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SBU Objectives andthe Sales Organization
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Selling functions and strategies
Selling functions and strategies
Selling Objectives and sales organization
Salary plus incentive
Prospective and new accounts
Provide high service levels
particularly pre-sales service
Product/market feedback
Build salesvolume; Secure
distribution
Build
SBU Objectives andthe Sales Organization
Compensation System
PrimarySales Tasks
Sales Organization Objectives
Market Share Objectives
Compensation System
PrimarySales Tasks
Sales Organization Objectives
Market Share Objectives
Salary plus commission
or bonus
Call on targeted current
accounts
Incr. service levels to current
accounts
Call on new accounts
Maintainsales volume
Consolidate market position
through concentration
on targeted segments
Secure additional outlets
Hold
SBU Objectives andthe Sales Organization
Compensation System
PrimarySales Tasks
Sales Organization Objectives
Market Share Objectives
Salary plus
bonus
Service most profitable accounts
eliminate unprofitable
accounts
Reduce service levels and/or
inventories levels
Reduce selling costs
Target profitable accounts
Harvest
SBU Objectives andthe Sales Organization
Compensation System
PrimarySales Tasks
Sales Organization Objectives
Market Share Objectives
SalaryDump inventory
Eliminate service
Minimize selling costs and clear out inventory
Divest or Liquidate
SBU Objectives andthe Sales Organization
Business Strategy andthe Sales Function
• Low-cost supplier
• Differentiation
• Niche
Pursue large customers
Minimize cost
Compete on price
Seek customers who are low price shoppers
Compete on non-price benefits
Provide high quality customer service
Seek customers who are not low price shoppers
Serve a distinct target market not served well
by others
Provide high quality customer service
Seek customers who are not low price shoppers
Sales Forecasting and Operational Planning
• Central part of strategic planning• Directly or indirectly influences following
functional areas– Sales an marketing planning– Production scheduling– Cash flow projections– Financial planning– Capital investment– Procurement– Inventory management– Human resource planning– Budgeting
Assessing the forecasting environment
• Controllable factors• Uncontrollable factors• Long-run or short- run forecast• Leading indicators (to name few)
– New orders– Ratio of price to unit labor cost in manufacturing– Corporate Profit after tax– Prices of industrial materials– Average workweek in manufacturing
Identifying levels of forecasting
Market Potential (350 thousands units)
Sales Potential ( 150 thousands units)
Sales forecast (125 thousand units)
Sales Quota ( 25 thousand units per sales person)
Description of concepts• Market potential – Highest potential expected industry
sales of a product or service during a set time period and specified market assuming application of appropriate marketing methods
• Sales Potential – Maximum market share that any company or brand could possibly obtain in a specified market segment during a given period.
• Sales forecast – Expected actual sales for a company or brand during a given time period
• Sales Quota – Sales volume goal for a salesperson or a sales organization
Analyzing Market Potential
• Market identification– Who Buys the product?– Who Uses it?– Who are the prospective buyers/users?
• Market Motivation– Why do people buy?– Why don’t people buy?
• Analysis of Market potential– Select market factors associated with the product’s demand– Eliminate market segments that do not contain prospective
buyers of the product
Sales Forecasting Methods• Jury of executive opinions
• Delphi technique (version of jury opinions method)
– Responses of one series of questionnaires are used to produce next questionnaires
• Poll of sales force opinion
• Projection of Past Sales– Simple method ( On the basis of current year’s actual sales or
adding some % to it (moving average))
Next year’s sales = this year’s sales x this year’s sale
Last year’s sale
Continued• Time series analysis
– long term trends, cyclical changes, seasonal variations, irregular fluctuations)
– For long term sales forecast
• Exponential smoothing – Moving average with weighted sum of past time series numbers
including higher weight to most recent data– Equation – Next year’s sales = a (this year’s sale) + (1-a)(this year’s
forecast)– a is small if the series of sales data changes slowly and vis-à-vis
• Evaluation of past sales projection method– Influencing factors: Market saturation, competitor’s move, marketing
campaigns etc.
