October 16, 2021

DESIGNING THE SALES FORCE Personal selling is a key element in promotion, one of the four Ps in the marketing mix. But not all sales representatives do exactly the same kind of selling. In business settings, McCurry has distinguished these six types of sales representatives, ranging from the least to the most creative types of selling Deliverer: A salesperson whose major task is the delivery of a product (milk, bread, or fuel). Order taker: A salesperson who acts predominantly as an inside order taker (the salesperson standing behind the counter) or outside order taker (the soap salesperson calling on the supermarket manager). Missionary: A salesperson whose major task is to build goodwill or to educate the actual or potential user, rather than to sell (the medical “detailer” representing an ethical pharmaceutical firm). Technician: A salesperson with a high level of technical knowledge (the engineering salesperson who is primarily a consultant to client companies). Demand creator: A salesperson who relies on creative methods for selling tangible products (vacuum cleaners or siding) or intangibles (insurance or education). Solution vendor: A salesperson, whose expertise lies in solving a customer’s problem, often with a system of the firm’s goods and services (such as computer and communications systems). In general, salespeople perform one or more of the following tasks: ➤ Prospecting: Searching for prospects, or leads, ➤ Targeting: Deciding how to allocate their time among prospects and customers, ➤ Communicating: Communicating information about the company’s products and services, ➤ Selling: Approaching, presenting, answering objections, and closing sales, ➤ Servicing: Providing various services to customers—consulting on problems, rendering technical assistance, arranging financing, expediting delivery, ➤ Information gathering: Conducting market research and doing intelligence work, and ➤ Allocating: Deciding which customers will get scarce products during shortages. As this list suggests, the sales representative serves as the company’s personal link to its customers and prospects while bringing back much-needed information about customers, markets, and competitors. Therefore, smart companies look carefully at the design of the sales force, including the development of sales force objectives, strategy, structure, size, and compensation. Sales force structures  Territorial: Each sales representative is assigned an exclusive territory. This structure results in a clear definition of responsibilities and increases the rep’s incentive to cultivate local business and personal ties. Travel expenses remain relatively low, because each rep travels within a small area. Product: The importance of sales reps’ knowing their products, together with the development of product divisions and product management, has led many companies to structure their sales forces along product lines. Product specialization is particularly useful for product lines that are technically complex, highly unrelated, or very numerous. Kodak uses one sales force for its film products that are intensively distributed, and another sales force to sell complex products that require technical support. Market: Companies often specialize their sales forces along industry or customer lines. IBM set up a sales office for finance and brokerage customers in New York, another for GM in Detroit, and still another for Ford in Dearborn. Market specialization helps the sales force become knowledgeable about specific customer needs, but the major disadvantage is that customers are scattered throughout the country, requiring extensive travel. Complex: When a company sells a diverse product line to many types of customers over a broad geographical area, it often combines several structures, with sales forces specialized by territory-product, territory-market, product-market, and so on. A sales representative might then report to one or more line and staff managers. Sales force size Once the company clarifies its sales force strategy and structure, it is ready to consider sales force size, based on the number of customers it wants to reach. One widely-used method for determining sales force size is the five-step workload approach:  (1) Group customers into size classes by annual sales volume; (2) Establish call frequencies, the number of calls to be made per year on each account in a size class; (3) Multiply the number of accounts in each size class by the call frequency to arrive at the total yearly sales call workload; (4) Determine the average number of calls a sales rep can make per year; and (5) Divide the total annual calls (calculated in step 3) required by the average annual calls made by a rep (calculated in step 4) to see how many reps are needed.   Sales force compensation The compensation package is a critical element in attracting top-quality sales reps, starting with the level and components. The level of compensation must bear some relation to the “going market price” for the type of sales job and required abilities. If the market price for salespeople is well defined, the individual firm has little choice but to pay the going rate. However, the market price for salespeople is seldom well defined. Published data on industry sales force compensation levels are infrequent and generally lack sufficient detail. The company must next determine the four components of sales force compensation— a fixed amount, a variable amount, expense allowances, and benefits. 1). The fixed amount, a salary, is intended to satisfy the sales reps’ need for income stability. 2). The variable amount, which might be commissions, a bonus, or profit sharing, is intended to stimulate and reward greater effort. 3). Expense allowances enable sales reps to meet the expenses involved in travel, lodging, dining, and entertaining. 4). Benefits, such as paid vacations, sickness or accident benefits, pensions, and life insurance, are intended to provide security and job satisfaction. Fixed compensation receives more emphasis in jobs with a high ratio of non-selling to selling duties and in jobs in which the selling task is technically complex and involves teamwork. Variable compensation receives more emphasis in jobs in which sales are cyclical or depend on individual initiative. Fixed and variable compensation give rise to three basic types of compensation plans—straight salary, straight commission, and combination salary and commission. Only one-fourth of all firms use either a straight-salary or straight-commission method, while three-quarters use a combination of the two, though the relative proportion

 SELLING AND MANAGING KEY/ MAJOR ACCOUNTS                                            Major/Key account management Key account management is a strategy used by suppliers to target and serve high-potential customers with complex needs by providing them with special treatment in the areas of marketing, administration and service. In order to receive key account status, a customer must have high sales potential. A second characteristic is that of complex buying behavior; for example, large decision making units with many choice criteria are often found in dispersed geographical locations. The decision-making unit may be located in different functional areas and varying operating units. Third, key account status is more likely to be given to customers willing to enter into a long-term alliance or partnership. Such relationships offer buyers many benefits including reliability of supply, risk reduction, easier problem-solving, better communications and high levels of service. Key accounts that are geographically widespread are often called national accounts. Key account management has three features. First, key account management involves special treatment of major customers that is not offered to other accounts. This may involve preferential treatment in the areas of pricing, products, services, distribution and information sharing. This may take the form of special pricing, customization of products, provision of special services, customization of services, joint co-ordination of distribution and workflow, information sharing and joint development of business processes and new products. Second, it is associated with dedicated key account managers who typically serve several key accounts. They may be placed in the suppliers’ headquarters, in the local sales organization of the key account’s country, or sometimes on the premises of the key account. Third, key account management requires a multifunctional effort involving, in addition to sales, such groups as engineering, marketing, finance, information technology, research and development and logistics. The six most critical conditions needed to ensure the success of key account management are as follows: Integration of the key account programme into the company’s overall sales effort; Senior management understands of, and support for, the key account unit’s role; Clear and practical lines of communication between outlying sales and service units; Establishment of objectives and missions; Compatible working relationships between sales management and field salespeople; Clear definition and identification of customers to be designated for key account status. THE TASKS AND SKILLS OF KEY ACCOUNT MANAGEMENT Tasks Skills 1. Develop long-term relationships Relationship building 2. Engage in direct contact with key customers Co-ordination 3. Maintain key account records and background information Negotiation 4.Identify selling opportunities and sales potential of existing key accounts Human relations 5. Monitor competitive developments affecting key accounts Focus on specific objectives 6. Report results to upper management Diagnosing customer problems 7. Monitor and/or control key account contracts Presentation skills 8. Make high-level presentations to key accounts Generating visibility, reputation 9. Co-ordinate and expedite service to key accounts Communication 10. Co-ordinate communications among company units servicing key accounts Working in a team                                  Building relationships with key accounts Five ways of building strong customer relationships will now be described. Personal trust The objective is build confidence and reassurance. Methods: Ensure promises are kept; Reply swiftly to queries, problems and complaints; Establish high (but not intrusive) frequency of contact with key account; Arrange factory/site visits; Engage in social activities with customer; Give advance warning of problems. Technical support The objective is to provide know-how and improve the productivity of the key account. Methods: Research and development co-operation; Before- and after-sales service; Provide training; Dual selling (supplier helps key account to sell). Resource support The objective is to reduce the key account’s financial burden. Methods: Provide credit facilities; Create low interest loans; Engage in co-operative promotions to share costs; Engage in counter-trade (accept payment by means of goods or services rather than cash). Service levels The objective is to improve the quality of service provision. Methods: Reliable delivery; Fast/just-in-time delivery; Install computerized reorder systems; Give fast accurate quotes; Defect reduction (right first time). Risk reduction The objective is to lower uncertainty in the customer’s mind regarding the supplier and the products/services provided. Methods: Free demonstrations; Free/low-cost trial period; Product guarantees; Delivery guarantees; Preventative maintenance contracts; Proactive follow-ups; Reference selling.  Criteria for selecting key accounts Traditionally the key criterion for designating particular customers as ‘key accounts’ was on the basis of the large quantity of output sold to a customer on the basis that an organization bought a considerable amount of product from a supplier, it deserved special treatment because of the high profit contribution it made, the supplier was motivated to provide the extra resources because the loss of that customer would have a significant impact on its own sales and profits. As experience with key accounts has grown, the range of criteria used to select key accounts has grown, based on the strategic or long-term importance of specific customers to a supplier. These include: Accounts that have growth prospects through their ability to build sales and market share in their existing markets. Accounts with growth prospects through their position as major players in small or medium-sized but expanding markets. Customers that are willing to be partners in innovation by allowing joint new product development with a supplier and/or will allow a supplier to test new products in their production processes. Customers that are early adopters of new products and so aid the diffusion of such products in the marketplace. Highly prestigious accounts that improve the image and reputation of the supplier and can be used in reference selling by the sales force. Accounts that are important to and currently served by competitors that the supplier has decided to attack. Accounts that provide a high contribution to the supplier’s profits.

Industrial/commercial/public authority selling These categories are grouped together as the sales approach is similar and behavioral patterns exhibited by each conform to organizational behavior. A number of characteristics in these types of market distinguish them from consumer markets. Fewer customers Institutions and businesses purchase goods either for use in their own organizations or for use in the manufacture of other goods. There are few potential purchasers, each making high-value purchases. Concentrated markets Industrial markets are often highly concentrated, an example being the UK textile industry which is centered in Lancashire and Yorkshire. An industrial salesperson who sells into one industry may deal with only a few customers in a restricted geographical area. Complex purchasing decisions Buying decisions often involve a large number of people, particularly in the case of a public authority where a purchasing committee may be involved in a major purchase. Many industrial buying decisions involve more than the buyer; in some cases the technical specifier, production personnel and finance personnel are involved and this is where the decision-making unit can be seen in practice. This can prolong negotiation and decision-making processes. Salespeople have to work and communicate with people in a variety of positions and tailor their selling approaches to satisfy individual needs. For example, specifiers need to be convinced of the technical merits of the product, production people want to be assured of guaranteed delivery and buyers will be looking for value for money. For technically complicated products, selling is sometimes performed by a sale team, with each member working with their opposite number in the buying team, e.g. a sales engineer works with engineers in the buying company. Long-term relationships A life insurance policy salesperson might make a sale and never meet the customer again. The nature of selling in industrial, commercial and public authority settings is that long-term relationships are established and both parties become dependent upon each other, one for reliable supplies and the other for regular custom. There is a tendency to build up strong personal relationships over a long time and high pressure sales techniques could be counter-productive. A more considered approach involving salespeople identifying needs of individual customers and selling the benefits of the product to satisfy those needs are more likely to be successful. The ability of salespeople to deal with complaints and provide a reliable after-sale service is important. It is suggested that the effective salesperson must understand how to develop and sustain relationships with key customer groups, along the lines of relationship selling. Reciprocal trading This is an arrangement whereby company A purchases certain commodities manufactured by company B and vice versa. Such arrangements tend to be made at senior management level and are often entered into when there is a financial link between the companies, such as those within the same group (referred to as intergroup trading) or between companies whose directors simply want to formalize an arrangement to purchase as much of each other’s products as possible. Such arrangements can be frustrating for salespeople and buyers alike, as they deter free competition. Buyers do not like to be told where they must purchase from, just as salespeople do not like having a large part of a potential market permanently excluded because of a reciprocal trading arrangement. 

