Sales Management
Structure
1.1 Introduction
1.2 Marketing Approaches
1.3 Marketing and Sales
1.4 Evolution of sales departement
1.5 Components of the Marketing Mix
1.6 Functions of the Sales Manager
1.7 Sales Management Model
1.8 Summary
1.9 Glossary/keywords
1.10 References
1.1 Introduction
"Sales management" as the term implies means sales management. It is often considered synonymous with personal sales management. It involves understanding the effort involved in managing the sales force and the various sales processes.
Initially, sales management was intended to be the direction of sales force personnel. Later, the term acquired a broader meaning apart from personal selling and the term "sales management" included the management of all activities related to sales, including below-the-line advertising, sales promotion, physical distribution , pricing and product marketing.
The Definitions Committee of the US marketing association defined sales management as "the planning, direction and control of personal sales, including recruitment, selection, equipment, allocation, routing, supervision, payment and motivation since these tasks are applied to the personal sales force. " However, we will also include direct sales through channels within the scope of sales management.
Objectives of Sales Management
After studying this chapter, you can:
1) Clearly identify the differences between marketing and sales functions.
2) Describe various marketing and sales approaches.
3) Describe the marketing mix and the sales management model.
1.2 Marketing Approaches
The American Marketing Association (AMA) defines marketing as "the activity, set of institutions and processes to create, communicate, deliver and exchange offers that have value for customers, customers, partners and society in general."
Marketing deals with the orientation of the company towards the market. it is mainly about four concepts, namely the concept of production, the concept of the product, the concept of marketing and the concept of sale.
1.2.1 Production Concept
The concept of production is based on the belief that customers favor those products that are highly available and affordable to them. The concept assumes that cheap products sell well and depends on improved production and distribution activities. Companies try to make a profit by exploiting economies of scale. Improved production and distribution is emphasized instead of the quality or characteristics of the product / service. This concept is also known as the manufacturing concept. This type of strategy for a company works well in developing countries, where demand is more than supply.
The important questions that companies must address in this process are:
1) Can the product be produced?
2) If the product can be produced, can it be made in the required quantities?
China has often practiced the concept of production to make goods / services available at very low prices at all times and to increase efforts to compete in international markets.
This concept is perfectly adequate when the company distributes products / services to the masses and not to a specific target group. This concept works well when the product's demand is high and the customer's preference does not change over a long period of time.
The production concept works perfectly well for some companies, especially in the fast moving consumer goods (FMCG) sector. However, it was later discovered that some products were not sold properly, regardless of all the measures taken by the production concept.
Then this situation demanded another concept known as the concept of the product.
1.2.2 Product Concept
The product concept is based on the assumption that customers buy products that offer the highest quality, performance and innovative features. This concept suggests that product quality is an important factor in the customer's purchasing process and customers would always prefer to buy products of superior quality.
The computer industry is a good example in which the concept of production worked before, but later the concept of the product took over. Customers require more and more features and quality when choosing a computer / laptop. As more and more companies joined this business and foreign brands arrived, local players had to adopt the concept of the product.
However, the quality must be defined. The quality attributes may differ from client to client. For the quality of some customers it means faster processing technologies and for some it may be some other characteristics of the product. Therefore, companies must take sufficient care when designing a product that is in accordance with the quality parameters of the target group. The synchronization of the product in the market also plays a vital role in the success of the product. Sometimes technological or innovative products fail when they are introduced in the markets and the customer does not know the benefits. So, educating the client before presenting a product is important.
For example, Golden Eye technology in televisions was introduced by Videocon but the client had no idea of what benefit it provided. After a while, when customers understood about that technology, it was presented by LG and became a marketing success for their products.
In some industries, the customer may not understand the benefits of the product or may lack a small motivation to buy the product, even if they know that it is necessary. In such cases, the concept of the product may not make the customer buy the product.
Hence, some companies have adopted the "concept of sale".
1.2.3 Selling Concept
This concept is based on the assumption that "we have to force the customer to buy the product". Then, the customer will buy the product only if the company aggressively promotes / sells its products / services. This concept believes that the customer is usually inert and would not buy the product / service if they are left with the choice. Then the company would push its products / services towards customers and push them to buy. Therefore, a strong sales force network is created for this purpose and they convince customers to buy products / services through advertising and personal sales. This type of approach worked well with products / services such as insurance, vacuum cleaners, water purifiers and other household items, etc.
The important questions that the company must address in this process are:
1) Can the product be sold?
2) How much can we charge for the product or what can be the maximum discount that can be given and still have a decent profit?
This concept would work well for the first time in the sale to a customer who could take the product / service when the sales representative convinces him. After purchasing the product / service if the customer is not satisfied, then he / she might not be interested in entertaining the seller for the next time.
It was later discovered that most customers will buy the products they need and want. Hence, the concept of marketing has entered the scene.
1.2.4 Marketing Concept
The marketing concept emphasizes the following principles:
1) Identify the needs and desires of the client.
2) Design the products and services to comply with them.
3) Use various promotion techniques to communicate the benefits of the products.
