• “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
 Selling concept proposes that customer will not buy
enough of an organization's products unless they are
persuaded to do so through selling effort. Where as
Marketing concept proposes that to achieve success,
the focus should be on organization's ability to create,
communicate and deliver a better value proposition 1
Introduction to Sales Management
Major Differences between Selling and Marketing

2
 Sales management involves the execution of
the following tasks:
 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 3
 Introduction to Sales
 Managing theManagement
sales force
- compensation, motivation, sales coaching/supervision
evaluation/appraisal, training/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

4
 Introduction to Sales
Management
 Personal selling:
 Personal selling is one of the forms of ‘Promotion’.
Other forms being advertising, sales promotion and
publicity.
 It is the art of successfully persuading customers to
buy a product or services from which they can
derive suitable benefits, thereby increasing their
total satisfaction.
 Personal selling is a face to face transaction, a
personal correspondence or a personal telephonic
conversation between a salesman and a prospective
customer.
 A well trained salesman can be a very effective
communication medium. Personal selling involves:
 Persuasion
 Flexibility of approach
 Supply of information
 Mutual benefit 5
 Introduction to Sales
 Management
The importance of personal selling from the point
of view of manufactures as well as consumers.
 From manufacturer’s point of view
 It creates demand for products both new as well as
existing ones.
 It creates new customers and, thus help in
expanding the market for the product.
 It leads to product improvement. While selling
personally the seller gets acquainted with the
choice and demands of customers and makes
suggestions accordingly to the manufacturer.
 Builds long term relationship.
 From customer’s point of view
 Personal selling provides an opportunity to the
consumers to know about new products introduced
in the market. Thus, it informs and educates the
consumers about new products.
6
 Introduction to Sales
 Management
It is because of personal selling that customers come to
know about the use of new products in the market. The
sellers demonstrate the product before the prospective
buyers and explain the use and utility of the products.
 Personal selling also guides customers in selecting
goods best suited to their requirements and tastes as.
 It involves face-to-face communication.
 Personal selling gives an opportunity to the customers to
put forward their complaints and difficulties in using the
product and get the solution immediately.
 Limitations of personal selling
 Can not reach mass audience  
 Expensive per contact
 Many sales calls may be needed to generate a single sale
 Labor intensive

7
 Introduction to Sales
Management
 Types of Personal selling
 Industrial selling / B2B selling
 Selling to resellers like wholesaler, retailer etc.
 Selling to business users. Eg:- reliance sells plastic
granules plastic film manufacturers.
 Institutional selling. Eg;- Johnson & Johnson selling
surgical equipments to hospitals.
 Selling to Government organizations – the buying
process often is different from that in public sector.
 Retail selling
 Retail selling involves direct selling to the end/
ultimate consumer for personal use or consumption.
The word retail is derived from the French word
‘Retallier’ which means breaking the bulk or ‘cutting to
pieces’. The retailer buys in bulk from the Industrial
seller and then sells the goods in smaller assortments
as per the demand of the consumer. Eg: Wal-Mart,
Kmart, Big Bazar, Shopper’ Stop, Spencer’s etc.
8
 Introduction to Sales
Management
 Services selling:
 Services selling involves selling of intangible goods.
Services have some unique characteristics which
distinguish them from physical goods such as
intangibility, simultaneity of production and
consumption, non storability etc. Examples of services
industry are hospitality, health care, insurance, airlines
etc.
 Types of selling function:
 Different buying situations call for different types of
selling function.
 Broadly selling function can be categorized as follows
 Order takers – they respond to existing customers.
 Order creators – they attempt to influence the
specifiers rather than customers.
 Order getters – They are the front line sales people
or sales support personnel
9
 Introduction to Sales

Management
Order takers can be classified as
 Inside order takers: these are retail sales assistants.
They perform the role of completing the transaction.
They receive payment and passes the goods to the
consumer : EG:- salespersons in Big Bazar.
 Delivery sales persons : They deliver the products to
customers as in the case of orders received on phone.
Eg:- Delivery boy in Dominos pizza.
 Outside order takers:- They make sales call and take
orders from customers. They do not deliver anything at
customer’s place. Eg:- Sales people from Eureka Forbes.
 Order creators
Missionary salespersons: They do not close a sale but
persuade the customers to promote a sellers brand . Eg:-
Medical representatives persuade the doctors to prescribe.

10
 Introduction to Sales
Management
 Order Getters are classified as:
 Front line salespersons
 Organizational salespersons – they are the
industrial sellers who try to establish long time
relationship with organizational buyers.
 Consumer salespersons are the door to door
salesmen. Eg:- insurance agents, carpet sellers,
sellers of spices etc.
 Sales support sales persons:
 Technical support salespersons – Render
support to frontline sales people when the
product or the services being sold is complex.
 Merchandisers: provide sales support in retail
and wholesaling situations.

11
 Personal Selling Skills
 Selling skills:
The essential selling skills of a sales persons are:
 Communication skill.
 verbal
 non-verbal.
 Listening skills.
 Content listening – Understanding and retaining the message
 Critical listening – Understanding and evaluating the speaker’s logic,
intentions, motives etc.
 Active listening – understanding speaker’s feelings, needs etc.
 Conflict management and resolution skills.
 Conflict exists with in every organization/ department. There can be
Interest conflicts, Emotional conflicts, Value conflicts. Conflict need to
be resolved.
 Negotiation skills
 Successful negotiation involves an attempt by two parties to reach a
mutually acceptable solution (preferably a win-win situation).
 Problem solving skills.
 Problem solving process involves 1. Define the problem 2. Generate
alternatives 3. Decide 4. Implement 5. Evaluate the solution.

12
 Personal Selling Process
 The sales process is a sequential series of
actions:
 Pre-sale preparation.
 Prospecting
 Pre-approach before the interview
 Approach the customer
 Presentation
 Handling the customer’s objections
 Trial close
 Close
 Follow-up and service.

