3.

Sales and Distribution Management

Sales management is the attainment of sales force goals in an effective and efficient
manner through planning, training, leading, and controlling organizational resources

Sales management is planning, direction and control of personal selling. This essentially
includes recruiting, selecting, equipping, assigning, supervising, compensating and
motivating the sales force

Objectives of Sales Management

Generate sales and earn revenue

Providing Profitability

Improving Market Share

Improving Corporate Image

Role and duties of Sales Manager

Setting personal selling objectives

Formulating sales policies.
Structuring the sales force.
Deciding the size of the sales force.
Designing / Demarcating / developing sales territories.
Developing the sales forecasts and sales budgets.
Fixing sales targets for individual sales territories /salesman.
Creating the sales force selection, recruitment, induction/ orientation.
Managing the sales force
- compensation, motivation, sales coaching/supervision evaluation/appraisal,
raining/development
Building the sales organization.
Managing the marketing channels.
Ensuring growth and developing new accounts.
Sales communication and reporting.
Sales coordination and sales controlling including sales expense control.
Creating and maintaining right image for the company and its products in the
market.
Co-ordination with marketing management in the areas like, product mix, pricing,
distribution, advertising and sales promotion.
Building relationship strategies with key customers

Theories of selling.

1. AIDAS Theory: Where A stands for Attention

I stand for Interest
D stand for Desire
A stand for Action
S stand for Satisfaction
2. Right set of circumstances:
This theory is similar to that of situation response theory. I.e.
salesperson must secure attention, gain interest, present and get
desired response. It depends upon the skills the salesperson utilizes to a
set of circumstances for predictable response.
Sales personnel try to apply this theory; although they experience
difficulties in many rightful selling situations as it cannot be
manipulated. The set of circumstances includes external and internal
factors which the salesperson tries to create favourable for getting
desired response from a given situation.
This theory is known as seller-oriented theory.

3.Buying Formula theory of selling: This theory is known as

Buyer-oriented theory .It looks out at buyers side i.e. needs and
expectation . The theory supports the thinking process that goes on in
prospects mind that causes decision to buy/not to buy.

Buying Formula

Need (problem) solution purchase .

Since, purchase results in continuous relationship between buying and

selling. So a fourth element must be preset.

Need (problem) solution purchase satisfaction.

When need is felt solution may involve two components.

Need (problem) solution purchase satisfn/dissatisfn.

To ensure purchase the component trade name must be considered

adequate & buyer must experience pleasant feeling.

Adequacy
Need/problem product & services and Trade name Purchase satisfaction
Pleasant feeling

4. BEHAVIORAL EQUATIONTHEORY: Using Stimuli-Response

Model, this theory has developed. Four essentials elements required in
learning process to explain buying behavior and purchasing decision
process.
Drives: a strong internal stimuli that impel the buyers response
i)Innate drive (psychological) -ii)learned drive (status/social)
Cues: weak stimuli when the buyers respond. i)Triggering cue-
activates decision process for given product. ii) Non triggering cue
influences the decision process but not activate. iii) Specific
product/information-also functions as triggering cue.
Response: What buyer does?
Reinforcement: event that strengthens buyers tendency of response.

B= P X D X K X V.
B=Response.
P= Predisposition/inward response tendency habit.
D= Present drive level.
K= incentive potential i.e. value of the product/potential satisfaction of
 the buyer.
V= Intensity of all customer.

People Management-Sales force

Sales Promotion

Sales Forecasting and Budgeting Sales

Sales forecasting is estimating what a company's future sales are likely to be in the future. It
is a projection into the future of expected sales, given a stated set of environmental
conditions.

Sales forecasting plays a vital role in sales planning, budgeting and decision making.

Forecasting in marketing is partly art and partly science. The blend of the two is fundamental
for successful forecasting. The amount of each varies from one situation to another.

There can be two approaches to sales forecasting:

o Break down approach and Build up approach.

The steps in Break down methods are:
1. General environment forecast
2. Industry sales forecast
3. Company sales forecast
4. Sales forecast for product lines
5. Individual product forecasts.
o In Buildup approach, estimated sales figures for individual products/market
segments are totaled up to arrive at forecast figures. This can be rather cumbersome
process if the organisation has many product varieties serving multiple markets.

Sales forecasting methods:

o Qualitative methods

Experts opinion method

Delphi method

Sales force composite method

Survey of buyers expectation method / User expectation method / End-use

method

o Quantitative methods (statistical methods)

Extrapolation method

Moving Average method

Exponential Smoothening method

Time series analysis

Regression analysis

Test marketing.

o Market Research methods

 Different measures of forecast errors are:

o Mean absolute percentage error ( MAPE)

o Mean absolute deviation (MAD)
o Mean squared error (MSE)
o Bias

SALES BUDGETING

Sales budget is a financial plan, which shows how the resources should be allocated to achieve
forecasted sales. The main purpose of sales budget is to plan for maximum utilization of resources
and forecast sales. The information required to prepare a sales budget comes from many sources.
One of the best sources is the salesperson who deals with the products on a daily basis. The
company can also gather information from the production department regarding the date of
manufacture or expiry. It is very important to forecast the accurate sales because the budget of
other departments is based on the sales budget. For example, the production is manufactured as per
the sales forecast, but if the sales forecast is not accurate, either the production will be less or more
than desired.

