SALES MANAGEMENT Every module consists of three to five units. Structure of a unit is as under:1) 2) 3) 4) 5) 6) 7)
Introduction & objectives 2-5 sections Short answer questions(SAQ) Summary Keywords References Suggested readings
Module I- Sales Process and its Management 1) Introduction to sales management
1 - 17
2) Sales Process
18 - 32
3) Personal selling
33 - 47
4) Computer applications in sales management
48 - 63
Module II- Selling Skills 5) Communication skills
64 - 80
6) Sales Presentation
81 - 109
7) Negotiation Skills
110 - 123
8) Retail communication
124 - 140
Module III-People Issues in Sales management 9) Job analysis, recruitment & selection
141 - 159
10) Training the sales force
160 - 174
11) Compensation and motivation of sales force
175 - 187
12) Monitoring and performance evaluation
188 - 204
Module IV- Sales Organization and Planning 13) Sales Planning
205 - 218
14) Sales Organization
219 - 235
15) Sales forecasting and sales quotas
236 - 249
16) Sales Budgeting and control
250 - 261
UNIT 1 INTRODUCTION TO SALES MANAGEMENT Structure 1.1 Introduction Objectives
1.2 Marketing Approaches 1.2.1 Production Concept 1.2.2 Product concept 1.2.3 Selling Concept 1.2.4 Marketing Concept
1.3 Marketing and Sales 1.3.1 Good Selling Process 1.3.2 Sales approaches 1.3.2.1 Direct Sales 1.3.2.2 In-direct sales
1.3.3 Types of personal sales
1.4 Evolution of sales department 1.5 Components of the Marketing Mix 1.5.1 Personal Selling and Other Promotional Tools
1.6 Functions of the sales manager 1.7 Sales Management Model
1.8 Summary 1.9 Glossary/ Keywords 1.10 References 1.11 Suggested Readings 1.1 Introduction “Sales management” as the term implies means management of sales. Often it is considered synonymous with the management of personal sales. It involves an understanding of the effort that goes into the management of the sales force and the various processes of sales. Sales management initially was meant to be the direction of sales force personnel. Later the term took on a broader significance apart from personal selling and the term “sales management” included managing of all the sales related activities including below the line
advertising,
sales
promotion,
physical
distribution,
pricing
and
product
merchandising. The Definitions Committee of the American marketing association defined sales management as “ the planning , direction and control of personal selling, including recruiting, selecting, equipping, assigning, routing, supervising, paying and motivating as these tasks apply to the personal sales force”. However, we shall also include indirect sales through channels within the ambit of sales management. Objectives After studying this chapter you will be able to:1) Identify clearly the differences between the functions of marketing and sales 2) Describe various marketing and sales approaches 3) Describe the marketing mix and the sales management model
4) Identify the various functions of a sales manager and his/her objectives
1.2 Marketing Approaches Marketing is defined by the American Marketing Association [AMA] as "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large." Marketing deals with the company orientation towards the market place. It deals with mainly four concept’s namely the production concept', product concept, marketing concept and the selling concept.
Marketing Concepts
Production Concept
Product Concept
Selling concept
Marketing Concept
1.2.1 Production concept The production concept founded on the belief that the customers favor those products that are highly available and affordable to them. So the concept assumes that the cheap products are sold well and relies on the improved production and distribution activities. Companies try to attain profits by exploiting economies of scale. Improved production and distribution are emphasized rather than the quality or features of the product/service. This concept is also known as the manufacturing concept. This type of strategy for a business works well in the developing countries where the demand is more than the supply. Important questions the firm has to address in this process are:1) Can the product be produced?
2) If the product can be produced, can it be done in required quantities? China has oft practiced the production concept in making the goods/services available at all times at very low prices and increased efforts to compete in international markets. This concept is perfectly suitable when the company distributes the products/services for the masses and not to a specific target group. This concept works well when the demand for the product is high and the customer preference doesn’t change for a long period of time. Production concept works perfectly fine for some companies especially in the fast moving consumer goods (FMCG) sector. However it was found later that some products did not sell adequately irrespective of all the measures taken by the production concept. Then this situation demanded another concept known as the product concept. 1.2.2 Product concept Product concept relies on the assumption that the customers buy those products that offer the most quality, performance, and innovative features. This concept suggests that the quality of the product is an important factor in the customer buying process and customers would always prefer to buy products of superior quality. Computer industry is a good example where the production concept worked earlier but later on product concept took over. Customers required more and more features and quality while choosing a computer/ laptop. As more and more companies joined this business and the foreign brands came in the local players had to adopt the product concept. Quality however needs to be defined. Attributes of quality may differ from customer to customer. To some customers quality means faster processing technologies and to some it may be some other features in the product. So companies must take enough care in designing a product which would be in accordance with the quality parameters of the target group. Timing of the product in the market also plays a vital part in the success of a product. Sometimes technological or innovational products fail when they
are introduced in the markets and the customers are unaware of the benefits. So educating the customers before introducing a product is important. For instance the Golden Eye technology in televisions was introduced by Videocon but the customers were clueless about what benefit it provides. After some time, when the customers understood about that technology, it was introduced by LG and it became a marketing success for its products. In some industries the customer would not be able to understand the product benefits or may be lacking a little motivation to buy the product even if they know it’s necessary. In such cases product concept might fail to make the customer buy the product. Hence the “Selling Concept” was adopted by some companies. 1.2.3 Selling Concept This concept relies on the assumption that “We need to compel the customer to buy the product”, so the customer will buy the product only if the company aggressively promotes/sells their products/ services. This concept believes that customer is usually inert and would not buy the product/service if the choice is left to them. So the company would push its products/services towards the customers and push them to buy. Hence a strong network of sales force is created for this purpose and they convince the customers to buy the products/services through advertising and personal selling. This kind of approach worked well with products/ services like insurance, vacuum cleaners, water purifiers, and various other household items etc. Important questions the firm has to 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 sale to a customer who might take the product/service when persuaded by the sales representative. After buying the
product/service if the customer is not satisfied then he/she might not be interested in entertaining the sales person for the next time. It was later realized that most of the customers will buy the products which they need and want. Hence the marketing concept has come into the picture. 1.2.4 Marketing concept The marketing concept underlines the following principles:1) Identify the needs and wants of the customer 2) Design the products and services to fulfill the same 3) Use various promotion techniques to communicate the benefits of the product 4) Realizing the profit by satisfying customer needs over a long term The marketing concept then is the management belief that customers will long those products that they need and what and that the key task of the management is to identify customer needs and wants and design products accordingly. SAQ 1 1) Identify 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 implies exchanging the products or services in exchange for money in such a manner that what you get from it is more than what you put into it. In other
words, the difference between the realized sales price and the cost of manufacturing is the profit for the organization from sales. Marketing on the other hand includes understanding the value proposition in the minds of the customer and designing the products and services accordingly. 1.3.1 Good Selling Process Good Marketing makes sales easy. However, even when the marketing process is good, the sales process needs to be handled carefully. Good selling implies:1) Identifying the right customer 2) Communicating the product benefits to the customers and 3) Exchange of goods/ services for money Sales are the culmination of all the marketing efforts and in a nut shell, it is the exchange of good and services, for money. It may be said that marketing is all the activities conducted to prepare for sales. Sales are all the activities required to close the deal. Clearly customers will buy those products which they need and also where the perceived value of the product is greater than the selling price of the product. The task of marketing is to enhance the value proposition in the minds of the customer and increase the perceived value. It would be ideal if the customers came and demanded the product/ service. However the customers may not do so because of several reasons such as:1) He/ She doesn’t know that the product is available 2) May not know where the product is available 3) And have no idea of whom to contact
4) Have no clear idea of the value proposition and the benefits 5) May not be clear of the utility of the product in solving his / her problem The sales force then plays an important role such as:1) To reach out to the customer and inform him/ her about the product benefits 2) Make the product easily available to the customer The product can be made easily available by the following methods:1) Meeting the customer on a one-one basis and delivering the product at the door step. This is referred to as personal sales. 2) Make the product available at place which is easily approachable by the customer. This is refereed to Indirect or channel sales. Sales management then begins with identifying the process of sales. The sales strategy determines the route the sales would take. 1.3.2 Sales Approaches Two possible approaches by which the sales would take place can be classified as follows:Direct sales Approach Sales Approaches In-Direct sales Approach
Depending upon the product and the approachability, needs and a affordability of the customer one of the above approaches would be followed by sales personnel 1.3.2.1 Direct sales approach may be:1) Selling to offices- (for examples, 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 An attempt is made to introduce these various sales approaches, but the following text is primarily focused on personal selling. The issues of channel management/ indirect sales approaches are also covered in the course work of “Distribution& 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. SAQ 2 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 the small scale industries were the leaders of the market and selling the products / services was not much of a problem. More emphasis was given on manufacturing activities. The orders were in hand before the actual manufacturing process of those orders had started. Meeting the demand was a major problem. In many firms a small team used to supervise all the business activities. There was no need of seperate teams for different functions like selling, marketing and manufacturing. All the tasks were performed by the team or sometimes, by a couple of individuals. Most of the time was spend on manufacturing. It was an ideal situation for most of the firms not to bother about the marketing and selling activities until the Industrial revolution began. With the Industrial revolution, which began in 1760 in England and shortly after the American Revolution, in United States, the companies had started to focus on the expansion of their territory by finding new market places. Factories were producing huge quantities of goods with the improved technology and machinery. The production process had become simple and now the main problem was what to do with excess surplus after meeting the domestic demand in nearby markets. The situation demanded for the expansion of their presence in new markets, crossing the boundaries of the cities, countries & continents. With increasing presence in many countries, it became difficult to manage all the departments by a single individual as was the case before the industrial revolution. The size and volume of business had increased to such an extent that it became necessary to delegate the authority to others. This process encouraged in establishment of various
functional units like manufacturing, finance, marketing etc. Each and every department was to function independently and be supervised by a separate authority. The creation of the marketing department has solved the problem of understanding the market place & helped in performing all activities to improve the market dominance of the products. With increasing markets and customers various sales divisions were setup. However a major issue of how to communicate with customer has to be perfected. This is where the roles of marketing mix and personal selling as a function came into the picture. Let us understand what marketing mix is and the importance of its various components.
1.5 Components of the Marketing Mix As you have already studied in marketing, marketing mix involves several components which can be understood by the following diagram.
Marketing Mix
Product
Advertising
Price
Public Relations
Promotion
Personal Selling (Sales management)
Sales Promotion
Place
Internet Based promotions
The marketing mix consisting of various components plays an important role in establishing the market place/ dominance of a product. According to the market needs the type of product, the pricing of product, the various promotion mechanisms to be used and the type of distribution network followed (place) should be decided. Various tools of promoting a product include advertising, public relations, personal selling, sales promotion and Internet based promotions. Personal selling can be understood as the one to one oral communication between the sales personnel and the target group in such a way that both the parties benefit from each other. The oral communication could be a personal meeting, a telephone conversation or by using latest trends in technology such video conferencing. The benefits for a sale personnel would be in terms of financial reward for closing the sale successfully & the customer would be benefitted by the product/ service received. Often the objective of personal selling may not be to close a sale. Most of the time, objective may be to pass on the information about the products/ services to the target group. Maintaining a good relationship with the customer is often treated as one of the important objectives of the sales team. 1.5.1 Personal selling Vs Other Promotional tools Let us now understand how the personal communication differs from other tools such as advertising, public relations, sales promotion and internet based promotion. We shall also understand the situations in which the personal selling would be preferred over other promotion tools and finally we shall discuss the disadvantages of the personal selling. Personal selling is preferred in cases where the customer cannot be reached or communicated easily about the company product / services by other means, such as the rural areas where the television or internet is not available. Secondly in the cases where the target group might be a CEO of a company or a head of the institution, such customers cannot be communicated easily with other tools as compared to personal selling.
1.6 Functions of the sales manager Any organization that has the sales people demands a sales manager. What does every sales manager have in common? They accomplish the tasks through their people and organizations. The sales manager is responsible for generating sales, profits & meeting the customer satisfaction levels as per the company objectives. One manager, John Rozurat of W.W.Grainger, described management as “the art of getting things done 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 and
5)
Effectiveness
Sales management has several functions like planning, budgeting, recruiting and selection, training, motivating, compensation, designing territories & evaluating performance.
1.7 Sales Management Model The 1st step “describing the personal selling function” deals with understanding the job activities and the sales process involved in personal selling
The 2nd step “Defining the strategic role of sales function” will deal with the corporate, business and marketing level strategic decisions which typically provide guidelines within which the sales manager and salespeople must operate.
Describing the personal selling function
Defining the strategic role of the sales function
Designing the sales organization
Developing the sales force
Directing the sales force
Determining sales force effectiveness and performance
Source: Thomas N. Ingram (1989) The 3rd step “Designing the sales organization” deals with the importance of designing an effective sales organization which is necessary to implement the strategies successfully. The 4th step “Developing the sales force” highlights the importance of right recruitment and selection methods and the need for proper training of the sales force personnel The 5th step “Directing the sales force” presents that hiring the best people for sales is one thing and directing their efforts to meet the sales organization goals and objectives is another. Sales managers spend a great deal of time in motivating, supervising and leading members of the sales force.
The 6th step “Determining sales force effectiveness and performance” deals with monitoring the progress of sales force to determine the effectiveness and performance. Developing forecasts, assigning quotas and budgets provides necessary information for the performance evaluation.
1.8 Summary In this unit we understood the definition of sales management and the differences between marketing and sales. We highlighted various marketing approaches starting with the production concept, product concept, selling concept and finally the marketing concept and their role in sales generation. A good selling process is essential in making the sales easier 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 right approach to reach out to customers and make the sale. Later in this chapter we have studied the importance of the components of the marketing mix in establishing the market place and the critical role of personal selling played for the same. This unit also helped in understanding the role of the sales manager in planning, staffing, leading, training and controlling the sales force personnel. Finally in this unit we understood the sales management model which helps in managing the sales.
1.9 Glossary/ Keywords 1) Sales Promotion
Activities, techniques and incentives that are directed towards customers with an intention to create consumer demand.
2) AMA
American
Marketing
Association
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 examples 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.
1.11 Suggested Readings 1. Douglas J. Dalrymple, William L. Cron, Thomas E. DeCarlo. (2004), “Sales Management”, John Wiley & Sons, New Jersey, USA. 2. Ralph W. Jackson, Robert D. Hisrich (1996), “Sales and Sales Management”, Prentice Hall, New Jersey, USA.
UNIT 2 SALES PROCESS Structure 2.1 Introduction Objectives 2.2 Marketing Strategy 2.2.1 Segmentation and Target Marketing 2.2.2 Determining Potential buyer and buyer group 2.3 Sales Approach 2.3.1 Typical Purchasing Process 2.3.2 Essential activities of Sales Process 2.3.2.1 Interest creation activities 2.3.2.2 Pre-purchase activities 2.3.2.3 Purchase activities 2.3.2.4 Post-purchase activities 2.4 Summary 2.5 Keywords 2.6 References 2.7 Suggested Readings
2.1 Introduction The previous unit dealt with the introduction to “Sales management”. It highlighted the functions of marketing and sales, described various sales approaches and presented functions of the sales manager. We will begin the unit by understanding various steps in marketing strategy and then deal with the sales personnel skills set and the various steps in the sales process. In this unit we will discuss about the sales process activities. We shall discuss some essential activities which need to be performed by the sales personnel in the sales process. The sales personnel help in creating customer value and competitive advantage to the product/service. Irrespective of the nature of sale and the type of customer, the sales personnel should follow certain basic activities for successful closing of a sale. We will discuss the essential activities of the sales personnel in general and later on find out in depth how the sales process changes for different types of sales like direct and indirect sales. Objectives After studying this unit you will be able to:1) Define segmentation, potential buyer and buyer group for the product/ service 2) Understand the typical purchasing process of the customer 3) Identify essential activities involved in a sales process 4) Explain the critical role played by the sales person in handling the sales process
2.2 Marketing Strategy Marketing strategy can be thought of as all the activities performed to use the company‟s limited resources to achieve the objectives marketing and sales and attain competitive advantage.
The first step includes identifying the product/ service. The product/ service is developed as per the company goals and the market needs. After identifying the product/ service, the next step is analyzing the market. This is where we begin to identify the customer for the product/service. 2.2.1 Segmentation and Target Marketing Market segmentation is defined as “the process of dividing the heterogeneous market into homogeneous sub-units”. If we take the population of a country say India, it would be around 113 crores. For a consumer product let‟s say the tooth paste, the market is huge. However, the entire population would not be looking for the same type of features in the toothpaste. So we need to convert this heterogeneous group into homogeneous sub groups. Let us say, we can divide the entire population into two categories, with one category preferring ayurvedic/herbal toothpaste and the other category preferring nonayurvedic toothpaste. This categorization will give an idea of the market segment which prefers your toothpaste. The need for segmentation is that the marketer is clear about where to compete and place the product/ service. There are different bases for segmentation, namely:a) Customer-based Segmentation b) Product-based segmentation and c) Competition based segmentation Generally there are two important factors before selecting the target segment. They are:a) Attractiveness of a market segment and b) The strategic fit between the segment and the firm‟s objectives, resources, and capabilities. Market Research will play an important role in finding the answers to the above two factors. You can learn more about this in the module on marketing management.
Once the segmentation has been carried out for the product/service, we can define the strategy using one or a combination of the following approaches:a) Standardization: - In this strategy, the firm maintains the same product, same price and same communication medium to all the segments. e.g.:- Cold drinks will be priced same to either the rich people or the poor people.
b) Differentiation: - In this strategy the firm differentiates the product to cater the needs of different segment. The pricing would be different in this case. E.g.:- The Indian Railways differentiates its service into several categories like AC 2-tier, 3-tier, Sleeper and general coaches depending upon the various segment needs.
c) Focus: - This is the combination of the above two strategies. In this the basic product remains the same with additional features for various segments to be added at an extra cost. E.g.:- A given model of laptop will be priced same for all segments, but if the segment needs an up-gradation of features it would be done at an added cost. So using the above approaches, we market the product/ service. 2.2.2 Determining Potential Buyer and Buyer group Determining potential buyer is more a marketing task than the function of a sales process. The potential buyers for a product/service can be arrived by market segmentation. The buyer group may be different for the product category and a brand. For example, if we take the cell phone. Every person in the segment is a potential buyer of the cell phone. But the buyers are different for high end mobiles and low end mobiles within the segment. Another example can be thought of as a photo copier. Every office is a potential buyer of a photocopier but when it comes to brand the offices might go for a cheaper brand an expensive brand.
