Course Introduction and Distribution Context PDF

COURSE INTRODUCTION Sessions 1 & 2
10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 1

SESSION AGENDA
▪ Part I- Understanding expectations & ▪Part II- Introduction to the topic of interest, sales
discussion on the course outline and distribution management
▪ Course introduction – objectives, focus and ▪Dimensions and drivers for SDM
envisaged outcomes
▪ Choices, systems & behaviors
▪Course administration

UNDERSTANDING
Course Participant Expectations

HUL INVESTOR PRESENTATION(2010)

HUL INVESTOR PRESENTATION TO
CLSA
2018

THE FIRM
Choices
Systems Behaviours

COMPANY X- A HYPOTHETICAL EXAMPLE
Corporate Goal Marketing Sales force strategy Sales force tactics (Action
Strategy Plans)
Increase sales ⚫ Enter export ⚫Identify countries and ⚫Sales Objectives and
volume by 15 markets the correct intermediaries Goals
percent ⚫Penetrate existing ⚫ Sign sales agreements ⚫Getting relevant market
domestic markets information to decide the
selection of countries and
intermediaries
⚫Negotiate and sign

agreements in 3-5 months
COMPANY X – CONT’D
▪What could be the issues?
▪Revisiting some summer internship experiences
▪Coordination, Planning, Training & control issues
This course is about understanding and tackling these issues

SALES & DISTRIBUTION EVOLUTION
▪Creation of separate functional departments
▪Economies of scale
▪Complexity of marketing tasks

ORGANISATIONS NEED STRATEGIC DESIGN
Task Task
Division Allocation
Information Reward
Provision Provision

THE OPERATING ENVIRONMENT PATH SELECTION &
DEPENDENCE
URBAN LADDER
Urban Ladder is all set to close
fiscal 2018 with 10 retail stores, all
of them in its home ground,
Bengaluru, a top executive told
BusinessLine.The company has
allocated $12-15 million for its
offline retail expansion over the
next 18 months. In addition to the
launch of its flagship 7,500 sq ft
retail store and a 750 sq ft sofa
lounge over the last six months,
Urban Ladder opened its third
offline format spread across 5,500
sq ft on Friday in its home city,
Bengaluru.
Producer End User
Sales & Distribution Management
Channel Management
Sales Force Management
Channel operation,
Channel Member Channel
Management Design
Place element of Marketing Mix

QUESTION
What is a Sales & Distribution System?

A DEFINITION
System of relationships existing among businesses that

participate in the process of buying and selling products
& services

SYSTEMS THINKING

SYSTEMS THINKING- A DEFINITION
Understanding a system by examining linkages and

interactions between components

THE SYSTEM MUST SUPPORT FLOWS
Ownership Negotiation Ordering
Financing Promotion
Payment Risk –Taking

KEY ISSUES IN SALES & DISTRIBUTION
MANAGEMENT
▪ Environmental effects on the system
▪How is the system defined? – structure, roles & accountability
▪ How is the system shaped? – selection & capability building
▪ How is the system motivated?- goals, culture, compensation and incentives
▪ How is the system controlled? – coordination, discipline & performance management

SALES FUNCTION Linkages & Scope

SALES
ORGANISATION
Intrinsic to Firm
Survival & Growth

POINTS TO PONDER
Sales and Marketing?

THE REALITY
“When sales are disappointing, Marketing blames
the sales force for its poor execution of an otherwise
brilliant rollout plan. The sales team, in turn, claims
that Marketing sets prices too high and uses too
much of the budget, which instead should go toward
hiring more salespeople or paying the sales reps
higher commissions”

THE NEED TO WORK TOGETHER
Sales Marketing
▪Customer acquisition ▪Product
▪Channel Management Push ▪Price
▪Sales Force ▪Packaging
Management & Pull ▪Costing
▪ Inventory ▪ Margin
▪ Relationship building ▪Branding
▪ Fulfillment ▪Advertising
&Collection ▪PR
▪ After sales service

