SALES AND DISTRIBUTION MANAGEMENT

Evolution of Sales Management

Situation before industrial revolution in U.K. (1760AD)

Situation after industrial revolutions in U.K., and U.S.A.

Marketing function splits into sales and other functions like market research, advertising, physical distribution

What is Sales Management?

One definition: “The management of the personal selling part of a company’s marketing function.”

Another definition: “The process of planning, directing, and controlling of personal selling, including recruiting, selecting, equipping, assigning, supervising, paying, and motivating the personal sales force. 

Nature of Sales Management

•Its integration with marketing management

Importance of Personal Selling and Sales Management

The only function / department in a company that generates revenue / income

The financial results of a firm depend on the performance of the sales department / management

Many salespeople are among the best paid people in business

It is one of the fastest and surest routes to the top management

 

Roles and Skills of a Modern Sales Manager

A member of the strategic management team

A member of the corporate team to achieve objectives

A team leader, working with salespeople

Managing multiple sales / marketing channels

Using latest technologies (like CRM) to build superior buyer-seller relationships

Continually updating information on changes in marketing environment

Skills of a Successful Sales Manager

People skills include abilities to motivate, lead, communicate, coordinate, team-oriented relationship, and mentoring

Managing skills consist of planning, organizing, controlling and decision making

Technical skills include training, selling, negotiating, problem-solving, and use of computers

Recruitment And Selection

Recruitment And Selection

Recruitment

1. Recruitment is the process of searching the candidates for employment and stimulating them to apply for jobs in the organization

Selection

Selection involves the series of steps by which the candidates are screened for choosing the most suitable persons for vacant posts.

Recruitment And Selection

Recruitment

2. The basic purpose of recruitments is to create a talent pool of candidates to enable the selection of best candidates for the organization, by attracting more and more employees to apply in the organization

Selection

WHEREAS the basic purpose of selection process is to choose the right candidate to fill the various positions in the organization.

Recruitment And Selection

Recruitment

3. Recruitment is a positive process i.e. encouraging more and more employees to apply.

4. Recruitment is concerned with tapping the sources of human resources

Selection

Selection is a negative process as it involves rejection of the unsuitable candidates.

Selection is concerned with selecting the most suitable candidate through various interviews and tests.

Recruitment And Selection

Recruitment

5. There is no contract of recruitment established in recruitment

Selection

Selection results in a contract of service between the employer and the selected employee.

Recruitment And Selection

Recruitment

5. There is no contract of recruitment established in recruitment

Selection

WHEREAS selection results in a contract of service between the employer and the selected employee.

Motivation and compensation

Definition

Motivation - Internal and external factors that stimulate desire and energy in people to be continually interested in and committed to a job, role, or subject, and to exert persistent effort in attaining a goal.

Motivation is the energizer of behavior and mother of all action.

It results from the interactions among conscious and unconscious factors such as the (1) intensity of desire or need, (2) incentive or reward value of the goal, and (3) expectations of the individual and of his or her significant others.

Motivation and Compensation

Definition

Compensation is the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required.

Compensation is based on

market research about the worth of similar jobs in the marketplace,

employee contributions and accomplishments,

the availability of employees with like skills in the marketplace,

the desire of the employer to attract and retain a particular employee for the value they are perceived to add to the employment relationship, and etc.

Training the Salesforce

Is the effort an employer makes to provide salespeople with job related knowledge, skills, attitudes and culture that should result in improves performance on. sales, productivity and profits

Managing the sales training process

Assess sales training needs

Design and execute

sales training

programme

Evaluation and reinforcement of

sales training programme

Assess sales training needs

Capability gaps

arise when the Salesforce doesn't have the required knowledge, skills or capabilities to become successful on the job.

Needs of both existing and newly hired sales trainees should be assessed.

Methods used for assessing training needs

Sales manager’s observation

Salesforce survey

Customer survey

Performance testing

Job description

Salesforce audit

Design and execute the sales training program

Aims/objectives of sales training(why?): like

Increase sales productivity,

Increase sales, profits or both

Improve customer relations,

Improve teamwork and cooperative efforts etc

Content of training program(what?):

company knowledge,

product knowledge,

customer knowledge,

competitor knowledge,

selling skills or sales techniques

Methods(how?):

Class room/conference training:

-lectures-demonstrations

-group discussions

Absorption training/self study

-audio cassettes-Manual books

-CD-ROM

online training:-EPSS

-Interactive multimedia training

-Distance learning

Behavioral learning:-role playing-case studies

Simulation games

Sales training methods

On the job training-mentoringJob rotation

Class room/conference training:

Lectures: to present more information in a short time to a large number of participants

Demonstrations: demonstrate the operation and use of the product like whirlpool asks newly hired salespeople to live for two months in a house that is equipped with its appliances

Group discussions: trainer leads the discussion and encourages participation from the salesperson

Behavioral learning:

Role playing: one trainee plays the role of a salesperson and another trainee acts as a buyer

Case studies: a case is a narration of a business situation. Cases should be linked to learning objectives like understanding the consumer behavior or commercial terms and conditions to make it an effective learning

Simulation games: programmed computer games based on reality. Help in learning impact of decision making

On the job training

Mentoring: Informal. Mentors usually provide the new employee advice and support as well as the information about the corporate culture

Job rotation: the sales trainee work in different jobs for short stints. For eg the sales person in FMCG is asked to work for two months each in retail shop, logistics department and field selling with a senior salesperson.

online training:

EPSS: electronic performance support system makes the information available to the sales person immediately and in a personalized manner

Interactive multimedia training: used for retraining salespeople who can repeat or skip material as desired

Distance learning: personal training method. Companies operate their own television network to deliver training messages to their employees. Salespeople can ask questions to the experts and also share information with their peers by calling toll free numbers

Absorption training/self study

Books

Audio cassettes

Articles

CD-ROM’s

Product manuals are supplied to the salespeople

Execution(who,where,when,what?):

usually the sales training manager or the sales trainer is responsible for the entire process of sales training

Who will be the trainees?

new and existing salespeople

Intermediaries

Sales managers

Who will conduct the training

Line sales personnel

Staff trainers 'outside

Training specialists

When should the training take place?

Before placing them in field selling

After new recruits show the desire the sell

Where should the training be done

Centralized training: at the central location like head office

Decentralized training: branch or regional office at the customer’s place or hotel room

What will be the budgeted expenditure for the training

A written document of all the estimated expenditure for conducting the training program

Evaluation:

Reactions: can be measured by interviewing them or asking them to complete a few questionnaires

Learning: before and after tests

Behaviour: self assessment by the trainee or observation from customers

Results: sales, profits, customer satisfaction, number of new customers and market penetration

What is Motivation??