Channels of distribution Management should constantly reappraise channels of distribution to make cost savings. Marketing channels are determined by company policy and this determines how the sales force should be organized. A sales channel is the route that goods take through the selling process from supplier to customer. Sometimes the channel is direct, especially where goods sold are incorporated into a manufacturing process. Final goods might then be sold through a different channel. Selecting/reappraising sales channels When selecting or reappraising channels, the company must take into consideration: The market; channel costs; The product; Profit potential; channel structure; Product life-cycle; and Non-marketing factors.  The market This must be analyzed to ensure that as many potential consumers as possible will have an opportunity to purchase the product or service. Channel compatibility with similar products in the marketplace is important. Consumers tend to be conservative and any move from the accepted norm can be viewed with suspicion. Unless there are sound reasons for so doing, it does not make sense to go outside the established channel. Channel costs Generally, short channels are the costliest. A company selling direct may achieve large market coverage, but in addition to increased investment in the sales force, the firm also incurs greater transportation and warehousing costs. This is balanced against the fact that there will be a greater profit margin, by virtue of the fact that distributive intermediaries are obviated and their margins will not have to be met. In addition to such financial criteria, short channels have an advantage of being nearer to end-users, which means the company is in a better position to anticipate and meet their needs. There has been a trend in recent years for manufacturers to shorten their channels to control more effectively distribution of their products, particularly where advertising has been used to pre-sell the goods to consumers. The product Normally, low-cost, low-technology items are better suited to longer channels. More complex items, often requiring much after-sales service, tend to be sold through short channels, which is why most industrial products are sold direct from the producer to user. The width of the product line is important, in that a wide product line may make it worthwhile for the manufacturer to market direct because the salesperson has a larger product portfolio with which to interest the customer, which makes for more profit-earning potential. A narrow product line is more suited to a longer channel because along the distribution chain it can be combined with complementary products of other manufacturers, resulting in a wider range of items with which to interest the customer. In this case, distributive intermediaries and not manufacturers are performing the final selling function. An example here is a manufacturer of bathroom fittings who sells through builders’ merchants. Builders’ merchants then sell these fittings to builders alongside other materials they require. Profit potential There comes a point when the costs of obtaining more sales through a channel outweigh revenue and profits to be gained from increased sales. For instance, a manufacturer of an exclusive perfume would not distribute through supermarkets or advertise during peak-time television viewing. If the company did so, then sales would no doubt increase, but the costs involved in achieving those sales would make it unprofitable. It is an accounting problem and a balance must be struck between channel expense, profit and gross margins. A manufacturer using short channels is more likely to have high gross margins, but equally higher channel expenses. A manufacturer using longer channels will have relatively lower gross margins, coupled with lower channel expenses. Channel structure To some extent a manufacturer’s choice of distributive intermediaries is governed by the members in that channel. If members of the channel are strong (by virtue of, say, their size), then it will be difficult for a manufacturer to go outside the established channel. In some cases it may be difficult to gain entry to the channel unless the product is differentiated by way of uniqueness or lower price from those products already established in the channel. An example is the potential difficulty that a new detergent manufacturer would have in attempting to sell products through larger supermarkets. The manufacturer would have to convince members of the channel that the detergent was in some way better than those already on the market, or offer advantageous prices and terms. In addition, detergent is mainly marketed using a ‘pull’ strategy that relies on consumer advertising to create brand loyalty and pre-sell the product to end-customers. A new manufacturer would have to spend a lot on mass advertising to create brand loyalty for the product, or attempt to ‘push’ the product through the channel by providing trade incentives, with probably a lower end price than competitive products coupled with larger profit margins for retailers. It can be seen that it would be a daunting task for a new detergent manufacturer to enter the market in a big way without large cash resources at its disposal. Product life-cycle Consideration must be given to how far the product is along the product life-cycle. A new concept or product just entering the life-cycle might need intensive distribution to start with to launch it on the market. As it becomes established it may be that after-sales service criteria become important, leading to a move to selective distribution, with only those dealers that are able to offer the necessary standard of after-sales service being allowed to sell the product. It would then be the case that only a select few distributors are needed in the early stages of the life-cycle.

SALES ENVIRONMENT ANALYSIS In this chapter we analyze the major forces that affect selling and sales management. We then consider specific sales settings such as sales channels, industrial/ commercial/public authority, retail and services selling. Related activities that support selling activities, namely sales promotions, exhibitions and public relations, are also examined. ENVIRONMENTAL AND MANAGERIAL FORCES THAT IMPACT ON SALES A number of major environmental (behavioral and technological) and managerial forces impact on how selling and sales management are and will be carried out. Behavioral forces As customers adjust to a changing environment, so sales have to adapt to a variety of influences: (a) Rising consumer and organizational buyer expectations; (b) Customer avoidance of buyer–seller negotiations; (c) Expanding power of major buyers; (d) Globalization of markets; (e) Fragmentation of markets.   Rising consumer/organizational buyer expectations and fulfillment of higher order needs As consumers experience higher standards of product quality and service, so their expectations are fuelled to expect even higher levels in the future. This process may be hastened by experiences abroad and new entrants to industries (possibly from abroad) that set new standards of excellence. Technological advances have created new higher customer expectations. The existence of the internet means that customers expect salespeople calling on them for the first time (and after) to be familiar with their firms, its products and personnel   Customer avoidance of buyer–seller negotiations Studies have shown that the purchase of a car is the most anxiety-provoking and least satisfying experience in retail buying.  