This is where the sales team comes into the picture in determining who the potential buyers for the brand are and the products associated with it. The marketing group or the brand management should identify the potential buyers. They ought to give certain marketing inputs in the form of promotions. It helps in creating the awareness of the supplier and the brand to the potential buyer before the sales person contacts the buyer. All these activities are a part of marketing policies and approaches of the firm. The firm also has to provide the support material to the sales people in terms of brochures, literature etc This is where the sales team begins its activities. When the sales team takes their responsibilities the first task is to find the customer, a process which we generally refer as “Suspect to Prospect through MAN approach”. MAN stands for Money, authority and Need respectively. Every potential buyer may not be an actual buyer of the product. The potential buyer cannot purchase the product if he doesn‟t have the money, authority and the need. It is written in this order because it is easier to identify whether the person is having the money followed by whether he has the authority to buy and finally whether he has the need to buy, it. Sales team needs to know how to assess whether the potential buyer has the money, authority and need. One cannot just ask the potential buyer whether he/she has the money. So, some parameters such as education, occupation, family status etc. needs to be analyzed to arrive at a conclusion whether the potential customer has the money to buy the product. Similarly, the salesperson has to assess whether the potential buyer has the authority to buy the product/ service and does he/she have the need for the same. Marketing would do this job at a macro level and sales would do this job at the micro level. Marketing identifies the target segment or potential buyers of the product/ service but at the level of individual potential buyers it the task of sales person to identify the needs and wants of the individual potential buyer.
SAQ 1 1) If you are the sales manager in your city for a firm selling laptops, what method would you follow in identifying the segments for your product and why? 2) Explain the importance of MAN approach in identifying the actual buyer for selling a high priced product like a luxury car.
2.3 Sales Approach Once the sales team identifies the prospect, it‟s time to decide on the sales approach. The first step in the sales process is the pre-approach. Pre-approach would include the attire, presentation material, fixing an appointment and deciding what to do in the appointment like opening remarks etc. The objective of the pre-approach is the often data collection, knowing more about your prospect, the team involved in buying the product, the customer history and so on. The sales team will always be able to sell better if they talk customer needs and not the features of the product/ service. This is referred to as term “FABing” which means converting features to attributes and attributes to benefits. If you are selling the photocopier it would be advisable to talk about the customer benefits. You may start your discussion by saying “Last year the expense on photocopy is „X‟ amount, if you install the machine you would end up saving „Y‟ amount per annum”. Now let us understand the typical purchasing process. 2.3.1 Typical Purchasing process Every purchase has a process which can be understood by the following diagram.
Recognition of needs
Evaluation of options
Purchase decision
Implementation and evaluation
Most of the customers do not buy a product unless there is a need for it. The problem is that the customer often does not know what he/she needs. So in the first step of purchasing process one has to identify what the problem or need is. In the second step “Evaluation of options” the customer would look for various competitive products or solutions for his problem. There might be a different criteria used by different customers. Some of them might be:a) Price: - Many customers use price as the differentiation criteria. Customers might go for a cheaper product rather than a costly one. This is seen more often in developing countries and less in developed countries. In this the sales person may be actively negotiating for a better price or give some discounts. Discounts play a major role in the successful closing of sale. But the sales person should have a clear idea of what could be the maximum discount allowed by the company for the product/service. Some customers go on with the higher price products or some may buy the medium priced products. The choice would depend on the customer mindset.
b) Quality: - Here the customer would be preferring the best quality product and does not mind paying a little more. Quality might be different for different customers. For the customer, Quality may be associated with long life of the product, more features, best designs, better after sales service, and so on. Most of the customers associate quality with the brand. It is the role of the sales person to know what the customer means by a quality product and carry on with the sales process. In the third step the purchasing decision will be taken by the customer. The role of a sales person is to make the purchasing process hassle free and convenient. And the final step “Implementation and Evaluation” deals with the installation of the product and evaluating the value. If the customer evaluation is positive it would lead to another sale in the future.
These are the four steps in a typical purchasing process for every sale. The level of activities involved in each step differs for different types of sales like direct and indirect sales. For instance more activities might be involved in the first step (recognition of needs) for an industrial sale while compared to door-to-door sale. It is very important to know the kinds of activities involved in each of the steps for different types of sales. 2.3.2 Essential Activities of Sales Process The sales process can be categorized into four main activities. Interest creation activities, pre –purchase activities, purchase activities and post activities. To convert the suspect to a prospect, each and every activity is important and needs to be performed successfully. These activities aim at serving customer better. The process is called sales process cycle. Every sale has some essential activities to be performed by the sales team. Let us understand those activities with the help of the following chart. Interest Creation Activities
Post Purchase
Pre-Purchase
Activities
Activities
Purchase Activities Source: Sales Management, by Andris A. Zoltner , Prabhakant Sinha, Greggor A. Zoltners, page no: 41
2.3.2.1 Interest Creation Activities The first activity is interest creation. Once a potential customer is identified, he/she needs to be educated about the product/service you are offering. It is the job of the sales person to be prepared with the necessary literature, brochures and or presentations. If the product is a technical in nature, the aim of the sales person should be in explaining the benefits of the product to the customer and not its technical features. In this activity, creating awareness about the brand or product should be the main aim than pushing for sales. The sales person needs to understand the customer in this phase and identify his/her problem and provide the necessary information documents which the customer may request. Various promotional techniques can be used for interest creation. Some of the ways in which companies create interest in the product/service would be: Giving full access to the software features and capabilities for a limited time period like 1 month. During this time the customer can evaluate the product and then buy it. This is usually prevalent in firms selling software products. Distributing fee trial packs are along with other products. This is the case with firms selling products like soaps, shampoo, toothpaste etc. Offering free test drive option to the customer, so he/she can purchase only if they are satisfied in case of high – value product like automobiles. Coining motivational quotes. “Why should boys have all the fun” (Hero Honda‟s “Pleasure”) implies that girls are entitled to same freedom as men and driving the scooter is symbol of freedom and liberty. 2.3.2.2 Pre-purchase Activities Having created interest in the brand/ product in the first activity, it is time for moving on to the next activity by the sales person. In this process we assume that the customer is actively considering various product offerings and comparing them. This activity aims at describing the product or service features to the extent possible. Much emphasis is laid on demonstrating the capabilities of the company and or the product. Here, the sales
person takes on an active role in assessing the customer needs and helping them in problem solving. 2.3.2.3 Purchase Activities Having presented a solution to the customer problems, it is time for the sales person to push for closing. Here a lot of activities happen both, from the sales person‟s end and the customer‟s end. Sales person‟s role lies in negotiating, bidding, finalizing the terms and condition of the sale. The customer evaluates various proposals, negotiates and finalizes the payment. It is not necessarily required that the same person or company who initiated the pre-purchase activities would be involved in purchase activities. Some of the processes may be outsourced to other agents. Interest Creation
Pre-purchase
Purchase
Post-purchase Business
IBM
IBM
direct Business
sales person
(reseller)
partner
does
Partner delivery and installation IBM may provide technical support
Source: The complete guide to accelerating sales force performance, by Andris A. Zoltner , Prabhakant Sinha, Greggor A. Zoltners, page no: 31 This table explains how the different stages in sales process are handled by the company sales force and the selling partner. To sell an IBM product, an IBM sales representative is involved in interest creation and pre-purchase activities like explaining the features, capabilities and benefits of the product and how the product would be an advantage to the customer in solving his problems. In the later stages like purchase activity, the IBM sales person would handover the lead to a reseller business partner to complete the purchase and post-purchase activities and technical support may be provided by IBM team when required. Companies may also decide to handle all the activities from interest creation to postpurchase. Most of the companies who adopt the outsourced model that have several advantages and disadvantages.
Advantages of Outsourced selling (Partner, reseller & distributor) Customer relationships: If the reseller or partner has good communication and negotiating skills, the chance of closing a sale is high. Financial Costs: If the partner charges a percentage of sales made, the financial and selling risk of the firm is reduced. Product variety: A distributor can acts as a one-stop solution for all customer requirements. If your company is good in manufacturing microphones/headsets only, then you can take the help of the distributor who would be dealing with the computer products. The chance of your product sale is higher when the customer comes for purchasing a computer/laptop and buys your key board as an accessory. Variable capacities: If demand of a product/service increase, company can‟t increase the sales force to sell the products and fire them when demand decreases. So, in peak demand season the distributors can help in selling your products/service to the customers. Disadvantages of Outsourced selling (Partner, reseller & distributor) Conflicts: Conflicts can arise when deciding which customers to be served and which territories should be assigned. The company may not be able to force the reseller to follow its sales strategies. Control: Outsourced selling cannot be controlled like personal sales team of the company. Companies may not be able to keep track of the reseller performance in selling the goods/services. Reseller may be interested in his own profit and may encourage the customer to buy other products as he/she may receives more share/profit/commission by selling other products.
2.3.2.4 Post-purchase Activities The post purchase activity begins after successful closure of the sale. This phase includes delivery of the product/ service, installation (if required), providing more
information about the features and finally collecting the payment. This phase can also include after-sales service. The primary objective of this phase is to win customer loyalty so that he/she would be a regular customer of the brand/product. As discussed earlier, some functions in this stage like providing information, delivery of product and installation can be done by the company itself or with the help of a reseller. After sales service plays an important role in creating the customer loyalty. It can be as simple as addressing the customer problem on the telephone line or may be a personally visiting the customer premises to resolve an issue. In B2B deals, postpurchase activities can include installing the product or service and then providing training for the uses of the product/service of the company until they understand the new product/service. Understanding the post-purchase behaviour by the sales team is an important task if the company looks for repeated business for a long term relationship with customer.
Post-purchase Dissonance “Did I buy the right one?”
Negative Evaluation “It doesn’t work well”
Consumer Complaints “I’m calling the store.”
No Purchase Purchase “This is the one I want” .
Usage “I found another for use…”
Product disposal “Can I trade this in?”
Repurchase
Positive Evaluation “It works well”
Source: Small business management: an entrepreneurial emphasis By Justin Gooderl Longenecker, Carlos W. Moore, J. William Petty, Leslie E. Palich, page no: 298 This model explains that activities like post purchase dissonance is a type of cognitive dissonance which would arise after the purchase decision is made and customer has
thoughts of other products as an alternative. This can create a negative effect on the evaluation and satisfaction level with the product/ service. So, sales people should try to find ways of maintaining this cognitive dissonance among customers. SAQ 2 1) If you are in need of an anti-virus product, identify the typical purchasing process you would follow. 2) If you are a sales representative for kitchen chimney products, what sort of interest creation activities would you employ if the customer is not interested?
2.4 Summary In the previous unit, we discussed various marketing and sale approaches followed by the companies. In this unit we have understood the importance of segmenting and targeting in identifying the customers. We have understood how the customer would purchase the product/service starting with the recognition of needs, evaluating options, making the purchase decision and finally implementation and evaluation of the product after it is delivered by the sales representative. It is the job of the sales person to help the customer in handling the purchasing process of the customer. We studied the essential activities of the sales person in handling the customer and making a deal. We understood how interest can be created in the product/service in various ways. After the interest is created it is time for the sales representative to handle the pre-purchase activities like giving sufficient information about the product/service and describing the benefits. The next stage would be purchase activities where the sales representative would be aiming at closing the deal successfully by negotiating and finalizing the payment terms. Finally the post purchase activities would include delivering the product/service, collecting the payment as per the terms and providing after sales service. Finally, we discussed that for repeated business with customers, it has become extremely important to handle the post-purchase behaviour of the customer as more and more alternative products/services are available for customer.
2.5 Keywords
1) Reseller
Company or an individual who purchases the products/ service with an intention of selling them to other customers on behalf of the company.
2) Potential Buyer
Buyer who is interested in buying your product/service, but may not necessarily buy it.
2.6 References 1. Andris A. Zoltners, Prabhakant Sinha, Greggor A. Zoltners (2001), “The complete guide to accelerating sales force performance”, Amacon, New York, USA. 2. Justin Gooderl Longenecker, Carlos W. Moore, J. William Petty, Leslie E. Palich (2006), “Small business management: an entrepreneurial emphasis (13th Ed.)”, South Western, USA. 3. Rajan saxena (2006), “Marketing Management (3th Ed.)”, Tata Mcgraw-Hill, New Delhi, India. 4. William L. Cron, Thomas E. Decarlo (2006), “Dalrymple’s Sales Management (9th Ed.)”, John wiley & Sons, New Delhi, India.
2.7 Suggested Readings 1. Ralph W. Jackson, Robert D. Hisrich (1996), “Sales and Sales Management”, Prentice Hall, New Jersey, USA.
UNIT 3 PERSONAL SELLING Structure 3.1 Introduction Objectives 3.2 Personal selling as a marketing communication tool 3.2.1 Personal selling and other communication tools 3.2.2 Advantages and Disadvantages of personal selling 3.3 Personal selling activities 3.3.1 Pre-approach activities 3.3.2 Approach activities 3.3.3 Presentation activities 3.3.4 Objection Handling 3.3.5 Closing the sale 3.3.6 Follow up activities 3.4 Summary 3.5 Keywords 3.6 References 3.7 Suggested Readings
3.1 Introduction In the previous unit, we examined a typical purchasing process of the customer and the essential activities of a sales process. In this unit we will study about the steps involved in handling the personal sales. We first define personal selling and understand how it is differs from the other marketing communication activities like advertising, public relations, sales promotions and direct marketing. Personal selling is one of the oldest communication techniques practiced by companies. Personal communication involves a person-to-person communication and is considered to be one of the best marketing tools due to the involvement of human element which helps to build up a long-term relationship with the customer understand the various activities involved and understand the importance of customer relationship management for future sales potential. Not every marketing communication tool is the best at all times. In this unit we shall understand the advantages and disadvantages of personal selling. Personal selling would achieve success easily when it is supported by other marketing tools like advertising or Public Relations. Objectives After studying this unit you will be able to:1) Define personal selling and how it differs from other marketing communication tools 2) Explain the advantages and disadvantages of personal selling 3) Understand various activities involved in handling personal sales. 4) Understand the importance of customer relationship management, in obtaining future sales opportunities.
3.2 Personal Selling as a marketing communication tool Definition: Personal selling can be viewed as a marketing communication tool that involves a one-to-one communication, which can happen in the form of face-to-face communication, over the telephone line, through video conferencing or by an email. 3.2.1 Personal selling vs. other communication tools Personal selling is different from other marketing tools such as advertising, sales promotions etc. Advertising is a communication tool which targets many consumers simultaneously. Unlike advertising, personal selling is targeted at an individual prospect and develops the relationship. Advertising aims at a group and is non personal where the communication primarily relies on the media. AMA defines sales promotion as “Media and non-media marketing communication employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improves product availability”. The major difference between sales promotion and personal selling is that the latter is a non-personal way of communicating with the customer. 3.2.2 Advantages and disadvantages of personal selling Every communication tool serves the purpose of the company’s objective to increase its sales. However, in doing so, some communication tools work better than others for the business. Each and every tool like personal selling, advertising, sales promotions etc have their advantages and disadvantages. Advantages of Personal Selling a) Flexibility in delivering the message If the customer doesn’t understand the message conveyed by the sales representative, then the message can be modifies and conveyed to the customer again. Since a sales representative interacts with one potential customer at a
time the messages can be tailored and delivered as per the customer needs. This flexibility is not available in advertising which happens through the television, newspapers, magazines, window displays etc.
b) Efficient way of communication Personal sales is a two way communication process which allows for the efficient dialogue between the customer and the sales representative. It would be easy to know whether the customer has really understood the communicated message about the product/ service. The feedback would be immediate by the customer in personal selling, which would helps the sales representative to know whether the sales approach is working or not change the approach accordingly. In other promotional tools like advertising which rely on one way communication, would not guarantee that the customers have understood the communicated message.
c) Building long term relationships Being a two-way & one-to-one communication, personal selling certainly has an added advantage over other communication tools in building long lasting relationships of customer.
d) Better access to various target segments Not all the target groups can be reached with advertising, sales promotions, and public relations. In such cases personal selling would help to reach out to the customer and inform about the product/ service. For instance if the company deals with B2B markets or with the CEO of a company, personal selling would be a better communication tool than advertising or sales promotion. In B2B markets, the sales process involves a lot of communication time and hence a high level of two way interaction is required making the personal sales a practical communication tool.
e) Complex information delivery
In personal selling, greater amount of complex information like technical features of the product can be conveyed easily in comparison to other communication tools. Since numerous meetings can happen between the customer and the sales representative, there is ample time available to explaining all the features of the product. Disadvantages of Personal Selling a) High costs per sale Personal selling can’t be applied to all the products even though it might be efficient in building the long lasting relationship with the customer. Cost per sale plays an important role in deciding the personal selling as a communication tool by the companies. Personal selling would be applied if the cost per sale is justified like Insurance products, loan products, credit card sales, personal banking products, high value kitchen appliances like dish washers, water purifiers, chimneys etc., in which the benefits from the customer to the company are more than the costs that are incurred for the sale to happen. Low value products can not be dependent on personal selling unless it is a repeat purchase by the customer and long-term profit is justified for the cost incurred.
b) Misunderstanding by the customer Many people prefer to buy the product/service from a store rather than buying it from a sales representative who visits home. These customers might have experienced the aggressive behaviour of sales people in the past and may be determined not to buy any product from them. Customer might lose trust on the sales people due to this aggressive behaviour, Hence, it is the responsibility of the sales people to focus in making the customer happy rather than pushing aggressively for the sale. SAQ 1 1) Explain the benefits of using personal selling as a communication tool for selling loan products.
2) If you are the sales manager for a FMCG product like tooth paste, which one would you prefer among personal selling or advertising to increase the sales? Explain the reason for your preference.
3.3 Personal Selling process activities Sales representatives of a company would have to follow a sales method, which help in dealing better with the customer. Various stages are involved in conducting a prospect to a buyer of the product/ service. Personal selling generally involves six steps as described below:a) Pre-approach activities b) Approach activities c) Presentation d) Objection handling e) Closing the deal f) Follow up The above mentioned steps are just a general way of understanding and the number of steps may vary from company to company. Let’s understand these in detail. 3.3.1 Pre-approach activities This includes all the activities a sales representative would perform before actually meeting the prospect. These activities may include the following: Knowing the details about the product/ service which is to be sold Knowing about the company which the product/ service represents Knowing the details of the prospect like name, family background, income status, employment, credit history etc Knowing the right place and time to meet the customer Knowing the right approach in getting an appointment with the prospect
Identifying which products/ services are to be presented to the prospect and keeping sufficient manuals/ technical documents
The level of activity depends upon the type of customer or market. If the sales are for the B2B market, then sales representative needs to have all the necessary documents which clearly explain all the technical details or benefits about the product/ service. If the sales are for the high value products like loan products, then knowing the credit history of the prospect is an important task. Knowing the right time, place and approach will be important if he/she is selling to top-level corporate like CEO of a company. Often people encounter sales representatives who come to sell the product/ services without even knowing the complete benefits or technical details. It is the job of the sales representative to clearly know the benefits or details of the product and also the about the company which they work for. We already studied in the previous unit that the actual closing of the sale may not be necessarily handled by company’s sales representative. The sales process may be outsourced where the reseller will sell you the product/ service. In such cases the reseller must have a clear idea about the company for which he/she is selling the product/ service.