Drive to initiate an action.

The intensity of effort in an action

The persistence of effort over time.

Motivation: Motivating the Sales Force

1. Maslow: Physiological: Fin Comp., AC, Cafeteria Safety & Security: Job security, Fringe Benefits Love & Belongingness: Liking & Respect from Boss / Peers /

Customers Self Esteem: Job title, responsibility, recognition and promotion Self Actualization: Challenging job, Creativity and achievement in

work

2. Herzberg: Hygiene Factors: Presence does not motivate, absence de-

motivates or negative impact (work conditions, job security, salary, interpersonal relations, company policies)

Motivational Factors: Absence causes dissatisfaction : Presence motivates (Responsibility, promotion, Recognition, Achievement)

HF corresponds to Maslow’s 1,2,3 while MF corresponds to Maslow’s 4 and 5.

3. Goal Setting Theory – MBO (Edwin Locke): People have needs / aspirations, they set goals, go about getting

these goals Higher goals – higher outputs Set goals for salespeople:

Plan activities better,

Learns to prioritize manage time Goal should be clear & not too difficult to achieve

4. Expectancy Theory (Victor Vroom)

Motivation depends on 3 factors = f (e × v × i)

e = expectations (expected outcomes)

v = valence (extent to which outcome is valued by the individual)

i = instrumentality (probability that the effort spend by the individual will help in obtaining the outcome)

Used to study sales force management problems particularly when motivation decreases because of realignment of Sales Territory.

5. Job Design Theories Correlate motivation with Job Satisfaction JS = Pleasure felt in one’s experiences in a job JS created by

Job Enrichment: Vertical expansion of a jobs involves addition of more tasks in the job, more responsibilities

Job Rotation: Assigning employee to alternative jobs, relieves monotony

Job Enlargement: horizontal expansion by adding more tasks with no increase in responsibility, prevents employee from getting board .

Motivation Model

Motivation to Work

“What Is the Probability of Success?”

Performance Level

“Will I Be Rewarded for Success?”

Rewards Intrinsic Extrinsic

“Are the Rewards Worth It?”

Equity Determination Inputs vs. Outputs

“Are the Rewards Fair?”

Satisfaction Intrinsic Extrinsic

Feedback

Sales Force Needs and Ways to Fill Them

Status

Control

Respect

.

Change title from “salesperson” to “area manager.” Buy salespeople more luxurious cars to drive.

Allow salespeople to help plan sales quotas and sequences of calls.

Invite salespeople to gatherings of top executives. Put pictures of top salespeople in company ads and newsletters.

Sales Force Needs and Ways to Fill Them

Routine

Accomplishment

Stimulation

Honesty

Assign each salesperson a core of Routine loyal customers that are called on regularly.

Set reasonable goals for the number of calls and sales.

Run short-term sales contests. Schedule sales meetings in exotic locations.

Deliver promptly all rewards and benefits promised.

AN EXERCISE TO DETERMINE YOUR MOTIVATIONAL NEEDS

To perform the exercise, read through the following statements…check those which are most important in motivating you to do your best work.

Select the ten most important statements.

629 Job security

847 Being trusted to do my job the way I think it should be done.

333 Participating in work group conversations.

311 Having adequate shelter to protect from the elements.

836 Having a job which allows me time with my family.

151 Having an opportunity for personal growth.

937 Socializing with my friends.

743 Being considered for an advancement opportunity.

431 Working with other people.

AN EXERCISE TO DETERMINE YOUR MOTIVATIONAL NEEDS

819 Having children.

458 Doing something meaningful with my life.

757 Being in a position to contribute new ideas.

828 Having an associate that looks out for my interests.

735 Including other people in what I do.

949 Being selected for an exclusive award.

234 Being involved with work associates in social and recreational activities.

616 Being sexually satisfied.

146 Having a responsible person tell me when I’ve done a good job.

539 Having an active part in work related social activities.

341 Knowing that other people respect me and my work.

132 Acceptance as a work group member

Second Number to left of statement indicates the category; how many in each:

Number Category

1 Physiological

2 Safety - Security

3 Love - Belonging

4 Self Esteem

5 Self Actualization

Determining Your Motivational Needs

YOUR SCORE

To determine results: the statements are divided into five categories intended to represent the five levels in Maslow’s Hierarchy of Needs. The second digit in each statement number indicates the category.

These categories are:

1-Physiological,

2-Safety-Security,

3-Love-Belonging,

4-Self-Esteem,

5-Self-Actualization.

Number Percent

84786%34174%75754% 43151%82837%45837%74334%

Maslow’s Hierarchy – U.S. Salespeople’s Responses

Sales Quotas

Sales quotas are sales goals or targets set by a company for its marketing / sales units for a time period

Marketing / sales units are regions, branches, territories, salespeople, and intermediaries

Generally, company sales budget is broken down to sales quotas for various marketing units

Objectives of Sales Quotas

To use quotas as performance standards or performance goals

To control performance

To motivate people by linking quotas to compensation plans

To identify strengths and weaknesses of the company

Types of Quotas

Sales volume quotas

For effective control, sales volume quota should be set for the smallest marketing units, such as salesperson, districts / branches, product items / brands

Sales volume quotas can be stated in (a) rupees / dollars, (b) units, or (c) points

Rupees / dollars sales volume quotas are appropriate when salespeople are required to sell many products

Unit sales volume quotas are suitable when

Salespeople are selling a few products

Prices of the product fluctuate rapidly

Price of each product / service is high

Point sales volume quotas are appropriate when the company wants salespeople to sell products that contribute more to profits

 

Financial Quotas

Financial quotas control (a) gross margin or net profits, and (b) expenses of marketing units

Gross-margin / Net-profit quotas

Calculate gross margin by subtracting ‘cost of goods sold’ (i.e. cost of manufacturing) from sales volume. Sales managers are not responsible for cost of manufacturing

Net profit quotas are generally accepted by sales mangers as it is calculated by subtracting direct selling expenses from the gross margin

Expense quotas

In many companies, expense quotas are stated as a percentage of sales

Expense quotas to be administered with flexibility, to make salespeople cost conscious, allowing reasonable expenses

Activity Quotas

These are set when salespeople perform both selling and non-selling activities

Objective is to direct salespeople to carry out important activities

For effective implementation, activity quotas are combined with sales volume and financial quotas

E.G. Calling on high potential customers, payment collection from defaulting customers

Combination Quotas

Type of Quota Quota Actual PercentQuota

Weight (Importance)

Percent Quota x Weight

Sales Volume (Rs)

5,00,000 4,50,000 90 3 270

Receivables (days)

45 50 89 2 178

New Customers (Nos)

04 05 125 1 125

Total 6 573

•Used when companies want to control salesforce performance on key selling and non-selling activities•Focus on a few types of quotas, to avoid confusing salespeople. An example:•Total point score=573/6=95.5 for a salesperson•Typically use ‘points’ as a common measure to resolve the problem of different measures used by various types of quotas

Sales Territories

A sales territory consists of existing and potential customers, assigned to a salesperson

Most companies allot salespeople to geographic territories, consisting of current & prospective customers

Major Reasons / Benefits of Sales Territories

Increase market / customer coverage

Control selling expenses and time

Enable better evaluation of salesforce performance

Improve customer relationships

Increase salesforce effectiveness

Improve sales and profit performance

Procedure for Designing Sales Territories

Select a control unit: select a geographical territorial base called control units

Are states, metros, cities, districts, towns, industrial estates and major customers

Sales manager should choose the smallest control units so that the adjustments and calculations are possible

Find location and potential of customers Of present and prospective customers in each control unit.