Some car salespeople are trained in the art of negotiation supported by high pressure sales tactics. Consequently, customers have taken to viewing the purchase as an ordeal to be tolerated rather than a pleasurable occasion to be savored.   Expanding power of major buyers The growing dominance of major players in many sectors (notably retailing) is having a profound influence on selling and sales management. Their enormous purchasing power means that they are able to demand and get special services, including special customer status (key account management), just-in-time inventory control, category management and joint funding of promotions.   Globalization of markets As domestic markets saturate, companies are expanding abroad to achieve sales and profit growth. The global challenge includes a correct balance between expatriate and host country sales personnel, adapting to different cultures, lifestyles and languages, competing against world-class brands and building global relationships with customers based in many countries. As companies expand into new overseas markets, there is a need to understand different cultural expectations and to give thought to various cultural issues. Ethical differences are also important what is ethical in one country may be unethical in another.    Fragmentation of markets Driven by differences in income levels, lifestyles, personalities, experiences and race, markets are fragmenting to form market segments. This means that markets are likely to become smaller with an increasing range of brands marketed to cater for the diverse needs (both functional and psychological) of customers. Marketing and sales managers need to be adept at identifying changes in consumer tastes and developing strategies that satisfy an increasingly varied and multicultural society.   Technological forces Three major forces are at play: Sales force automation; Virtual sales offices; Electronic sales channels. Sales force automation includes laptop and palmtop computers, mobile telephones, fax, email and more advanced sales software which aid such tasks as journey and account planning, and recruitment, selection and evaluation of sales personnel. In addition, electronic data interchange (EDI) provides computer links between manufacturers and resellers (retailers, wholesalers and distributors), allowing direct exchange of information. Improved technology has encouraged the creation of virtual offices, allowing sales personnel to keep in contact with head office, customers and co-workers. The virtual office can be home or even a car. This means cost and time savings and enhanced job satisfaction for salespeople who are spared time waiting in traffic that is a feature of the job. The fastest growing electronic sales channel is undoubtedly the internet.  Its impact is not simply to reduce the size of sales forces but also to change the focus of the sales team. The internet has also raised customer expectations regarding salesperson knowledge about their company and responsiveness.  Managerial forces Managers can respond to the changes in the environment by developing new strategies and tactics to enhance sales effectiveness, including: (a) Employing direct marketing techniques; (b) Improving co-operation between sales and marketing; (c) Encouraging salespeople to attend training programmes and acquire professional qualifications. Sales channels Distribution channels involve two separate, yet closely connected, activities: logistics, or physical distribution management (PDM), and channels of distribution. Logistics or physical distribution management (PDM) The terms logistics and PDM are interchangeable, although some writers infer that logistics is more concerned with strategic issues whereas PDM relates to tactics. Basically, logistics means the effective and economic planning, implementation and control of the physical flow of materials in their unprocessed state through to finished goods from the point of origin to delivery to the end-consumer.

INDUSTRIAL/COMMERCIAL/PUBLIC AUTHORITY SELLING These categories are grouped together as the sales approach is similar and behavioral patterns exhibited by each conform to organizational behavior. A number of characteristics in these types of market distinguish them from consumer markets. Fewer customers Institutions and businesses purchase goods either for use in their own organizations or for use in the manufacture of other goods. There are few potential purchasers, each making high-value purchases. Concentrated markets Industrial markets are often highly concentrated, an example being the UK textile industry which is centered in Lancashire and Yorkshire. An industrial salesperson who sells into one industry may deal with only a few customers in a restricted geographical area. Complex purchasing decisions Buying decisions often involve a large number of people, particularly in the case of a public authority where a purchasing committee may be involved in a major purchase. Many industrial buying decisions involve more than the buyer; in some cases the technical specifier, production personnel and finance personnel are involved and this is where the decision-making unit can be seen in practice. This can prolong negotiation and decision-making processes. Salespeople have to work and communicate with people in a variety of positions and tailor their selling approaches to satisfy individual needs. For example, specifiers need to be convinced of the technical merits of the product, production people want to be assured of guaranteed delivery and buyers will be looking for value for money. For technically complicated products, selling is sometimes performed by a sale team, with each member working with their opposite number in the buying team, e.g. a sales engineer works with engineers in the buying company. Long-term relationships A life insurance policy salesperson might make a sale and never meet the customer again. The nature of selling in industrial, commercial and public authority settings is that long-term relationships are established and both parties become dependent upon each other, one for reliable supplies and the other for regular custom. There is a tendency to build up strong personal relationships over a long time and high pressure sales techniques could be counter-productive. A more considered approach involving salespeople identifying needs of individual customers and selling the benefits of the product to satisfy those needs are more likely to be successful. The ability of salespeople to deal with complaints and provide a reliable after-sale service is important. It is suggested that the effective salesperson must understand how to develop and sustain relationships with key customer groups, along the lines of relationship selling. Reciprocal trading This is an arrangement whereby company A purchases certain commodities manufactured by company B and vice versa. Such arrangements tend to be made at senior management level and are often entered into when there is a financial link between the companies, such as those within the same group (referred to as intergroup trading) or between companies whose directors simply want to formalize an arrangement to purchase as much of each other’s products as possible. Such arrangements can be frustrating for salespeople and buyers alike, as they deter free competition. Buyers do not like to be told where they must purchase from, just as salespeople do not like having a large part of a potential market permanently excluded because of a reciprocal trading arrangement.