4) Make the benefit satisfying the long-term needs of the client.
The concept of Marketing is management's belief that customers will need those products they need and which ones and what key management tasks is to identify the needs and desires of the customers and design the products accordingly.
SAQ1
1) Idenfity any two products for which you would prefer to follow the production concept?
2) Explain which concept would work well in selling a cell phone to a CEO of the company and to a small farmer?
3) Identify which model does Dell follow in selling the computer products and explain how it has benefited them?
1.3 Marketing Vs Sales
Sales as a process involve exchanging products or services in exchange for money in such a way that what you get from it is more than what you put into it. In other words, the difference between the sale price made and the manufacturing cost is the sales profit of the organization.
On the other hand, marketing includes understanding the value proposition in the customer's mind and designing the products and services accordingly.
1.3.1 Good Selling Process
Good Marketing facilitates sales. However, even when the marketing process is good, the sales process must be handled with care.
A good sale implies:
1) Identify the correct client.
2) Communicate the benefits of the product to customers.
3) Exchange of goods / services for money.
Sales are the culmination of all marketing efforts and, in a nutshell, is the exchange of goods and services, for money. It can be said that marketing is all the activities carried out to prepare for sales. Sales are all activities necessary to close the deal.
It is evident that the customer will buy the products he needs and also where the perceived value of the product is greater than the sale price of the product. The marketing task is to improve the value proposition in the minds of the customer and increase the perceived value.
It would be ideal if the clients came and demanded the product / service. However, the client can not do so due to several reasons, such as:
1) He / She does not know that the product is available.
2) You may not know where the product is available.
3) And I have no idea who to contact.
4) You do not have a clear idea of the value proposition and the benefits.
5) It may not be clear about the usefulness of the product to solve your problem.
The sales force plays an important role, such as:
1) To reach the customer and inform him about the benefits of the product.
2) make the product easily available to the customer.
The product can be easily available by the following methods:
1) Know the customer individually and deliver the product at the door. This is known as personal sales.
2) Make the product available in a place accessible to the customer. This refers to indirect or channel sales.
Sales management begins with the identification of the sales process. The sales strategy distinguishes the route that sales would take.
1.3.2 Sales Approaches
Two possible approaches by which sales would be carried out can be classified as follows:
Depending on the product and the ability to approach, the needs and the affordability of the client, one of the previous approaches would be followed by the sales staff.
1.3.2.1 Direct sales approach may be:-
1) Selling to offices (for example, Office Automation Products).
2) Selling to industries (business to business - B2B)
3) Door-to-door selling.
1.3.2.2 In-Direct sales approach
1) Company to retailer to customer.
2) Company to wholesaler and then to retailer to customer.
3) Company to wholesaler to distributor and then to retailer to customer.
We try to introduce these various sales approaches, but the following text course work of "Distribution and logistics" and & "Supply Chain Management".
1.3.3 Types of Personal Sales
Personal sales can be classified into broad areas like:-
1) Office sales
2) Industrial/institutional sales
(In some countries like India there is significant difference in the approaches to be followed for Industrial/Institutional sales and the government sales)
3) Door-to-door sales
The kind of sales strategy to be adopted is the function of the product/service, the market, buying process, and the competition.
SAQ2
1) If you were a sales person for agricultural products like fertilizers, quality seeds etc, which sales approach would best fit in and why?
2) In the above question, what steps would you follow if the customer has no knowledge about the benefits of your product?
1.4 Evolution of the sales department
As described by Richard (2001), before the industrial revolution, small-scale industries were the market leaders and the sale of products / services was not a big problem. More emphasis was placed on manufacturing activities. Orders were available before the actual manufacturing process of those orders began. Satisfying demand was a major problem.
In many companies, a small team used to supervise all commercial activities. There was no need for separate equipment for different functions such as sales, marketing and manufacturing. All the tasks were done by the team or, sometimes, by a couple of people. Most of the time was spent on manufacturing. It was an ideal situation for most companies not to bother about marketing and sales activities until the industrial revolution began.
With the industrial revolution, which began in 1760 in England and shortly after the American Revolution in the United States, companies began to concentrate on the expansion of their territory through the search for new markets.
The factories were producing large quantities of goods with improved technology and machinery. The production process had been simplified and now the main problem was what to do with the surplus surplus after satisfying domestic demand in nearby markets. The situation demanded the expansion of its presence in new markets, crossing the borders of cities, countries and continents.
With a growing presence in many countries, it became difficult to manage all departments by a single individual as was the case before the industrial revolution. The size and volume of business have increased to such an extent that it is necessary to delegate authority to others. This process fostered the establishment of several functional units, such as manufacturing, finance, marketing, etc. Each and every department had to function independently and be supervised by an independent authority.
The creation of the marketing department solved the problem of understanding the market and helped carry out all the activities to improve the domain of the market of the products. With the increase of the market and customers, several sales divisions were established. However, an important issue of how to communicate with the client must be perfected. This is where the marketing mix and personal sales roles came into play as functional.
Let us understand what combination of marketing is and the importance of its various components.