Information of present customers can be obtained from company's sales analysis

Information on prospective customers can be obtained from both company's sales people and telephone directories and market research studies.

Next the estimate the total sales potential for all customers in each geographical control unit.

Estimate market potential or market forecast based on one or more forecasting methods

Classify customers on the basis of their sales and or profit potential.

Can be done by using ABC analysis.

ABC analysis.

All the customers are entered in the reverse order of their sales/profit potential

Entering the name of the customer whose sales/profit potential is the highest.

Then the name of the customer with second highest potential is entered

A= whose sales/profit potential add up to 70%

B= whose sales/profit potential add up to 20%

C= whose sales/profit potential add up to 10%

Decide basic territories

Through:

Build-up method,

Or

Break-down method

Procedure in Build-up Method

Decide customer call frequencies

Calculate total customer calls in each control unit

Estimate workload capacity of a salesperson

Make tentative territories

Develop final territories

Objective is to equalize the workload of salespeople

Procedure in Breakdown Method

Estimate company sales potential for total market

Forecast sales potential for each control unit

Estimate sales volume expected from each salesperson

Make tentative territories

Develop final territories

Objective is to equalise sales potential of territories

Assigning Salespeople to Territories

Sales Manager should consider two criteria:

(A) Relative ability of salespeople

Based on key evaluation factors:

(1) Product knowledge, (2) market knowledge, (3) past sales performance, (4) communication, (5) selling skills

(B) Salesperson’s Effectiveness in a Territory

Decided by comparing social, cultural, and physical characteristics of the salesperson with those of the territory

Objective is to match salesperson to the territory

Management of Territorial Coverage

It means: How salesperson should cover the assigned sales territory

It includes three tasks for a sales manager:

Planning efficient routes for salespeople

Scheduling salespeople’s time

Using time-management tools

Routing

Routing is a travel plan used by a salesperson for making customer calls in a territory

Benefits of or Reasons for routing:

Reduction in travel time and cost

Improvement in territory coverage

Importance of routing depends on the application:

Nature of the product – Important for FMCG

Type of jobs of salespeople – Important for driver-cum-salesperson job, but creative selling job needs a flexible route plan

Procedure for Setting up a Routing Plan

•Identify current and prospective customers on a territory map•Classify each customer into high, medium, or low sales potential•Decide call frequency for each class of customers•Build route plan around locations of high potential customers•Computerized mathematical models are developed•Commonly used routing patterns are:

Scheduling

Scheduling is planning a salesperson’s visit time to customers. It deals with time allocation issue

How to allocate salesperson’s time?

Sales manager communicates to salesperson major activities and time allocation for each activity

Salesperson records actual time spent on various activities for 2 weeks

Sales manager and salesperson discuss and decide how to increase time spent on major activities

Companies specify call norms for current customers, based on sales and profit potentials, and also for prospective customers

Time Management Tools

To help outside salespeople* to manage their time efficiently and productively, the tools available are:

High-tech equipment like laptop computers and cellular phones

Inside salespeople to provide clerical support, technical support, and for prospecting, and qualifying, as they remain within the company

Outside salespeople can then spend more time getting more orders & building relationships with major customers

*Outside salespeople travel outside the organization  

Sales Budget?

It includes estimates of sales volume and selling expenses

Sales volume budget is derived from the company sales forecast – generally slightly lower than the company sales forecast, to avoid excessive risks

Selling expenses budget consists of personal selling expenses budget and sales administration expenses budget

Sales budget gives a detailed break-down of estimates of sales revenue and selling expenditure

Purposes of the Sales Budget

Planning

Coordination

Control

Sales Budget Process

Many firms follow a process for preparation of annual sales and company budgets. It generally includes:

Review past, current, and future situations

Communicate information to all managers on budget preparation – guidelines, formats, timetable

Use build-up approach, starting with first-line sales managers

Get approval of sales budget from top management

Prepare budgets of other departments

The Sales Process

The sequence of below steps may change to meet the sales situation in hand.

Some of the steps may not be applicable for selling to the trade

Marketing channels

Channel Functions

Information gathering Consumer motivation Negotiating with suppliers Placing orders Financing Inventory management Risk bearing After sales support

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Channel Functions…….

Physical reach Customer contact Building relationships Market feedback Understand market trends and keep principals informed Handle price risks Finances market credit and inventory holdings Provide after sales service

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A

SDM- Ch 9 78

Channel Flows

Forward flow – company to its customers – goods and services

Backward flow – customers to the company – payment for the goods. Returned goods.

Flows both ways - information

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Three Flows Recognized

FORWARD

BOTH WAYS

BACKWARD

Goods and Services

Information

Payment for goods / returns

Company Customers

SDM- Ch 9 80

Channel Flows

Some channel member/s have to perform them There is a cost associated with each flow If a channel member is discontinued, the flow has to

be performed by another All flows and transactions can be effective only with

timely, accurate and correct information The channel flow is ideally to be handled by the most

competent channel member who can deliver best service at the lowest cost.

Why are marketing intermediaries used?

SDM- Ch 9 82

The Five Channel Flows

Physical flow::-transportation and storage of the product in order to physically deliver the product to end-user

Title flow of goods: (negotiation, ownership and risk sharing also)(i) Ownership :- nominally taking title to the product so that in case the

product is damaged or lost due to any reason ,the loss is accounted for

(ii) Promotion :- promoting the product to the customers in several ways like advertising ,displaying demonstrating ,giving information about ,etc

(iii)Negotiating :- coming to an agreement about the terms of trade with the upstream and down stream entities in the channel including the customer

Payment flows: (financing and payment):taking care of the financial requirement of the members of the channel

Information flow (about goods, orders placed and orders executed)::- receiving and recording the orders, consolidating it and passing it on to the upstream receiving payments ,recording it, consolidating it , and passing it on to the upstream.

