- Let’s start panning gold (more profitable orders)
CONTEST PRIZES
1. Cash
2. Merchandise
3. Travel
4. Special Honors or Priveleges
CONTEST DURATION

CONTEST PROMOTION
MANAGERIAL EVALUATION OF CONTESTS

• The Contest versus Alternatives
• Short- & Long-Term Effects
• Design
• Fairness
• Impact on Sales Force Morale
OBJECTIONS TO SALES CONTESTS
1. Sales people are paid for their services and there is no need to
reward them further for performing regular duties.
2. High caliber & more experienced sales personnel consider
contests as juvenile & silly.
3. Contests lead to increased returns & adjustments,
overstocking of dealers.
4. Bunching of sales during the competition and sales slumps
occur both before & after the contest.
5. The dissappointment suffered by contest losers lead to
general decline in sales force morale.
6. Contests are temporary motivating factors & if used
frequently they have a narcotic effect.
7. Competitive atmosphere weakens team spirit.

SALES FORCE MANAGEMENT PROCESS
1. Company Goals are defined and appropriate objectives

for the sales department, are derived.
2. To facilitate achievement of objectives, departmental

policies are formulated and plans designed.
3. To execute the policies and implement the plans,

promotional programs & campaigns are mapped out and
other needed actions, such as making changes in the sales
organization are taken.

4. Various sales department activities are coordinated with

each other and with related activities performed by other
organizational units and middlemen.
5. Quantitative performance standards are set and criteria

for appraising qualitative aspects of performance are
selected.
6. Actual performance is recorded.
7. Actual performance is compared with quantitative

performance standards and qualitative performance
criteria and judgment is reached on the significance of the
variations.
8. Indicated actions are taken after deciding:

a. To take “no action” at this time.
b. To increase the degree of attainment of the
objectives.
c. To revise the policy and / or plan, or the various
strategies used in their implementation to better fit
the achievement of objectives.
d. To lower or raise objectives or the standards and /
or criteria used in measuring their degree of
attainment to make them more realistic.
The last four steps of the above process have to do with

EVALUATING & SUPERVISING and constitute what is
known as CONTROL.

PERFORMANCE STANDARDS
• Requires consideration of the Nature of the Selling Job i.e.
sales job analysis.
• They measure progress made toward achievement of sales
department objectives – which could vary with changes in the
company’s marketing situation.
• Quantitative Performance Standards provide description
of what the management expects by defining performance
aspects being measured and the measurement units. Specific
company standards could be a combination of the following:
- Quotas
- Selling expense ratio
- Territorial net profit or gross margin ratio
- Territorial market share
- Sale Coverage effectiveness index
- Call-frequency ratio
- Calls per day
- Order call ratio
- Average cost per call
- Average order size
- Non-selling activities
• Qualitative Performance Criteria are used for appraising

performance characteristics that affect sales results –
specially over the long-run – which defy exact definition but
whose degree of excellence can be evaluated only
subjectively. The measurement could be on continuous or
discrete point scales. These could be a combination of the
following:

- Job Factors
(i) Product Knowledge
(ii) Awareness of Customer Needs
(iii) Relationship with Customers
(iv) Number of Sales Calls
(v) Quota Performance
(vi) Service Follow-up
- Personal Factors
(i) Punctuality
(ii) General Attitude
(iii) Dress & Appearance
(iv) Diligence
(v) Cooperation
(vi) Accuracy
(vii) Adaptability
(viii) Reliability
- Strongest Point
- Weakest Point
RECORDING ACTUAL PERFORMANCE
• Define Information Needs – based on Performance

Standards & vice versa
• Determine Sources of Information
- Sales & Expense records
- Reports of Sales Personnel & lower levels of Sales
Management
• Collect the Information
SYSTEMS OF FIELD SALES REPORTS

• Purposes of Field Sales Reports

(i) To provide data for evaluating performance
(ii) To help sales person plan the work
(iii) To record customers suggestions, reactions &
complaints
(iv) To gather & record information on competitor activity
(v) To report changes in local business & economic
conditions
(vi) To log important information about territory to take
care of change in sales person looking after the territory
(vii) To keep the mailing list updated
(viii) To provide information required by marketing research.
• Types of Sales Force Reports

(i) Progress or Call report
(ii) Expense report
(iii) Sales work plan
(iv) New-Business report
(v) Lost sales report
(vi) Report of Complaint and / or adjustment.
• Reports from Field Sales Management