13
 Personal Selling Process
 Pre-sale preparation: by the salesman to equip himself
with-
 Product knowledge
 Types
 Features
 Benefits / Limitations
 Price
 Company knowledge
 History
 Management
 Size
 Finances
 Policies and procedures
 Competitor’s knowledge:
 Industry structure
 Products
 Market share
 Policies 14
 Personal Selling Process
 Prospecting: involves locating and qualifying prospects. It is
the process of seeking and identifying prospective buyers or
‘leads’. Qualifying prospects means to determine whether the
prospect is able to buy. Few methods of prospecting are:
 Cold canvassing: goes door to door in an identified area.
 Customer referrals: Requesting customers to provide a list
of possible customers.
 Prospect pools: Gathered from telephone directory or
mailing list.
 centers of influence: They are people in a position to
influence others by the virtue of their power, popularity etc.
Their referrals carry certain level of authority.
 Net working
 Non competing sales force.
 Telemarketing.
 Direct mailing
 Using internet.
 Trade shows and demonstrations at exhibitions
15
 Personal Selling Process
 Pre-approach before selling: The pre-approach
takes place prior to meeting the qualified prospect. In
this stage the salesperson must decide how to best
initiate a face to face meeting. This includes analysis of
available information about the prospect’s buying
behaviour and evaluation of competitor’s products.
 Approach: This takes place when the seller first meets
the prospective buyer. It is necessary to fix an
appointment with the customer at their desired place
and time, before meeting him. The goal at this stage is
to gain the interest and attention of the buyer. Careful
pre-approach planning is needed to achieve this.
 Presentation: the presentation of the sales message
may take the form of a prepared (‘canned’)
presentation or take an interactive (needs-satisfaction)
approach. The message is intended to persuade buyers
to purchase the product based on it’s attributes and
benefits. During sales presentation there are basically
three approaches used– attracting attention, creating
interest and arousing desire / conviction building. 16
 Personal Selling Process
 Handling objections: This needs considerable sales skill. Well
prepared salesmen anticipate objections and are prepared to handle
them. Commonly used objection handling methods are
 Boomerang methods - Converting objections in to reasons for
buying.
 Compensation – Used when objections are valid but there are
factors which compensate or outweigh the objections
 Forestalling - With his experience anticipates and counters the
possible objections at the presentation level itself.
 Feel, felt, found – Salespeople express their understanding of how
prospects feel, indicate that it is possible to feel that way because
others have also felt that way but have found their fears to be
unfounded.
 Head on – It is used when the objections are based on incorrect
information. Salespeople in such a situation

17
 Personal Selling Process
politely but firmly deny the validity of the objections.
 Indirect denial: This is when a head on approach is better
avoided. Here the approach is not to tell the buyer directly
that he is wrong but yet manage to correct the impression
by stating the facts.
 Closing the sale : This the stage at which the seller tries to gain
a purchase commitment from the prospect. Salespersons who
are uncertain that it is an appropriate time to close the deal may
use a trial close. If a trial close seems to be going well , it can be
pursued to a complete close. If not, it can be withdrawn with out
detracting reducing the effectiveness of the meeting.
 Follow-Up: This step in the process represents the salesperson’s
efforts to assume customer satisfaction after the sale. These
efforts provide an important basis for building goodwill and
future sales. It may be used to suggest additional sales of the
product or related goods.

18
 Sales Forecasting
 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.
 The contribution of science comes from application of

various statistical techniques used to analyze past data

about a market
 The contribution of art lies in an ability to link experience

of, and feel for, a market with the results of various

analyses, plus the ability to assess the significance of
factors which can not yet be included in the statistical
analysis and the effects of which may not yet have been
experienced.
19
 Sales Forecasting
 Importance of Sales forecasting and its role can be
understood from the following:
 Sales forecasts are vital to the efficient operation of

the firm and can aid managers on such decisions /

areas such as:
 Future investments in new ventures, capacity

expansion, resource allocation to functional areas,

cash flow projections etc.
 Material requirement planning, inventory to carry.

 Personnel requirement planning.

 Planning marketing and sales programs and to

allocate resources among the various marketing

activities such as advertising, distribution etc.
 Deciding on proper price to charge, and the

salaries to pay salespeople. 20

 Sales Forecasting
 Sales / demand forecasting can be classified as
 Short range forecast
 Long range forecast
 Perspective forecast
 Short range forecasts are made for one year and
reviewed monthly, quarterly or half yearly. They are
used for projecting cash flows, planning marketing
activities such as personal selling, advertising,
warehousing. They are also used for other functional
areas like Production, Human resources and Materials.
 Long range forecasting is made for 5 to 10 years. This
is used for expansion, diversification and other
investment decisions. Long term forecasting is
relatively difficult because of uncertainties involved
 Perspective forecasting is still longer term forecasting.
It may be a forecast of 15 to 20 years.

21
 Sales Forecasting
 Characteristics of Forecasts
 Forecasting is a difficult process because of the
uncertainties involved. More the number of factors
influencing a situation more complex and inaccurate
the forecasting tends to be. The difference between
the forecast and the actual is the ‘forecast error’.
The objective is to minimize it.
 Long term forecasts are more error prone than short
term forecasts.
 Aggregate forecasts are more accurate than
disaggregate (individual) forecasts.
 In today’s business scenario, due to globalisation
consumers have more product choices. They also
demand greater product diversity and innovation. This
is aided by rapid technological advancement. Because
of this dynamics forecasting is becoming increasingly
difficult.
22
 Sales Forecasting
 There can be two approaches to sales forecasting:
- Break down approach and Build up approach.
 In Break down approach the company’s internal and external
environments are studied to determine the significant factors that
influence the sales.

 The internal factors studied are:

 Pricing
 Product changes
 Distribution
 Promotion
 Resources available – finance, facilities, material, labour.
 Management skills
 Technology.

 The external factors studied are:

 General economy
 Industry related activities
 Competition
 Government laws and regulations. 23
 Sales Forecasting
 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.
 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.
24
 Sales Forecasting
 Sales forecasting methods:
 Qualitative methods
 Expert’s opinion method
 Delphi method

 Sales force composite method

 Survey of buyer’s expectation method / User

expectation method / End-use method
 Quantitative methods (statistical methods)
 Extrapolation method
 Moving Average method

 Exponential Smoothening method

 Time series analysis

 Regression analysis

 Test marketing.