SCOPE OF THE SALES FUNCTION
Sales Planning Execution-Channel
Management
Forecasting demand Sales team recruitment and
Channel dimensioning by deployment
geography/turnover Channel selection and appointment.
Direction Channel selection process Market coverage norms at unit level.
Customer Segmentation Channel Value proposition Primary
Channel & sales team profile Market coverage norms Secondary
Budget / Cost / Resource Product Promotion plan Claims
Operating Policy- Claims/returns Promotion execution
Sales team dimensioning Market feedback
Training & development. Reporting
Define monitoring and control

A WINNING SALES
FORCE – DIMENSIONS
Results
Drivers Activities
People

DUCK OR RABBIT
Effectiveness defined in terms

of one’s vantage point

DIFFERENT
PERSPECTIVES
Training Manager
VP- Sales Finance
Compensation
Analyst

INTERLINKING & OUTCOMES
The Sales Force
Sales Force Salespersons

Effectiveness Results
Drivers
Activities
Company Customer
Results Results

WHAT ARE THE KEY RESULT AREAS?
Company
Overall Customers
Effectiveness
People Activity

COMPANY RESULT METRICS
▪ Achievement of sales, market share and profitability targets
▪ Growth rate with respect to competition
▪ Cost structure with respect to industry standards

CUSTOMER RESULTS

CUSTOMER RESULT METRICS
▪ Deep customer relationships and customer trust
▪ High customer retention and low defection
▪ A loyal customer base

ACTIVITY RESULTS
Priority & Outcomes

GROFERS- 2017
Grofers, the Indian on-demand delivery service startup backed by top investors,
confirmed today that it has stopped operating in nine cities as first reported in
Inc42.The decision to pull out of Bhopal, Bhubaneswar, Coimbatore, Kochi, Ludhiana,
Mysuru, Nashik, Rajkot, and Visakhapatnam, all major cities in their respective states,
“was just a regular decision to not focus on areas where we were not seeing a
significant number of transactions happening,” Grofers co-founder Albinder Dhindsa
told TechCrunch.

ACTIVITY METRICS
▪ Amount of attention to products of strategic importance
▪ Customer satisfaction with key sales force activities
▪ Time allocation to new and old activities
▪ Quality of activities, given the time spent

PEOPLE RESULTS
Effective activities
through effective
behaviours

PEOPLE METRICS
▪ Salesperson knowledge about products, consumers and competition
▪ Learning and new skill development
▪ Adapting to new selling processes
▪ Turnover of high performers in the company

EFFECTIVENESS METRICS
▪ Strategy and process
▪ Sales force size, structure, roles and territory design
▪ Recruitment, learning & development
▪ Compensation & incentives
▪ Goal setting & performance management

THE CHANNEL (DISTRIBUTION) Sessions- 4, 5 & 7

QUESTION
What value does a channel add?

TRANSACTIONS & COSTS
Total transactions
P1 P2 P3
3 producers
5 customers
= 3 X 5 = 15 nos.
C1 C2 C3 C4 C5

AN INTERMEDIARY
Total transactions
P1 P2 P3
3 producers
1 intermediary
Intermediary 5 customers
= 5 + 3 = 8 nos.
C1 C2 C3 C4 C5

VALUE ADDED BY A CHANNEL
▪Production Vs Consumption
▪Discrepancies of various kinds – Spatial & temporal
▪Need for bulk breaking & provision of assortment
▪Promoting transactional efficiency
▪Need for specialization of roles

KEY DIFFERENCES
Products Services

KEY ISSUE
Finding an Optimal Route to Market

ROUTE TO MARKET
Mix and type of intermediaries chosen by a company

to facilitate the flow of its products/services from the
site of production to the site of consumption

IMPORTANT CONSIDERATION IN RTM
High
Sales ( Potential)- Low

Separation of Push &
Pull Effects
Low High
Value ( Price)/ Volume( Weight) Ratio

UNDERSTANDING THE CONTEXT OF Examples
DISTRIBUTION
WHAT IS THE KEY
SALES DRIVER?
Brand Pull
Control
Location