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Channel partners and their Involvement in flows

Manufacturer C&FA or Distribution

Center

Distributor,dealers

Wholesaler or retailer

PhysicalTitle / ownershipInformationRisk sharingPromotions

PhysicalTitle InformationPayment Order processing

PhysicalTitle / ownershipInformationPayment Order placementNegotiation Risk sharingPromotions

PhysicalTitle / ownershipInformationPayment Order placementNegotiation Risk sharingPromotions

Channel formats…

SDM- Ch 9 85

Channel Formats

Is decided by who ‘drives’ the channel system:

Producer driven

Seller driven

Service driven

Others

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Producer Driven

This is the effort of the manufacturer to reach the product to his consumers. Examples: Company owned retail outlets: petrol, Bata shoes, Titan, Tanishq,

Reliance mobiles Licensed outlets: exclusive rights to some retail outlets like KMMF, Bata Consignment selling agents: the company passes on the physical stocks to

the intermediary who pays the company only after the products have been sold

Franchisees: franchisee has to buy from the company and sell it Brokers: sells on the behalf of the company without taking ant physical

possession of the goods Vending machines: mostly soft drinks companies, ATMs

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Seller Driven

Use of existing channels to reach the largest number of end users

Existing wholesalers and retailers: like convenience stores, paanwalas

Modern retail formats: like department stores, supermarkets

Specialty stores: sell one type of merchandise only like Tanishq, shopper’s stop, any furniture store.

Discount stores – sell at discounted rates due to volume buying and lower overheads like best price

Pheriwalas: the door to door sales people

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Service Driven

These are the people who facilitate the distribution

Transporters and freight forwarders

Providers of warehouse space

Carrying and forwarding Agents (C&F agents)

3P Logistics service providers

Couriers: handle smaller packages than C&F agents

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Other formats

Multi-level marketing systems: Amway, Tupperware Co-operative societies: to help farmers TV home shopping Catalogue marketing The internet Exhibitions, fairs and trade shows Data base marketing

Channel levels…

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Channel Levels

Zero level – if the product or service is provided to the end user directly by the company.

Used mostly by companies delivering service like health, education, banking (also known as service channels)

One level – consists of one intermediary like Biz bazar

Two level – consists of two intermediaries and is the most common for FMCG products

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Service Channel

Companies establish their own unique channels to deliver services like health, education, banking, insurance etc Hundreds of bank branches to be close to

prospects. Banks may also recruit independent agents to get

customers to walk in. Musician or magician may use mass media, events

or web sites to reach customers.

Marketing Channel Systems

Vertical:

Corporate

Administered

Contractual

Horizontal

Multi-channel

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92

Vertical….

Types of Vertical Marketing SystemsTypes of Vertical Marketing Systems

CorporateCommon Ownership at Different

Levels of the Channel

CorporateCommon Ownership at Different

Levels of the Channel

ContractualContractual Agreement Among

Channel Members

ContractualContractual Agreement Among

Channel Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

Number of marketing intermediaries

Intensive distribution

Exclusive distribution

Selective distribution

Channel Management DecisionsChannel Management Decisions

SelectingSelecting

FE

ED

BA

CK

MotivatingMotivating

TrainingTraining

EvaluatingEvaluating

Physical distribution and logistics management

Physical distribution(marketing logistics)

major logistics function

Integrated logistics management

Third-party logistics

Major logistics function

Order processing

Warehousing

Inventory

transportation

Integrated logistics management

Cross-functional teamwork inside the company

Building channel partnerships

Third-party logistics

An independent logistics provider that performs any or all of the functions required to get their clients’ product to market.

Vertical Marketing System

Various parties like producers, wholesalers and retailers act as a unified system to avoid conflicts

Improves operating efficiency and marketing effectiveness

3 types: Corporate Administered Contractual

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100

Corporate…

Corporate VMS

Combines successive stages of production and distribution under single ownership.

The company would like to do this in order to ensure that it has direct control on the distribution of its products

Examples:

Bata, Bombay Dyeing, Raymond, medical diagnostic equipment

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101

Administered…

Administered VMS

Co-ordinates distribution activities Gains market power by dominating a channel Usually true of dominant brands like GE, Kodak, Pepsi, Gillette, Coke

and HLL in certain locations Command high level of co-operation in shelf space, co-operation

from resellers, displays, pricing policies and promotion strategies

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102

Contractual…

Contractual VMS

Independent producers, wholesalers and retailers operate on a contract Could take the forms of:

Wholesaler sponsored voluntary chains: Kemp toys Retailer co-operatives: Apna bazar Manufacturer sponsored retail franchise: Maruti and Hyundai Manufacturer sponsored wholesale franchise: Franchise

organizations: Pepsi, coca cola Service firm sponsored retail franchise: like starbucks

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103

Horizontal Marketing System

Two or more unrelated companies join together to pool resources and exploit an emerging market opportunity

In-store banking in hotels, big stores

Retail outlets in petrol bunks

Coffee Day outlets in airports

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104

Multi-channel…

Multi-channel Distribution

Company uses different channels to reach / same or different market segments Most FMCG companies have separate networks for retail market and

institutions

Most B2B firms use multi-channels for customer segments like Government, institutions etc

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105

Multi-channel Distribution

Used in situations where: Same product but different market segments

Unrelated products in same market – detergents and ice creams (HLL)

Size of buyers varies

Geographic concentration of potential consumers varies

Reach is difficult

Benefits include lower cost, better market coverage and customized selling

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106

Channel Functions

Information gathering: about customers, competitors Consumer motivation: to make them buy the products Negotiating with suppliers: on price and other terms Placing orders: buy the product and pass it on to customers Financing: pay the price Inventory management: safe keeping of inventory Risk bearing: risk of storing After sales support: extend credit

Physical reach Customer contact Building relationships Market feedback Understand market trends and keep principals informed Handle price risks Finances market credit and inventory holdings Provide after sales service

Role of Intermediaries

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109

Company 1 Company 2 Company 3

Intermediary

Large number of CONSUMERS

Direct and Indirect….