 Market Research methods 25

 Sales Forecasting
 Expert’s opinion method: This a commonly used method. In
this the estimates of experts with versatile experience and
sound knowledge such as marketing professionals,
distributors, marketing consultants are sought. One way is
taking the average and another way is in which the group
meets, each one presents his estimate then a group
consensus is arrived at.
 Delphi method: In this panel of experts are formed from
within or outside the organisation. A coordinator interacts
with experts. The experts work separately, so that they can
not influence each other. They give their opinions
individually in written form. The coordinator compiles,
processes and sends back for revision. This goes on for
several rounds as long as a final forecast does not evolve.
 Sales force composite method: This forecast is done by the
sales force of the organization. Sales men are in direct
contact with the market so it is assumed that they are well
informed about the market trends. The individual forecasts
of salesmen are combined to form the overall demand
forecast of the organization. But the result can be biased
because of self interests, ignorance of broad changes taking
place in the market place etc. 26
 Sales Forecasting
 Survey of buyer’s expectation method: This is also called User
expectation method or End-use method. In this a sample of
potential buyers is taken and then the information regarding
their likely consumption of the product and their buying plan
are collected. The information is then extrapolated to get the
total demand forecast. But often there is a difference between
the stated and the actual demand.
 Extrapolation method: This is a simple inexpensive method and
can be adopted in market situations where little changes occur.
It involves plotting of the sales figures of past years and then
extending the line to forecast the future demand.
 Moving average method: This an averaging method in which
the past data beyond a certain period is considered irrelevant.
The period needs to be selected judiciously. In a weighted
moving average method, weightages are assigned to the data
of different time periods by the analyst depending upon his
perception of their importance.

27
 Sales Forecasting
 Exponential Smoothening method: It is essentially a modified
version of the weighted moving average technique. Here we
have a smoothening constant. Example – Say the old forecast
for present period = 100 but the actual observed for the
period was= 80. To get the forecast for the next period if the
smoothening constant =0.3 then it means the weightage
given to old forecast is 0.7 and the weightage given to the
actual is 0.3. The forecast for the next period is = 100 x 0.7
+ 80 X 0.3 = 94. In effect it considers all past data but places
heaviest weightage to the most recent data and the
weightage lessens as the data ages.
 Time series analysis: This statistical method is used to
identify systematic cyclical / seasonal variations that repeats
itself as a pattern.
 Regression analysis: This is a form of correlation technique.
A correlation basically the degree of linear association
between two variables where one is treated as dependent
variable and the other dependent variable. In regressin
analysis attempt is
28
 Sales Forecasting
to relate sales to those variables that influence sales.
They may be economic factors, price etc.
 Test marketing: This is a method often used for
measuring consumer acceptance of a new product. The
outcomes of a test market are mathematically
extrapolated to forecast future sales. Here a limited
number of cities/ towns with representative population
are chosen for test marketing. Effectiveness of
promotion campaign can be measured by the difference
in sales between ‘test market’ and ‘control market’.
 Market research methods: Marketing research methods
adopted for sales forecast are basically of two types
-Market testing (– focus group technique is used) and
Market survey (– interviews, Questionnaires etc are
used).
29
 Forecast Error
 Different measures of forecast errors are:
– Mean squared error (MSE) :- This estimates the variance
of forecast error.
– Mean absolute deviation (MAD) :- Average of the
absolute deviation.
– Mean absolute percentage error ( MAPE):- First absolute
percentage deviation is calculated by subtracting
forecast from actual and then dividing it by actual value.
The MAPE is expressed as average mod percentage
value over selected time zone. MAPE does not
differentiate between positive and negative error but it
does have reference to the quantum of the value.
– Bias :- It is the average of the deviations (with signs +/-
considered ). It is calculated as - the sum of all errors
( signs +/- considered) divided by the number of
periods. It shows under/over estimates of demand.

30
Setting Personal Selling objectives
 As a first step it is important for the sales management
to precisely determine the role of personnel selling in
the marketing mix.
 Setting the personal selling objectives
 clarifies the role of the sales force

 facilitates the determination of the size and the

quality of the sales force
 forms the basis of setting goals ( or targets) and the
evaluation of the performance of the sales force
 The objectives will vary from organisation to
organisation depending on:
 Overall objectives of the organisation

 Nature and type of the products

 Nature of the market

 Nature of competition

 Distribution channel, etc. 31

Setting Personal Selling objectives
 Objectives of personal selling need to be set in the
following areas:
 Sales volume (overall and product wise)
 Sales growth ( overall and product wise)
 Market share ( overall, product wise and territory wise)
 Profits ( overall, product wise and territory wise)
 Selling costs
 Key customers ( volume, growth, share, profit
contributions etc)
 New customers
 Expansion of channels, new dealers etc.
 Collection of dues (sales proceeds)
 Ratio of cash to credit sales
 Service level – pre and post sales.
 Training of dealers / customers as needed
 Gathering and communicating market information.
 Involvement in promotional activities of the company
32
 Sales Organisation
 What is an organisation?
 “An organisation in general can be defined as the
rational coordination of the activities of a number
of people for the achievement of some common
explicit purpose or goal, through division of
labour and function, and through hierarchy of
authority and responsibility.”
 The important portions of the definition are:-
1. Coordination of activities
2. Group of people
3. Achievement of common goal
4. Division of labour
5. Hierarchy of authority and
responsibility and responsibility.3333
 Sales Organisation
 A sales organisation is a team of individuals working together to
achieve the set sales objectives. A sales organisation operates
within a organisational / corporate framework.
 A sales organisation ought to have a well defined structure to
operate efficiently and effectively.
 A well designed organisational structure does the following:
 Defines jobs - roles, responsibilities and duties of the

personnel
 Clarifies authority and power at each level.