GENERIC BRANDED RETAIL CHANNEL DESIGN
Company
Own Store/
Franchisee
End Customer/
User

FMCG
Coverage
Assortment Rotation
Hygiene

MARICO -2018

MARICO- CONFLICTS AND CONCERNS
Marico Ltd has over the past year created a differentiated portfolio and
strategy for distribution, sales and marketing of niche premium and mass
brands, said a senior company executive. The shift in strategy comes even as
the company languishes in its core business of selling Saffola and Parachute
oils amid intense competition. "We now have two sets of growth and they are
completely different models and they can happily coexist as opposed to
saying that one is growing at the cost of another,” said Saugata Gupta,
managing director and chief executive officer, Marico.

D-MART

KEY INDICATORS- 2017
Variable D- Mart Competition Comparison
No. of Stores 131 - NA-
Area 4.1 Million Square Feet THPL-.25 Square Feet
Rent % of Sales 1% THPL- 15-20%, ~9% -
Future Group
Sales/ square foot Rs.28,136 Rs.5,300- Future Retail, Rs.
9000/ Trent
Inventory Turnover 9.1% 3.7%- Trent, 1.5 %- Future
Group

DISTRIBUTOR ROI
•Distributor ROI = Annual Net Margin/
Investment
•Annual Net margin= Annual Gross

Margin- Annual Opex- Annual
Depreciation
•Investment= Working capital investment

(Stock Investment)+ credit investment+
Capex+ Opex (working capital)

Investment & Opex
Investment component Nature of cost Opex Component Nature of cost
Rental Related to turnover. low ratio and not

proportionate to turnover. Distributor can
Investment in stock Directly variable with Turnover reduce it further by adding other business
lines
Investment in Market Credit Directly variable with Turnover
Manpower Related to turnover. low ratio and not
proportionate to turnover.
Investment in Capex Tenuously Linked to turnover.
Office overheads Not related to turnover
Significantly lower than
proportionate
Working capital for Opex Function of Opex and is Market coverage opex Related to turnover. low ratio and not
therefore both a low ratio and proportionate to turnover.
not proportionate to turnover.
Depreciation Tenuously Linked to turnover. Significantly
lower than proportionate

WHAT IS VALUE ADD OF TECHNOLOGY AT KIRANA
STORES?
Inventory & Connected Leveraging
Supply Chain Payment Customer
Management Solutions Data
Virtual Loyalty
Catalogue Program
Expansion Development
CONSUMER DURABLES
/APPLIANCES
New / replacement
demand
Customisation Demand
Cycles
In store Activity

GENERIC CHANNEL

PHARMA
COMPANIES
Product Sales &

Attributes Distribution
System

PHARMA OTC PRODUCTS

PHYSICAL DISTRIBUTION- PRESCRIPTION DRUGS

PRESCRIPTION PRODUCTS- INFORMATION FLOW

THE CONSUMER DECISION MAKING PROCESS
Decision Stage
Need Information Evaluation of Purchase Post – Channel
Recognition Search Alternatives Purchase Role
Evaluation
Decision
Type
Impulse
Decisions
Variety
Seeking
Sub-
Contracting

CUSTOMER DECISIONS AND OMNICHANNEL

ROLE OF A SALES MANAGER Contextual Role

Industry Key role of Sales Manager Deliverable Additional Role Support functions
Trial, sampling, below the line

brand promotion
FMCG Re-distribution and Merchandising Availability and display Marketing
Billing to distributors
Distributor ROI
Customer service for

Address Verification(AV)/
Identify prospect, present, detail and
Telecom Postpaid Sales Credit Verification (CV),
convert
activation, data entry and
service
Second Recharge by customer

Re-distribution and Merchandising; Billing to and collection from Customer Service
Telecom Prepaid Availability and display
below the line brand promotion distributor Marketing
Distributor ROI
Key Account Management,

Office Automation Revenue, Sales Billing and collection
Demonstrate and convert
Conversion of walk-in
Consumer Stock merchandising, deals, Counter enquiries Manage Billing and collection
Installation and service team
Durable salesman training, franchisee to achieve Franchisee profit/ ROI
targets,