SDM- Ch 9 110

Channel Flows

Forward flows – company to its customers – goods and services

Backward flow – customers to the company – payment for the goods. Returned goods (like soft drinks bottle)

Flows both ways - information

SDM- Ch 9 111

Other formats

Multi-level marketing systems – Amway, Tupperware Co-operative societies TV home shopping Catalogue marketing The internet Exhibitions, fairs and trade shows Data base marketing

Channel levels…

SDM- Ch 9 112

Channel Levels

Zero level – if the product or service is provided to the end user directly by the company. Used mostly by companies delivering service like

health, education, banking (also known as service channels)

One level – consists of one intermediary Two level – consists of two intermediaries

and is the most common for FMCG products

SDM- Ch 9 113

Service Channel

Companies establish their own unique channels to deliver services like health, education, banking, insurance etc Hundreds of bank branches to be close to prospects Banks may also recruit independent agents to get

customers to walk in Musician or magician may use mass media, events

or web sites to reach customers

Logistics

Marketing logistics (physical distribution) involves planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet consumer requirements at a profit

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Increasing importance of logistics

Effective logistics is becoming a key to winning and keeping customers.

logistics is a major cost element for most companies.

the explosion in product variety has created a need for improved logistics management.

information technology has created opportunities for major gains in distribution efficiency.

Nature:

Marketing logistics involves:• Outbound distribution: Moving products from the

factory to resellers and consumers• Inbound distribution: Moving products and

materials from suppliers to the factory• Reverse distribution: Moving broken, unwanted,

or excess products returned by consumers or resellers

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Supply Chain Management

Supply chain management is the process of managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers

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Goals of Logistics system

• Provide a Targeted Level of Customer Service at the Least Cost.

• Maximize Profits, Not Sales.

Importance of Marketing Logistics

• Competitive advantage by giving customers better service at lower prices

• Cost savings to the company and its customers• Product variety requires improved logistics• Information technology has created opportunities

for distribution efficiency

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• Order Processing• Warehousing• Inventory Management• Transportation• Logistics information management

Design system to minimize costs of attaining objectives

Logistics Functions

Warehousing

Warehousing is the storage function that overcomes differences in need quantities and timing, ensuring that the products are available when customers are ready to buy them.

Storage warehouses are designed to store goods, not move them.

Distribution centers are designed to move goods, not store them.

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Inventory management

Inventory management balances carrying too little and too much inventory

Just-in-time (JIT) logistics systems allow producers and retailers to carry small amounts of inventories of parts or merchandise

RFID (radio frequency identification devices) are small transmitter chips embedded in or placed on products or packages to provide greater inventory control

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Transportation

Transportation affects the pricing of products, delivery performance, and condition of the goods when they arrive

• Truck• Rail• Water• Pipeline• Air• Internet 12-67

Transportation ModesTransportation Modes

RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback

RailNation’s largest carrier, cost-effective for shipping bulk products, piggyback

TruckFlexible in routing & time schedules, efficient

for short-hauls of high value goods

TruckFlexible in routing & time schedules, efficient

for short-hauls of high value goods

WaterLow cost for shipping bulky, low-value

goods, slowest form

WaterLow cost for shipping bulky, low-value

goods, slowest form

PipelineShip petroleum, natural gas, and chemicals

from sources to markets

PipelineShip petroleum, natural gas, and chemicals

from sources to markets

AirHigh cost, ideal when speed is needed or to

ship high-value, low-bulk items

AirHigh cost, ideal when speed is needed or to

ship high-value, low-bulk items

Marketing Logistics and Supply Chain Management

Intermodal transportation combines two or more modes of transportation

• Piggyback uses rail and truck• Fishyback uses water and truck• Airtruck uses air and truck

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Logistics Information Management

Logistics information management is the management of the flow of information, including customer orders, billing, inventory levels, and customer data

• EDI (electronic data interchange)• VMI (vendor-managed inventory)

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Integrated Logistics Management

Integrated logistics management is the recognition that providing customer service and trimming distribution costs require teamwork internally and externally

• Cross-functional teamwork inside the company

• Building partner relationships

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Integrated Logistics Management

Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires

Teamwork, Both Inside the Company and Among All the Marketing Channel Organizations.

Cross-Functional Teamwork inside the Company

Cross-Functional Teamwork inside the Company

Building Channel PartnershipsBuilding Channel Partnerships

Third-Party LogisticsThird-Party Logistics

Integrated Logistics Management

Cross-functional teamwork inside the company refers to the inter-relationship of different departments within the company to achieve the goals of integrated supply chain management

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Integrated Logistics Management

Building partner relationships refers to the understanding that one company’s distribution is another company’s supply system

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Integrated Logistics Management

Third-party logistics is the outsourcing of logistics functions to third-party logistics providers (3PLs)

• Provide logistics functions more efficiently • Provide logistics functions at lower cost• Allow the company to focus on its core business• Are more knowledgeable of complex logistics

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What is Channel Conflict?

Channel conflict occurs when one member’s actions prevent another channel from achieving its goal.

Types of channel conflict

Vertical

Horizontal

Multichannel

Causes of Channel Conflict

Goal incompatibility: objectives of the company and its distributors may not always match

Unclear roles and rights

Differences in perception

Intermediaries’ dependence on manufacturer

Loss of opportunity

Clash of interest

New channel partner

Extension of credit

Channel design and planning process

Segmentation stage Pharmacy company segments: Doctors/ Chemists/ Hospitals

and nursing homes

Positioning stage Service objectives at each channel element. Each segment

has different expectation

Focus stage Doctors in all A category towns

Chemists located in the main markets of A towns

Only big govt and private hospitals

Developing the right channel alternative Modifications required to make it an ideal channel

1. Channel Stages

M1 M2 M3

P1

P2

P3

Lot size Toothpaste pack sizes, Wheat flour packs, Motor with horse power

Waiting time Difference of “Desire to purchase”

Choice to the consumer Variety and assortments

Place utility Service support

Sales support for maintenance and repair Installation and training Credit Home delivery Regular service follow ups

2. Defining the customer needs

Industrial products require direct-marketing by the company

Consumer products should be available in large no of outlets

Frozen desert and ice-cream products need cold storage facilities

Seeds selling will need rural distribution Multi level marketing will require their distributors

to appoint further distributors

3. Designing channel objectives

Business intermediaries currently available The number and type of intermediaries required Any new member to be specially developed Roles of each channel member

4. Channel Alternatives study

Margins of the channel partners Cost of transportation of goods between the

company and the end user Cost of order booking and execution Cost of stock returns/ date expired stocks

taken back Cost of reverse logistics required (getting

empties back)

5. Cost of channel system

Ready channel partners may be already available. These can be further utilized

Distributors or redistribution: stockiest of some other companies

C&F agents: can be further utilized for collections and other work

Logistics service providers: will undertake distribution activities.

Manufacturer’s agents, stockiest, guarantors provide financial support

Financial agencies can be used to finance your customers.

6. Current intermediaries

Should be adequate for expected coverage of the target markets at the same time should not be too much to dilute the effort and add to the costs.