 Promotes specialisation

 Avoids duplication of work

 Facilitates coordination and communication

 Facilitates adaptation – by being flexible to the changing

environmental needs.
 Facilitates growth

34
 Sales Organisation
 The factors considered while designing a sales
organisation structure are -
 Nature of the product and services factors: For
example the sales organisation structure in case of
FMCG products like soaps, shampoos, toothpaste
(the customer base is large and the frequency of
purchases is also high) is very different from selling
technical products like machine tools or computers.
 Organisational related factors: Size, volume, product
range, geographical expanse of business etc
influence the sales structure.
 Marketing mix related factors: The type of
distribution channel, pricing policy, marketing
communication influence the sales structure.
 External factors: Nature of competition for instance.

35
 Sales Organisation
 Major principles based on which the sales organisation is
designed:
 Span of control: It refers to the number of subordinates a

manager can effectively manage. A narrow span of control

permits a more effective and close supervision but results
in more number of layers which means higher cost,
communication time, larger gap between the top
management and customers. A wider span has fewer levels
of supervision. The process of communication takes shorter
time.
 Centralisation and Decentralisation: Centralisation of

authority refers to the relative concentration of authority

for decision making especially at top level.
In a highly centralised sales organisation most of the
decisions are made at the corporate level and very few at
the field

36
 Sales Organisation
manager’s level. Consistency in the marketing plan,
uniformity in product and service delivery, uniformity in
compensation packages of the sales force, integration of
the sales force are the essential features of centralised
structure.
But to be more competitive organizations are preferring to
go in for more decentralised structures. A decentralised
structure helps in making the organisation more
responsive to the market and regional demands. In many
organisations combination of centralised and
decentralised organisational structures are used. In Titan
Watches for instance decentralised service centers are
under field managers but the training is provided by the
corporate office. In Modi Xerox recruitment of sales force
at the ground level is done by field managers but the
regional training center provides the training.

37
 Sales Organisation
 Organisations adopt different kinds of
structures
 To assure that all necessary activities are
performed
 To define authority
 To achieve coordination and control
 To permit the development of specialists
 To economize on execution time

38
BASIC TYPES OF SALES
ORGANISATIONS
Line Sales Organization

General Manager

Sales Manager

Assistant Sales Assistant Sales Assistant Sales Assistant Sales

Manager Div. 1 Manager Div. 2 Manager Div. 3 Manager Office

Salespeople Salespeople Salespeople Office Staff

39
 BASIC TYPES OF SALES ORGANISATIONS
Line and Staff Sales Organization
President
VP (Marketing)
Advertising Manager General Sales Manager Manager (Marketing Research)

Director (Sales and Training)

Sales Personnel Director

Assistant General
Sales Manager
District Sales Managers
Branch Sales Managers
Sales Personnel

Assistant to General
Sales Manager

Sales Promotion Manager

Director of Dealer and

Distribution Relations
40
 BASIC TYPES OF SALES
ORGANISATIONS
Functional Type of Sales Organization
Director
of
Sales
Administration

Installation Manager Manager Manager of Manager

Manager of
and of of Dealer and of
Sales Distribution
Service Sales Sales Sales
Supervision Networks
Manager Training Promotion Personnel

Salesperson Salesperson Salesperson Salesperson Salesperson Salesperson

41
 BASIC TYPES OF SALES ORGANISATIONS

Geographic Division of Line Authority

General
Sales
Manager

Sales Eastern Director of Central Director Western Director of

Division Division of Division
Personnel Sales
Sales and Sales Sales Sales
Sales
Director Manager Training Manager Promotion Manager Analysis

Branch Branch Branch

Sales Sales Sales
Managers Managers Managers

Sales Sales Sales

Personnel Personnel Personnel

42
BASIC TYPES OF SALES ORGANISATIONS

Product Division of Line Authority

General
Sales
Manager

Sales Sales Director of Director Director of Sales

of
Manager Personnel Sales and Sales
Sales Manager
Product 1 Director Training Promotion Analysis Product 2

Sales Sales
Personnel Manager
Product 1 Product 1

43
BASIC TYPES OF SALES ORGANISATIONS

Customer Division of Line Authority

General
Sales
Manager

Director Manager, Director of Manager, Director Manager, Director of

Lumber Construction of Mining Sales
Product Industry
Sales Industry Sales Industry Promotion and
R and D Sales Planning Sales Training Sales Advertising

Branch Branch Branch

Sales Sales Sales
Managers Managers Managers

Sales Sales Sales

Personnel Personnel Personnel

44
BASIC TYPES OF SALES ORGANISATIONS

Marketing Channel Division of Line

Authority
General
Sales
Manager

Sales Director of Sales Director of

Advertising
Personnel Sales Promotion Customer
Manager Relations
Director Planning Manager

Sales Manager
Sales Manager Wholesale Sales Export
Sales Manager Sales Manager
Chain Store Sales
Institutional Sales
Sales Personnel Sales Personnel
Sales Personnel Sales Personnel

45
 Sales Territories
 Sales territory is a geographical grouping of existing and
potential customers allocated to
 an individual

 a group of salespersons.

 a branch

 a dealer

 a distributor

 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. 46
 Sales Territories
 Designing of sales territory has various advantages:
 Better market coverage

 Better work load distribution

 Improves the performance of salespersons

 Reduces loss of sales (opportunities)

 Reduces sales expenses

 Increases individual attention to key customers

 Advantages of segmentation can be gained. As

characteristics of different territory can be different.

 More effective planning, implementation and

control.
 Helps in assigning responsibilities to salespersons.

Accountability is better.
47
 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 territory’s
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 :
 Motivating the sales force

 To bring in the right focus (products to be given importance)

 These form an important basis for feedback, evaluation of and

reward for the performance of a sales unit.

48
 Sales Quotas
 Types of sales quota:
 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. An unit of a product may
higher points than another product)
 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.
 Sales activity Quota: Activity quotas are fixed for salesmen
in addition to sales quotas.