Continued• Regression analysis
A statistical tool used in sales forecasting and measuring the association between company sales and other variables
– Simple regression ( one independent and one dependent variable)
– Multiple regression ( two or more independent variable and one dependent variable)
– The higher the co-relation the closer the association
Continued
• Econometric model building and simulation– Attractive for the companies in durable goods– Independent variables = demand determining variables
Formula = S = R + N» S = Total sales» R = Replacement demand» N = New-owner demand
• Converting Industry forecast into company forecast
Determining sales related marketing policies
Sales and Marketing policies
Three major Policies
1.) Product Policy ( What to sell)
2.) Distribution Policy ( whom to sell)
3.) Pricing Policy
Product Policies ( What to sell)
• Product objectives (e.g. – Selling products that require less after sales service or selling products having higher quality than competitors)
• Product line Policy– Short line (narrow range/specialized product)
– Full line (large range)
i.) Changes in Product offerings• Whether items are still in line with the market• To select the items to be dropped or to be added
Product Policies Continued…
ii.) Reappraising and simplification of product line– Clash between two products– Profitability standards– Desires of dealers– For better utilization of resources– Chances of making the product better by change in some policies
iii.) Reappraising and diversification of product line– Existing product lines at market saturation or industry in dying– Assist dealers in increase in sales– Unused plant facilities / seasonal fluctuations– Introducing a new product and then a new product line
Product Policies Continued…
iv.) Ideas for new products
• From internal resources or external resources
v.) Appraisal of proposed new product
• Profitability, market potential, legal implications, competition, pricing of the policy
• Production friendliness of the product• Benefits of existing distribution channels and sales
force if any
Product Policies Continued…
• Product Design Policy
– Frequency of the design change
– Protecting design from copying
• Product Quality, Service and Guarantee Policy
– They can be advocated in marketing campaign
– Simple and customer friendly service policies win over competition
– Of prime Importance for customer loyalty
Distribution Policies ( Who to Sell)
Distribution Objective: Getting the right product/service to the right people at the right time with special consideration for profit and effectiveness
• Distribution channels are influenced by the nature of the product.
• The choice of particular distribution channel/s sets the pattern for sales force operations
Producer Producer Producer Producer
Consumers Consumers Consumers Consumers
Retailers Retailers Retailers
Wholesalers Wholesalers
Agents orBrokers
WholesalerWholesalerChannelChannel
RetailerRetailerChannelChannel
DirectDirectChannelChannel
Agent/BrokerAgent/BrokerChannelChannel
Traditional Channels for consumer markets
Producer Producer Producer Producer
IndustrialUser
IndustrialUser
IndustrialUser
IndustrialUser
IndustrialDistributor
IndustrialDistributor
Agents orBrokers
Agents orBrokers
Agent/BrokerAgent/BrokerChannelChannel
IndustrialIndustrialDistributorDistributor
DirectDirectChannelChannel
Producer
GovernmentBuyer
DirectDirectChannelChannel
Agent/BrokerAgent/BrokerIndustrialIndustrialChannelChannel
Traditional Channels for Industrial markets
Non-Traditional Channels
• Tele marketing
• Internet Marketing
• Direct Mailers
• Network Marketing
Distribution Policies
• Sales volume potential:– Reach to the potential buyers by the channel– Market analysis to judge each channel’s potential– Comparative analysis– Role of the sales people
• Comparative Distribution Costs – Shortest are the costliest– Direct selling more common in industrial markets than
consumer markets
• Net Profit possibilities– Relationship of gross margin, expenses and net
profits
Pricing Policies
• Relative to Competition– Meeting the competition– Pricing above the competition– Pricing under the competition
• Relative to Cost– Full cost pricing (Variable + fixed cost covered)– Promotion Pricing (special low introductory prices)– Contribution Pricing (above relevant incremental cost)
Continued…• Relative to Buyers
– Wherever individual sales involve large sums– Bargaining power varies with the size of transaction– Creative selling
• List pricing– List of standardized resale price– Seek or does not seek to control resale price– Multiply with the increase in the number of middlemen– Resale price reporter is essential for effective
enforcement
Continued…• Policy on discount
– Trade discounts ( A discount on the list price granted by a manufacturer or wholesaler to buyers in the same trade)
– Quantity discounts
– Cash discounts (A reduction in the price of an item for sale allowed if payment is made within a stipulated period)
• Geographical pricing policy
– F.O.B pricing– Delivered pricing
Continued…
• Policy on price leadership