7. Number of intermediaries

Evaluation of Major alternatives

Cost: Every channel will have different costs associated with

Ability to manage and control: Considering coverage, frequency, productivity, inventory, credit, merchandising,

distribution, promotions, after-sales-service, pre-sales-sales, channel salespeople, stock points

Adaptability: Sensitivity of channel to addition, elimination of products, additional service,

new territory coverage, generating leads, handling price change, stock rationing

Range and volume to be handled: Ability to handle large range of products and volumes.

Selecting channel partners

Selecting Carrying and Forwarding agent

Location of the party In or close to main market of the company

Location of the warehouse Close to a major market Outside octroi limits Should have proper road/ transport access Labor availability Utilities support Connected by phone

Past experience As a C&FA for a similar company As a transporter should have access to a good warehouse

History of past business Should have handled similar but non-competing companies Ability to maintain confidentiality of transactions

Financial strength To handle all operating expenses till re-imbursement Insurance

IT capability Adequate own hardware Trained staff to handle simple programmes and repairing formats

Selecting channel partners

Flexibility In operating hours daily To handle peak loads

Transportation facilities Reliability, consistency in source of vehicles Additional volumes to be handled at short notice

Attitude, commitment To be of the highest order/ positive Willing to expand the business Disciplined

..conti

Selecting channel partners

Selecting Distributor

Size of the channel partner Current business portfolio Financial strength/ asset ownership including personal assets of partners

Own Salesforce No of sales people Qualifications, background, experience

Current business Products handled, volume handled Should be of similar products but non-competitive Product quality, compatibility and complimentary

Reputation Leadership in the market Integrity, fairness in dealings

Market coverage Territory/ intensity Regularity, reliability Relationship, productivity

Sales performance On current business Awards, prizes, certificates won on performance

Management of business Educational background, qualification of partners

Market working Efforts on merchandising, displays

Handling sales promotions Past experience

Inventory management Adherence to stock norms recommended by the company

Selecting channel partners

Credit extended in the market % of outlets & of current business Bad debts, if any

Stock distribution Ready stocks or order booking

Infrastructure availability Warehouse Distribution vans Hardware/ personal computers/ connectivity

Channel power

Referent power: Power out of eminent position of the company

Expert power: Power out of special knowledge of the company

Legitimate power: Power of legal agreement with company

Support power: Support in the form of promotions, subsidies, additional help

Competition power: Comparison with other channel members

Reward power: Incentives, special incentives

Coercive power: Power of ‘threat’

Channel design comparison factors

While comparing two channels,

Efficiency: Input versus output Effectiveness: How well channel meets its objectives Capacity: How effectively channel can handle changes in

volume Agility: How well can channel handle changing demand

pattern Consistency: of performance Reliability: Commitment on performance

Sales Meetings & Sales Contests

Sales Meetings & Sales Contests

Sales Meetings Objectives:

Communication & Motivational Purposes

Exchanging Information & Ideas

Directions & Guidelines to Sales persons

To Stimulate the group to raise its standards as to reasonable & acceptable performance

Appraisal & reviewing the job performance

Sales Meetings Organization

A-C-M-E-E Defining the specific Training Aims

Deciding Meeting Content

Determine methods of conducting the meeting

Deciding upon execution of the meeting

Evaluation of the results

Sales Meetings Organization

1. Defining the specific Training Aims

Communicate & Motivate

New Product Introductions

Improving Deficiency in Sales People

Orienting Sales Personnel on advertising Program

Introducing New Services for customers

Aims to be clear & attainable

Probable results justify the estimated costs

Sales Meetings Organization

2. Deciding Meeting Content

Planning the agenda

Customizing according to the aims

3. Determine methods of conducting the meeting

Need, Time available & meeting place

Short & Participative

Group discussion

Sales Meetings Organization

4. Execution:

Decisions on speakers, Seminar Leaders, Meeting Site & Time

Infrastructure including room arrangements

5. Evaluation:

Meeting accomplished its specific aims

Participant Feedback

Types of Sales Meetings

1. National Sales Meetings:

Appropriate in situations where changes have to be brought about in the marketing policies or any important changes, which require the attendance of various major executives.

National sales meetings can bring out the changes speedily and consistently.

Presence of the executives at the national sales meetings provides more encouragement and motivation when compared to written and recorded messages. 

Advantages:

Comprehensive change in policies;

Standardized explanations & answers;

common platform;

better coordination

Disadvantages

High Costs

Convenient time problem,

Disruption of routine

Types of Sales Meetings

2. Regional Sales Meetings:

Executives instead of meeting at the central office, they attend the decentralized meetings, thus reducing the costs and saving time. Each regional meeting is planned to deal with distinctive problems of that particular region.

Advantages:

Decentralization

Reduced Traveling costs

Lowering lost selling time

Disadvantages:

High demand on executives

Smaller percentage of top management

Types of Sales Meetings

3. Local Sales Meetings: Local sales meetings are held on weekly basis.

They last for about 15mins to more than an hour.

Local sales meetings provide an occasion for the sales persons to express their personal opinions and problems.

It gives an opportunity for the sales persons to come together and build up their individuality.

Strength is Informality

Ample time for each sales person

Better Acquaintance & Group Identity

4. Remote control & Traveling sales meetings: Closed circuit television: Companies having large sales force can make use of closed

circuit television meetings. Companies that launch new products or introduce national sales campaign use televised meetings. 

Sales meetings by Telephone: Telephone conference call is appropriate for small group meetings and discussions. In this meeting the sales manager starts the discussion and it is guided by two conditions that one person talks at a time and speakers identify themselves. The basic advantage is it saves time and money.

Sales Meetings at Home: In this kind of sales meeting the material and the required information is sent to sales personnel’s home.

Sales Contests

Special selling campaign offering incentives in the form of prizes & awards beyond those in the compensation plans

Provide extra incentives to increase sales volume, to bring in more profitable sales volume

Needs for esteem and self actualization

Sales Contests Objectives

To obtain new customers To secure larger orders per sales call To push slow moving items, high margin goods, or new products To overcome a seasonal sales slump To sell a more profitable mix of products To improve the performance of distributors sales personnel To promote seasonal merchandise To obtain more product displays To get reorders To promote special deals to distributors, dealers

Sales Contests

1. Contest Formats

Novelty Format: are ones that "hunt for hidden gold," or "win the Super Bowl.“

 are more fun, but many sales managers feel that they tend to insult the intelligence of more sophisticated salespeople. 

tend to work better with younger, less experienced salespeople.

 Novelty contests can be fun for selling special inventory, special events, or seasonal packages.

Direct Format: Direct contests are straightforward, such as "achieve 15 percent higher rates," or "write 20 percent more direct business

Important Points:

Timely & Effective

Understandable to the audience

Sales Contests

2. Contest Prizes: Cash:

Cash is not the most effective prize, especially if salespeople are reasonably well paid. Their money and security needs are satisfied by their regular compensation. 