Sales force evaluation The sales force evaluation process  Sales force evaluation is the comparison of sales force objectives with results. It begins with the setting of sales force objectives which may be financial, such as sales revenues, profits and expenses; market-orientated, such as market share; or customer-based such as customer satisfaction and service levels. Then, the sales strategy must be decided to show how the objectives are to be achieved. Next, performance standards should be set for the overall company, regions, products, salespeople and accounts. Results are then measured and compared with performance standards. Reasons for differences are assessed and action taken to improve performance. Sources of Information Management can obtain information about reps in several ways, including sales reports, personal observation, customer letters and complaints, customer surveys, and conversations with other sales representatives. Many companies require their representatives to develop an annual territory marketing plan in which they outline their program for developing new accounts and increasing business from existing accounts. This type of report casts sales reps into the role of market managers and profit centers. Sales managers study these plans, make suggestions, and use them to develop sales quotas. Sales reps write up completed activities on call reports and, in addition, submit expense reports, new-business reports, lost-business reports, and reports on local business and economic conditions. These reports provide raw data from which sales managers can extract key indicators of sales performance: (1) average number of sales calls per rep per day, (2) average sales call time per contact, (3) average revenue per sales call, (4) average cost per sales call, (5) entertainment cost per sales call, (6) percentage of orders per hundred sales calls, (7) number of new customers per period, (8) number of lost customers per period, and (9) sales force cost as a percentage of total sales.  Formal Evaluation There are several approaches to conducting evaluations. One type of evaluation compares the rep’s current performance to that individual’s past performance and to overall company averages on key sales performance indicators. These comparisons help management pinpoint specific areas for improvement. For example, if one rep’s average gross profit per customer is lower than the company’s average, that rep could be concentrating on the wrong customers or not spending enough time with each customer. Evaluations can also assess the rep’s knowledge of the firm, products, customers, competitors, territory, and responsibilities; relevant personality characteristics; and any problems in motivation or compliance. As indicated earlier, an increasing number of companies are measuring customer satisfaction not only with their product and customer support service, but also with their salespeople. The sales manager can also check that salespeople know and observe the law. For example, under U.S. law, salespeople’s statements must match the product’s advertising claims. In selling to businesses, salespeople may not offer bribes to purchasing agents or others influencing a sale; they may not obtain or use competitors’ technical or trade secrets through bribery or industrial espionage. Finally, salespeople must not disparage competitors or competing products by suggesting things that are not true  The purpose of evaluation The prime reason for evaluation is to attempt to attain company objectives. By measuring actual performance against objectives, shortfalls can be identified and appropriate action taken to improve performance. However, evaluation has other benefits. Evaluation can help improve an individual’s motivation and skills. Motivation is affected since an evaluation programme will identify what is expected and what is considered good performance. Second, it provides the opportunity for the recognition of above-average standards of work performance, which improves confidence and motivation. Skills are affected since carefully constructed evaluation allows areas of weakness to be identified and effort to be directed to the improvement of skills in those areas. Thus, evaluation is an important ingredient in an effective training programme. Further, evaluation may show weaknesses, perhaps in not devoting enough attention to selling certain product lines, which span most or all of the sales team. This information may lead to the development of a compensation plan designed to encourage salespeople to sell those products by means of higher commission rates. Evaluation provides information that affects key decision areas within the sales management function. Training, compensation, motivation and objective setting are dependent on the information derived from evaluation. THE SALES BUDGET The sales budget may be said to be the total revenue expected from all products that are sold, and as such this affects all other aspects of the business. Thus, the sales budget comes directly after the sales forecast. It can be said that the sales budget is the starting point of the company budgeting procedure because all other company activities are dependent upon sales and total revenue anticipated from the various products that the company sells. This budget affects other functional areas of the business, namely finance and production, because these two functions are directly dependent upon sales.

SALES FORECASTING The point is that planners are only interested in forecasts when the forecast comes down to individual products in the company. We now examine the applicability and usefulness of the short-, medium- and long-term forecasts in so far as company planners are concerned and look at each from individual company departmental viewpoints. Short-term forecasts. These are usually for periods up to three months ahead and are really of use for tactical matters such as production planning. The general trend of sales is less important here than short-term fluctuations. Medium-term forecasts. They are of most importance in the area of business budgeting, the starting point for which is the sales forecast. Thus, if the sales forecast is incorrect, then the entire budget is incorrect. Forecasting is the responsibility of the sales manager. Such medium-term forecasts are normally for one year ahead. Long-term forecasts. These are usually for periods of three years and upwards depending on the type of industry being considered. In industries such as computers three years is considered long-term, whereas for steel manufacture ten years is a typical long-term horizon. They are worked out from macro-environmental factors such as government policy, economic trends, etc. Such forecasts are needed mainly by financial accountants for long-term resource implications and are generally the concern of boards of directors. Forecasting techniques They are classified into two, namely: Qualitative techniques Quantitative techniques  Qualitative techniques  Qualitative forecasting techniques are sometimes referred to as judgmental or subjective techniques because they rely more on opinion and less on mathematics in their formulation. They are often used in conjunction with the quantitative techniques. These techniques includes: Forecast by analogy Delphi method Technology forecasting Statistical surveys Scenario building composite forecasts Consumer/user survey method This method involves asking customers about their likely purchases for the forecast period, sometimes referred to as the market research method. For industrial products, where there are fewer customers, such research is often carried out by the sales force on a face-to-face basis. The only problem is that then you have to ascertain what proportion of their likely purchases will accrue to your company. Another problem is that customers (and salespeople) tend to be optimistic when making predictions for the future. Both of these problems can lead to the possibility of multiplied inaccuracies. This method is of most value when there are a small number of users who are prepared to state their intentions with a reasonable degree of accuracy. It tends, therefore, to be limited to organizational buying. It is also a useful vehicle for collecting information of a technological nature which can be fed to one’s own