Methods of Sales Budgeting

There are a variety of methods which can be used to prepare a sales budget. The following are some
of the popular methods to prepare a sales budget:

Affordable Budgeting

This is a method generally used by organizations dealing in industrial goods. Also, firms, which do
not give importance to budgeting or firms which are having small size of operation, make use of this
judgmental method.

Rule of Thumb

Such as a given percentage of sales. Companies involved in mass selling of goods and companies
dominated by the finance function are the major users of this method.

Competitive Method

A few companies, the products of which face tough competition and many challenges in selling and
which need effective marketing strategy to maintain profits, make use of this method. Using this
method needs knowledge of how our competitor is working with regards to resource allocation.
Companies make use of a combination of the above methods. Depending upon the past experiences,
budgeting approaches are refined time to time. The status of the sales & marketing helps the
organization to figure out the extent of sophistication needed in approaching sales budgeting.

Management of Sales territory and sales quota

SALES TERRITORY
Sales territory is a geographical grouping of existing and potential customers allocated to
o an individual
o a group of salespersons.
o a branch
o a dealer
o a distributor
o A marketing organisation
Essentially designing territory means to divide the market into convenient clusters.
Sales territory must be designed to meet certain criteria such as easy administration,
accessibility, optimisation of travel time.
Designing of sales territories can be done by Equal Workload Method or Equal Potential
Method.
Designing of sales territory has various advantages:
 o Better market coverage
o Better work load distribution
o Improves the performance of salespersons
o Reduces loss of sales (opportunities)
o Reduces sales expenses
o Increases individual attention to key customers
o Advantages of segmentation can be gained. As characteristics of different territory
can be different.
o More effective planning, implementation and control.
o Helps in assigning responsibilities to salespersons. Accountability is better.

SALES QUOTAS
Sales quota is the target or goals assigned to sales units (such as sales person, dealer,
distributor, territory) to be achieved in a specific period of time.
Sales quotas (quantified objectives) may be expressed either in monetary terms or in volume
terms.
These quantified objectives should be realistic.
The basis for fixing the sales quota should not only be potential of the territory and the past
data but also factors such as territorys importance to the company, the market share expected
from it and the profitability of sales in that territory.
Participative approach while fixing the sales quota is desirable.
The objective of fixing Sales quotas are:
o Motivating the sales force
o To bring in the right focus (products to be given importance)
o These form an important basis for feedback, evaluation of and reward for the
performance of a sales unit.
Types of sales quota:
o Sales volume quota: These are basically of three kinds
Monetary sales volume quota
Unit sales volume quota (resorted to because rupee value may vary price
may vary)
Point sales volume quota (followed in multi-product situations. Relative
weightage. A unit of a product may higher points than another product)
o Sales Budget quota: These quotas are set with the objective of controlling expenses,
increasing gross margin / profit. Profit quotas are set. By this the salesmen are
encouraged to sell more profitable products. Expenses are often controlled by setting
an expense budget as a percentage of the territory sales.
o Sales activity Quota: Activity quotas are fixed for salesmen in addition to sales
quotas.
o As an example the activity quota may be set for number of
sales call to be made
number of dealer contacts
number of product demonstrations to be made
number of new accounts to be created
Methods for fixing sales quota:
Sales quotas can be fixed based on -
o Sales potential / forecast
o Average of Past sale
o Executive judgment
o Judgment of salesmen

The concept of channel flows

Marketing channel can be defined as the procedure of activities that need to be performed to
distribute the finished goods at the point of production to the customer at the point of
consumption. Manufactures use different channels to distribute the finished goods to customers.
However, the most common methods are wholesale or retail, which are discussed further. The profit
is distributed between the elements of distribution channel, so if the channel is longer, each element
has lower profit margin and there is less scope for discounts for the consumer. In a shorter channel,
the distribution is divided between fewer elements, profit is higher for each element and higher
discounts can be provided to the customer.

Wholesale

In this distribution channel, wholesalers buy the products and then distribute to consumers.
Wholesalers directly purchase goods from the manufacturer in large quantity at a discounted price.
Several service taxes and sales taxes are also reduced, which in turn reduces the cost of the final
product. The wholesaler then sells the product to the consumer. From the consumers perspective,
wholesale is a cheaper option as the cost of the product is lower than retail value and for
wholesalers, the profit margin is higher because of bulk purchase from the producer.