Also, cash does not act as a motivator unless it is between 10 percent and 25 percent of salespeople's base compensation for the period of the contest. Well-paid salespeople will generally not go to much extra effort for just a few hundred dollars.

Cash does not fulfill any need for recognition and provides no tangible, permanent evidence of the achievement like a trophy does.

Merchandise:

Merchandise is better than cash as a prize

it is more permanent evidence of achievement. Also, companies can often get merchandise through trade deals or at wholesale prices, and thus give larger prizes than if cash were used.

Furthermore, if people are allowed to have a choice of merchandise, rewards can be more closely tied to individual needs and preferences, and salespeople and their families can express their individuality in the prizes they choose.

Sales Contests

Travel:

Travel is becoming more and more popular as a prize, because of the status, prestige, glamour, and fun associated with an exotic or exciting trip. 

they can be glamorized, and people love to fantasize about them.

Also, trips can include spouses and partners, which helps get partners involved in contests and in a frame of mind to support the extra work and effort necessary to win a contest (if no extra effort is necessary, contests are a waste of time).

Special Honor & Privileges:

Special privileges are a good reward, but they are often hard to get approval for in larger, more rigid companies (extra vacation, for example.).

 Special recognition, like being flown in to the home office to meet the company president or receiving special recognition and publicity ("Million Dollar Roundtable," for example) are sometimes easier to get approved in larger, more bureaucratic companies than days off.

Sales Contests

3. Contest Duration:

Mostly run for one to four months

No set guidelines

Consideration of length of time interest

4. Contest Promotion:

Promote contests well to keep the enthusiasm level high

Promote them at all levels of the organization, not just in the sales department in order to get everyone in the company involved and supporting the salespeople (even include vital support people in prizes)

Sales Contests

Managerial Evaluation of contest:

Contest vs. alternatives

Short & Long term effects

Design

Fairness

Impact upon sales force morale

Sales Contests

Objections:

No reason to reward sales persons for their regular duties

High Caliber & more experienced sales personnel consider sales contests juvenile

Unanticipated & undesirable results

Bunch sales

Disappointment to losers

Temporary motivating devices

Weakens Team Spirits

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Sales & Cost Analysis

173Sales & Cost Analysis

Done for sales control:Statistical purpose of sales control: Accounting analysis to determine profitabilityWhy Sales Control?1. Measuring Performance: Objective evaluation of sales efforts critical for growth Some measures: Sales / Quota ratio / Budget ratio, Closes / Calls ratio2. Identifying problems before they magnify: Inaccurate sales forecasts,

low profit margins, low business, inability of Sales Management to maximize revenues to existing customers

3. Identifying sales opportunities

174How to manage Sales Control?

1. Setting goals: Part of Sales Planning & Sales Budgeting process

SP: Staffing, Recruiting, Training, Evaluation SB: Targets for Sales and for Costs associated with Sales2. Comparing actual with targets:3. Taking corrective action:

Problem in sales control4. External factors over which sales people have no control 5. Inadequate information

175Sales Analysis

1. Gathering, classifying, comparing and studying sales data2. Converts raw data from various sources into actionable information 3. Helps in non marketing functions like production planning,

cash management, inventory management etc.4. Managers have to decide on purpose of evaluation before

doing sales analysis; simple sales analysis gives figures while comparative sales analysis sets standards

5. Sales information systems use mathematical and statistical procedures to generate reports; managers have to decide which information to use for what purpose.

176How to do Sales Analysis?

1. Most critical element in sales analysis is sales information; most commonly used source for sales information is the sales invoice.

2. Other sources of information include cash register receipts, sales person call reports and expense reports, financial reports, warranties etc.

177

1.

Different types of sales analysis could be : Sales Analysis by Region

Region S. Quota Actuals Diff. Performance Index

Sales/SQ × 100

West SouthNorthEast

10.2510.009.758.75

10.2010.029.737.01

-0.05+0.02-0.02-1.74

99.51100.2099.7980.11

1782. Sales Analysis by Sales Representative

Sales Rep. S. Quota Sales Diff. Perf. Index

RaviRahulRishi Raj

500.5300.5

500.25425.75

475.5290.5

150.25400.75

-25-10

-350-25

95.0096.6730.0394.12

1793. Sales Analysis by Product for Rishi

Product Quota (Rs.) Actual (Rs.) Diff.

Tooth PasteSoap

Cosmetics

400300500

240180220

160120280

Rishi has problems of motivation, selling skills.

180

4. Sales analysis by customer: Company can focus on promising segments

5. Sales analysis by distribution channel: Can help in making elimination decisions regarding channels

6. Sales analysis by units sold: Useful during times of inflation and price changes

COMPENSATION PLANS

Compensation objective

compensation is one of the most important motivating and retaining field salesperson

sales force compensation is a cost that can be quickly spiral out of control if the compensation plan is design improperly

So the useful tool to translate company objectives and desires of salespeople into an appropriate compensation plan is to consider the customer product matrix

Company’s General Compensation Structure

1. Ranking- It is widely being used in businesses. It sorts job description in the order of worth. It measures only overall appraisals of the relative worth of different jobs.

2. Grading- A system of grades & grade description, against which individuals jobs are compared. The grades are described in terms of job responsibility, skills required, supervision given & received, exposure to unfavorable & hazardous working conditions.

3. Point system- It involves establishing & defining the factors common to most jobs that represent the chief elements of value inherent in all jobs. The specific factors chosen are, minimum education required, mental & physical skills, responsibility, personality requirements.Each factor is assigned a minimum & maximum no of points, different ranges being associated in line with relative importance of the factors.

4. Factors comparison method- It employs selected factors & evaluation scales. It compares sales person on a set of selected factors & rank them according with the performance performed by them under such criteria factors.

5. Competitors offer- the compensation structure should me made while seeking the competitors offering to their sales staff .

4. Determine Compensation Level

Management must determine the amount of compensation a salesperson should receive on the average.

According to caliber: Management should ascertain whether the caliber of the present sales force measures up to what the company would like to have.

According to worth of individual: Management weighs the worth of individual persons through estimating the sales & profit dollars that would be lost if particular salespeople resigned.

According to the amount the company can afford to pay: The company should make a cost estimate on a break even chart to propose the compensation plan for every individual salespeople.

1. A fixed element, either a salary or a drawing account, to provide some stability of income.

2. A variable element (for example, a commission ,bonus, or profit sharing arrangement) to serve as an incentive.

3. An element covering the fringe or “plus factor”, such as paid vacations, sickness & accident benefits, life insurance, pensions.