research and development function. Panels of executive opinion This is sometimes called the jury methods, where specialists or experts are consulted who have knowledge of the industry being examined. Such people can come from inside the company and include marketing or financial personnel or, indeed, people who have a detailed knowledge of the industry. More often, the experts will come from outside the company and can include management consultants who operate within the particular industry. Sometimes external people can include customers who are in a position to advise from a buying company’s viewpoint. The panel thus normally comprises a mixture of internal and external personnel. Sales force composite This method involves each salesperson making a product-by-product forecast for their particular sales territory. Thus individual forecasts are built up to produce a company forecast; this is sometimes termed a ‘grass-roots’ approach. Each salesperson’s forecast must be agreed with the manager and divisional manager where appropriate, and eventually the sales manager agrees the final composite forecast. Such a method is a bottom-up approach. Where remuneration is linked to projected sales (through quotas or targets) there can be less cause for complaint because the forecast upon which remuneration is based has been produced by the sales force itself. -Delphi method -Product testing and test marketing Quantitative techniques Quantitative forecasting techniques are sometimes termed objective or mathematical techniques as they rely more upon mathematics and less upon judgment in their computation. These techniques are now very popular as a result of sophisticated computer packages, some being tailor-made for the company needing the forecast. Quantitative techniques can be divided into two types: Time series analysis. The only variable that the forecaster considers is time. These techniques are relatively simple to apply, but the danger is that too much emphasis might be placed upon past events to predict the future. The techniques are useful in predicting sales in markets that are relatively stable and not susceptible to sudden irrational changes in demand. In other words, it is not possible to predict downturns or upturns in the market, unless the forecaster deliberately manipulates the forecast to incorporate such a downturn or upturn. Causal techniques. It is assumed that there is a relationship between the measurable independent variable and the forecasted dependent variable. The forecast is produced by putting the value of the independent variable into the calculation. One must choose a suitable independent variable and the period of the forecast to be produced must be considered carefully. The techniques are thus concerned with cause and effect. The problem arises when one attempts to establish reasons behind these causes and effect relationships; in many cases there is no logical explanation. Indeed, there is quite often nothing to suppose that the relationship should hold good in the future. Levels of forecasting Forecasts can be produced for different horizons starting at an international level and ranging down to national levels, by industry and then by company levels until we reach individual product-by-product forecasts. The forecast is then broken down seasonally over the time span of the forecasting period and geographically right down to individual salesperson areas. These latter levels are of specific interest to sales management, for it is from here that the sales budgeting and remuneration systems stem. However, companies do not generally have to produce international or national forecasts as this information is usually available from recognized international and national sources. The

The role of technology in the retail industry Some of the greatest changes in e-commerce have taken place within the field of retailing. This has major implications for the way in which business is conducted between suppliers and retailers, The following paragraphs offer a brief insight into other applications used in the retail industry by both suppliers and retailers. Supply chain management Much of the drive for investment being made by retailers is to increase the efficacy of data relating to stock to allow efficiencies to be made in supply chain management. Supply chain management is the concept of the provision of products from suppliers’ production lines to their sale at the retailers’ tills. Supply chain management drives profitability as it ensures retailers and suppliers are focused on ensuring the right products are available in the right quantities at the right times to meet their individual customers’ requirements. Accurate and real-time data are the enablers for this. Retailers are increasingly aware of the benefit of having collaborative relationships with their suppliers and are now making these data available to their suppliers, usually through web-based technology such as secure intranets and extranets. This allows the supplier to see the same data as their customers at the same time. Production and supply are harmonized to in-store demand, facilitating the concept of demand management. This can have the mutual benefits of increased sales, fewer stock-outs and lower levels of stock required across the entire supply chain. Retailers have taken the lead in this investment and thus now hold the balance of power in dealings with suppliers as they now possess more up-to-date and relevant real-time data than their suppliers. This obviously gives retailers a commercial advantage when negotiating with suppliers.  Electronic point of sale (EPOS) and electronic funds transfer at point of sale (EFTPOS) Data are captured at the moment a product’s unique barcode is scanned at the till. Advances in technology have significantly aided the scope for data analysis. In addition to the original scanner-related data on sales rate, stock levels, stock turn, price and margin, retailers now have information about the demographics, socio-economic and lifestyle characteristics of consumers. They can also assess the impact of a whole host of variables, e.g. price, promotions, advertising, position in store, shelf position and number of facings. This information drives their choice of product mix, allocation of shelf space and promotional tactics. Some retailers also use customer loyalty cards as a means to capture data which can be analysed, allowing the retailer to engage in one-to-one marketing initiatives, e.g. information on new products and offers of discounts to retain customers. EPOS has certainly changed the relationship between buyer and seller. Before the availability of scanner data, the trading relationship depended on information provided by manufacturers from retail audits, information that was at least several weeks old. Access to more detailed, accurate and timely data from scanner systems gives the retailer significant bargaining power. Not surprisingly, information finds itself on the negotiating agenda. Manufacturers do buy EPOS data from their customers, but they can also trade the information and capabilities they have in exchange for it. Market knowledge is still the manufacturer’s forte and this national market picture is of great use to the retailer. Additionally, armed with the retailer’s EPOS data, the manufacturer could deliver well-targeted trade marketing programmes beneficial to both sides. In true trade marketing spirit, co-operation is the overall preferred approach. EPOS depends on the inclusion of barcodes on all products to be scanned. This impacts directly on the manufacturer/supplier who should ensure that all packs carry a barcode and that the barcodes for any new line listings or promotional packs are entered into the customer’s system before any goods are shipped. Space management systems Maximizing the sales and profitability of selling space is critical. One of the reasons for retailers investing in supply chain management is to reduce the amount of storage space required in store, allowing sales areas to be increased. To ensure the right amount of product is kept in store and featured on the shelf, retailers use space management systems to construct virtual plannograms, which should maximize sales that can be achieved from each meter of selling space. To better understand the implications of