3.3.2 Approach activities After identifying the prospect and gathering necessary information, it is time to interact. It is said that the first impression would last longer and is critical for any future meetings. The aim of the sales representative should be in gaining attention of the customer and stimulate his interest in the product/ service. Opening remarks would play a major role interest creation. Sales representative start introducing his/her name and the company which they represent. Later on, they proceed with the product/ service which the sales representative have in to offer. Interest can be created by citing product benefits, giving referrals, repeated calling etc. In B2B markets, if you are the sales representative selling a workstation to the IT firm, a single meeting wouldn’t be enough in getting to the presentation stage, so repeated calling would be required. It is the aim of the sales
representative to create enough interest to transit to the presentation stage. In brief the task of a sales representative in this stage can be summed up as following: Gaining prospect attention Interest creation in the product/ service Gathering more information about the prospect Successful transition to the presentation stage
3.3.3 Presentation activities This is the stage where the sales representative will work to his level best to convert the prospect to a customer. The desire for the product/ service needs to be created by handling the presentation carefully. So this is a critical stage and if the presentation is not done effectively, the prospect might not be interested in listening to the presentation. We need to set the environment in the first few minutes of the presentation and get a positive impression. Often when we walk into an office for presentation, the prospect would be busy in middle of some work, so it’s very important to get his attention in the first few minutes. Just as people often judge the book by its cover, in the same way looking at the sales representative people decide sometimes whether to entertain the presentation or not. Attire and grooming of the sales representative like clothing and grooming are very important. It is important to deal with a positive attitude while making the presentations. If you are dealing with PowerPoint slides, then there are some general guidelines which you have to follow in making the slides. We shall discuss more about this stage in subsequent units. Finally, to sum up, the important activities that you as a sales representative would perform in the presentation stage are as follows: Introduce yourself and the company by giving a business card Create an atmosphere for gaining the attention of the prospect Deal ethically with a positive attitude and never give any negative comments like those who didn’t buy this product/ service are suffering and so on
If you require more information about the prospect company then state the reason for the same. For instance, if you want to know the number of staff or the type of customers handled by the prospect, then provide a reason for the same. Ask some interesting questions in between just to check whether the prospect is really listening to what you say in the presentation In most of the cases, presentation stage would is not said to be successfully completed if the objections that arise from the prospect side are not handled properly. So in the next stage we understand about the objection handling.
3.3.4 Objection Handling Handling sales objections is as important as making a good presentation for the prospect. Objection handling is about handling the objections of the prospect when he/she says no the product/ service stating a reason. The prospect may say no, due to some of the following reasons: The product/ service which is offered is more expensive than other similar products in the industry Prospect may not interested in particular feature of the product/ service Prospect may not have fully understood the benefits Prospect might not be interested in making a decision in buying a product in the first meeting itself Prospect might be willing to test you or need more information on the product/ service to be satisfied
It is the job of the sales representative to know the exact reason for the objection and handle it carefully. “Prevention is better than cure”, it makes sense in this context as it is better to handle the presentation well, before discussions lead to the above mentioned objections by the prospect. So it is important that the sales representative have a check-list of the possible objections which can arise during the presentation. It is also important that the companies provide the checklist and train its sales persons in handling situations when the objections arise.
Sometimes even a well trained sales person might go wrong in handling the objections as he/she might lose temper or may be for some other reason. So it is very important to know the ways in which the objections can be handled. Darryl Davis in his book “How to be a power agent in real estate” describes Ten Commandments of handling objections. Some of them are as follows: Objections shouldn’t be taken personally Objections should be looked as an opportunity to increase your skill set in handling them. As Warren Buffet who is the greatest investor and one of the richest persons in this world says in his autobiography, “ success is a terrible teacher, because you only learn from your failures” Take your time when handling objections and do not rush into giving an answer for the objection. The better you present, the less number of objections arise in the later stage of your presentation.
So objections should be thought of as an opportunity in gaining more attention of the prospect and should be handled carefully. After the objections are handled properly there should a smooth transition into the next stage “closing the deal”
3.3.5 Closing the deal After successful presentation and effective objection handling it is time for the sales representative to close the deal by obtaining a purchase commitment from the customer. Various closing techniques can be employed by the sales representative in requesting an order for the product/ service. Sales representative must know the right time for closing the deal during the presentation. If closing technique is used at an appropriate time during the presentation, an objection may arise from the prospect. Sales representative can know the right time by observing the prospect carefully and looking for some buying signals from prospect such as: Positive statements about the product/ service Enquiry about other customers who are using the product/ service Willingness to test the product/ service
Discussion with finance team about the product Enquiry about the warrant period, price, installation time, after sale service etc Playing with the company order form and a pen Enquiry about the discount rates Enquiry about the terms, mode of payment and any installments provided. Enquiry about any loan facility is available with the product
The list can include many more items and it is the job of the sales representative to know the right time for closing the deal. After identifying the right time, we can apply some of the closing techniques as described by Ralph W Jackson and Robert D Hisrich in their book “sales and sales management". Some of them are as follows: Trial close: This technique can be used at any stage during the presentation. Once some buying signals are identified, the sales representative should attempt a trial close and see if a positive response is received from the prospect. If a positive response is received then he can go for closing the deal. If he is selling a car to the customer, the trial close can be “Would you be interested in buying a Maruti Alto or Zen”. If the prospect says any one of them, you can proceed with the actual closing and discussing the terms and payment methods of the product. Asking for an order: This includes directly or indirectly requesting the prospect to make the purchase. Assumption close: In this the sales representative assumes that the decision to buy is already made by the customer and proceeds to close the deal. For example he can say “Having found the product/ service to be beneficial, when would you like it to be delivered?” Summary-of-benefits close: Here the sales representative summarize the benefits of the product/ service and then go for the sale. T-account close: This includes describing the advantages and disadvantages of the product/ service by putting them side by side in a T-table format. This form can help the prospect easily understand about the product/ service.
Special deal close: Here the prospect would be given a one-time special offer on the product/ service such as “We would like to offer a 15 percent discount if you place an order for the product/ service today”.
If you are interested in various other closing techniques, you may refer to the books listed in references and suggested readings. Various problems might arise during closing, such as the sales representative having no idea of how many times does he/she have to attempt a closing technique. Another problematic situation would be a “No” from the customer after using a closing technique. After using a trial close, if you find the prospect is not giving enough response or says no, then try to use another trial close. There isn’t any fixed number but another two to three times can be reasonable after the first trail close. This wouldn’t offend the prospect if it is done professionally. Most of the sales wouldn’t happen in the first closing, especially if it is for B2B markets. So, maintaining a calm and positive attitude would work for the sales representative in closing the deal. After closing the deal, the next activity in the personal sale would be follow-up after the sale.
3.3.6 Follow-up activities If you are a sales representative, your duty doesn’t finish once the deal is closed and the order is received by the customer. It is your job to ensure that the customer is fully satisfied with the product/ service. If there are any problems faced by the customer, it has to be resolved by identifying it and referring to the right team in the company. We face such problems a lot when we deal with technical products. You might have promised certain features of the products and those features might be interpreted differently by the technical team in the company. As a result, some of the features wouldn’t be made as per the customer requirement, resulting in low customer satisfaction levels. It is your duty as a sales representative to ensure that these problems are resolved and make sure the customer is satisfied. It is very important to understand that customer satisfaction is very important, because it has direct effect on
loyalty and trust. Low customer satisfaction levels may make it difficult for you to have future sales possibilities and repeated business. Companies do know the value of a customer when he/she is lost. In most of the businesses, making a sale to a new customer is a costly affair when compared to making the sale for an existing customer. So the follow up techniques plays an important role in maintaining the relationship between the customer and the company. Repeated calling to know how the products/ services have benefited the customer would work in keeping up the relationship. During these calls, you can describe the new products/ services launched by your company and try to get a sales opportunity. Let’s understand with an example, some of the important follow-up activities that can be associated after closing the sale. If you are selling a software product to the telecom company, like a billing management software which would help in managing the bills of the subscribers, various follow up activities may include as follows: Checking the date of delivery and ensuring the product is delivered. Ensuring that the product is installed properly in the required number of systems Making a call to find out how comfortable are the employees with the product Identifying if any training is required for the employees in handling the product Providing necessary information on who to contact if any technical problems arise in future Repeated calling after some period as per the company guidelines, to know for any problems and try to describe about any new products/ services launched
SAQ 2 1) Explain various pre-approach activities you would perform, in selling a post paid mobile connection to a corporate employer. 2) If a customer says that he/she would consider buying the product/ service, if the price is decreased, then as a sales representative what type of closing techniques would you use? 3) If customer appreciates the product and has some problem with the high price of the product, then what type of closing techniques would you use as a sales representative?
4) Having successfully closed the deal for a washing machine with the customer, what type of follow-up activities would you perform?
3.4 Summary In this unit, we have understood the importance of personal selling as a communication tool for the company. We have understood how advantageous it would be in improving the customer relationships with personal selling. As every communication tool has certain disadvantages, we have looked into various disadvantages of the personal selling. It is essential that every sales person would follow certain steps in making a sale, so as to create standardization in the sales method. Hence, we have understood step by step, the various activities that involve in a personal selling. We studied how pre-approach and approach activities would help in getting an appointment for presentation. During the presentation, it is important to grab the attention of the prospect in the first few minutes and handle objections carefully. We have discussed various objecting handling techniques and then discussed about closing techniques which help in closing the deal. Getting an order doesn’t end the job as follow up is very important to gain the customer trust and loyalty which would help a repeat business. We have finally understood the importance of existing customer to the company, as it would be difficult and costly to sell the product to the new customer rather than selling to an existing customer.
3.5 Keywords
1) Prospect
A prospective buyer in short a prospect, is an individual or a company who has the potential
to become your potential customer if handled properly by the sales representative. 2) Public Relations (PR)
Activities that are performed by the company to maintain
relationship
with
its
employees,
investors, customers and general public.
3.6 References 1. Darryl Davis (2003), “How to be a power agent in real estate”, Tata McGraw-Hill, USA. 2. Ralph W. Jackson, Robert D. Hisrich (1996), “Sales and Sales Management”, Prentice Hall, New Jersey, USA.
3.7 Suggested Readings
1. William L. Cron, Thomas E. Decarlo (2006), “Dalrymple’s Sales Management (9th Ed.)”, John wiley & Sons, New Delhi, India. 2. Douglas J. Dalrymple, William L. Cron, Thomas E. DeCarlo (2004), “Sales Management”, John Wiley & Sons, New Jersey, USA.
UNIT
4
COMPUTER
APPLICATIONS
IN
SALES
MANAGEMENT Structure 4.1 Introduction Objectives 4.2 Customer Information Management 4.2.1 Traditional ways of maintaining information 4.2.2 Contact management softwares 4.2.3 Sales Force Automation 4.3 Customer Relationship Management 4.3.1 Microsoft Dynamics CRM 4.3.2 Open Source CRM Applications 4.4 Summary 4.5 Keywords 4.6 References 4.7 Suggested Readings
4.1 Introduction In the previous unit, we understood the advantages of personal selling and its various activities involved in making a sale. We understood the importance of knowing the customer before approaching him for a presentation. We also discussed about the
various steps which can ensure a successful closing of a sale. In this unit we examine how computer applications can improve the effectiveness of the sales method and generate more leads to the business. Due to continuously expanding nature of business, it is very important to keep track of customers, an activity which used to be performed with pen and paper. With increasing size of business and the competitors, it is advantageous to speed up the activities in the sales process, so that more leads can be generated to the company. This is where computer technology comes in, to make the processes effective and also to help in increasing the efficiency of sales representatives in generating leads. Various technologies have been discussed in this chapter to give you an idea of what are the current practices followed up in using technology as an important tool in sales process. We shall also discuss what type of computer applications are used by the sales representatives in the field, while interacting with the customers and types of applications that are used by the sales managers in monitoring their sales team and measuring the goals. It is identified in many companies that sales representatives spend only 20-30 percent of their time in selling activities. Most of the time ends up in performing administrative functions like coordinating the day to day meetings, checking the status of product that needs to be delivered, travelling, training etc. So it is very important for the companies to use the computer applications in reducing wastage of the resources in non productive functions.
Another major problem which companies face in today’s
world is attrition. We shall discuss how computer applications can help in resolving of the problems which arise when a sales representative leaves the company. Finally we shall identify if there are any disadvantages associated in with use of these computer applications that to help sales activities. Objectives After studying this unit you will be able to:1) Identify the importance in maintaining the updated database of the customer
2) Understand the role played by contact management software in improving customer relationships. 3) Explain the role of SFA in managing sales activities 4) Explain the benefits of the CRM software with the help of Microsoft Dynamics and Sugar CRM.
4.2 Customer Information Management Maintaining customer information is an important task to every business. Customer information may include some of the details like: Name of the customer Address of the customer Mobile/ landline/ fax numbers, e-mail, website address etc Last date of meeting Minutes of meeting Future meeting schedules or follow up activities Products/ services used Products interested in future Preferred time of calling Any problems faced in the past Customer rating about your company products/ services if provided The list can be much more depending upon the customer, so maintaining such list is an important task of the sales representatives. Let us understand some of the
disadvantages and preventive measures to be taken in the case of improper management of customer information. Some of them include: Address of the customer: If the address is not properly updated time to time, the sales representative might find difficult in locating the customer when needed to send some promotional offers or information about the new products/ services launched by the company. So he should try to get both the residential and office addresses. Mobile/ landline/ fax numbers, email: This information helps us in giving choice to the customer for contacting
him the customer. The sales representative
should try to get as many contact details as possible, so if mobile numbers is changed then we can use landline as an alternative in contacting the customer. Minutes of meeting: Improper entry or no entry about the minutes of meeting can create many problems such as frequently asking the same questions for customers which you have already discussed in previous meetings or you may try to sell the same product/ service which the customer refused earlier. So maintaining proper minutes of meeting can resolve such problems. Preferred mode and time of contact: Nowadays customers are too busy and prefer to interact in a particular time on a particular number. Some of the customers prefer only emails. It is your job to maintain such information to avoid any contact during their inconvenient times and places. These mistakes can be very serious which can make you lose the customer permanently. 4.2.1 Traditional ways of maintaining information The way how customer information is maintained may vary from business to business. The traditional way of maintaining customer information is by noting it down on a paper. This way of recording the information worked well when the business were small, having few customers and few competitors. But today as the business grows with both customers and competitors increased in the market, companies can’t just rely on the
traditional way of maintaining information. Some of the problems which can arise by this method are: If you are having the data of customers, it would take lot of time in converting that data into information such as who is my potential buyer? By the time you identify them, customers might be using your competitor’s products/ services. There is every chance of misplacing the papers containing customer information and to add for this problem, if your sales representative quits, then the contact information would be difficult to retrieve More and more sales force would be required to maintain the database as the customers increase. Hence it’s important to find an alternative way to for maintain the data. Customers expect faster processing of their requirements. So, it would be better to use the computer applications that are available to speed up the sales process and maintain the customer information effectively. 4.2.2 Contact Management Software To decrease the workload in maintaining customer information, various contact management softwares are available in the market. These softwares help the sales representatives in getting a complete picture about the customer with a single touch. You get access to all the critical data of the sale such as customer contact information, minutes of meeting, relevant technical documents if any, partners associated with the sale, future meeting schedules, important deadlines etc. in a single screen. These softwares provide easy updating and avoid any discrepancies in data such as multiple entries. These softwares can help in minimizing the mistakes that can happen during the customer interaction and help in building stronger, long-lasting relationships. If you are interacting with customer on the phone, you may use simple contact management software in your computer, such as the address book provided by windows. Sometimes it wouldn’t be practical to carry your computer especially when
you are at customer premises. Keeping this in mind, many software vendors providing software applications which can be used in your mobile or PDA. Contact management software can be used by the off-site sales representatives who are in the company and also who are on-site at the customer premises. Most of the times companies buy contact management software which would suit for their requirements. Some features which you must check while buying such software products are: User friendly screens Faster access to customer information Easy-to-understand the functions by sales representatives i.e. less training requirement for adoption Having multiple views of the data, such as the total customer list, elite or platinum customers, prospect list, recent customers list etc. In today’s world every customer is having an email facility, so it is important that the software would support email, fax, and call facility as per the scheduled time with customer, group mailing when new products/ services launched etc. Required information access in a single touch The picture below helps us in understanding how a contact management application looks like. This is Microsoft outlook new contact entry screen when you can enter customer information like name, phone numbers, mailing address and much more. You can see the call facility provided where you can call the customer, business card and pictures can also be updated, you can add up reminders and schedules with the customer in the follow up tab, you can locate the customer address suing the “map” button and so on. This interface provides you a clear picture how contact management software looks like. There are also many custom made contact management softwares where you can approach the software vendors and create one for you.
4.2.3 Sales Force Automation In today’s competitive world, managing the sales representatives is as difficult as managing the customers. Contact management softwares can be very useful if the customer is handled by the same sales representatives all the time. In reality this is not the case, as companies face high attrition rate due to more opportunities for sales representatives in the industry. Some companies have 100% attrition within a year. What would happen with the customer if the sales representative leaves the company and the customer is handled by other sales representatives? The problem can be severe if the sales representative leaves the company without notifying and company has no idea with the latest customer information the sales representative was handling. Many problems may arise when the customer faces a new sales team. Customers would have to state all the requirements, budgets, features, payment details to the new
sales team, a process which can be time consuming and creates dissatisfaction among customers. This scenario demands a computer application which will not just maintain the customer information in the sales representative computer, but can also report the latest information to the sales manager in the company. This is where the implementation of sales force automation (SFA) software is required. SFA connects all the sales representatives contact management software with a central database for reporting. Various advantages of SFA include: Centralized data base for retrieval and updating customer information Information sharing is the biggest advantage Company has access to all the latest information about the customers Sales team can be more responsible in entering right data, as company can track when the data was updated and by whom Data can be accessed anywhere irrespective of the location either using wired networks like LAN, WAN or wireless networks like Wi-Fi. Sales team can work from home whenever required as data can be accessed anywhere Since all the customers data stored at one place, it would be easy to know the efficiency of the sales teams, status of the targets and less duplication of the data Due to centralized data, many departments can access the customer data so multiple sales to the same customer by different teams can be avoided thereby using the time more efficiently. Matching the new products/ services to the entire customers can be done easily as the data is centralized
Having discussed with many of the advantages, let’s look at some disadvantages mentioned below: Complex screen may not be user-friendly for all the sales representatives and they may find it difficult to work Require continuous management and back-up facilities if the data crashes. SFA applications may be costly for the company where the investments need to be justified implementing one. May be difficult to integrate with other legacy systems in the company SFA applications are integrated and became a part of another system namely customer relation management system which aims to be the ultimate solution to manage the entire sales process. SAQ 1 1) Explain the benefits of using contact management software over traditional ways of maintaining information. 2) Explain how SFA car help your company if attrition rate is high
4.3 Customer Relationship Management (CRM) SFA can be thought as a subset of CRM. SFA deals with data of the customer during sale interaction where as CRM deals with automating all the customer related data related to the sales, marketing, customer care, technical, finance, human resource departments. CRM systems highlight the importance of integrating sales with other business functions. “Sales force management” written by Johnston and Marshall (2009) provides more insights into the use of CRM systems for an organization. In their book CRM is defined as “ any application or initiative designed to help your company optimize interactions with customers, suppliers, or prospects via one or more touchpoints such as
call
center, sales person, distributor, store, branch office, web or e-mail for the purpose of acquiring, retaining, or cross-selling”. Sales and marketing have goals in common, yet marketing blames sales for not performing duties effectively, in turn sales blames marketing for their poor strategies and lack of knowledge about the situations in real world or it may blame HR department for not providing sufficient man power. So, it is time to stop this blame game and work collectively to deliver growth by focusing on the customers. CRM aims at putting the customer at the center of the business process. In a client meeting you see not only the sales representative but also may see members from marketing, finance, technical departments participating. A system is required to be in place where all these business operations need to be aligned. This is where the CRM applications come into picture. Let’s now look at some of the CRM applications which are used by the companies. 4.3.1 Microsoft Dynamics CRM
Source: http://en.wikipedia.org/wiki/File:Microsoft_Dynamics_CRM.gif
Microsoft Dynamics CRM provides applications which focuses on sales, customer service and marketing departments. Let’s understand the benefits of these applications in brief as stated in their website http://crm.dynamics.com:a) Sales Department: The CRM application for sales department is the SFA which provides the following benefits: Improved sales planning and management Automating the lead system Managing sales opportunities effectively Streamlining account management Boosting sales productivity Enhancing sales pipeline management Simplifying workflow processes Mobility in accessing customer data in real-time Analytics for improved decision making b) Customer care: The CRM benefits provided for customer service include the following: Improved account handling Managing or resolving customer cases efficiently Simplifying contract management Knowledge management to store the staff experiences as a repository Streamlining the schedules Automating workflows
Mobility features for data Analytics for customer service c) Marketing Department: Some of the CRM benefits provided for marketing department include the following: Streamlining campaign planning Managing events efficiently Improved response management Automating workflows Analytics for marketing Pinpointing the marketing efforts by instantly segmenting customers or prospects Managing data effectively User - friendly Require continuous management and back-up facilities if the data crashes. For more information you may refer the website. We have discussed this Microsoft Dynamics CRM to give you a clear idea of benefits of the CRM in general. Disadvantages of CRM would be in similar with SFA systems as SFA is the heart for CRM of sales. Some disadvantages include: CRM applications may be too costly for an organization to implement It might take time to implement the system Difficult to integrate with legacy systems Since cost can be a major factor for most companies in implementing CRM, let’s now look at some open source softwares which are there in the market.