4. An element providing for reimbursement of expenses or payment of expenses allowances.

Management selects the combination of elements that best fits the selling situation. The proportions that different elements bear to each other vary of 60:40 to an 80:20 basis.

Compensation elements.

Designing an effective sales compensation plan

Examine job description

Set up specific objectives for sales people

Decide levels of pay/compensation

Develop the compensation mix

Decide indirect payment plan or fringe benefits

Pretest, administer and evaluate the plan

Examine job descriptions: Separate job descriptions are required for different sales positions or jobs e.g.

missionary salesperson senior salesperson, key account executive

Each job description should include responsibilities and key performance standards to decide how much to pay

Set up specific objectives for salespeople These are derived from company’s sales and marketing objectives

Salespeople should have some control on the objectives e.g. number of sales calls made

Objectives should be measurable e.g. sales volume, selling expenses

Decide levels of pay/compensation. It means the average pay or money earned per year(or month)

It is important to decide levels of pay for all sales positions

It is decided based on the following factors:

Levels of pay for similar positions in the industry

Levels of pay for comparable jobs in the company

Education, experience and skills required to do sales job

Cost of living in different metros and cities

Annual average pay level vary between industries, within the same industry and sometimes within the company

Firms decide a range of average pay, instead of a specific pay

Salespeople earn pay depending on their and company performance

Develop the compensation mix

Widely used elements of compensation mix are:

1) salaries

2) commissions

3) bonuses

4)fringe benefits(or perquisites)

Expense allowances or reimbursements like travel, lodging, etc are not included

Basic types of compensation plans are:

Straight salary

Straight commission

Combination of salary, commission and bonus

68% companies use combination and balance 32% firms use straight salary or straight commission

1. Straight salary plan- is simplest compensation plan. Salesperson receive fixed sums as regular intervals(usually each week or

month sometimes every 2 weeks), representing total payments for their services.

Such plans are more common among industrial- goods companies than among consumer- goods companies.

Types of compensation plans

Advantages :

1. More control over wages level

2. Allow maximum control over sales people activities

Limitations :

3. Salary don’t provide strong incentives for extra effort.

4. Salaried employees require supervision

5. This method overpay the least productive members of sales team

Application :

6. In competitive environment

7. when team selling is important

8. sales of complex products

9. When product are resold through advertisements

2. Straight commission Plan- Salespeople on commission are paid a percentages of the sales or gross

profit they generate The theory supports the individual sales personnel should be paid

according to productivity. As sales volume rises to different levels, the commission rates differ for

different products, categories of customers, or during selling seasons.

This method is common in the clothing, textiles & shoe industries & in drug * hardware wholesaling. Firms selling intangibles, such as insurance & investment securities, manufacturers of furniture, office equipment & business machines also are frequent users of straight- commission plans.

Advantages :

1. Foster independence of actions

2. Maximum incentives

Limitations :

3. Little control over commission people

4. Turn over when business conditions are too bad

Application :

1. When maximum incentives is needed and minimum post sale service

Salary plus commission- Most sales compensation plans are combinations of salary & commission plans.

By a judicious blending of the two basic plans, management seeks both control & motivation. Actual results depend upon management’s skills in designing & administering the plan.

to give a salespeople a push needed to sell complex products and services

Advantages :-

1. Commission rate can be adjusted to promote the sale of individual products

2. Paid monthly

3. Discourage salespeople to leave the company

Limitations :

Expensive and costly to administer

Application :

In industries where business fluctuate with seasonal or economical cycles

Salary +Bonus: Used to provide representatives with income security while the bonus gives added incentives to meet company objectives .

Bonus : are discretionary payment for reaching specific goals and are paid annually

Advantage:

1. Balance the need to control selling expense and provide extra rewards

2. lower turnover

Limitations :

3. In some firm the size of bonus is so arbitrary

4. Deals with the relation between performance and rewards

Salary + commission +Bonus

The most comprehensive plan combine the stability of the salary , the incentives of a commission and special rewards of bonus

Advantages :_

1. Allow manager to reward everyone

2. Allow to design different plan to appeal salespeople needs

3. Earn more money

Limitations:

This method is too complex

Application:

Industries such as electronics and business services .

Commission +Bonus

Combines the incentives of a commission and a special rewards for meeting firm’s objectives

Advantages :

1. Easy to understand

2. Simple to administer

3. Similar cash flow benefit

Limitations :

Perceived equity of the year end bonus that’s mean a typical high performing sales person become frustrate when he or she sees that top salesperson receive larger year end bonus

_Application :

Suited to companies which use independent sales Rep .

A bonus is an amount paid for accomplishing a specific sales task

It is paid for: reaching sales quota performing promotional activities obtaining new accounts following up leads setting up displays, or carrying out other assigned works.

It is like an additional financial reward to the sales person for achieving results beyond a predetermined minimum.

Use of bonus & Fringe benefits

Fringe benefits do not bear direct relationships to job performance they are provided by federal & state law.

For example, payment for social security premiums, unemployment compensation, worker’s compensation, pension plan, holiday’s , vacations, hospitalization insurance, company providing housing etc.

Apart from pay packages marketing people also get high incentives and perks. The industry provides for special allowances such as annual bonus, house rent allowances, mobile allowances, transportations, travel leaves, paid vacations, etc. 

Figure: Average Salary offered in Indian Telecommunication Sector for Entry Level Jobs

Figure: Average salary (in lakhs) offered to entry level employees

Note: The software and hardware industry is in need of talented programmers, testers, developers and analysts to improve their productivity.

Figure: Average salary offered in BPO and KPO

Compensating Salespeople

ComponentsSalary

Commissions

Needs * Motivate effort on non-selling

activities

* Adjust for differences in territory

potential

* Reward experience and competence

* Motivate a high level of selling effort

* Encourage sales success

Compensating Salespeople

Components

Incentive Payments (Bonus)

Sales Contests

Personal Benefits

NeedsDirect effort toward strategic

objectives

Provide additional rewards for top performers

Encourage sales success

* Stimulate additional effort targeted at specific short-term

* Satisfy salespeople’s security needs

* Match competitive offers

Figure 14-2: Comparing Salary and Commission Plans for Field Sales Representatives

0 100 200 300 400 500

10,000

20,000

30,000

40,000

Straight salary

10% Com

miss

ion

Tota

l cost

per

pers

on

(th

ou

san

ds $

)

Sales Per Person in Thousands

Use of Compensation Plans

Straight Salary 7Straight Commission 10Salary Plus Bonus 34Salary Plus Commission 21Salary Plus Bonus Plus Commission 24Commission Plus bonus 4

Total 100%

Percentage ofCompanies Using

Thank you…