these software packages on their products, suppliers have not only bought packages but also set up departments that specialize in space management. Opportunities exist for their proactive use by manufacturers, particularly in situations where the retailer is short of resources; importantly, manufacturers can put themselves forward as produce category specialists. In the soft drinks sector, Coca-Cola Schweppes Beverages (CCSB) acts as the category specialist. A key function of the trade marketing role at CCSB is to advise the retail trade on the allocation of space to the soft drinks category in totality. An example of a software package that can accomplish this is Nielsen’s Spaceman. Recently, however, retailers have become concerned that some suppliers may use this technology to favour their products at the expense of competitors at the key point of purchase. Direct product profitability Maximizing the profitability of every product is critical in many areas of retailing where price figures highly in the marketing mix. The output from direct product profitability (DPP) systems can affect retailer decisions on product stocking, store position, pricing and even trading terms demanded. Internet and IT applications in selling and sales management It is vital, therefore, that the manufacturer understands DPP and the extent to, and manner in which, individual retailers use it. DPP replaces gross margin as a much more accurate measure of a product’s contribution to total company overhead costs and profit. It takes account of the fact that products differ with respect to the amount of resource they use; such as the amount of transport costs, warehouse and back-of-store space, staff handling time, share of shelf space, even head office costs. As a minimum, the manufacturer needs to be aware of how the retailer is using DPP and have sufficient expertise to question

ELECTRONIC COMMERCE AND ELECTRONIC PROCUREMENT While the role of the salesperson has changed considerably, there have also been significant changes in the way sales and procurement are carried out, particularly between large organizations and their suppliers. In these business-to-business (B2B) environments, the nature of electric commerce, or e-commerce, has certainly undergone a revolution in recent years. E-commerce and B2B trading The term ‘electronic commerce’ or e-commerce refers to any sales or trading activity that is carried out over an electronic network. Today, e-commerce is synonymous with business-to-business (B2B) trading, as opposed to its business-to-consumer (B2C) counterpart. Although the first wave of growth of e-commerce was in the B2C domain, the B2B area is between five and ten times larger. E-commerce comes in many different flavors. For many years, electronic data interchange (EDI) allowed companies to place orders and facilitated suppliers’ sending invoices electronically. However, the growth of internet use has seen an accompanying expansion of e-commerce through this medium. No one should be misled into believing that success on the internet is guaranteed. For every success story there are hundreds of expensive e-commerce failures. Poor website design, reluctance to conduct transactions through a new medium, problems with the adoption of common standards, difficulties with the integration of back-end computer systems and security fears are all barriers that hinder the faster adoption of e-commerce by consumers and businesses alike. E-commerce can take place at four levels Level 1: Publish This is the provision of information to the customer electronically. It is one-way communication that may involve annual reports, press releases, information on products and services, recruitment opportunities and advertising. Sometimes referred to as Internet and IT applications in selling and sales management brochure ware’, it is little more than the establishment of an online presence and has little to do with selling. Level 2: Interact The next level refers to interactive engagement with the user on the internet. For example, Dell’s website provides online technical support services including email links to online technical support representatives. Again, this has little to do with sales but does provide an additional layer of functionality to the ‘publish’ level. Level 3: Transact The third level of e-commerce allows goods and services to be bought and sold over the internet. Reaching this level can be costly in terms of initial investment, and although operating costs should be lower than more traditional ways of conducting business, usually costs need to be driven down in other areas of the business for cost savings overall to fall. Level 4: Integrate The highest level of e-commerce is where integration of the computer system and processes of traders is achieved to create a strong, formalized relationship. This may involve the establishment of a business-to-business extranet which is an electronic network linking companies to their trading partners. Extranets allow partners to exchange information such as that relating to ordering, delivery and invoicing in a secure environment. For example, Mobil’s extranet allows the oil company to accept orders from 300 distributors globally. CUSTOMER RELATIONSHIP MANAGEMENT Customer relationship management (CRM) is a term for methodologies, technologies and e-commerce capabilities used by firms to manage customer relationships. In particular, CRM software packages aid the interaction between customer and company, enabling the firm to co-ordinate all its communications so that the customer is presented with a unified message and image. CRM vendors offer a range of IT based services including call centers, data analysis services and website management. One basic principle behind CRM is that company personnel should have a ‘single customer view’ of each client. As customers are now using multiple channels more frequently, they may buy one product from a salesperson and another from a website. Indeed, a website may provide product information which is used to buy the product from a distributor. Interactions between customer and company may take place through a combination of some, or even all, of the following: direct sales force, call centers, websites, email and fax services or distributors. Therefore it is crucial that no matter how a customer contacts a company, front-line staff have instant access to the same data about the customer, such as their details as well as past purchases. This usually means consolidation of the many databases held by individual company departments into one centralized database that can be accessed by all relevant staff on a computer screen. Although the term CRM is relatively new, the ideas and principles behind it are not. Businesses have long practiced some form of customer relationship management. What sets present-day CRM apart is that companies now have an increased opportunity to use technology and manage one-to-one relationships with huge numbers of consumers. This is facilitated by companies such as Seibel (www.seibel.com), SNT (www.snt.com) and Sales force (www.salesforce.com), which provide specialist consultancy services. In practice, CRM projects have not always achieved their objectives. It is therefore important to take note of the following factors, which research has shown to be related to successful implementation: having a customer orientation and organizing the CRM system around customers; taking a single view of customers across departments and designing an integrated system so that all customer-facing staff can draw information from a common database; having the ability to manage cultural change issues that arise as a result of system development and implementation; involving users in the CRM design process; designing the system in such a way that it can readily be changed to meet future requirements; having a board-level champion of the CRM project, and commitment within each of the affected departments to the benefits of taking a single view of the customer and the need for common strategies – for example, prioritizing resources on profitable customers; creating ‘quick wins’ to provide positive feedback on the project programmes; ensuring face-to-face contact (rather than by paper or email) between marketing and IT staff’ piloting the new system before full launch.  