4.3.2 Open Source CRM applications Open source is defined by Cambridge dictionary as “software that is free to use, and the original program can be changed by anyone”. Many opensource applications flooded the market promising better CRM applications than the proprietary softwares. According to David Hakala (2008), Top 10 CRM applications designed in opensource platform are as follows:i) Sugar CRM Inc ii) SplendidCRM software Inc iii) CentricCRM iv) Hipergate v) Compiere Inc vi) Vtiger CRM vii) CentraView Inc viii)XRMS CRM ix) Cream CRM x) Tustena CRM More details about these products can be refereed from their respective websites. Let us now understand about various uses of Sugar CRM for the organizations:a) Sales Force Automation Sugar CRM applications helps the sales manager in handling various functions such as contact management, forecasting the revenues, managing accounts etc. The following diagram is a snap shot of how the contact information such as name of the employee, his/her designation or title, the account name handled and the contact information about the account.
Source: http://www.sugarcrm.com/crm/products/capabilities/sales/contacts.html This is just one of the view in which the data is represented and there would be multiple views such as arranging the list by the account name which displays the list of employees who are handling the account. The information can be viewed by the region or area wise which would display the list of customers according to the region and so on.
b) Marketing Automation Sugar CRM provides several functions to handle the various marketing activities like campaign management, email marketing, lead management, marketing analytics etc. The following picture would help us in understanding how the leads are managed. In the figure we can see that the entire leads the organization generated is categorized into different categories by the lead source like cold calling, purchases from existing
customer, public relations, direct mail etc. This sort of representation would gives us an idea of which lead source is more profitable and identify the lead source which is generating lowest revenue and plan according to improve the operations at that lead source. Opportunities by lead source by outcome would help the manager in understanding what part of the revenue is in qualification stage, proposal stage, closed or won stage, negotiation stage etc. Such a view will help us in understanding the performance of the lead source better.
Source: http://www.sugarcrm.com/crm/images/content_images/screens/marketing.jpg
Apart from sales and marketing automation sugar CRM also helps in providing and developing the customer support, reporting, platform and collaboration capabilities. For more information you may refer to the Sugar CRM website.
SAQ 2
1) Explain the importance of CRM in creating a customer centric organization.
2) Which one would you prefer among proprietary or opensource if you have a small organization and explain the reasons for the preference
4.4 Summary In this chapter we have understood the traditional ways of maintaining customer data. This way of recording worked perfectly fine when there were few customers and the business is small. With growing customer base, companies looked for computer application which can manage the customer information and present it back in a single touch. As the job opportunities improved, attrition became the major problem with some companies having 100 percent attrition rate within a year. In order to maintain customer information more effectively, companies started using sales force automation applications which as contact management software at its heart. In SFA the customer information is maintained at a central database rather than just in the computer of the sales representatives. This increases accountability as any wrong entry of data can be traced. We have discussed several advantages of SFA over just using contact management applications. Later on, the need for integrating all the business operations started with the use of CRM applications, which transformed the way how we used to see various departments like sales, marketing, human resource, finance, customer care and technical separately. Customer has become the center for all the business operations and we see today that in a sales meeting with customer, we find employees not only from sales teams but also from technical, finance, customer care, and marketing whenever necessary. We have finally understood clearly the benefits a Microsoft Dynamics CRM and opensource software Sugar CRM for the organizations.
4.5 Keywords 1) Analytics
It is the science of analyzing the data to arrive at meaningful decisions with the existing data.
2) Legacy systems
It is old or traditional methods, technology or computer softwares continued to be in use and are outdated as per today’s standards.
3) Proprietary Software
According to Cambridge dictionary proprietary means “relating to ownership, or relating to or like an owner. So, proprietary softwares are those made by the company and are sold under the legal rights of the owner.
4.6 References 1. David
Hakala
(2008),
“The
top
10
Open-Source
CRM
Solutions”,
http://www.insidecrm.com/features/top-open-source-solutions-121307/ 2. Haag, Stephen; Maeve Cummings, Donald J. McCubbrey, Alain Pinsonneault, Richard Donovan (2006), “ Management Information Systems for the Information Age (3rd Ed.), McGraw-Hill Ryerson, Canada 3. http://crm.dynamics.com 4. http://dictionary.cambridge.org/dictionary/british/open-source 5. http://en.wikipedia.org/wiki/File:Microsoft_Dynamics_CRM.gif 6. http://www.insidecrm.com/features/top-open-source-solutions-121307/ 7. http://www.sugarcrm.com/crm/products/capabilities/sales/contacts.html
8. http://www.sugarcrm.com/crm/images/content_images/screens/marketing.jpg 9. Mark W Johnston, Greg W Marshall (2009), “Sales force management (9th Ed.)”, Tata McGraw-Hill, New Delhi, India.
4.7 Suggested Readings
1. Bryan P. Berg(2002), “Essentials of CRM: a guide to customer relationship management”, John Wiley & Sons Inc, New York, USA 2. Douglas J. Dalrymple, William L. Cron, Thomas E. DeCarlo. (2004), “Sales Management”, John Wiley & Sons, New Jersey, USA.
UNIT 5 COMMUNICATION SKILLS Structure 5.1 Introduction Objectives 5.2 Communication Defined 5.2.1 Definitions of Communication 5.2.2 Forms of Communication 5.3 Communication Process Models 5.3.1 Aristotle communication model 5.3.2 Lasswell’s Communication model 5.3.3 Shannon and Weaver communication model 5.3.4 Schramm’s Interactive communication model 5.3.5 Transaction communication model 5.4 Effective Communication Process 5.4.1 Identifying the sender 5.4.2 Identifying the receiver 5.4.3 Identifying the right messages 5.4.4 Identifying the right channels 5.5 Summary 5.6 Keywords 5.7 References
5.8 Suggested Readings
5.1 Introduction In the previous four units, we have understood functions of the sales manager, activities that are performed by a sales person in handling the sale, comparison between various types of sales and the computer applications which assist the sales person in handling sales effectively. An important factor which can improve the efficiency of the sales team and increase the chances of successful closing of the sale is the “Communication Skills” of the sales person. Good communication also helps in faster relationship building with the customers. We all know how important communication plays in making the customer knowledgeable about the products/services. We ourselves end up many-atimes buying the products/services when felt satisfied with the communication of the sales people without even looking for all the advantages and disadvantages about the products/services. A lot of excellent products/services end up with not many customers when the sales people lack the required communication skills. Hence, for the sales manager it is advisable to know the good communication skills that are required by the sales people for selling the product/services and provide necessary training. However small or big the product/service is, in terms of cost or features, communication skills of the sales people will play a major role for success in the market place. In this unit, we shall identify different forms of communication that are used in today’s world by the sales representatives. We shall do a study on advantages and disadvantages of using various forms of communications. We shall examine what constitutes an effective communication process. We shall also discuss various communication models described by various scholars. Objectives After studying this unit you will be able to:1) Understand the definition of communication
2) Understand the advantages and disadvantages of verbal and nonverbal forms of communication. 3) Explain various communication models 4) Identify various issues in selecting the right sender and receiver 5) Identify various issues while creating the right message for the receiver/customer 6) Explain the importance of selecting the right channel during the communication process
5.2 Communication Process Communication is the process in which the sender tries to convey a message to the receiver. Let’s see some of the definitions of communication from oxford dictionary and by various scholars as mentioned by Sri Jin Kushal (2009). 5.2.1 Definitions of Communication 1) Communication as explained by “Oxford dictionary” is the imparting or exchanging of information by speaking, writing, or using some other medium. 2) According to Louis A. Allen, “Communication is the sum of all the things which a person does when he wants to create understanding in the mind of another. It involves a systematic and continuous process of telling, listening and understanding.” 3) According to Newman and Summer, “ Communication is an exchange of facts, ideas, opinions or emotions by two or more persons” 4) According to Theo Haimann, “ Communication is the process of passing information and understanding from one person to another….It is the process of imparting ideas and making oneself understood by others”
What we understand by the above definitions is that the communication is a process of exchange of the information between sender and the receiver. In sales the communication would be between the sales representative and the customer. 5.2.2 Forms of Communication Sri Jin Kushal (2009) explains that there are two main basic forms of communication, namely Verbal communication and the non-verbal communication.
Basic forms of communication
Non-Verbal Communication
Verbal Communication
Oral
Written
a) Oral Communication & written communication There can be many forms of oral communication as mentioned by the author, namely:face-to-face conversation, lecturers, meeting and conferences, interviews, telephone talks, grapevine, social and cultural affairs, seminars, radio and television. In sales call we mostly make use of meetings and conferences, face-to-face conversation, telephone, seminars etc. On the other hand written communication deals with sending letters, emails, faxes, sms on phone etc. Each form of verbal communication has its advantages and disadvantages and so it is advisable to use the right mix of both oral and written communication during the communication process for the sale.
b) Advantages and disadvantages of verbal communications (Oral and Written) Some of the advantages of verbal communications include: The ideas can be conveyed easily with oral and written communication The ideas can be expressed without any misunderstanding between the sender and receiver using oral and written communication Lengthy messages can be stated out accurately with the help of written communication The feedback can be very quick while compared with non-verbal communications It works well for technical presentations which involve lot of communication between the sender and the receiver c) Disadvantages of verbal communications (Oral and written) Some of the disadvantages include: Oral communication will not be suitable for lengthy messages, in such cases we have to make use of written communication Oral communication may take long period of time Oral communication may involve a lot of expenses Oral communication cannot be performed when the sender and receiver are not available personally Written communication cannot be deemed fit for visually challenged people and uneducated people Feedback would take a lot of time in written communication
d) Types of Non Verbal Communication As mentioned in the book by Sadhana Gupta (2008), G.W.Porter divides non-verbal communication into four broad categories as shown below:Non-Verbal Communication
Physical
Aesthetic
Signs
Symbolic
Physical category includes facial expressions, voice tone, sense of touch, sense of smell and body motions Aesthetic includes conveying message through creative art like painting, music, dance movements, dramatics, sculpture Signs include the sign language which is used for disabled people. Symbolic implies making use of religious or status symbols e) Advantages of Non verbal communication There are various advantages and disadvantages of using the non verbal form of communication. Some of the advantages include: This form of communication works well with the hearing disabled people The communication process can be done in brief and in shorter time This form of communication will be useful if there are any language barriers During this communication process, we can easily judge the personality of the?? This communication process helps to convey emotions easily by facial expressions
If performed well using this communication process, there is a high chance of building a long-lasting relationship with customer f) Disadvantages of Non verbal communication Now let us look at some of the disadvantages of this non-verbal form of communication: If the sale is a technical product or service which involves lot of explanation, you may not do it just with the non-verbal communication process The customer may misinterpret your communication process in non-verbal communication This type of communication cannot be used everywhere Customers might not be interested to communicate with you in the non-verbal communication process It would be difficult to follow when there are cultural differences between the sender and the receiver This form of communication can only be done when both the sender and receiver are engaged in personal communication. It would be possible on the phone or mail For more information on forms of communication you can refer to the books mentioned in reference section at the end of this unit.
5.3 Communication Process Models Various models have been designed to understand the communication process and to identify any areas of improvement by reducing the errors that occur in the process. Let us understand some of the models:-
5.3.1 Aristotle Communication model This can be considered as the basic and simplest communication model which has only three components as show below:Speaker
Message
Audience
This model mainly considers communication as a one way process from the speaker who tries to convey the message to the target audience.
5.3.2 Lasswell’s Communication model Lasswell introduce two concepts namely channel and effect into the model when compared with Aristotle model. This model is same as Aristotle which is delivered to the multiple audiences. This communication model has five major components as shown below:Who
Says What
To whom
In what channel
With what effect
In the model Lasswell included other channels apart from speech as the communication channel. Another new term is added “Effect” which acts like a feedback mechanism in which the receiver reacts to the message sent by the sender. 5.3.3 Shannon and Weaver communication model This communication model helps us to study the communication scientifically. It has five components as shown below:Information Source
Transmitter
Received Signal
Signal
Noise source
Receiver
Destination
This is a one way transmission and reception of messages. This model explains that during the process of sending the message from the sender to the receiver some distortions may takes place in the message, which is referred to as Noise. This model aims at knowing the source of such distortions and tries to minimize them for effective communication. 5.3.4 Schramm’s Interactive communication model In this model the communication process is described as an interactive process where the feedback from the receiver helps in altering the message accordingly by the sender and this process is endless. This model defines communication process as a circular process.
Source: Julia. T Wood (2010) Even though this model is an improvement over linear models, it still assumes that the sender and the receiver are different persons from each other. 5.3.5 Transaction communication model This model states that both the participants during communication process can be the sender and the receiver. It also explains that the level of communication varies over time when participants face new experiences and changing relationships during the communication process. It can be understood further with the following diagram:-
Source: Julia T. Wood (2010)
For more information on various other communication models you may refer to the books mentioned in the further reading section. Let’s now understand the various components of the communication process in detail.
SAQ 1 1) Define Communication 2) Write short notes on non verbal communication explaining its advantages and disadvantages. 3) Explain what are the advantages of verbal communications over non verbal communications 4) Explain Lasswell’s Communication model and its drawbacks
5.4 Effective Communication Process We have already studied various communication models and understood various components described in those models. Let’s now understand them in detail with the help of following communication process diagram:Sender
Message
Receiver
Sender receives
Message feedback
Becomes Sender
Fig: Communication model incorporating feedback Source: Chris Rose (2005) Here we must understand that the message and the feedback message are sent by some appropriate channel. Channel
Message
Message feedback
5.4.1 Identifying the Sender In business scenarios, sender can be an individual, group or the company who want to convey some message to the receiver. In a communication process, the first step would be to identify the sender. It appears that a sender will be sales representatives for the
sales process, but identifying the right sales persons for the customer is a difficult task. Depending upon the nature of sale, the sender will vary as follows: If the sale is for an individual customer and low priced product like FMCG good like shampoos, cooking items etc., then the company may appoint individual sales representatives as the sender in the communication process. If the sale is for high priced products like washing machines, laptops, LCD TV’s etc, then the sender can be a single or team of sales representatives. If the sale is for a high net worth individual like CEO of the company, then the sender will be a highly qualified person or team who can handle all sorts of objection handling during the communication process If the sale involves an IT product for the company which may run into millions of rupees, then the sender will be mostly a team of members from various departments like technical, marketing, sales, finance, HR etc. Hence it is understood that the sender can be a single person or a team depending upon the complexity and value of the sale. 5.4.2 Identifying the receiver The receiver in business is audience which the company would be targeting to make the sales. In sales management, identifying the right audience is a complex task. Several steps will be followed by the company in identifying the receiver for the communication process. The first step is to identify the market place i.e. the state or country or continent in which the company wants to do business. After identifying the market, the next step would be to segment them into various categories appropriate to the product/service. Customers or target audience are identified from the preferred segment and are involved in the communication process.
Often, companies end up giving promotional offers, advertising, sales calls to the wrong target audience/receiver in the communication process and end up with poor sales results. So identifying the right customer will be a challenging task. Once the right customer is identified he/she can be involved in the communication process for successful closing of the sale. 5.4.3 Identifying the right Message Message is the information which will deliver your idea to the receiver/customer. Message is what you communicate to the customer which will be explained during the communication process. The right message should be able to address the needs and wants of the customer. Various issues have to be addressed in creating the right message. Some of the issues include: Identifying the needs of the customer/receiver Planning for the ideas which can resolve the customer/receiver issues. For example, if the customer problem is increasing printing costs in the company due to inkjet printer in use, then the idea would be why not upgrade the printer to a LaserJet which save time and cost per page. After the idea generation, it is time to fabricate the idea into messages. In the above example, once you have identified installing LaserJet as an idea, you need to create appropriate presentations or any documents proving that it is the right solution for the problem of the company. This would be the message creation part of the communication process. Now in some models you identify encoding as a part of message sent by the sender. Here encoding involves identifying the right amount of slides and text for the presentations, using the right amount words in the slides, appropriate number of slides in presentation, avoiding any words which can create misunderstanding due to any language and cultural gaps etc. We shall learn more about this in the next unit “Presentation Skills”.
Try to design the message in such a way that you will make use of both the verbal and nonverbal communications. While creating the message, it is important to understand the decoding part at the receiver end. When you convey the message to the receiver, they use their own style of decoding the message. It will be better to anticipate and know the thinking process of customer and move according while creating the message. For example, if you come to know that customer is looking more into the reliability and multi-functional capability in the printer like scan, automatic dual printing etc, then when you create the presentation or documents on the capabilities of your LaserJet printer it would be better to incorporate such details which the customer is interested and will be looking for.
5.4.4 Identifying the right channel You will come across two terms namely medium and channel in some communication models. The medium and channel in the communication process refers to the method and means by which the message will be communicated between the sender and the receiver. For example, if the message is to be conveyed by a written document, then the letter becomes the medium and the fax or postal service becomes the channel. In general channels can be fax, email, postal service, PowerPoint presentation, telephone etc. Identifying the right channel is very important as improper selection might lead to the complete failure of the communication process. Some of the issues that need to be addressed include: Before selecting the channel, try to find out whether the customer/receiver has the necessary facilities to use that channel. For example, if you plan to send a letter by email, check out whether the customer is having internet facility in his/her premises. The right channel selection should depend upon the type of message you want to convey. For example, if you want to convey a very detailed technical document
which runs for more than hundred pages then the PowerPoint presentations would be a very bad choice. So in such cases it is advisable to use the written documents and send them through appropriate channels like email or postal service Nowadays, many sales representatives rely heavily on PowerPoint presentations during the communication process. If this channel is appropriate for the message then make sure that you use not only the verbal codes but also the visual and vocal codes. Verbal code means the right text in the slide and vocal code means the right language you use while speaking and visual code includes any diagrams, animations or videos in the slides. According to Cheryl Hamilton( 2000) , while interpreting the message the receiver/customer will rely more heavily on visual and vocal codes rather than the verbal code as illustrated in the below diagram:-
Source: Cheryl Hamilton (2008) SAQ2 1) Explain various issues which need to be addressed while selecting the sender for effective communication process. 2) Explain various issues which need to be addressed while creating the message for effective communication process. 3) Explain various issues which need to be addressed while selecting the channel for effective communication process.