Retail

In retail distribution channel, the finished goods are purchased by a wholesaler or distributor, the
wholesaler sells to retail shops and then the product is sold to the consumer. The wholesalers buy
the product in bulk; then the product is sold to the retailers in lesser quantities; further, the retail
shops sell the product to the customers. Here the distribution channel is longer than wholesale, so
the profit margin for each element is comparatively lower and the customer gets a higher cost than
wholesale.

Basics of warehouse/inventory/ transportation planning

The factors considered for designing physical distribution system are:

o The distribution objectives and the minimum service level desired.

o Expectations of the customer in the product delivery (lead time, meeting

emergencies etc.)

o Finding out what the competitors do?

o Optimizing cost which means incurring lowest cost without sacrificing the minimum
service level.

o Ensuring flexibility of the system.

Functions involved in physical distribution are:

o Transportation

o Inventory management

o Warehousing

o Order processing

o Packaging

o Material handling

Transportation

o Transportation and delivery add approximately 10 percent to product costs.

o Classes of carriers include common carriers, contract carriers, and private carriers.

o Major transportation modes include railroads, motor carriers, water carriers,

pipelines, and air freight.

o Intermodal operations: Combination of transport modes such as rail and highway

carriers (piggyback), air and highway carriers (birdy back), and water and air carriers
(fishy back) to improve customer service and achieve cost advantages.
 o Freight forwarders and supplemental carriers consolidate shipments to gain lower
rates and faster delivery service for their customers.

Warehousing

o Ware houses are basically of two types

Storage warehouseholds goods for moderate to long periods to balance

supply and demand for producers and purchasers.

Distribution warehouse assembles and redistributes goods, keeping them

moving as much as possible.

o Automated warehouse technology can cut distribution costs and improve customer
service.

o Decisions regarding warehouse locations are influenced by:

warehouse building costs

materials handling costs

delivery costs from warehouses to customers.

o Questions that arise are 1. private or a public warehouse ? 2. How many

warehouses? Where should they be located ?

Inventory Control systems

o Companies must balance customer demand with costs of carrying excess inventory.

o Firms use just-in-time delivery systems, RFID technology or vendor-managed

inventory to help manage costs.

Order processing

o This is a set of procedures for receiving , handling and filling orders promptly and
efficiently. Directly affects firms ability to meet customer service standards.

o Includes four major activities:

Conducting a credit check.

Keeping a record of the sale.

Making appropriate accounting entries.

Locating orders, shipping them, and adjusting inventory records.

Protective packaging

o Packaging costs and form of packaging is influenced by mode of transport and

material handling equipment's. Vice versa the selection of particular mode of
transport determines the characteristics (form, design etc.) of packaging

Material handling

Materials handling system activities for moving products within plants, warehouses, and
transportation terminals.

Unitizingcombining as many packages as possible into each

load that moves within or outside a facility.

Containerizingcombining several unitized loads.

 Proper material handling system helps to 1. Decrease material damage, maintain quality of
storage, facilitate order processing, move right material at right time to make them available
to right customers.

Intermediaries

Following are the types of intermediaries in a marketing channel:

o Sole selling agent:

It is a large marketing intermediaries with large resources. Operates in an

extensive territory. Works on commission basis. Usually chosen when a
manufacturer prefers to stay out of marketing and distribution task.

o C&F agents (CFAs)

Often manufacturers employ carrying and forwarding agents, referred to as

CFAs or C&F agents. They act as branches of the manufacturer. They do not
resell products but act as agent/ representative of the manufactures.

Wholesaler/stockist

o A wholesaler buys in bulk (large quantities) from the and resells the goods in sizable
lots to semi-wholesalers and retailers. Usually a wholesaler does not sell directly to
consumers (except the institutional buyers). Wholesalers not only play the role of
stockholders and sub-distribution, but also perform functions such as promotion,
financing, market feedback etc. They can be categorized as 1. Agent wholesaler 2.
Merchant wholesaler. Agent wholesaler perform all or most of the marketing
functions associated with wholesaling. Agent wholesaler unlike merchant wholesaler
do not take ownership. They are primarily involved in the buying and selling of the
products. They negotiate sales but do not but do not take title to merchandise. They
also participate in collecting market information, promotion and receiving orders.

Retailer/ Dealer.

o They sell to the ultimate customers. They are at the last end of the distribution
chain. In cases where the company operates a single tier distribution system, they
operate directly under the company. The retailers are also sometimes referred to as
dealers or authorized representatives. The stocks they keep are just operational stocks
needed for immediate sale at the retail outlet. Retailers perform much more than simply
buying and selling. They add value to goods and services that they sell by creating time,
place, possession and form utility.

Managing channel partner