(i) Actual achievement versus planned
(ii) Individual personnel performances
(iii) Sales meetings
(iv) Complaints
(v) Competitor information
(vi) Local economic conditions.
• Number of Reports
- Minimum necessary to produce the desired information.
• Design & Construction of Reports

- Consistent with purpose & short as possible

- Easy checking-off, convenient size & shape

- Can be easily summarized
CONTROLLING SALES PERSONNEL THROUGH

SUPERVISION
• Conditions under which Supervision is needed

- Sales personnel turnover rate excessive
- High turnover of accounts
- Increased complaints from customers
- Mail or phone orders increasing for no known reasons
- Low ratio of order to sales calls
- Total number of calls very low or very high
- Increasing ratio of selling expenses to sales
- Low morale, negative attitude to company, lack of
enthusiasm.
• Who should supervise?

- Sales supervisor
- Branch Manager
- District (Regional) Manager
- Assistant / Sales Manager from HO.

DISTRIBUTION NETWORKS
• Most producers do not sell their goods directly to the final

users.
• Sets of interdependent organizations involved in the process
of making a product or service available for use or
consumption is a MARKETING CHANNEL.
• In-between intermediaries, performing different functions,
constitute the marketing (trade or distribution) channel.
• Wholesalers & Retailers buy, take title & resell the goods –
MERCHANTS.
• Brokers, Manufacturers’ Representatives, Sales Agents
search for customers & may negotiate on producer’s behalf
but do not take possession – AGENTS.
• Transporters, Warehouses, Banks & Advertisers assist in the
distribution process but do not negotiate or take possession –
FACILITATORS.
CONSUMER & INDUSTRIAL MARKETING CHANNELS

CONSUMER MARKETING CHANNELS
0-level 1-level 2-level 3-level
Manufacturer Manufacturer Manufacturer Manufacturer
Wholesaler Wholesaler
Jobber
Retailer Retailer Retailer
Consumer Consumer Consumer Consumer
INDUSTRIAL MARKETING CHANNELS
0-level 1-level 2-level
Manufacturer Manufacturer Manufacturer
Manufacturer’s
Representative
Industrial Industrial Distributor

Distributor
Consumer Consumer Consumer

SETTING UP DISTRIBUTIVE NETWORKS
ROLE OF THE MANUFACTURER’S SALES FORCE
• Sales Departments are the initiators of the co-operative

programs
• Sales representatives regarded as the Company
• Communication & Interpersonal-relations skills are
important.
OBJECTIVES & METHODS OF MANUFACTURER –

DISTRIBUTION NETWORK CO-OPERATION
• Building Distributive Network loyalty to the

Manufacturer
• Appraisal of manufacturer’s policies and their
implementation
• Analysis of communication System.
• Stimulating Distributive Outlets to greater selling effort

• Changing policies
• Sharing promotional risks with dealers
• Using forcing methods
• Incentives to the Distributive outlet
• Incentives to the distributive outlets’ sales personnel
• Incentives to ultimate consumers.
• Developing Managerial efficiency in Distributive

Organizations
o Dealer training programs
o Assistance in Sales Force management
o Advice & assistance on general management problems
o Shelf-allocation programs

o Missionary sales personnel.
• Identify Source of Supply at Final Buyer Level

o Local Advertising
o Point-of-purchase identification.
DISTRIBUTIVE NETWORK CHANGES & MAINTAINING

RELATIONS
• Evolution of new types of distributive outlets
• Conflict in interests with the old existing network
• Best policy neither to assist nor to throw roadblocks in the
way of the newer institutions
• If the new types are capable of becoming important outlets
for the product, changes in the marketing channels & sales
policies should be considered.

Sales Management

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Sales Management

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SALES MANAGEMENT & PERSONAL SELLING

SALES DEPARTMENTS have responsibility to their

EVOLUTION OF THE SALES DEPARTMENT

• AFTER INDUSTRIAL REVOLUTION

Teaching notes of Vijay Bhandari. Email: vb73@hotmail.com

Sales departments set up after activation of manufacturing &

• ADVENT OF SPECIALIZED SALES DEPARTMENTS

Originally referred to direction of Sales Force Personnel

Teaching notes of Vijay Bhandari. Email: vb73@hotmail.com

AMA ultimately agreed SALES MANAGEMENT meant “the

Sales Managers are also responsible for –

Participating in preparation of information critical to key

OBJECTIVES OF SALES MANAGEMENT

Objectives are translated into more specific goals, that the

Teaching notes of Vijay Bhandari. Email: vb73@hotmail.com