5.5 Summary In this unit, we understood the various definitions of the communication as stated by different scholars. We identified various basic forms of communication namely verbal and nonverbal communications. We have also studied the advantages and disadvantages of these forms of communication. Hence it is advisable to use the right mix of appropriate verbal and nonverbal forms during the communication process. Later we have studied how the communication process models have evolved from a linear way into an interactive process to take care of the changing level of relationships and communications over time. Later in this unit we have examined how an effective communication process can be implemented. We have understood the critical nature in selecting the right sender to take
part in
the communication process. We also
studied
how the
right
receiver/customer will be identified by the company. We understood the role the message creation plays in the communication process and various issues that need to be addressed in his stage. We also understood that the comfort level of the receiver/customer should be kept in mind while designing the message. Finally in this unit we have identified how an improper channel can make the entire communication process a failure and identified various factors that need to be taken into account while selecting the communication channel.
5.6 Keywords 1) Channel
It is the means by which the message will be transmitted from the sender to the receiver and vice-versa.
2) Grapevine
Grapevine means “Gossip”. It is an informal way of communication which exists in every organization in almost all the departments.
3) Noise
Noise
in
communication
is
any
wrong
interpretation of the words and phrases used during the communication process by the receiver or sender. Noise distracts the actual meaning
of
the
messages
during
the
communication process
5.7 References 1. Cheryl Hamilton (2008), “Communicating for results: A guide for business and the professions”, Thomson Wadsworth, USA. 2. Chris Rose (2005), “How to win campaigns: 100 steps to success”, Earthscan, USA. 3. Julia T. Wood (2010), “Interpersonal Communication: everyday encounters (6th Ed.)”, Wadsworth, USA. 4. http://www.oxforddictionaries.com/definition/communication 5. Sadhana Gupta (2008), “Communication skills and functional grammar”, University Science Press, New Delhi, India. 6. Sri Jin Kushal, Sunitti Ahuja (2009), “Business Communication”, V.K. Enterprises, New Delhi, India.
5.8 Suggested Readings 1. Uma Narula (2006), “Communication models”, Atlantic publishers, New Delhi, India. 2. Lesikar, Flatley (2005), “Basic business communication: Skills for empowering the internet generation (10th Ed.)”, Tata McGraw-Hill, New York, USA.
UNIT 6 SALES PRESENTATION Structure 6.1 Introduction Objectives 6.2 Pre-presentation activities 6.2.1 Knowing about your company 6.2.2 Knowing about your customer 6.2.3 Knowing your competitors 6.2.4 Defining the presentation objectives 6.2.5 Other essentials activities for presentation 6.3 Presentation design Guidelines 6.3.1 Guidelines for preparing your PowerPoint presentation or paper slides 6.3.2 Guidelines for preparing a word document 6.4 The sales presentation process 6.4.1 Sales presentation methods 6.4.2 Objection handling and closing the sale 6.5 Summary 6.6 Keywords 6.7 References 6.8 Suggested Readings
6.1 Introduction In the previous unit we have understood various definitions of communication and the communication models. We have also analyzed the issues that need to be addressed for effective communication. We saw that presentation skills are one of the important factors which determine the success of the sale. In this unit we shall understand about what are the issues that need to be addressed in making a successful sales presentation which helps in building a long lasting relationship with the customer. The quality of presentation is an important factor which will determine how well the prospect will understand your product/service. Presentation should be motivating enough to the prospects to make them participate in the process. In this unit we shall understand that before going for the presentation there are some pre-presentation activities that one must follow. One has to keep in mind that his/her presentation should be better that the competitors and therefore, some background work needs to be done in deciding what goes into the presentation to make it look better than the competitors. In this unit, we shall understand that knowing your company should be the first task before knowing your customers. Many-a-times prospect may not know what the problem is and so identifying the problem is the first task for the sales representative. Once the sales representative and the prospects understand the right problem, it would be easy to concentrate on the solution part of the presentation. This unit also highlights the basic concepts on how to make a better looking presentation in terms of presentation of content. Finally in this unit, we shall understand that the presentation wouldn’t be complete if the objections aren’t handled well. We shall also look at about some of the objection handling techniques where you can handle the objections effectively. Objectives After studying this unit you will be able to:1) Importance of Knowing your customer, company and competitors
2) Various functions of sales team and pre-sales team in preparing an effective and efficient presentation 3) Define the presentation objectives 4) Enumerate various guidelines for preparing slides and documents 5) Explain various presentation methods and scenarios where they can be applied. 6) Address various objections and use appropriate objection handling techniques
6.2 Pre-presentation activities Pre-presentation activities include all the activities that are performed to ensure a successful presentation design. The list of pre-presentation activities would generally include the following:-
Knowing about your company Knowing about your customer Pre-presentation activities
Knowing your competitors Defining the presentation objectives Other essentials activities
Several issues have to be addressed such as the objective of the presentation, content that goes into presentation, gathering information about the customer, your company and the competitors and so on. 6.2.1 Knowing about your company Knowing about your company is vital because during the presentation customer may ask you anytime about your company and the products/services. Anytime if the customer is interested to know about your company, you should be able to explain about your company in not more than 30 sec to 1 min during the presentation. So it is important for you to write a brief summary about your company which includes the following: Company’s objective mission and vision statement List of product/services Areas of expertise Previous and present customers of your company Number of employees working Company turnover and growth Your seniors and heads in your department Knowing your company’s employees or various domains of expertise would be very important when you are responding to the customer requirement. In situations like when the customer sends the problem and request you for the solution, you should be able to know whether your company will be able to handle that problem. For example, if the customer is in a telecom company and the problem is low network connection speed, then the solution would be to upgrade the entire network to a faster platform which requires huge amount of investment. As a part of your sales team it’s important for you to know the following before making the presentation for such customer:-
whether your company has such expertise in handling big projects If yes, are there any customers in the past where such projects have been implemented What should be the profit margin in such projects What could be the time-limit for project completion How many number of employees would be required to work in such projects What are the other resources required by your employees (travel tickets, internet bandwidth, laptops, living expenses in other countries etc). In many companies, there would be a sales team and a pre-sales team to handle huge volumes of customers. The main function of the sales team would be to meet the customer, take the requirements of the customer and make the necessary sales presentation. Most of the times, the sales team will be on-site i.e. at the customer place. The pre-sales team will be mainly at the company’s office which may not necessarily be at customer premises. The pre-sales team would be responsible to address all the questions which we have discussed earlier and make the presentation. It is the job of pre-sales team to correctly optimize the profit margins and the number of employees required to implement the solution for customer. If you are a part of the presales team it is very important to know that the customer solution may not be handled by a single technical team. For example, if there is a telecom problem of low network speed, the solution team may involve the networks/hardware team, software team, testing team etc. It is important to know that every team will try to put as many employees as possible in the projects so that their employees will have maximum work and profits. As a part of pre-sales team it is your job to keep optimizing the number of employees such that not too many or too less employees are involved. Coming to the cost part, it is always advisable to check the number of days employees need to stay at on-site with the customer and try to optimize these days so as to reduce some of the living expenses in other countries.
The important objective apart from developing a long-lasting relationship with customer is to have a decent profit margin in the project. It is the job of the sales team to get a clear picture of the profit margin and then decide to go on with the presentation or not. You cannot make the presentation for the solution which brings loss instead of profit for the company. Most of the time sales team may have to get approval from the finance team who monitors the financial status of the company before going ahead with the presentation with the customer. Even in door-to-door sales, most of the times the sales representatives will be instructed by the sales manager about the maximum discount he/she can give to the customer in order to close the deal effectively. Now let’s look at the information that is necessary to known about the customer before the presentation process. 6.2.2 Knowing about your Customer Customer is the key to any business, hence knowing the customer will be an important task for any business. Your customer may be a multi-national company or a government institution or even a single customer in door-to-door sales. A due diligence would be required to know your customer well. If it’s a door-to-door sale, some of the parameters you should be willing to look are: Income level of the family or head of the family Gender and age of the family members Educational level of the family members Occupation of the family members Most of the parameter can be known easily except the income level. One can never ask the customer what his income is esp. when selling some door-to-door products like chimneys, water purifiers and some other household items. If it is a loan product or insurance products you may ask the customer directly to fill the income in the required column in the application. Age can be known approximately when you look at the
customer. The important thing to know is who is the decision making authority in the home, is it the male head or the female head or the children. If the customer is the Government or Institutional organization some of the parameter you should be looking at include: When was the organization established How many employees or departments there in the organization Who is the decision making authority or individual in the organization What are the areas which the organization serve How good is the organization in clearing the payments in time What can be the future sales opportunities with the organization In Government and institutional sales the important task for sales people would be to get timely payments. Since the organization deals with many other responsibilities your payments may get late, so knowing the credibility of the organization for timely payments is important task. One way of finding this is by looking at the previous customers and any problems they have faced. You cannot go and ask directly your competitors about the organization but what you can do is to take a look at the growth of the organization over time. Finally if your customer is a big multinational, then the list of parameters you must have a look are: Time of establishment Number of employees and departments Turnover and the profit margin of the company Year-on-year growth of the company Rank of the company in the market place
Previous experiences with the company if any The biggest problem with big multinationals is to know whether the customer will be able to fund the project successfully in time. If necessary funds are not released in time then the time period will increase and so do the costs. So it’s very important to look at the financial health of the customer and then proceed for sales presentation. 6.2.3 Knowing your Competitors Customer prefers the company who serves them according to his needs. However, if there is more than one company which is able to serve the customer according to his needs and expectations, then the customer will choose the best one according to his/her criteria. This leads to the competition between the companies to prove themselves that they are the best according to the customer criteria. Hence it is an important task for any company or you as the sales representative to correctly analyze the competitor movements towards the customer. Your presentation may fail if the analysis of your competitors is not done well. We have already discussed that there exists two functions in sales namely sales and pre-sales in the company. The competitor analysis is primary function for sales rather than pre-sales. It is the duty of the sales team who is on-site to know who the competitors are and what are their strength and weakness? Once the information is known it can be passed on to the presales team who will prepare the presentation accordingly to reflect that they are much better than the competitors. No matter how well the presentation is prepared, it won’t close the deal unless the sales teams have a clear idea about their competitors. For example, let’s assume that you have prepared a wonderful presentation which clearly highlights the benefits of your products/services to the customer. But if you have quoted the price much higher than your competitors, your solution may not be preferred by the customer. You must understand that in today’s competitive world there is a pressure on profit margins and growth of every company and so your customers too.
You customers always look for the company which provides best or reasonably good solution at the least cost for the solution. So as a sales representative it is very important to know approximately how much cost the competitors would quote for the solution. This cannot be known easily as every company maintains the bid amount secretly and will be given strict instructions to the employees not to disclose it. But you should be able to get an approximate idea by looking into their past project costs. So the important parameters which you should be looking in knowing the competitors include the following: Domain of expertise and the number of employees Years of expertise i.e. is the competitor a new entrant or an established player in the market place Type of solution offered to the customer i.e. the product/services Amount quoted for the solution in the bidding process for the customer Competitors advantage areas over your company’s products/services Having discussed much about knowing your company, customer and the competitor, it’s time for us to look at some of the other pre-presentation activities in subsequent sections. 6.2.4 Defining the presentation objectives Many sales presentation ends up without any results due to improper planning of the presentation and no measurable results. It is always better to have the list of objectives that you want to achieve by the sales presentation. One must remember that the objective of the first sales presentation with the customer shouldn’t always be the successful closing of the sale. Initiating a dialogue to involve the customer in the presentation and help in decision making should be the first objective. We see lot of presentations where the customer doesn’t take part much or remains to be a silent participant. So, one should plan the presentation such that necessary dialogues would happen between the customer and the sales representative which will help in building
the rapport. Some of the general objectives one would look for the presentation would be as follows: Developing a good rapport with the customers Explaining about your company expertise Building trust in the customer Creating enough interest to make the customer participate in the presentation process Identifying problems of the customer Identifying the right products/services for the customer Successfully handling objections Setting the stage for next meetings Maintaining the time allotted for the presentation Closing the deal effectively whenever it’s appropriate Most of the sales presentation starts with the introduction of the company. You should be able to clearly highlight the strengths of your company like a strong workforce, various domains of expertise, level of employees i.e. the educational and experience levels of the employees and so on. Once you have created a positive image about your company, the next objective would be to develop a good rapport where the presentation process would become a two way communication between the customer and the sales representative rather than a one way communication with only sales representative involvement. A two way communication process will always helps in quickly identifying the problem and then identifying the right solution for the problem. Following the time limit is very important as the customers will be busy with their daily work and may not show enough interest if presentation takes too long. The final objective before ending the presentation should be to set the stage for the next presentation. You should be
able to get another appointment where you can carry on with your further presentation activities which can help in closing the deal effectively. It is very important to have a check-list of the objectives such that they will be followed by all the sales representatives during presentation. It is important to measure the objectives in terms of their level of achievement and should plan better in future presentations. For e.g. if the objective of maintaining the time limit is not achieved as the time for presentation overshoots, then it’s important for you to ensure that at least from now onwards in next meetings you will take care of that objective with utmost importance. 6.2.5 Other essential activities for presentation Till now we have discussed about a lot of pre-presentation activities like maintaining an objective check-list for every presentation and important parameters in knowing your company, customer and the competitors. Now let’s look at some other issues which must be addressed before going for the presentation. Some of them include as follows: Having sufficient number of hard copies of your presentation, preferably with the name of the customer on it. Dress appropriately Have your own tools for presentation Ensure your tools are working perfectly fine Choose appropriate team for presentation Ensure every team member is present for the presentation Have the necessary check-lists You may never know how many people from the customer side will participate in the presentation. So an important requirement in any sale, it door-to-door or institutional or industrial sale, it is advisable to have adequate number of hard copies of your presentation and any other supplements like company brochures, previous customer list
etc. It is always better to have individual copies in decent folders with the names of the customers. The next issue is about the dressing for the presentation. It is better to have a formal dressing in any sales presentation with or without a tie depending upon the circumstances. Make sure you have a tie with you if you see everybody wearing a tie in the presentation. For door-to-door sales tie may not be an important requirement. Dressing should be in such a way that you are not over dressed or neither underdressed. In absence of any clue a plain blue shirt and black trousers are recommended for use. The next issue would be having tools for your presentation. Make sure that you have necessary tools which make the presentation process easier without any interruption. If it is a PowerPoint presentation, the tools may be your own laptop with the necessary software to run the presentation, your own project and your own audio system. You will never know whether the customer premises will be having all these facilities. So it is better to carry one yourself. Nowadays you get projectors with audio system embedded in them. The next task is about choosing the appropriate team for presentation. If it’s a door-todoor sale of some FMCG products or consumer care products, then there would be no team as it will be handled by one sales representative most of the times. But in case of institutional or industrial sales, generally a group of sales team goes for the presentation. In such cases it is important for you to choose the appropriate team which has the technical, financial, HR and sales persons whoever is required for the presentation. Most of the times, the presentation may happen over the videoconferencing or over the phone where the sales person will be with the customer and rest of the team members on the call. So it’s an important task to ensure that every team member is committed and be present in the required time, keeping their regular daily duties of their departments aside. In companies lot of time it happens that one of the team members will be busy in his/her department activities and may not be able to participate in the presentation. So, it is very important for you as the part of the sales team to keep reminding the other team members about the sales presentation. Again in
many companies this work of engaging all the team members in right time is the duty of the pre-sales team in the organization. The final task is to have necessary check-lists for every activity that leads to a successful presentation in time. For example, preparing the presentation itself is a biggest task that needs regular monitoring and feedbacks. For example, we have discussed the problem faced by the customer in Telecom Company due to low network connection speed, and then the solution team involves various departments like the networks/hardware team, software team, testing team etc. So getting the appropriate solution slides from these teams and checking for the compatibility between these solutions is a time taking process. The solution given by the software team may not be compatible according to the networks or hardware team. Hence such complications have to be resolved and the presentation should be prepared with involvement of all the team members. So maintain the check-list and monitoring the progress is important for presentation preparation. Any other required check-lists must be in place before the presentation process. SAQ 1 1) Explain various issues you have address to know your competitors better in an industrial sale 2) Explain the important objectives you will layout for your sales presentation 3) If you are in door-to-door sales selling a vacuum cleaner, then what information you would like to gather from the customer
6.3 Presentation Design Guidelines In the earlier times, sales representatives had presented their products/services on a paper slides which were either printed or hand written. But now with advances in computer technology and print media, many of the companies prefer the PowerPoint presentations in industrial and institutional sales and printed slides in case of door-to-
door sales. PowerPoint slide are considered as an excellent way of communication since you can easily incorporate the graphics, pictures, videos in it and make the presentation interesting enough. But there are some limitations to it in terms of content. A lot of content in terms of text make the presentation cumbersome, hence any text matter it is advisable to give the customers in a printed word document format, so that they can refer to it whenever needed. We often wonder what makes the presentation to be presentable to the audience, (i.e. customers). Are there any steps which we can follow so that the presentation would be appealing enough to draw the attention of the audience? Even in case of word document the audience should be willing to read it rather than preserving it for later use or just misplacing it. So in this section, we shall understand some basic guidelines which will help you in preparing effective presentations and word documents which are presentable enough to the audience. Remember these are general guidelines which can not only be used to the sales presentation but most of the guidelines can also be used for your project presentations in your class. Let’s look at the guidelines proposed by Krieger (2007) and some other guidelines as well for the PowerPoint or paper slides and as well as word document.
6.3.1 Guidelines for preparing your PowerPoint presentation or paper slides The main objective in preparing a PowerPoint slides or paper slides presentation is to grab the viewer’s attention. The challenging task is to decide the appropriate number of slides you will be presenting in the given time limit by the customers. The presentation should be in such as way that it doesn’t complete too early or too late that the prescribed time by the customers. We often find that presentations may be prolonged up to 50 percent of the time limit of even finish when 50 percent of the time is still left. So how to decide how many slides to present in the given time? A simple rule can be that “the number of slides <= the number of minutes”. If you have been given the 30 min time to present in the class or the company, then the ideal number of slides will be 30 or less. This rule can be applied to PowerPoint or paper slides. Having discussed about
the number, it’s time for us to decide how that number of slides will be designed. Remember the guidelines apply to both the PowerPoint slide and the paper slides as well. So let’s take a look at some of the guidelines as stated below:a) Select or create your own theme Themes refer to the design template of your slide. It includes the background colour and the design of each slide. Themes in PowerPoint mainly consist of a master slide and lay out slides. Master slide is the starting slide where you enter the presentation topic and the name of the presenters. The layout slides follow the master slide where you design the material to be presented. Some of the guidelines here include: Select carefully the theme which has the appropriate background which suits to your topic Always try to follow the theme which your company recommends Show the company logo on each slide On each slide with the company logo it is better to include the catch phrase of the company. For example, on Wipro Logo you will find “Applying Thought” and on Infosys you will find “Powered By Intellect Driven By Values” Make use of slide layouts to save time in formatting b) Use video and audio to convey your message more effectively Using video and audio will be possible in a PowerPoint slide and not in a paper slide, but you can show some images and messages from the video and audio in the paper slides to convey the message. Again you must ensure that the number of slides doesn’t overshoot than the required number. Some guidelines you should follow are: Use video and audio only when required Use video and audio when you want to convey a very important message such as company values or the statements of the previous satisfied customers etc.