49
 Sales Quotas
 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 -
 Sales potential / forecast

 Average of Past sale

 Executive judgment

 Judgment of salesmen

50
 Recruitment and selection of sales
Persons
 Creating an effective sales force is essential.
 The first step in creating a sales force is recruitment
followed by selection.
 The recruitment is the process of searching the
candidates for employment and stimulating them to
apply for jobs in the organisation whereas selection
involves the series of steps by which the candidates are
screened for choosing the most suitable persons for
vacant posts.
 The importance of right recruitment and selection
process can never be over-emphasised.
 High turnover of sales persons can be very damaging to
the organisation for more many reasons - the cost of
hiring a salesman and training them is high, customer
dissatisfaction, loss of company information etc.
So the recruitment process and selection process should
be sound. 51
Recruitment and selection of sales
Persons
 The following steps need to be undertaken for
recruitment
 Job analysis
 Locating prospective candidates / Sources
 Job analysis:
Job analysis is a systematic procedure to analyze the
requirements for the job role and job profile. Job
analysis can be further categorized into following sub
components.
1. Job position: This refers to the designation of the
job and employee in the organization. Job position
forms an important part of the compensation
strategy as it determines the level of the job in
the organization.
52
Recruitment and selection of sales
Persons
2. Job description: It refers to the activities that an
employee has to do in a particular job position. It
describes the roles and responsibilities attached with
the job position. It states the key skill requirements,
the level of experience needed, level of education
required, etc. It also helps in benchmarking the
performance standards.
3. Job Worth refers to estimating the job worthiness i.e.
how much the job contributes to the organization. It is
also known as job evaluation. Job description is used
to analyze the job worthiness. It is also known as job
evaluation. Roles and responsibilities helps in
determining the outcome from the job profile. Once it
is determined that how much the job is worth, it
becomes easy to define the compensation strategy for
the position.
53
 Recruitment and selection of sales
Persons
 Locating the candidates ( sources) There are two categories
 Internal sources: The internal sources can be
 Lateral and upward moves (Transfers, promotions etc.)

 Interns

 Employee referral ( existing salesmen as talent scouts)

 External sources: The external sources can be:

 Competitor company

 Other industries ( may be from customers’ or suppliers’

industry)
 Educational institutions

 By advertising

 Employment agencies / HR consultants

 Networking

 Internet / Web sources

54
 Recruitment and selection of sales
Persons
 Selection Process comprises of the following steps:
 Screening the candidates – this generally includes
receiving and screening of application forms
 Personal interviews
 Reference check
 Physical examination
 Psychological and other tests like Intelligence tests,
Aptitude tests, Personality tests etc.
 Negotiating / fixing the terms of services
 Appointment
 Screening applicants for an interview: The job analysis done
previously helps in short listing candidates. The job
description specifies the competencies required for a job
position, hence this forms the guideline for short listing the
applicants. The application form gives the details regarding
the applicant’s qualifications, experience, previous
compensation, employment history, reasons for leaving
previous organizations, health history, references etc.
References should be used, in a discerning /judicious manner,
to verify information provided.
55
 Recruitment and selection of sales
force
Scientific and psychological tests related to intelligence, ability,
personality etc helps to gain insights about the candidates.
 Selecting Applicants: Personal interview is carried out for this.
The following needs to be done:
 Preparation for the interview: An interview needs to be
conducted effectively hence it needs preparation. The
purpose is to effectively gather information about the
candidate from the candidate himself.
Behavioral interview is a popular method adopted for this
purpose. Behavior based interviewing focuses on
experiences, behaviors, knowledge, skills and abilities that
are job related. It is based on the belief that past behavior
and performance predicts future behavior and performance.
 Managing the interview: Broad based questions should be
followed by specific questions. Questions should be posed in
a manner so that it calls for long responses. Loaded or
leading questions should not be asked.
Interviewer should be a good listener and be able to sort out
relevant / important information related to the job from the
irrelevant/ unimportant ones.

56
 Orientation and socialization
 Orientation Programs: Effective orientation programs are
designed to introduce new employees to a company's mission so
that they begin to feel they are a vital part of the team. These
are key to early productivity and improving employee
retention. They need to be designed with the following in mind
- Make new employees feel welcome and valued as key
players on the team.
- Explain the mission/purpose of the company and the job so
employees can see the big picture.
- Familiarize employees with rules, policies and procedures.
- Help employees adapt to their new surroundings, learn who
all the players are and how they work together.
- Establish friendly relationships among co-workers managers.
- Ensure new employees have all the information and tools
they need to do their jobs.
- Develop the long-term commitment to the organization.

57
 Training the sales force

Training is a process of learning a sequence of

programmed behavior and application of
knowledge. It gives people awareness of the rules
and procedures to guide their behavior. It
attempts to improve their performance on the
current job or prepare them for an intended job.
Types of training:

58
 Training the sales force
• ON THE JOB TRAINING ( OJT) :
 This is the most common method of training.
 On- the- job training (OJT) is conducted at the work sites
and in the context of the actual work.
 This method is basically learning by doing, while
working. In this method the employee is placed in to the
real work situation and shown the job and the method
of work by an experienced employee or the supervisor.
 The trainee is placed on the job and the manager or
mentor shows the trainee how to do the job and receive
immediate feedback. To be successful, the training
should be done according to a structured program that
uses task lists, job breakdowns, and performance
standards as a lesson plan.

59
 Training the sales force
On the job training methods:
 Job Instruction Training
 Coaching
 Mentoring
 Job Rotation
 Job Instruction Training :

 Job instruction training (JIT) is a systematic approach

to the job training. This is a proven and systematic
method to teach workers how to do their current jobs.
The method also called ‘training through step –by- step
learning’ involves:
 Preparation of the trainees for the instruction.

 Presentation of trainees for instruction.

 Performance of the job by the trainee.

 Motivating the trainee to follow up the job regularly

60
 Training the sales force
 Coaching:
 Coaching is a continuous process of learning by doing.

In this, the superior guides his sub-ordinates & gives

him/her job instructions. The superior points out the
mistakes & gives suggestions for the improvement.
Merits
 It requires the least centralized staff coordination as
every executive can coach his subordinates.
 Periodic feedback and evaluation gives immediate
benefits to an organisation .
Demerits
 The training atmosphere free from worries of the
daily duties is not available.