STRATEGIC CUSTOMERS PLANNING High performing salespeople tend to be strategic problem solvers for their customers. The top salespeople who are effective strategic problem solvers have the skills and knowledge to be to: Uncover and understand the customer’s strategic need by gaining an in-depth knowledge of the customer’s organization. Develop solutions that demonstrate a creative approach to addressing customer’s strategic needs in the most efficient and effective manner possible. Arrive at a mutually beneficial agreement. Critical key terms to strategic problem solving:- Strategic needs Creative solutions Mutually beneficial agreement Strategic needs The salesperson who understands the full range of customer’s needs is in much better position to provide a product solution that helps the customer progress more efficiently and effectively towards achieving her/ his organization’s strategic goal. “The top salespeople have an in-depth understanding of our needs,” said one business purchasing agent. “They can match-up their products with these needs to help us reach our goals”. Creative solutions For each customer a salesperson is often faced with specific, unique set of problems to solve. As a result, each customer requires a specific solution from the sales organization. The ability of a salesperson to tailor a ‘custom’ solution for each customer is critical today. The salesperson needs to use creative problem solving technique to identify the specific problem that meets each customer’s needs. Mutually beneficial agreements To achieve a mutually beneficial agreement, salespeople and customers must work together to develop a common understanding of issues and challenges at hand. Information about an organization’s business strategies and needs is often highly confidential. But more and more customers in the interest of developing solutions that will achieve their strategic goals are willing to let salespeople to cross the threshold confidentially. In this case there is collaborative (win-win) agreement rather than the adversarial (win-lose) agreement. The customer relationship model   The customer relationships model brings together the main elements of consultative selling. The model shows that the customers have strategic needs salespeople must meet through creative solutions. In doing so, both buyer and seller benefit. The customer reaches its goals, as does the seller. This result in the seller being able to sell to the customer again, again and again thus building a long-term relationship. Strategic customer sales planning is extremely important to the success of today’s salesperson. Pre-approach refers to the planning the sales call on a customer or prospect.  Reasons for planning the sales call This is the key to sales success. There are four frequently mentioned reasons. Builds self-confidence Sales call planning can greatly reduce nervousness and increase self-confidence. It is also important also in making a sales presentation; you increase confidence in yourself and your ability as a sales person. This is also important in sales call. Develops an atmosphere of Goodwill The salesperson who understands a customer’s needs and is prepared to discuss how a product will benefit the prospect is appreciated by the buyer. Knowledge of a prospect and concern for the prospect’s needs demonstrates a sincere interest in a prospect that generally is rewarded with an attitude of goodwill from the prospect. This goodwill gradually aids in building the buyer’s confidence and results in a belief that the salesperson can be trusted to fulfill the obligations. Creates professionalism Good business relationships are built on your knowledge of your company, industry and customer’s needs. Show prospects that you are calling on them to help solve their problems or satisfy their needs. These factors are the mark of professional salesperson who uses specialized knowledge in an ethical manner to aid customers. Increases sales A confident salesperson who is well prepared to discuss how products solve particular needs always will be more successful than the unprepared salesperson. Careful planning ensures that you have diagnosed a situation and have a remedy for a customer’s problem. Planning ensures that a sales presentation is well thought out and appropriately presented. Elements of a sales call The sales call objective is the main purpose of a salesperson’s contact with a prospect or customer. The pre-call objective Selling starts with setting a pre-call objective. This is because a sales call must move systematically toward a sale. Taking time to set a pre-call objective is very important. Before every sales call ask yourself “what am I going in here for? What is the result I’m trying to make happen? If they give me an opportunity, what am I going to recommend?” Focus and flexibility Writing down your pre-call objective in case the focus of your efforts. Focus enables salespeople move their customers in the direction of predetermined goal. Knowing where you are going definitely increases the likelihood of getting there. Obviously if the pre-call objective turns out to be inappropriate as the sales call develops, it’s easy to switch tactics. Often such changes involve a simple redirection. Making goals specific When asked the purpose of a call, some salespeople say enthusiastically, “it’s to get an order. Let go!”  Of course, everyone’s in favor of getting orders, but that is more likely to happen if the salespersons stop and ask themselves questions such as: what need of this prospect can I serve? Which product or service is best for this account? The more specific the objective the better. Moving towards your objectives Sometimes a sales call has limited objective. Guiding the customer in the direction of that preplanned outcome is what experienced salespeople do on most sales calls. Set objectives for every call Don’t let anyone tell you that selling is repetitive that the next step becomes a matter of rote (learning by repeating). Set SMART call objective Specific – to get an order is not specific Measurable – quantifiable (size, number etc) Achievable – not too difficult to fulfill Timed – at this call or before end of the financial year.

PLANNING A PROSPECTING STRATEGY     Prospecting is the searching for and calling upon customers who have not previously purchased from the company. This activity is not of uniform importance across all the branches of selling. It is obviously far more important in industrial selling than retail selling.  Concept of prospecting Prospecting begins the process of converting prospects into repeat customers. A suspect or lead is a potential prospect, i.e. a person or an organization that might have a need for a salesperson’s product or services. If a salesperson determines the suspect has a real need for the product, then that person or organization becomes a prospect. The next step is for the salesperson to qualify the prospect to find out if that person has both the ability and authority to make a purchase. Once a qualified prospect is located process begins. Prospecting strategies The following are some of the prospecting strategies commonly used: Direct mail marketing – Have a direct mail marketing, planning and tracking system, keeping in mind parameters such as age, income, occupation location and so on. Decide the frequency and number of mailers to be sent and the enclosures therein. Remember to follow-up. Trade shows – Professionals who effectively work trade shows, keep the following in mind:- they define very clear goals, as to what they want to accomplish through shows. The ultimate aim here is to translate presentations into sales. Customer referrals (endless chain) – this is a very effective method to for finding customers. Customers and customers are the best sources of future sales, with repeat sales from customers being better. You ask customers whether they know any other individuals or organizations who may be interested in finding out about your product or service. If the customer hesitates on communicating with other individuals about your product ask for names and promise to call them and ask them to give brief description of what you do. Orphaned customer – these are the customers left by the salespeople. These are great prospects. As a salesperson you should quickly contact such customers to begin developing relationships. Sales lead club – organize a group of salespeople in related but non-competitive fields to meet twice a month to share leads and prospecting tips. Observation Networking Center of influence The prospect pool The referrals come from prospects and customers. Different sources of prospects form prospect pool.  The prospect pool is a group of names gathered from various sources. Your source, for example may be mailing list, telephone book, referrals, orphans or existing customers. A prospect pool is usually created from the main sources such as: Leads – people or organizations you know nothing or very little about. Referrals – you frequently know very little about these people or organizations other than what you learned from the referrals. Orphans – company records provide your only information about these past customers. Your customers – the most important prospects for future sales                                             The referral cycles Obtaining referrals is a continuous process without beginning or end. The salesperson is always looking for the right opportunity to find a referral. The referral cycle provides guidelines for a salesperson to ask for referrals in four commonly faced situations experienced by salespeople as shown below. If you have a sales presentation at 10:00 am you can begin the referral cycle in the presentation phase. If you are delivering a product to a client you can start the cycle in the product delivery phase. If you are planning on making telephone calls to leads, referrals, orphans, or customers you can begin pre-approach phase. Referral cycle can begin at any point.   The parallel referral sales Salespeople must sell the product, plus sell the prospect on providing referrals. Equal emphasis must be given to both product sales and referral sales. You must nurture a parallel referral sale from the time of the initial contact, such as when making appointment. The referral sale should receive equal importance, effort and emphasis as the product sale. This is the key to referral cycles.