Don’t use more than a couple of video and audio in the presentation Excessive use of video and audio might dilute the presentation effect and also eat up much of your presentation time Play a video when you feel that the audience shows signs of losing attentiveness towards the presentation The best time for video would be in the middle or at the end of your presentation c) Use graphics to emphasize key points Graphics here refers to using images, tables, textboxes, and flow charts in your presentation. Some of the guidelines are: Use images instead of text when you want to convey a lot of information The expertise in your company and the list of employees who works and their hierarchy can be shown in the form of a flow chart rather than text Better to use bullet point wherever necessary Keep changing the graphics every three to four slide so that the presentation doesn’t look monotonous Be cautious to use appropriate graphics and don’t over burden the presentation. For e.g. don’t keep on showing images or flow charts or tables on every slide. Use them wisely whenever required. d) Use animations and transitions wisely There are lot custom animations and transition of slide you can learn in PowerPoint slides. Unfortunately you may not be able to show them in paper slides. Some of the guidelines to be followed are: Use animations only when required.
Don’t use multiple animations in one slide i.e. the animations in any given slide should be uniform. For e.g. If the animation for the first text in the presentation is “Blinds”, then the following text or pictures or any graphics should use the same animation. Try to use the same slide transition thought out your presentation. Avoid using multiple transitions Remember the animations and transitions are used only to grab the viewer’s attention. Use them only if they are required. In serious topics, such as budget presentations or some high level technical presentations avoid using many animations as it would distract the attention and the audience might feel uncomfortable. e) Consider difference between print and on-screen presentations The presentations that appear excellent on screen may not necessarily look good on the printed slides. The backgrounds or the themes may be printed dark when compared to the actual text in the slide. This makes the printed slide difficult to read. Some guidelines to be followed include: Make sure that the presentation design and the text looks good both on computer screen and on a printed paper Better to have two different designs of your presentation so that one suits for your computer screen and one for the print Make the necessary adjustments in the theme and make sure that print looks fine by taking the actual printout. Most of the times sales representative might be give black and white copies, so make sure that the presentation is designed to look good in gray scale prints too f) Other general guidelines Some of the other general guideline which we haven’t covered earlier include:-
Don’t use more than 5-8 lines of text in any slide Make use of any note pages in the slide so it can be used as a reference in case you forget some concepts during the presentation Make sure you have a printed copy of the slides with you during the presentation. You may have handouts which have 4 or 6 slides per page. Always make sure that you don’t deviate from the topic of your presentation or the objective of your presentation in any slide Avoid using colours which are too dull or too bright Always choose the colours so that they are visible from a appropriate distance say from the member in the last row of your room Don’t keep changing the font on every slide. Make sure you follow the same font on every slide. Size of the font may vary from text to text, but make changes appropriately. Make sure that the picture or the text doesn’t over shoot the boundaries of the slide. This may result in breaking of the picture or text during the presentation. Make sure that the text in the pictures, flow charts, tables etc are readable from the appropriate distance Try to use the same theme for all the presentations you present in the meeting Make sure the company logo is visible in all the slide clearly enough Make sure that the important points are highlighted in the presentation so that the audience can easily see them. For example, important points can be the cost of the project, number of employees, domain expertise etc. Be careful that you don’t over highlight every other text which is not very important At the end make sure you give appropriate references and a thank you note
Let’s now look at some of the guidelines that have to be follow in a word document preparation for the customers.
6.3.2 Guidelines for preparing your word document file Most of the times we see that presentation wouldn’t be complete without giving the word document containing detailed information of various topics or issues discussed in the presentation. Due to the time factor or the limitations of a slide presentation, we may not be able to convey detailed information about the product/ services. In such case all the information related to the product/ service including the Service level agreements (SLA’s) will be provided to the customer for review. Documents should be created in such a way that it grabs the viewer’s attention. Documents would be big and run into a lot number of pages, hence we need to follow some guidelines so as to make them more appealing. So let’s take a look at common guidelines which should be followed while creating a word document. a) Choose your content carefully Since the documents has a lot of information per page and may run into 20-25 lines per page, there is every chance that the viewer will get lost while reading it. In order to make the document easy to understand it is very important that you choose only that content which is very important. Some of the guidelines are: Choose the content carefully Try to put a concise summary point in the first page such that it gives necessary impetus for the viewers to read the entire document. You may highlight some of the problems the customer is facing in the first couple of pages. Like you may say most of the companies are facing the problem of low network speeds and are not able to carry out daily transactions effectively with increasing number of customers day-to-day. So what is the solution for this
problem? Then you can keep on continuing with your company solutions in the subsequent pages. Always give some information about your company and its key strengths in the first page. Give a suitable heading such that it reflects your objective of the word document Try to use a picture or table or a chart every couple of pages so that the document will be interesting enough to read b) Select or create a document theme A document theme will describe how the background of every page in the document looks like. It also deals with the style of border, header text and footer text in the document. Many a times the company will be having its own theme with its logo water marked at the center or top of every page. Some of the guidelines includes: Choose the theme which suits your company You may have the same theme which you used for your PowerPoint slides so that the uniformity is maintained in terms of font selection, colours and graphics C) Maintain uniformity in the text In the document if you have used the font size 16 and bold for the heading in the 1st page. Then in any other pages if you want to keep a heading use the same font as used earlier in 1st page. Some of the guidelines here include: Make sure the all the main headings, sub headings, inner sections maintain the uniform font style and size within them as explained earlier. You may use font size 16 for main headings, 14 for sub headings, and 12 for the text in the sections and so on. Make sure the font used in the text of all the tables are same Make sure that font in all the flow charts are same
d) Use graphics to illustrate key points Graphics are a great way of creating interest while reading the document. Some of the guidelines include: Avoid using blurred images; always use clear images in the documents If you are taking the picture from some other source, clearly give the reference below it The text in the picture should be readable enough Avoid using bright colours in the chart, especially in a pie-chart - it would make the text difficult to read Make sure the size and the colour formats looks similar for most of the charts in the document e) Other general guidelines Some of the other general guideline which we would follow for creating a document include: Make use of an appendix if you have any supporting information to your content which can be put at the end of the document. Make use of a footer and header in the document Make sure the header will include the company name and logo and footer includes the page number. When the document is ready make sure that you see the print preview to get to how it look when printed Avoid breaking of tables and flow charts into multiple pages, always try to keep them in a single page unless they are very lengthy
If you are copying some text or table or a chart from other document and the font is changing, try “past special” instead of paste in the document. This command will preserve the text style and font while coping. Finally when the document is ready make sure that you run the spelling check and clear all the language and spelling errors. Give the document for review to you team members and your manager and get their approval Get a copy printed and make sure the colours in the pictures, charts and any other graphics are readable The list of guidelines is not exhaustive and you may follow some others which may help you in creating an effective and efficient documents and PowerPoint or paper slides. SAQ 2 1) Explain various presentation design issues while using animations and transitions in the slides. 2) Explain the guidelines which you will follow while selecting the content for your word document 3) Explain the uses of video and audio in your presentation
6.4 The sales presentation process Having prepared your presentation slides and documents, it’s time for you to understand how to carry on with the presentation process. Let’s us now look at some of the presentation methods as suggested by Koekemoer (2004) in the following section.
6.4.1 Presentation methods There are many ways in making a presentation which can be understood by the following:-
Presentation Methods
Stimulusresponse approach
The formula selling presentation
The need satisfaction presentation
The problem solution approach
a) Stimulus-response approach Stimulus refers to any statement which will create a response from the customer. We know that the ultimate objective of all the presentations is to develop a long-lasting relationship with the customer and to close the deal successfully. The sales person in this method makes some statements that will act as a stimulus to the customer and in response, the customer will like to make a purchase. Most of the times in this method, the presentation will be as brief as possible and the sales representative will try to close the deal. The sales representative may offer discounts or lowest price in the market or extra add on benefits as a stimulus and then in response they will make the customer to close the deal. This type of method will be useful for new sales representative who are inexperienced to handle longer periods in presentation. This method would be appropriate and work well in case of door-to-door sales or sales which include small revenue per product such as FMCG goods. Normally in industrial and institutional sales when the product/service value is much higher such type of presentation method may not work well.
b) The formula selling presentation This method can be used for similar customers and situations where you have a single presentation for all the customers. This method follows AIDA approach (attention, interest, desire and action). Initially you try to get the attention by stating the problem of the customer and about your company’s capabilities, next you provide the solution to create interest, then you provide some documents backing up your solution to retain the interest, then you ask few question to know the desire level of the customer and finally you attempt few closing techniques to close the deal. This method will give reasonably time for presentation and will provide more flexibility in handling the presentation according to customer feedback. A less customized presentation will be used so that it can be applied to all the customers. This method will be useful in consumer goods where the sales representative will be handling many customers per day. c) The need-satisfaction presentation This method varies from other two which we discussed earlier which focuses mainly on the sales representative presentation point of view. In this method we assume that the sale will happen only when the need of the customer is satisfied. This method focuses on sales interaction from the customer point of view. This method is approached in three different phases namely need development phase, need awareness phase and need fulfillment phase. Need-development phase: In this phase, the customer need will be identified. Many a times the customer may not know what does he require for solving his problem. So the sales representative asks a series of questions to identify the customer needs Need-awareness phase: In this phase, once the need is established by the sales representative, it’s time to confirm it by explaining the needs to the customer and check whether the customer is satisfied or not. During this discussion the customer may discover other needs which he/she may not have thought of earlier.
Need fulfillment: In this phase the sales representative will identify the right products/services for the customer needs and present necessary presentations explaining the features and benefits and tries to close the deal. This method is especially suited for industrial and technical sales. d) The problem-solution approach This method will be used for high value products/service which can bring a significant change in the company’s working environment. For example, implementing a CRM system can be approached by this method. To implement a CRM system the sales representative have to understand the organization fully so that to estimate what changes will be made in the organization processes and system. Sales representative may not be able to do this big task all by himself, so he will be requiring a team to identify various problem areas and give the appropriate solutions. For the sales presentation the sales team may require not only the presentation but also the catalogues, brochures, sample booklets, testimonials, various order forms etc. The sales process may into weeks or even months before finalizing a solution. You may require multiple approvals from various departments in the organization to effectively implement the CRM system across the organization. This process also involves handling the written proposal for the presentation in getting the permission to do the sales presentation. So whenever the sale includes a lot of activities, it is appropriate to follow the problem-solution approach. Having discussed enough on the presentation methods, it’s time to look at some of the objection handling techniques during the sales presentation. 6.4.2 Objection Handling and closing the sale When the entire presentation goes well and it’s time for closing and the sales representative uses the closing technique, then the customers may respond positively or negatively by raising objections. So it is very important know how to handle objections you may prefer to address as and when an objection is raised. If there are many objections you may inform that they will be taken after the presentation. Most of
the times customer raises objections to show his/her intelligence or to test the behaviour of the sales representative or to get more benefits from the product. It’s your responsibility as a sales representative to handle the objections without any negative effects on the sale. We have discussed some of the ways how to handle objection in unit 3 “Personal Selling”. In this section let’s find out some of the objection handling techniques as described by Claudyne (1994):a) Ask an open question: When you are not sure how to handle an objection it is better to ask an open question so that you can get some views from the customer which will help you in handling the objection. For e.g. If the customer says the budget for the project is too much, then you may ask an open question like “How come do you feel the budget is too much?” b) Ask a closed question: Closed questions can be answered with just a yes or no. If the customer objects that the funds cannot be cleared in such a short period of time, and then you may respond by saying “Do you want us to start the project in a quarter or a couple of quarters later?” c) Clarify the benefits: If the objection is because the customers haven’t understood the benefits clearly then try explaining them again. For e.g. If the customer says “I don’t find any extra value creation to the company by your product/service” then you may start explaining again how your product will create extra value for the organization. d) Admit when you are wrong: Customer will be more intelligent than you many of the times. If customer pinpoints any wrong statement by you, and if it true then simply admit your mistake. For e.g. if customer says that “Industry growth for VOIP service is not 12.5% but its 15%”, then if it’s true then admit that “You are correct, this slide needs to be updated”. e) End eye contact: Whenever you feel like one of the viewers is giving many objections try to avoid eye contact during the presentation so that the viewer will be discouraged to raise another objection.
f) Ask for help: Whenever you feel that you are not the right person to take an objection, it will be better to suggest the customer that his/her objection will be addressed by other person in next meeting. For e.g. if the customer says “Can you explain the various functions or code used in the software for your product”, then if you happen to be a nontechnical sales representative and have no idea of the code you may inform the customer that “a technical manager will be able to contact the next day and explain the functions”. g) Discourage the objection: This is like a last step for rescue when you don’t have any choice of using any other technique. For e.g. if the customer says “your company has posted less revenues when compared to last year and losing out some of the previous customers” then the better will be not to explain why the company has lost the customers and the revenue and simply answer that “It is the job of the higher authorities and they are working on that issue”. The next process after handling the objections successfully would be using some closing techniques to close the sale. We have already understood some of the closing techniques in Unit 3 “Personal Selling”. The sale wouldn’t be completed unless some negotiations happen between the customer and the sales representatives. We shall learn about the negotiation skills in the next unit. SAQ 3 1) Which presentation method you will use in selling a chimney product for the customers in door-to-door sales? Explain the reason for the same. 2) Explain how will handle the objection when the customers says “Your company is performance is deteriorating day-to-day in the market place”. 3) Explain the way you handle the objection when customers say “Your product features are good and will be very useful for our company, but the price factor seems to be a little heavy for our pockets”
6.5 Summary In this unit we have discussed the importance of knowing about you company, customer and the competition for any sale. Without knowing your competitor well and his strategies used, it would be difficult for you to impress the customer and get the deal and the various objectives of the presentation. We have also discussed the role of sales and pre-sales team in making the presentation. We have understood that the presentation may require multiple teams or departments in the organization and so coordinating them to ensure the presentation is prepared on time is a critical task for the pre-sales team. Later we have understood various guidelines we have to follow to create a good presentation that is appealing enough to the customers. We have identified separately the guidelines for PowerPoint or paper slides and the documents. We have understood various presentation methods and the scenarios where they are applicable. We have recognized the importance of objection handling in closing the deal. Finally, we have learnt various closing techniques with situations where it can be applied.
6.6 Keywords 1) Due diligence
Due diligence involves investing or auditing. In this unit it is used in a sense to know the financial,
legal,
environment
and
market
situation of the company. 2) Check-list
A list of things which are required us to do to ensure the process is completed. Having a check-list reduces the number of errors that may occur in future due to a neglected issue in the process.
6.7 References 1. Claudyne wilder (1994), “The presentations kit: 10 steps for selling your ideas”, John Wiley & Sons, New York, USA. 2. Ludi Koekemoer (2004), “Marketing Communications”, Juta and co. Ltd, South Africa. 3. Stephanie
Krieger
(2007),
“12
tips
for
creating
better
documents”,
http://www.microsoft.com/atwork/skills/documents.aspx
6.8 Suggested Readings 1. Douglas J. Dalrymple, William L. Cron, Thomas E. DeCarlo. (2004), “Sales Management”, John Wiley & Sons, New Jersey, USA. 2. Darryl Davis (2003), “How to be a power agent in real estate”, Tata McGraw-Hill, USA.
UNIT 7 NEGOTIATION PROCESS Structure 7.1 Introduction Objectives 7.2 Negotiation Defined 7.2.1 Definitions of Negotiation 7.2.2 Principles of Negotiation 7.3 Effective Negotiation Process 7.3.1 Pre-negotiation process 7.3.2 Negotiation Process 7.3.2 Post-negotiation Process 7.4 Closing techniques 7.5 Summary 7.6 Keywords 7.7 References 7.8 Suggested Readings
7.1 Introduction In the previous unit we have understood activities that are performed to ensure a successful presentation. We have discussed the pre-presentation activities, various guidelines for making presentation and the process of effective presentation. Having achieved the objective of presentation and successfully handling the objections, it is time for the sales representative to negotiate and close the deal effectively. Once the customers are satisfied they would like to negotiate the price and other features like warranty period, after sales services, discount on add-on products and so on. So, negotiations are the part and parcel of the sales process before getting an order. During the negotiation process the customer will like to have the best price for the product/ service. The customers are always intelligent enough to know that the price quoted by the sales representative can always be negotiable. Negotiations will happen until both the customer and the sales representative negotiations comes to an equilibrium point. It is always important to understand that the customer will try to negotiate the price to such an extent that there would be no profit left for the product/service sold. It is the skill of the sales representative to successfully negotiate the deal such that a profitable relationship can be built both for the company and the customer. So, let us now understand the negotiation skills a sales representative must possess to successfully handle the deal. After negotiations, sales representative will use closing techniques to close the deal and make an agreement of the sale. Objectives After studying this unit you will be able to:1) Define negotiation and its objectives 2) Identify the underlying principles of negotiation 3) Explain the pre-negotiation, negotiation and the post-negotiation processes in handling the deal effectively 4) Understand the objective of closing techniques
5) Use appropriate closing techniques according to various situations in the sales process
7.2 Negotiation defined After the sales representative knows that the customer is willing to make the purchase but has some concern related to price or features then he/she will enter into a negotiation process. 7.2.1 Definitions of negotiation Let‟s start this section by identifying by defining the term “Negotiation”. Negotiation can be thought of as “a process between two or more parties to arrive at a mutually beneficial agreement or relationship”. Various other definitions given by some of the scholars include as follows: Steven Cohen (2002) describes negotiation as “the process of two or more parties working together to arrive at a mutually acceptable resolution of one or more issues, such as a commercial transaction, a contract, or a deal of any sort”. Fowler (1996) describes negotiation as “a process of interaction by which two or more parties who consider they need to be jointly involved in an outcome, but who initially have different objectives, seek by the use of argument and persuasion to resolve their differences in order to achieve a mutually acceptable solution”. 7.2.2 Principles of negotiation Flower (1996) describes that there are seven principles to any form of negotiation. Let‟s look at them in detail:a) Negotiation is the process which will require both the parties to reach to a desired outcome. Both the parties show some common interests in either the subject matter or in the negotiation context, which shall hold them in the negotiation process. For e.g. If
you are selling a technical software such as anti-virus to the company, then your objective might be to sell as many copies as possible with a reasonable profit margin and the customer objective might be to get the copies at the least cost possible. Here both the customer and the sales representative objective are to get best value from the deal. This holds them in the negotiation process. b) The discussion in negotiation process will normally start off with different objectives which will initially prevent the achievement of the outcome. For example, in the previous example, the customer who is buying the anti-virus product might say he will be interested to take 50 copies if the discount is 30 percent. But the sales representative might say the maximum discount he will consider giving is 15 percent. So, here both the parties started off with different objectives which don‟t allow them to come to a conclusion easily. c) At least initially, both the parties will opt for negotiation as a satisfactory way of resolving the differences rather than forcing to them to abide by the agreements. For example, when the sales representative says the maximum discount he can give is 15 percent and the customer is expecting a 30 percent. Then both the parties will proceed to negotiate further rather than the sales representatives forcing themselves to give the 30 percent discount or the customer buying the product for a 15 percent discount. d) There is a belief in negotiation that each party can persuade the other to change his/her stand on the original position. As stated in the previous principle, both the parties initially look for the negotiations. As per this principle, the customer will believe that he can get more discount than 15 percent from the sales representative and the sales representation will proceed with a belief that he can persuade the customer to buy the product at reasonable profit margin to the company. e) The next principle states “both the parties feels that there is still some hope left even if there ideal outcomes are unattainable”. For example, if the sales person feels that the customer is not going to place the order at 15 percent discount at any cost, then there can still be some hope left that the customer will buy the product at 15 percent if the benefits of the product are explained once again to the customer.