61
 Training the sales force
 Mentoring:
 Mentoring is a relationship in which a senior manger in an
organisation assumes the responsibility for grooming a junior
person. Technical, interpersonal and political skills are generally
conveyed in such a relationship from the more experienced
person. Mentors help employees solve problems both through
training them in skills and through modeling effective attitudes
and behaviors.

Merits
 There is an excellent opportunity to learn.
 Constant guidance helps the mentee to be on track, using
facilities to good advantage.

Demerits
 It may create feeling of jealousy among other workers who are
not able to show equally good performance.
 If mentors form overly strong bonds with trainees, unwarranted
favoritism may result. This can have a demoralising effect on
62
other workers.
 Training the sales force
 Job Rotation:
 This involves the movement of trainee from one job to
another. The trainee is given several jobs in succession,
to gain experience of a wide range of activities.
Merits
 Improves participant’s job skills, job satisfaction.
 Provides valuable opportunities to network with in the
organisation.
 Offers faster promotions and higher salaries to quick
learners.
Demerits
 Increased workload for participants.
 Constant job change may produce stress and anxiety.
 Mere multiplication of duties do not enrich the life of a
trainee.
 Development costs may shoot up when trainees commit
mistakes handle tasks less optimally.
63
 Training the sales force
• OFF - THE- JOB TRAINING:
 “Off-the-job training” simply means that
training is not a part of everyday job activity.
The actual location may be in the company,
class-room or in place which are owned by
the company in universities or associations
which have no connection with the company.
 Some methods of Off-the –job Training are:

Lectures
 Conferences
 The Case Study
 Role Playing
 In-Basket Method
64
 Training the sales force
 LECTURES:
 Lecture are regarded as one of the most simple
ways of imparting knowledge to the trainees,
especially when facts, concepts or principles,
attitudes, theories and problem solving s abilities
are to be taught.
Merits:-
 Presenting basic material that will provide a

common background for subsequent activity.

 Illustrating the application of rules, principles,

reviewing, clarifying and summarizing.

 The main advantage of the lecture system is that

it is simple and efficient and through it more

material can be presented within a given time
than by any other method. 65
 Training the sales force
 THE CONFERENCE METHOD :
 In this method, the participating individuals confer to discuss the points of common
interest to each other. A conference is a formal meeting, conducted in accordance with
an organized plan, in which the leader seeks to develop knowledge and understanding
by obtaining a considerable amount of oral participation of the trainees.
 There are three types of conference methods.
1. Directed discussion :- The trainer guides the discussion so
that the facts, principle or concepts are explained.
2. Training conference :- The instructor gets the group to pool its
knowledge and past experience and brings different points of
view to bear on the problem.
3. Seminar conference problem :- The instructor defines the
problem, encourages and ensures full participation in the
discussion.

66
 Training the sales force
 CASE STUDY
 The individual is expected to study the information
given in the case and make decisions based on the
situation. if the student is provided a case involving an
actual company, he is expected to research the firm to
gain a better appreciation of its financial condition and
corporate culture.
 Typically, the case method is used in the class room
with an instructor who serves as a facilitator.
 Analytical, problem-solving and thinking skills are most
important.
 The KSAs (Knowledge, Skills, Abilities) required are
complex and participants need time to master them.
 Active participation is required.
 The process of learningis as important as content.
 Team problem solving and interaction are possible. 67
 Training the sales force
 ROLE PLAYING
 It is a technique in which some problems –real or
imaginary involving human interaction is presented &
spontaneously acted out. Participants assume roles of
specific organizational members in a given situation &
then act out their roles.
 It develops interpersonal skills among participants.
They learn by doing things. Immediate feedback helps
them corrects mistakes, change & reorient their focus
in a right way.
 On the negative side, realism is sometimes lacking in
role-playing, so the learning experience is diminished.
It is not easy to duplicate the pressures & realities of
actual decision-making on the job; & individuals, often
act very differently in real life situations than they do
in acting out a simulated exercise.

68
 Training the sales force
 IN-BASKET METHOD
 The participant is given a number of business papers
such as memoranda, reports & telephone messages
that would typically cross a managers desk.
 The papers, presented in no particular sequence, call
for actions ranging from urgent to routine handling.
The participant is required to act on the information
contained in these papers.
 Assigning a priority to each particular matter is initially
required.
 If the trainee is asked to decide issues with in a time
frame, it creates a healthy competition among
participants.
 On the negative side, the method is somewhat
academic & removed from real life situations.
69
 Compensation plan for sales force
 A motivated sales force is essential for sales performance. A
good well structured and balanced compensation plan is
required to attract and retain a quality sales force and keep it
motivated.
 An effective compensation plan (characteristics):
 Directs the sales force toward activities that are consistent

with overall marketing objectives.

 Connects efforts, performance and rewards

 Helps to attract and retain competent sales persons.

 Is based on the principles of equity.

 Helps to stimulate sales persons to put in their best efforts

 Has two components, one as an assured income another as

an additional income for superior performance.

 Is flexible to adjust to changes in the environment.

 Is simple to understand and administer.

70
 Compensation plan for sales

force
Designing the compensation plan involves following steps:
 Consider Job analysis, job evaluation and overall
compensation structure of the company
 Consider Industry practice ( What competitors offer?)

 Decide compensation level after discussions.

 Decide compensation mix:

 Financial

 Direct payment like salary.

 Indirect payment - medical care, paid vacation, LTA etc.

 Non financial

 Promotions, better designation etc.

 Recognition

 Decide on weightage of different elements in the mix.

 Implement , evaluate / review and improve.

71
 Compensation plan for sales force
 Types of compensation plans:
 Straight salary
 Straight commission
 Salary plus group commission.
 Salary plus commission
 Straight salary plan:
Merits
 Simple and easy to design and administer.
 Gives a sense of security.
 Is suitable when
 the company adopts a ‘pull’ strategy.

 the product/ territory is new

 efforts and actual sales are loosely correlated.