1.5 Components of the Marketing Mix
As you have already studied in marketing, the marketing mix involves several components that can be understood in the following diagram.
The marketing mix that consists of several components plays an important role in establishing the market / domain of a product.
Several tools to promote a product include advertising, public relations, personal sales, sales promotion and Internet-based promotions.
Personal selling can be understood as one-on-one oral communication between the sales staff and the target group in such a way that both parties benefit mutually. The oral communication could be a personal meeting, a telephone conversation or using the latest trends in technology such as video conferencing.
The benefits for the sales staff would be in terms of financial reward for successfully closing the sale and the customer would benefit from the product / service received. Often, the goal of personal selling may not be a near sale. Most of the time, the objective may be to transmit information about the products / services to the target group. Maintaining a good relationship with the customer is often treated as one of the important goals of the sales team.
1.5.1 Personal selling Vs Other Promotional tools
Let us now understand how personal communication differs from other tools, such as advertising, public relations, sales promotion and Internet-based promotion. We will also understand the situations in which personal selling would be preferable to other promotional tools and finally we will discuss the disadvantages of personal selling.
Personal selling is preferred when the customer can not be easily contacted or communicated about the company's products / services by other means, such as rural areas where television or Internet are not available. Second, in cases where the target group could be a CEO of a company or a head of the institution, those clients can not easily communicate with other tools compared to personal sales.
1.6 Functions of the sales manager
Any organization that has sales personnel demands a sales manager. What do all sales managers have in common? They perform the tasks through their people and organizations. The sales manager is responsible for generating sales, profits and reaching the level of customer satisfaction according to the company's objectives.
A manager, John Rozurat of W.W. Grainger, described the management as "the art of doing things through people."
Charles Futrell (1998) describes the functions of the sales manager as follows:-
1) Planning:- Building a profitable customer oriented team.
2) Staffing:- Hiring the right people to sell and lead
3) Training:- Educating sales personnel according to company objectives.
4) Leading:- Guiding average people to perform at above average levels
5) Controlling:- Evaluating the past to guide the future.
The outcome of these several functions would be the attainment of objectives such as:-
1) Achieving defined goals
2) Product sales and profits
3) Better customer satisfaction levels
4) Efficiency
5) Effectiveness
Sales management has several functions like planning, budgeting, recruiting and selection, training, motivating, compensation, designing territories and evaluating performance.
1.7 Sales Management Model
The first step "describe the personal sales function" is about the understanding of the work activities and the sales process involved in the personal sale.
The 2nd step "Definition of the strategic role of the sales function" will deal with the strategic decisions of the corporate, commercial and marketing level, which generally provide guidelines within the sales manager and the salesmen must operate.
The third step, "designing the sales organization", is about the importance of designing an effective sales organization that is necessary to implement the strategies successfully.
The fourth step, "Develop the sales force", highlights the importance of correct recruitment and selection methods and the need for adequate training of sales force personnel.
The fifth step "Lead the sales force" presents that hiring the best people for sales is one thing and directing their efforts to meet the goals and objectives of the sales organization is another. The sales manager spends a great deal of time motivating, supervising and leading members of the sales force.
The 6th step "determine the effectiveness and performance of the sales force" is to monitor the progress of the sales force to determine effectiveness and performance. The development of forecasts, the allocation of quotas and budgets provides the necessary information for the evaluation of performance.
1.8 Summary
In this unit we understood the definition of sales management and the difference between marketing and sales. We highlight several marketing approaches, starting with the concept of production, the concept of the product, the concept of sales and finally the concept of marketing and its role in generating sales. A good sales process is essential to facilitate sales by identifying the customer, communicating the benefits and exchanging the goods / services for money. For the sales process to be effective, the sales force plays an important role in identifying the correct approach to reach the customers and make the sale. Later in this chapter, we have studied the importance of the components of the marketing mix to establish the market and the fundamental role of personal selling that is played by the same. This unit also helped to understand the role of the sales manager in the planning, staffing, management, training and control of sales force personnel. Finally, in this unit we understood the sales management model that helps manage sales.
1.9 Glossary/Keywords
1) Sales Promotion: Activities, techniques and incentives that are directed towards customers with an intention to create consume demand.
2) AMA: American Marketing Associating is a professional association for marketers.
3) FMCG: Fast Moving Consumer Goods are the products used by individuals or households which are used or replaced very fast by the customers over a period of weeks, months of within a year. Some example would be soft drinks, toiletries etc.
1.10 References
1. Tyagi C.L. Arun Kumar (2004), "Sales Management", Atlantic Publishers and Distributors, New Delhi, India.
2. Charles Futrell. (1998), "Sales Management: Teamwork, leadership, and Technology (6th Ed)", The Dryden Press, Florida, USA.
3. Richard R. Still, Edward W. Cundiff, Norman A. P. Govoni (1998). "Sales Management: decisions, strategies, and cases (5th Ed.)" Prentice-Hall International, New Jersey, USA.
4. Thomas N. Ingram, Raymond W. LaForge (1989), "Sales Management: analysis and decision making', The Dryden Press, New York, USA.
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