f) The next principle states that there is no point to participate in the negotiation process if one party is having influence or power which is real or assumed over the other party which is completely powerless. For example, if the customer whom you are selling the antivirus product is your elite or No.1 profitable customer in the past for your company, then there is no point in arguing much and sticking to your 15 percent. It would be better to increase your discount rate may be to 20-25 percent and proceed the negotiations. On the other way, if your antivirus product is the No.1 in the market and is the only antivirus which can cater to the needs of the customer, then you shall have the power or influence during the negotiation process. In this case, you can just stick to your 15 percent or may just give a little consideration and increase the discount to 17 or 18 percent. g) The final principle states that the negation process is carried mostly by human element with verbal interactions. Hence, the negotiation is strongly influenced by the emotions and attitudes rather than the facts in the each party‟s arguments. This is where the negotiation skills come into play a lot. The sales representative must understand that he can still win a better deal even if the customer is adamant by using his/her negotiation skills. SAQ 1 1) Define negotiation in your own words 2) Explain the principles of negotiation
7.3 Negotiation process Negotiation is all about give and take with the aim of both the parties getting satisfied. In this process various issues are to be handled well. Negotiation process can be thought of as a three step process as shown below:-
Pre-negotiation Process Steps in negotiation
Negotiation Process
Post-negotiation Process Let‟s now discuss then in detail. 7.3.1 Pre-negotiation process Before entering into the negotiation it is always advisable to be prepared for the negotiation. You should remember that if the negotiations are not handled properly you may lose the customer and also his referrals. Hence some of the steps which you need to follow in the pre-negotiation process involve the following: Identify the customer group Collection as much customer data as possible Identify whom to involve in negotiation process Make a check-list of possible scenarios that may arise during the negotiation process Prepare for the scenarios and alternate ways to handle Make sure you and your team members are fully aware of the objectives of the negotiation process Depending upon the type of sale, the team for the sales negotiation can be a single sales representative or many. Normally, in door-to-door sales like FMCG and consumer care products, only a single sales representative is involved. In such case, he/she must be fully aware about the customer details and preferences. The sales representative
should be prepared for scenarios where the customer might ask for a more discount or any add on benefits along with the product/service. In Institutional and Industrial sales, there will be a team of members who will participate in the negotiation process. Once the presentation process is completed and the customer is willing to give an order but express is some concerns and want a negotiation to be done, it‟s time for the sales team to be prepared for the negotiation process. Company expects that nothing wrong would happen during the negotiation process in such big deals with the industrial or institutional sales. So, the first important step is to choose a team that is capable of handling the negotiation process effectively. The sales representative team can involve not only the people from the sales team but may also include members from other departments like technical, testing, hardware, finance and HR. The team depends mainly on the type of product/service being sold in the negotiation process. For example, if the sale is about a multi-million dollar CRM product is being sold, then the team for negotiations may include the technical, finance, testing and the sales team. Every team member is associated in the creation of the CRM product. Hence his/her approval may be required when giving the discounts. One must understand that the customer may ask discount on some features of the CRM products like the cost for testing services, then it is important that the testing team member approval has to be taken to give such a discount. Knowing about your customer is very important before entering the negotiation process. This process can be very tedious in big industrial or institutional deals. If it‟s the previous customer, you may look into the existing past data of the customer and judge his buying behaviour and interests. Other ways of knowing more about the customer interests include looking at the financial status, knowing details from some referrals, browsing the past and present business activities of the customer etc. With the help of such information you can know whether the customer would be adamant about the price or choose the best features and cost is a secondary importance.
During the negotiation process, various scenarios may arise from the customer side such as the customer requesting to increase the warranty periods, decrease the cost, free add on products/services, and decrease the cost of extra warranty periods and so on. So it is always better to know about the possible situations that may arise in the negotiation process by looking at the previous experiences with the same or other customers in the similar deals. If the deal is new deal, it will be always better to prepare for all the situations that may arise during the negotiation process. Expert advises can be taken who may be the industry leaders for knowing the possible scenarios. Finally, before going to the negotiation process, your objectives must be clear about the offer or agreement you do in the negotiation process. Let us now look at the negotiation process. 7.3.2 Negotiation process Let us understand in this how the negotiation process will proceed in general. Flower (1996) described the pattern which is followed by most of the effective negotiations. Let‟s understand the pattern in detail:a) Both the parties lay down their issues and decide what they are willing to negotiate in the process. b) After the issues are set out then one of the party will set the claim which will be responded by the other party. Here both the parties will define their initial positions. c) Then there would be the discussion in order to test the initial positions of both the parties. d) During this discussion both the parties try to explore all other possible outcomes. e) After analyzing all the possible alternatives, formal proposals are made which will be discussed and modified f) After several modifications, the proposal will be treated as final and then an agreement will be made. This agreement phase can be thought of as the postnegotiation process
7.3.3 Post-Negotiation process After the negotiation process the sales representative will use the closing technique to close the deal and prepare the agreement between the parties. It is always better to have the final proposal which is agreed by both the parties to be presented in a written format. This printed document is also known as service-level-agreements (SLA‟s). Some of the issues have to be taken care of so that the agreement may not lead to an implementation failure. Those issues or concerns include: Be clear on what is going to be written in an agreement Take approval from both the parties Cross check that any higher authority hasn‟t been missed out for informing about the agreement Ensure that the method of implementation and the level of service are clearly stated in the agreement i.e. ETA (Estimated time of arrival), number of employees working on the project, type of resources used, etc. Cross check the details in the agreement with all the members before signing the contract SAQ 2 1) Describe various objectives of the negotiation process. 2) Explain the need of a well documented SLA after the negotiation process 3) Explain the need for understanding the customer group before starting the negotiation process 4) Explain the pattern which is generally followed during the negotiation process
7.4 Closing Techniques A close refers to end the process and in sale it means to end the selling process after the negotiations are completed. The main objective of the closing technique is to successfully close effectively and get an agreement signed between the parties. Most of the times customer might show some resistance to make the decisions fast enough, hence closing technique serve the purpose of helping or assisting the customer to make the decision quickly and close the sale. It is the skill set of the sales representative to know when and what closing techniques are to be used. There are many closing techniques which can be applied depending upon the situation in the presentation process. A sales representative may use a single or multiple closing techniques to effectively close the deal. We have already learnt about some of the closing techniques in the 3 rd unit „Personal Selling”, let‟s now look at some more closing techniques which are given in the website changingminds.org:a) 1-2-3 close: In this closing technique the sales representative will try to summarize the benefits of the product in a sentence with three items. For example “This product is hassle-free, faster and efficient in removing viruses from your computer” or “this service is the cheaper, reliable and has a plenty of features than the competitors”. In this closing technique the main aim is to give a great impetus to the customer to feel that the product/service is the best in the market. This type of closing technique is used widely in the sale of low value products where the sales process may take place within a day. For larger sales where the discussions run over weeks, this might not be the only technique used. b) Adjournment close: This type of closing technique assumes that the customer will not be able to make the decision right away and will require some time. So here you will ask the customer to take his/her own time in making the decision and you will adjourn the meeting to follow up on some other day. This closing technique is ideal when:-
The deal involves a lot of issues and value where the customer has to discuss with his/her higher authorities When the deal is done during the budgetary period or when the funds are low You have a feeling that customer will definitely come back and make more purchase. During the time given to customer he/she may do an analysis of other competitor‟s product/services and will return to you You are the market leader and provide the best service c) Affordable close: This type of closing technique is used when you know that the price of the product is way too high for the customer pocket and you need to do something to reduce the price or offer some other alternatives. This type of closing technique is used very common in both the door-to-door sale and the institutional or industrial sale. Some of the situations in which you may use this technique are: When you feel that the customer doesn‟t have budget to buy the software or hardware, then you may give an option to the customer that the software need not be purchased fully but can be taken as a service, paying rent for every month or quarter while using. This is a wide trend which is used now a days and the concept is known as software-as-a-service. If you are selling the car or a house to the customer, then you may help the customer in making the payment through some loans or in easy-monthlyinstallments. Always try to find out the best installments or loan facility which doesn‟t make the customer to go in debt and will not be able to make the timely payments. If the customer feels that your product cost is very high, you may inform him that the price is justified because the maintenance cost is very low. Try to make the customer feel that the price is affordable for long term usage d) Alternative close: This type of closing technique is used when you have a feeling that the customer is willing to make the purchase and then you may present some alternatives which the customer can choose according to his preference. For example, if you are selling the laptops then you may ask the customer “would you like the laptop to have a 2 GB Ram or 3GB RAM?” or “Would you like to have the Intel i3 processor or i5
processor?” and so on. This can make the customer to make the decision faster and close the deal. e) Assumptive close: In this closing technique the sales representative will assume that the customer has already made the decision and the next step is to take the order. For example, the customer may be asked “Where do you want the product to be delivered to the head office or at your branch office?” or “Will one year license be enough for your product?” and so on. This technique is closely related to the alternative close and often used along with it during the sale. f) Best time close: In this closing technique the sales representative will explain the customer how this is the best time to make the purchase. Some of the statements used in this technique are: We have this stock only in this festival season This is the first time the product/service is sold at 20 percent concession This is a limited offer where you get extra one year free onsite service Having the summer approaching it would be the best time to have an AC Having got recently married, it is the best time to think about having your own apartment These are some of the closing techniques which might help you in different situations in the sales process. For more closing techniques you may look at the website address given in the reference section. Many-a-times negotiations and closing techniques go hand in hand to close the deal effectively. If the closing technique is not working then the sales representative might negotiate the price or other features and will try again for closing the sale using an appropriate technique. SAQ 3 1) Explain any two scenarios where you would use assumptive close 2) If the customer says that they are having tight budgets in this quarter, then which type of closing technique would you apply? Justify your answer.
3) If the customer is not sure which laptop model to select, then which closing technique would you find appropriate to use?
7.5 Summary In this unit we have understood the various closing techniques which can be applied to know the willingness of the customer to close the deal. We have also understood that most of the sales process wouldn‟t be completed without the negotiation phase. We have defined negotiation and understood the several principles of negotiation. We have identified the entire negotiation process would be completed in three process namely pre-negotiation process, negotiation process and the post-negotiation process. Before any negotiation process it‟s important to be prepared and so we have understood the various activities that need to be done to ensure an effective negotiation process. We have understood the six key steps which are followed in most of the effective negotiation processes. Finally in this unit we have learnt the important issues that need to be taken care of so that the negotiation agreement of the sale may not lead to an implementation failure in future.
7.6 Keywords 1) SLA
Service Level Agreement is a document which states the terms and conditions that define the level
of
service
being
provided
by
the
product/service to the customer. 2) ETA
Estimated time of arrival is the time at which the product/service will be available for delivery
7.7 References 1. Steven Cohen (2002), “Negotiation skills for managers”, Tata McGraw-Hill, USA.
2. Alan Flower (1996), “Negotiation skills and strategies”, Universities Press Limited, India. 3. http://changingminds.org/disciplines/sales/closing/closing_techniques.htm
7.8 Suggested Readings 1. Lisa J Downs (2008), “Negotiation skills training”, ASTD Press, USA.
2. Chris Newby (2004), “Sales strategies: negotiating and winning corporate deals”, Kogan Page Limited, UK.
UNIT 8 RETAIL COMMUNICATION Structure 8.1 Introduction Objectives 8.2 Importance of Retailing 8.2.1 Necessity of retailing 8.2.2 Advantages and disadvantages of retailing 8.3 Communication Skills in Retailing 8.3.1 Understanding the retailer 8.3.2 Selecting a retailer 8.3.3 Communicating with the retailer 8.4 Retailing in Modern times 8.4.1 Modern retail formats 8.4.2 Role of merchandising 8.4.3 Internet Retailing or E-retailing format 8.5 Summary 8.6 Keywords 8.7 References 8.8 Suggested Readings
8.1 Introduction In the previous unit we have understood negotiation process and the closing techniques in the sales process. In this unit, we shall look at the retailing mode of selling and the various issues that need to be addressed to build a strong relationship between the company and the retailer. Unlike personal selling, where the sales representative will visit the customer, in retail mode of selling the customer will visit the retail outlet to make the purchase. Retailing has two major entities who work for the benefit of the customer. One is the retailer and other is the sales representative of the product. Relationship between these two entities is crucial for the successful selling and make profits of the business. The retailer will be benefited from the sales representative by timely supply of goods whenever there is a need and the sales representative will benefit from the retailer in reaching out to the customers who visit the retail outlet. So there is a necessity to build a profitable relationship between these two entities. So, in this unit we shall understand the communication mechanisms between the retailer and the sales representatives which help to improve and build a profitable relationship. We shall also understand about the information that the sales representative and the retailer needs to communicate with each other. We shall examine the necessity of retailing for the company to survive in the market place. Later, we shall understand the role of merchandising in increasing the sales of the product in retail outlets. We look at the modern retail formats like shopping malls and super markets and discuss the reasons for changing customer preference some kirana store to these modern retail formats. Finally, we shall understand the benefits of E-retailing and various issues faced by the customer that need to be addressed by the sales representative. Objectives After studying this unit you will be able to:1) Define retailing 2) Understand the necessity of retailing for the company in the market place
3) Explain the advantages and disadvantages of retailing 4) Identify various issues that need to be addressed in understanding, selecting and communicating with the retailer 5) Examine various modern retail formats like shopping malls, supermarkets and Eretailing 6) Understand the critical role played by merchandising to increase the sales in retail outlets
8.2 Importance of Retailing Let‟s start the unit by defining retailing. Retail is defined by oxford dictionary as “the sale of goods to the public in relatively small quantities for the use or consumption rather than for resale”. The origin of this word is from the French word “retaillier” meaning “a piece cut off”. 8.2.1 Necessity of retailing The objective of any business is to reach out to the customer and sell the goods or services effectively. There are three main challenges for the company in making the sale: Locate the customer group Reaching the customer group Selling the products/services effectively The first challenge is to locate the customer group. After creating the product and service it‟s time to find the customers for it. The customers may depend upon several factors like the economy, age, sex, culture, location etc. For example: Children will be the customers for toy products
Rural people would be the customers for Agricultural products like pesticides and fertilizers The people who have the desktops or laptops would be the ideal customers for software products Customers for a medicinal product would be everywhere such as in rural and urban areas After locating the customer, the company needs to select a method to reach them. One method would be personal selling where the sales representative will contact the customer on a one-one basis. But this wouldn‟t be ideal when there is a larger customer group. Companies can‟t just rely on personal selling for the product which requires repeated purchasing. So other channels like retailing should be used in complement to personal selling. After identifying the channel for reaching out to the customer, companies have to monitor the selling process so that the sales would be done effectively. Each and every method like personal selling or retailing has their own advantages and disadvantages. Let‟s look at them in following section. 8.2.2 Advantages and disadvantages of retailing Retailing has many advantages when compared to other sales methods. Some of advantages of retailing to the company include: Better reach to customers Decreased costs to acquire the customer Easy implementation of promotional schemes Easy branding of new products/services Ensuring the availability of products for customers at all the times Reduced costs for warehousing
Retailing also has some disadvantages. Some of them include: No control over the selling process in the retail outlet Customers may be misinformed about the product benefits Low quality sales force in retail outlets with poor communication skills A lot of competing products exist in the retail outlet Customer will be having lot of choices when deciding to buy your product Difficulty in keeping constant touch with the retailers on a day-to-day basis SAQ 1 1) Define Retailing 2) Explain the need of retailing for the company 3) Explain the advantages and disadvantages of retailing
8.3 Communication skills in Retailing In India, both the organized and unorganized retailing plays a very important role. Most of retail outlets in India are unorganized i.e. which do not have the license and who don‟t pay the taxes. For the company to sell its products/services it‟s important to understand the behaviour of both these sectors. Companies have to analyze the factors that a retailer looks at in running his business. Retail formats in India can be many and includes the mobile store on vehicles, grocery shop, Kirana store, departmental store, super markets, shopping malls etc. Understanding various needs of the different retailers is very important to develop a good relationship. Relationship building with retailer involves three major steps as shown below:-
Understanding the Retailer Relationship building with retailer
Selecting the Retailer
Communicating with the Retailer Let us now understand these steps in detail. 8.3.1 Understanding the Retailer You will generally find many products of the same category with the retailer. It is important to understand the influential factors that prompt the retailer to select the products for keeping in the outlet. Four main factors are observed to be influential viz:-
a) Location: - Location refers to the place where the retail outlet is situated. If the retail outlet is in a village, you may not expect to get high value products. Sachets are preferred over big tubes or bottles and the retailer would not keep a stock of high value items. b) Community: - Community refers to the group of people who may be categorized on the basis of their preferences. Retailer may prefer to keep those products which the community prefers. For example, people at a place may prefer sunflower or groundnut oil and may not prefer olive oil, hence the retailer may not prefer to have olive oil in his outlet. c) Commission: - Retailer may prefer those products which offer him/her the best commission for a sale. For example if company „X‟ offers a 5% commission and company „Y‟ offers a 7% commission then retailer might prefer to have more products of company „Y‟ in outlet than company „X‟ products.
d) Relationship: - Retailer might prefer those products from the company which has understood the retailer needs well and has helped the retailer in the past for instance like extending the credit time in difficult situations, ensuring the timely availability of stock whenever needed and so on. 8.3.2 Selecting a Retailer Having understood the factors that favour the retailer in choosing a particular product for his outlet, it‟s important to understand whether the retailer will be useful for the company or not. Sales representatives have to look at certain issues before selecting the retailer such as: Understanding the universe of retailer Examining the retailer profile Analyzing the benefit of the retailer to the company At the end of the retailing, the relationship between the company and the retailer should be a profitable one. So it is very important for the sales representative to choose those retailers for the company who do not create loss and difficulties in handing the sales process. So, the first step is to understand the universe of retailer for the company products. For example, if the product is software related then the retailer would include mainly the shopping malls or markets where the technical items, laptops and computers are sold. Every city has such markets which are exclusive for selling technical products. On the other hand, if the product of your company is a tobacco related one like cigarettes then the retail outlet would be a pan shop which can run into thousands in number for any city in India. After understanding the universe of retailers and having the list, it‟s time to examine their profiles and analyze the benefits. Some of the basics things you should be looking at are: Time of establishment of the retail outlet Average number of customers visiting the outlet
Size of the retail outlet Number of employees in the retail outlet Type of products being sold in the outlet Type of strategies used by the retailer These factors can help you in deciding to shortlist the retailers and then examine for the benefits of building the relationship with them. It is very important for the company or the sales representatives to know the strategy used by the retailer and analyze it. Depending upon the type of strategy used by the retailer, Manfred (2010) described various retailing techniques used by the retailer as shown by the diagram below. This diagram states that the strategy played by the retailers is based upon the relative price and the relative offerings.