 Negotiation and purchase cycle is long (Eg: technical projects)

Demerits
 Is not a stimulant to increase sales
 Cost of fixed salary is to incurred even if the sales is poor. 72
 Compensation plan for sales force
 Straight commission plan:
Merits
 Incentive to perform better.
 Commission is a variable cost and is linked with volume/ profits.
 It is suitable when:
 Company has adopted a ‘push’ strategy.

 Not much of non-selling activities are involved.

 Market is highly competitive and sales effort is directly linked

with sales results.

 Demerits
 Often difficult to design and administer.
 May be ineffective when there are many new salesmen.
 May lead to unhealthy rivalry/ jealousy among salesmen.
 May lead to unhappiness when market is down due to
external reasons.
 Income of salesmen can be unstable.
73
 Overaggressive salesmanship might dissatisfy customers.
 Motivating the sales force
 The mettle of a sales manager lies in his ability to motivate
his sales force. The greater is this ability greater are the
chances of his success.
 The elements of the motivational mix are:
 Compensation plan

 Recognition (like trophies, certificates, praise

encouragements, job enrichment )

 Promotions

 Fair and transparent performance evaluation

 Good forecasting, budgeting, Fair quotas/territory

definition.
 Good sales coaching and supervision

 Regular sales meeting and conventions

 Sales contest

 Effective training programmes

 A good leadership style. 74

DISTRIBUTION
MANAGEMENT

75
 Distribution Management
 Distribution management “is concerned with
management of physical movement of goods
from the production center to the consumer
through different distribution channels,
involving transportation, warehousing,
inventory, and information system order
processing and documentation”.
 Distribution management comprises of two
distinct sections
 Physical distribution

 Distribution channels

76
 Physical Distribution
 Physical distribution is related to “Place” of the marketing
mix.
 It provides ‘Place utility’ and ‘Time utility’ to a product by
ensuring that it is available to the user at the right place
and at the right time.
 It becomes all the more important where the distance
between the production centers and the consuming
centers (market) is large and time consuming.
 A good physical distribution or availability at the right
place and time increases sales and helps to build a
customer base/network.
 Distribution cost forms a substantial part of the total cost.
With so many alternatives available, it is an area with high
cost reduction potential.
 The distribution function is undergoing a tremendous
change because of technological developments in
communication, transportation and Information
technology. 77
 Physical Distribution
 The factors considered for designing physical
distribution system are :
 The distribution objectives and the minimum service level
desired.
 Expectations of the customer in the product delivery (lead time,
meeting emergencies etc)
 Finding out what the competitors do?
 Optimising cost which means incurring lowest cost without
sacrificing the minimum service level.
 Ensuring flexibility of the system.
 Functions involved in physical distribution are:
 Transportation
 Inventory management
 Warehousing
 Order processing
 Packaging
 Material handling
78
 Physical Distribution
 Transportation
 Transportation and delivery add approximately 10
percent to product costs.
 Classes of carriers include common carriers, contract
carriers, and private carriers.
 Major transportation modes include railroads, motor
carriers, water carriers, pipelines, and air freight. 
 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.
 Freight forwarders and supplemental carriers
consolidate shipments to gain lower rates and faster
delivery service for their customers. 79
 Physical Distribution
 Warehousing
 Ware houses are basically of two types
 Storage warehouse—holds 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.
  Automated warehouse technology can cut distribution
costs and improve customer service.
 Decisions regarding warehouse locations are influenced
by:
 warehouse building costs

 materials handling costs

 delivery costs from warehouses to customers.

 Questions that arise are – 1. private or a public warehouse

? 2. How many warehouses? Where should they be
located ?
80
 Physical Distribution
 Inventory Control systems
 Companies must balance customer demand with costs of carrying
excess inventory.
  Firms use just-in-time delivery systems, RFID technology or
vendor-managed inventory to help manage costs.
 Order processing
 This is a set of procedures for receiving , handling and filling
orders promptly and efficiently. Directly affects firm’s ability to
meet customer service standards.
 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.

81
 Physical Distribution
 Protective packaging
 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.
 Unitizing—combining as many packages as possible into each  
 load that moves within or outside a facility.
  Containerizing—combining 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.

82
 Physical Distribution
 The concept of physical distribution system has the
following components:
 Total cost perspective
 TDC (total distribution cost) = Transport cost + Facilities
cost + Communication cost + Inventory cost + Protective
packaging cost + Distribution management cost
 Trade off :
 An integrated approach towards reducing the total cost
needs to be adopted otherwise decreasing cost in one
area can lead to increase (may be higher) in another area.
For example an attempt to reduce transportation cost can
lead to an increase in the inventory cost thus offsetting
the advantage. Because of this a tradeoff is required. The
main purpose of doing trade off is to achieve a net gain.
 Total system perspective : (Supply chain management). It
involves channel partnership and strategic alliances.

83
 Physical Distribution
 Tradeoffs can be of four types
 Intra-activity tradeoff: Eg:- Whether to use public
carrier or own private carriers.
 Inter-activity tradeoff: Eg: Increasing transport cost
might reduce inventory cost and warehousing cost.
Xerox in US found air freighting the spares cheaper
than storing them in warehouses without affecting
customer service level.
 Inter functional tradeoff : Eg:- Packaging a product
might be best in terms protecting the product but
may not be good for promotion or transportation
purposes.
 Inter organizational : This is a tradeoff between
manufactures and the channel partners.
Manufacturer should ensure excellent relationship
with the channel partners and should examine all
external organization's and thus capitalize on
tradeoff opportunities. 84
 Distribution Channel
 What is distribution channel?
 “A set of interdependent organizations

involved in the process of making a product

or service available for use or consumption
by the consumer or business user”. - Stern
 The main function of a distribution channel is to
provide a link between production and consumption.
 It is the Supply chain’s front end.
 The use of Distribution channels may not be limited
to movement of physical products alone. They may
be used for moving a service from producer to
consumer in certain sectors. For instance, hotels may
sell their services (booking of rooms) directly or
through travel agents, tour operators, airlines etc.
85
 Marketing intermediaries
What are the uses of marketing intermediaries?