• Product line pricing policy– Price space between two lines– Pricing of the top and bottom lines
• Competitive bidding policy– Industrial and government buyers– Large volumes
Determining the kind of sales personal
Determining the kind of sales personal
Sales Organization ConceptsSales Organization ConceptsSalesforce Specialization
GENERALISTSGENERALISTSAll selling activitiesand all products to
all customers
SPECIALISTSSPECIALISTSCertain selling activities
for certain productsfor certain customers
Some specializationof selling activities,products, and/or
customers
Selling SituationSelling Situation
• Consideration of Specialization• A generalized salesforce should be used when selling effort is
more important than selling skill• A specialized salesforce should be used when selling skill is
more important than selling effort
• Consideration of Environmental Characteristics, Task Characteristics, and Performance Objectives
• Consideration of Customer Needs and Product Complexity
Selling Situation Selling Situation Customer and Product Determinants
of Salesforce Specialization
Customer Needs Similar
Customer Needs Different
SimpleProductOffering
ComplexRange ofProductsGeography-
DrivenSpecialization
Product-Driven
Specialization
Market-Driven
Specialization
Product/Market-Driven
Specialization
Geographic Sales OrganizationGeographic Sales Organization
Sales Training Manager
Salespeople (100)
District Sales Managers (20)
Zone Sales Manager (4)
Eastern Regional Sales Manager
Salespeople (100)
District Sales Manager (20)
Zone Sales Manager (4)
Western Regional Sales Manager
National Sales Manager
Product Sales OrganizationProduct Sales Organization
Salespeople (100)
District Sales Manager (10)
Office Equipment Sales Manager
Salespeople (100)
District Sales Manager (10)
Office Supplies Manager
National Sales Manager
Market Sales OrganizationMarket Sales Organization
Sales Training Manager
Salespeople (50)
Dsitrict Sales Managers (25)
Zone Sales Managers (4)
Commercial Accounts Sales Manager
Salespeople (50)
District Sales Managers (10)
Government Account Sales Manager
National Sales Manager
• Broad Market Specialization– Consumers and/or Industrial
• Specific Industry Specialization– Government agencies, educational institutions, distributors, and
retailers, OEMs
Functional Sales OrganizationFunctional Sales Organization
Salespeople (160)
District Sales Managers (16)
Regional Sales Managers (4)
Field Sales Manager
Salespeople (40)
District Sales Managers (2)
Telemarketing Sales Manager
National Sales Manager
Sales Organization StructuresSales Organization StructuresIdentify Major Accounts
Complexity of AccountSimple Complex
Large
Small
Size
of
Acc
ount
LargeAccount
RegularAccount
ComplexAccount
MajorAccount
Comparison of Sales Organization Comparison of Sales Organization StructuresStructures
Organizational Structure Advantages Disadvantages
Geographic Low Cost No Geographic Duplication No Customer Duplication Fewer Management Levels
Limited Specialization Lack of Management Control Over
Product or Customer Emphasis
Products
Product Salespeople Become Experts inProduct Attributes andApplications
Management Control overSelling Effort Allocated to
High Cost Geographic Duplication Customer Duplication
Market Salespeople Develop BetterUnderstanding of UniqueCustomer Needs
Management Control OverSelling Effort Allocated toDifferent Markets
High Cost Geographic Duplication
Functional Efficiency in PerformingSelling Activities
Geographic DuplicationCustomer DuplicationNeed for Coordination
Hybrid Sales Organization Hybrid Sales Organization StructureStructure
Major AccountsSales Manager
WesternSales Manager
EasternSales Manager
FieldSales Manager
TelemarketingSales Manager
Regular AccountsSales Manager
Commercial Accounts Sales Manager
Office EquipmentSales Manager
Office SuppliesSales Manager
Government Accounts Sales Manager
National Sales Manager
Determining the size of the sales force
Determining the size of the sales force
Popular methods
• Workload method
• Sales potential method
• Incremental method
Workload Method
• Step 1 - Classifying the customer• Step 2 - Decide on length of time per each call and
desired call frequencies on each customer per year• Step 3 - Calculate the total workload involved in covering
the entire market• Step 4 - Determine the total time available with the sales
person• Step 5 -Divide the total time available per sales person
by task• Step 6 -Calculation of total number of salespeople
needed
Sales potential method
Formula usedN = S/P(1+T)
N = Number of sales personnel S = forecasted sales volumeP = Estimated productivity of one sales personnelT = Allowance of rate of sales force turnover
E.g. - N = 10,00,000 (s)/ 1,00,000 (P) x 1.10 (@ 10% sales force turnover)
= N = 11 sales personnel units
Incremental method
With additional salesperson no
Additional sales
volume of
Cost of goods sold Gross margin
16 250000 162500 87500
17 200000 130000 70000
18 150000 97500 52500
19 100000 65000 35000
With additional salesperson no
Gross margin
Salaries +commission+
travel exp
Net profit contributio
n
16 87500 44500 43000
17 70000 42000 28000
18 52500 39500 13000
19 35000 37000 -2000