Industry Key role of Sales Manager Deliverable Additional role Support functions
Sales, Customer
Dealer management, dealer
Automobile management at dealer Finance/Loan support to customers Spares and Service
manpower training
points
Policy verification and

Identify prospects, product
Insurance Sales, revenue Collection approval
presentation, conversion
Claims processing
Manage Key Accounts and

Hotel Revenue Below the line activities
Alliances

“At a leading cement manufacturer in India, the sales force was constantly
complaining about its dealer margins being lower than those of the competition. The
company developed a simple tool that provided salespeople with information on the
returns on capital employed (ROCE) that dealers were making by doing business with
the company. This exercise resulted in insights that surprised both the dealers and the
salespeople. Most dealers were making very healthy ROCE of at least 25 percent,
driven by the fact that the company had strong brand pull, which allowed dealers to
rotate their invested capital faster. This knowledge changed the conversations
between the sales force and the dealers: they went from focusing only on dealer
margins to finding levers jointly to increase ROCE further”

A major Indian auto company that managed to improve its conversion rates at dealerships
by 20 to 30 percent at scale, at a time when competitive intensity had increased
significantly due to multiple brand launches and rapidly changing customer expectations
across channels. The team built a predictive analytics engine that could, in real time, with
eight to ten data points on customers, identify 30 to 45 percent of initial inquiries across
channels that had three times the likelihood of conversion to sales. Furthermore, the
engine provided interesting insights into what could drive conversion even higher, such as
time taken to test-drive or a specific financing offer. These insights on high-priority leads
were then translated, in real time, onto the dealer sales-force tool, along with
recommended “next best action” to prioritize time and effort every day. This approach led
to a 5 to 10 percent increase in sales and a 20 to 30 percent improvement in sales
conversion and was deployed across all the brands by a combined team of sales leaders
and data scientists in the regions.

DISTRIBUTION OF A SERVICE

NANDAN NILEKANI@KALAARI CAPITAL

TREND 1
Low volume, High Volume,

high value & low value and
high cost low cost

TREND 2
Credentials from proprietary to open

TREND 3

TREND 4
Uniform pricing to individual pricing of

risk

TREND 5
From Fee Income to Data

TREND 6

TREND 7
Merchant models ready for disruption

TREND 8
Implications of cash less economy

IMPLICATIONS

TREND 9
Convergence of interest rates

TREND 10

TREND 11

TREND 12

THANK YOU jeevan@tapmi.edu.in

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COURSE INTRODUCTION Sessions 1 & 2

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 1

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 2

Course Participant Expectations

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 3

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 4

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 5

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 13

⚫Negotiate and sign

▪Revisiting some summer internship experiences

▪Coordination, Planning, Training & control issues

This course is about understanding and tackling these issues

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 15

▪Complexity of marketing tasks

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 16

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 17

Sales Force Management

Place element of Marketing Mix

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 20

What is a Sales & Distribution System?

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 21

System of relationships existing among businesses that

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 22

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 23

Understanding a system by examining linkages and

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 24

Ownership Negotiation Ordering

Payment Risk –Taking

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 25

▪How is the system defined? – structure, roles & accountability

▪ How is the system shaped? – selection & capability building

▪ How is the system motivated?- goals, culture, compensation and incentives

▪ How is the system controlled? – coordination, discipline & performance management

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 26

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 27

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 28

Sales and Marketing?

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 29

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 30

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 31

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 32

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 33

Effectiveness defined in terms

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 34

VP- Sales Finance

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 35

The Sales Force

Sales Force Salespersons

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 36

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 37

▪ Growth rate with respect to competition

▪ Cost structure with respect to industry standards

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 38

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 39

▪ High customer retention and low defection

▪ A loyal customer base

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 40

Priority & Outcomes

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 41

10/18/2019 JEEVAN J ARAKAL SALES & DISTRIBUTION MANAGEMENT(SDMT) 42

▪ Customer satisfaction with key sales force activities

▪ Time allocation to new and old activities

▪ Quality of activities, given the time spent