•Physical
flow
•Title flow
•Payment
flow
•Informati
on flow
•Promotio 86
Functions of a Distribution Channel
 Channel organisations perform many key functions :-
 Information: Gathering and distributing market research and intelligence
- important for marketing planning
 Promotion: Developing and spreading communications about offers
 Contact: Finding and communicating with prospective buyers
 Matching: (presales service) Adjusting the offer to fit a buyer's needs,
including grading, assembling and packaging
 Negotiation: Reaching agreement on price and other terms of the offer
 Physical distribution: Transporting and storing goods
 After sales services: This may include installation and maintenance.
 Financing: Acquiring and using funds to cover the costs of the distribution
channel
 Risk taking: Sharing commercial risks. E.g. holding stock

87
 Types of marketing Channels
 Typical marketing channels:

88
 Types of intermediaries
 Following are the types of intermediaries in
a marketing channel:
 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.
 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.
89
 Types of intermediaries
 Wholesaler/ stockist
 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 categorised as 1. Agent
wholesaler 2. Merchant wholesaler. Agent whole saler
perform all or most of 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.

90
 Types of intermediaries
 Retailer/ Dealer.
 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 authorised 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.

91
 Channel Strategy
 Channel selection

 Distribution intensity Channel strategy

 Channel integration
 Channel selection
 Market factors: buyer behavior; installation
and technical assistance; willingness of partner
to market a product; location of buyers
 Producer factors: resources of partner;
product mix; control of channel operations
 Product factors: large, complex, perishable,
difficult to handle
 Competitive factors: Selecting a unique or a
tried and tested channel.
 Distribution intensity
 Intensive distribution: using all
available outlets; mass market products,
heavy competition e.g. beer, chewing
gum.
 Selective distribution: limited number
of outlets; select only the best; e.g.
cameras, hi-fi equipment, personal
computers...
 Exclusive distribution: only one outlet
in a geographic area, reduces
competition e.g. cars
 Channel integration
 Conventional marketing channels:
 Benefits of specialization against lack of control
 Administered vertical marketing system
 e.g. Procter & Gamble
 Franchising:
 Shared resources and access to local knowledge against areas
of potential conflict
 Contractual vertical marketing system
 e.g. Mc Donald‘s, car industry, Benetton
 Channel ownership:
 purchasing outlets; total control over distributor against high
costs;
 Corporate vertical marketing system
 e.g. Pepsi purchased Pizza Hut
 Channel design
Steps of channel design:
 Setting the objectives. Basic expectations from a
channel:
 Effective coverage of the target market
 Cost effective and efficient physical distribution.
 Convenience of the consumer.
 Uninterrupted manufacturing while channel
members take care of the sales.
 Playing supportive role in financing and sub-
distribution tasks.
 Identifying the functions expected from the channel.
 Linking Channel design to product characteristics.
Consider the following:
 Industrial and consumer goods channels need
different types of channels
 Buying behaviour of different consumer goods are
different so they need different types of channel.
 Channel choice is influenced by PLC stage.
 Channel design
 Evaluation of distribution environment.
 Evaluation of competitors channel design
 Matching the channel design to company resources.
 Evaluating the alternatives and selecting the best.
 Balance cost, efficiency and risk.

 Should have flexibility and controllability.

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 Channel Management 
 Once channels have been designed, the
challenge becomes effectively managing all the
relationships
 The challenge is to set up a system or method
for assigning responsibilities, controlling
behaviors, and monitoring performance
 Channel Management involves:
 Selecting channel members

 Motivating, training and resolving conflicts.

 Evaluating channel members

 Feedback

 Corrective actions
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 Channel Management
 Selecting the channel members:
 Factors that need to be considered while selecting a
channel member are:
 Financial strength

 Product lines

 Market coverage

 Management strength

 Equipment facilities

 Sales strength

 Willingness

 Ordering and payment procedures

 Compatibility – working culture

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 Channel Management
 Motivating, training, resolving conflicts:
 Monetary and non-monetary motivators are used to control
the behaviours of channel members.
 Under monetary motivators a manufacturer can use reward
power while under non-monetary motivators manufacturers
can use coercion, functional knowledge, leadership etc.
 A n attractive Trade margin is a major motivator. It is essential
to set the dealer margin to a level that would enable the
dealer to have a reasonable retained earning after meeting all
the normal expenses.
 The firms need to collaborate with their dealers to help them
in achieving a larger turnover and greater retailing
productivity.
 A long term partnership approach needs to be adopted to
build a harmonious relationship with the channel members.
Ideas need to be exchanged, complaints and queries need to
be addressed promptly.

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 Channel Management
 Training the members of the channel member is a
vital activity. This involves preparing the channel
members to represent the firm in the best possible
way. The trainees are provided complete knowledge
of the firm, product, consumer, company objective
and strategies. Apart from these essentials of
inventory management, credit management and
sales promotion may also be a part of their training
programme.
 There are possibilities of conflicts within the channel
members. One channel member might perceive the
behaviour of another channel member to be
obstructive to its goals. These conflicts need to be
resolved tactfully. Managing conflicts is an
important task of the channel manager. In fact,
conflict management attempts to prevent the
conflicts to appear or detect it at early stage and
take corrective actions. 101
 Channel Management
 Evaluating the channel members:
 The purpose of performance appraisal and monitoring the
same, is to improve the performance of the dealers.
 The channel members are evaluated in terms of their
sales quota achievement, average inventory levels,
Customer delivery time, service level provided to
customers co-operation in promotional and training
programmes, enlistment of new account, treatment of
damaged goods,, market intelligence report.
 The performance appraisal system should be discussed in
advance with the dealers.
 Feedback and Corrective action:
 The performance appraisal should be discussed with the
channel members on a regular basis in a proactive style.
 Corrective actions needed should taken both at the firms
and the dealer’s end. Termination of relationship should
be the last alternative but a firm should not hesitate to
take the extreme step when necessary.

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