Fig 8.1 Retail Landscape
In the above figure, if the relative price and offerings are low then the retailer will offer only those products which are very cheap and will not keep many varieties of the product in the outlet. If the relative price and offerings are high, then the retailer will keep all the high value products with many varieties for a product category. Here, the retailer will use the selling skills to sell the high value products to the customer. If the relative price and offering are neither too low or nor too high it means that the retailer keeps a variety of products which are preferred by the middle class customer group and has with a lot of varieties for a product category. Wal-Mart will fall into this category. Finally if the retailer is using high relative price with low relative offerings then the sales representative should understand that in near future it would be time for the retailer to exit the business. So it is better to avoid such retailers. Hence depending upon the strategy used by the retailer it is advisable to select those retailers who will fit to your company‟s objectives. 8.3.3 Communicating with the Retailer Most of the retailers in India belong to the unorganized sector where modern ways of communication like email and fax wouldn‟t work. So it‟s very important to understand the right way of communication with the retailer. Depending upon the retailer sales representative may use many communication channels like email, fax, telephone, direct mail and personal communication. For most of the times sales representative end up using telephone and personal communication channels when other channels are not effective in communication. Some of the objectives of communication would be to monitor the sales process on the retailer end, collecting timely payments, checking for the leftover stock etc. The frequency of communication depends upon the product and the number of retailers. The sales representative may communicate daily or once in a month or once in a quarter. If the retailers are larger in number, then the sales representative may communicate with the distributor or wholesaler, who in turn communicates with the retailer. For some products like tobacco and ice creams which are sold by the retailers on vehicles or small outlets, communication would be on a daily basis. In such cases, where the sales representative or the distributor will deliver the product in the day and collect the product
in the night or the retailer will come in the day time to collect the product and return them in the night time at the distributor location. This may happen due to several factors such as lack of warehouse to keep the stock, risk of pilferage in the night etc. It is important to know that most of the retailer do not follow stringent accounting procedures and the accounting period would be mostly on daily basis. It is important for the sales representatives to ensure that the money is collected on the same day, month or year depending upon the payment terms agreed earlier. For small businesses, payments are collected on a daily basis or weekly basis in most cases. There can be many problems in getting the money later if the sales representative doesn‟t go and collect the payment on time. Some of the reasons include: No funds to pay Personal problems like retailer unavailability for a week Disputes in payments i.e. disagreement on the amount to be paid So it is always better to go in time and collect the payments. One of the important objectives in communicating with the retailer is to ensure that the retailer communicates positively about your product to the customer. Various things that have to be discussed with the retailer to ensure that the sales process will be effective are: Availability of products Visibility of products Adequacy of stocks Payment terms and commissions Product benefits and USP‟s Importance of appropriate behaviour with customers Feedback processes
Sales representative has to ensure the timely availability of the products for the retailer. There can be several problems both for the retailer and the sales representative if the product is not available on time such as the retailer might lose the business and the sales representative loses the sale. Customer might prefer other products if the product is not available on time. This might lead to losing the customer permanently. So it is very important to ensure that the sales representative delivers the products on time and the retailer has adequate stock of it. Visibility of stock also places an important role in increasing the sales and so the sales representative should see that the products are kept in the right place where the customer can easily view them. Sales representative has to clearly communicate the payment terms and commissions on the products and if possible should make the agreement copy and get signed. This would remove the discrepancies which may arise in future on the amount to be paid and time period of payments. Importance of appropriate behaviour has to be explained when selling your products to the customers. The sales people in the retail outlet should be well informed about the product benefits and the USPs. This leads to a creation of positive image about the brand and increase the sales. A proper feedback should be taken from the retailer to know that the retailer is promoting your product and showing interest in improving the relationship with the company. SAQ 2 1) Explain various factors in understanding a retailer 2) Examine the universe of retailer if the product you are required to sell is a “pen drive”. 3) Explain the importance of timely availability of product for the customer in the retail outlet. 4) Explain the role of feedback process in developing the relationship between the retailer and the sales representative.
8.4 Retailing in modern times Let us understand various retail formats present in the 21st century. 8.4.1 Modern Retail formats We have understood that in India most of the retail outlets are unorganized and survive on a strong relationship with the customer. With the entry of international players like Wal-Mart and many other Indian retail chains the modern retail formats are on the rise. These modern retail formats include supermarkets, shopping malls which are facing tough competition with the unorganized sector of retailing. Customers in the urban and rural areas prefer to buy from the modern retail outlets due to many reasons such as: Best prices in the market place Good shopping experience Easy payment methods apart from cash like credit and debit cards Parcel and delivery services to the door step Large variety of products to choose These retail formats depends upon some rules such as: Self service Absence of owner in the retail outlet Fixed prices and no negotiations Even though the prices are fixed and cannot be decreased, the customers prefer to visit them due to the discounts offered on bulk purchase or due to the availability of various range of products. 8.4.2 Role of Merchandising Merchandising is any activity that leads to the sale for the retail customer. It can be thought of as a practice which leads to the sale of products to the retail customer.
Hiebing (2004) defines merchandising as “the method used to communicate product information, promotions, and special events and to reinforce advertising messages through a non-media communication vehicle like brochures, sell sheets, product displays, video presentations, banners, posters, shelf takers etc. Nowadays we make use of video displays and interactive media too. Most of the purchase decisions are made on point of purchase (POP) and hence merchandising plays a very important role in increasing the sales. The most common way of merchandising is in shopping malls or super markets are by the displays. Sales representative must work with the retailer to ensure that proper care is taken in setting up the display in the outlet. Some of the issues which need to be addressed while using the display as a way of merchandizing includes: Differentiating clearly between paid and unpaid displays in terms of the space and number of displays allowed being setup in the outlet. Acquiring the right place for displays i.e. getting the place for your posters where the customers are going to spend more amount of time. One of the best places would be at the purchase counter or at the entrance where the customer would definitely notice the display. Sufficient posters and point of purchase material are available so that they can be distributed when customers visit the counters Ensure that the retailer works for the display along with you in creating a positive image for the brand Retailer commitment is necessary for ensuring that the sign boards are clean and well-lighten up, hence try to win that level of commitment from the retailer Ensure that the sales promotions are received to the customer. For example, if free samples are given with the product, ensure that they are given for free and are not sold separately.
The end result of merchandising is to create a favourable response image in the customer mind and the customer should be willing to recommend the product to his friends and family members. This can be measured with the help of feedback forms making available at the retail outlets. 8.4.3 Internet Retailing or E-Retailing format Modern retail format would be incomplete without a discussion on the internet retailing format which is on the rise in the 21st century. Internet retailing is also known as Eretailing. With the rise in e-commerce activities and increase security levels of online transactions many customers prefer to shop on the net. Companies are using this as an opportunity and reaching out to internet retailers who provide shopping services on the net. Some of the reasons for the internet retailing on the rise include: Various payment methods with credit and debit cards Convenient payment methods like EMI facilities The database of products are large so that customer can compare various products, look at the reviews and make purchases More secure payment technologies with increase level of protection from 64 to 128 bit Secure SSL technologies Easy and convenient way to shop, at least need not have to walk across the store and find the product 24/7 shopping experience Better discount rates than retail outlets since companies save cost on the employees as E-retailing doesn‟t require many sales representatives to handle the customers
There are various concerns which the customers face when shopping on internet. Hence it‟s the responsibility of the sales person to address such issues. Some of them include: The shipping period of the product/service i.e. the time period mentioned during purchase should be followed Offline help whenever needed i.e. customers should be provided with necessary contact information like email, phone numbers etc. about the retailer or the supplier in case of any queries Payment over the net using credit cards is not preferred by many customers, hence the sales representative should make sure that the retailer also provides the option of debit cards or making the purchase on the phone using IVR system SAQ 3 1) Explain why the customers prefer to shop in modern retail outlets like shopping malls rather than in kirana stores. 2) Examine the role of merchandising in increasing the sales of the product 3) Identify various issues which the customer face in E-retailing 4) Explain the benefits of E-retailing over retail outlets
8.5 Summary In this unit we have defined retailing and understood its necessity for the company‟s survival in the market place. We have also examined various advantages and disadvantages of retailing for the company. Understanding the retailer and his business is crucial for the sales representative to establish a profitable relationship with the retailer. Hence, we have examined various factors that determine the retailer to choose the products for his outlet. We have understood various issues that need to be looked into such as universe, profile and benefits of the retailer before selecting for the company. We have seen the importance of discussing the payment terms and
commissions and the consequences for not collecting the payment on time. We later examined the various things that need to be communicated with the retailer on a daily or weekly or monthly basis to ensure a profitable relationship persists between the retailer and the company. In the final section of this unit, we have looked into the modern retailing formats such as super markets and shopping malls. We have examined the reasons for the customer changing preferences towards modern retail formats. We have learnt about E-retailing and the increasing acceptance by the customers and the companies. We have looked at merchandising as a practice which will increase the sales in the modern retail outlets. Finally we have discussed about the various issues that need to be taken care of while using the display as a way of merchandising for the products/services.
8.6 Keywords 1) USP
Unique Selling Proposition can be a statement about the product which highlights the benefit of the product or the unique proposition created for the customer. USP is considered to make an impact to a lot of new customers
2) IVR
Interactive Voice Technology is a technology which allows automating the interaction over the telephone with several keypad inputs on the phone.
3) POP
Point of purchase is the place where the sales are made. In retailing it will be retail outlet where the customer makes the purchase.
8.7 References 1. Manfred Krafft, Murali K. Mantrala (2010), “Retailing in the 21st century: Current and future trends”, Springer, New York, USA 2. Roman G. Hiebing Jr., Scott w. Cooper (2004), “The successful marketing plan: A discipline and comprehensive approach”, Tata McGraw-Hill, USA.
8.8 Suggested Readings 1. Margaret Bruce, Christopher Moore, Grete Birtwistle (2004), “International retail marketing: a case study approach”, Elsevier Ltd, UK.
2. Paul Stinson (2008), “Retail, marketing and sales”, Infobase Publishing, New York, USA.
UNIT 9 JOB ANALYSIS AND DESIGN, RECRUITMENT AND SELECTION Structure 9.1 Introduction Objectives 9.2 Job Characteristic Model 9.3 Job Analysis Activities 9.3.1 Understanding the nature of a sales job 9.3.2 Identifying the skill set for a sales job 9.4 Job Design Activities 9.4.1 Steps for job design 9.4.2 Job designing techniques 9.5 Recruitment and Selection Process 9.5.1 The Recruitment process 9.5.2 The Selection process 9.6 Summary 9.7 Keywords 9.8 References 9.9 Suggested Readings
9.1 Introduction In the previous module, we have understood that selling skills are essential for the sales representative to effectively close the sale, communication skills are an important trait of an effective sales person and having representatives with better communication skills would ensure success for an organization. However big or small the organization would be, it’s performance and survival depends upon the employees skill set. Hence selecting the right candidates for the job is an important task. Identifying the skill set a candidate requires for doing the job is a part of job design. Knowing various issues related to the job and the type and level of skill set required will be the first task before starting a recruitment process. In this unit we shall understand the characteristics of the job with the help of a job characteristic model and then understand the nature of the sales job. We shall then understand the steps in job design and the techniques that can be employed for job design in creating the jobs which would benefit both the company and the employees. After performing the job design activity the organization would determine the way in which recruitment process will be held. Recruitment process should be efficient and effective in ensuring that a wrong candidate is not selected. The number of stages in which the candidate will be tested differs from company to company. The method of testing the candidate also differs from company to company and the nature of job. Companies would have to test the communication skills and the comfortable level of the candidate in the sales job. The nature of sales job can make the sales representative uncomfortable most of the times and hence he/she would require the ability to withstand the pressure mentally both from the customer side and also from the company side in meeting the targets. The recruitment process should be able to test clearly the mental ability and strength which the candidates possess. If this is not done properly and the wrong candidate is chosen, it would then lead to attrition in future. In this unit we shall understand about various parameters or qualities that the recruitment process should be able to evaluate.
Objectives After studying this unit you will be able to:1) Explain the job characteristic model 2) Explain the nature of the sales job 3) Identify the skill set required for the sales job 4) Understand the role of Job analysis and design in creating the jobs which benefit both the company and the sales representatives 5) Narrate the significance of a well executed recruitment and selection process on the organization
9.2 Job Characteristic Model The aim of any company is to optimize its resources and get the maximum out of them. Resources may include not only capital, office space, computers, softwares etc., but it also includes the employees of the organization. Employees are critical for an organization survival. Taking care of employees is an important task for any company. The job of the employee must be promising for his/her career growth and if it is not the employee might leave the company. Let us now look at the Job Characteristic Model and then define Job analysis and design. This model aims at describing any job in terms of different dimensions which measure the nature and requirements of the job. Stephan (1999) describes in his book about the Hackman and Oldham’s Job Characteristic model which explains five important job factors which would explain about the job. Let us now discuss them in detail:a) Skill variety Skill variety refers to the usage of different skills which the job requires. It might not always be essential to use different skill set in every job. For example, if your job
involves fixing an automobile part in the assembly line, you would keep doing the same type of fitting all the day and this job doesn’t require a variety of skills. In contrast, a sales representative job demands the use of different skills based upon the nature of the sale. So the first step in defining or understanding the job would be identifying the variety of skill set required for the job. Identification of greater variety of skill set is usually associated with the complete understanding about the nature of job. Therefore, it is advisable for the companies to prepare jobs which demand greater variety of skill set. b) Task identity Task identity refers to the completion of a whole and identifiable piece of work. Employees in a job would love to improve their skill set. The only way to improve the skill set practically is by performing the entire piece of work assigned to him/her. For instance, if you are the sales representative handling the personal sales, you would like to complete the entire sales process until the deal has been done. You wouldn’t like to just describe the product benefits and then handover the selling process to other representative. Even when you are handling any project in the company, you would like to take part and work from the start to finish. It might not be always possible for the companies to assign the entire project from start to finish to the employees but companies have to design and create jobs with significant task identity and visible outcome for the employee and organization. In many ways, task identity is an important factor for job satisfaction of the employees and decreased attrition rate. c) Task Significance Task significance is about understanding the impact of an employee work on the lives or work of other employees or the organization. Understanding task significance can immensely motivate the employees to perform their duties effectively and efficiently. For example, if you are involved in a software project which automates the working of government hospitals and helps the patients to know about the bed availability, blood stock, medicines and doctor availability and if the employees working on the project
were informed about the task significance of the project and their work, it would definitely motivate them to work on the project more sincerely and on time. The sales representatives must understand that the organization will survive and be able to provide employment only if they perform their duties well and get more leads to the company. The work timings for a sales representative would not be fixed many a times and especially in industrial sales where the meetings would be held according to the client’s availability. If you have to interact with the clients in other countries like UK and USA, then the timings to do a teleconferencing or a video chat would be in the night. The sales representatives should be motivated enough to before his task with dedication in odd timings. Hence, the sales representative should be informed about their task significance which can motivate them to work with dedication. d) Autonomy Autonomy in this unit refers to the freedom which an employee can have at the work place. It is the degree to which the employee can schedule his tasks and procedures to perform according to his/her convenience. It is believed that jobs with higher autonomy would create a greater responsibility and job satisfaction for employees, although it might not be true in all the cases. Greater job autonomy might encourage the employees to bring the work to their home and just not restrict it to work place. This gives a benefit for the company as the employee will be able to work from home whenever it is required. This is common practice nowadays among employees in managerial positions and the trend of working from home is seen more among sales representatives in the company. In Industrial sales if the client availability to discuss about the sale is after the office hours then the sales representative would like to arrange the call from the home and even the organizations are providing with all the facilities to do a teleconferencing from the home. Some of the disadvantages of increased autonomy are little control over the employees work and monitoring their performance. It is the decision of the company about the degree of autonomy that should be provided to the employees. It also depends upon the nature and level of job assigned.
e) Feedback Feedback is the information that is conveyed to the employee about his/her performance in the job. Feedback may come directly from the job assigned to them or verbally by his/her manager. A system for giving the feedback must be developed and be well informed to the employee about the time and procedure to receive the feedback. Feedback shouldn’t come as a surprise to the employees. It might lower their satisfaction level when given at times the employees are not expecting. For example, in many call centers the feedback will be given at the start of the day. All the employees will be assembled at a place where the previous day’s work will be reviewed and the level of error rates will be discussed. The employees will be informed about their error rates and the ways to decrease it. If required the employees will be given some training before allowing them to work.
Every employee knows that the feedback and the
suggestion will be given how to rectify the problems. In personal sales, feedback might be possible on a day-to-day business. But, in industrial sales where the sales process can run into months for a single sale, it wouldn’t be possible to provide feedback daily. Hence the companies have to find out the right time for feedback may be once in a month or quarter. It is always advisable not to judge the employee in the feedback but only give the recommendations on his/her work. Companies take every care while giving the feedback so that it doesn’t become a de-motivating factor for the employees and their satisfaction levels. Let us now look at the job analysis of the sales representative and the nature of work he performs. SAQ1 1) Explain the advantages and disadvantages of providing autonomy in work place 2) Explain the importance of providing feedback to the employees of the organization 3) Explain the role of task identity in improving the skill set of the employees in the organization.
9.3 Job Analysis Activities Job analysis deals with collection of detailed information about the job. The information collected would include the necessary skill set, duties and responsibilities a job requires to be performed. Ram Nath (2004) in his book described various definitions of job analysis as stated by numerous scholars. Some of them include: “Job analysis is the process of critically evaluating the operations, duties and responsibilities of the job”,Scott clothier and Spriegal “Job analysis is the process of studying and collecting information relating to the operations and responsibilities of a specific job”, Edwin B. Flippo “Job analysis is the procedure by which the facts with respect to each job are systematically discovered and noted” ,Dale Yeder Job analysis activities include understanding the nature of the sales job and making the list of skill set required. Let us look at the nature of sales job as described below:9.3.1 Understanding the nature of the sales job There are many characteristics which determine the nature of the sales job. Some of them are:a) Sales is a lonely job You would not have a very big team in most of the sales. You as the sales representative will be alone with the customers most of the times explaining them about the products/ services. In personal selling the sales representative has to visit the customers alone whereas a couple of team members may accompany him if it were an industrial and institutional sale. b) High level of rejection Rejection is a part of the sales job most of the times whenever a sales representative tries to make a sale. It should be understood that high level of rejection doesn’t mean
that you are an incompetent for a sales job. In many companies especially in personal sales a success rate of 5-10 percent is termed as good job done i.e. 90 calls in 100 have been rejected by the customers. So one shouldn’t take the rejections too personally and get de-motivated. c) Sales job require physical fitness The sales representative is expected to be personally fit to perform the sales job. Most of the times you will be required to travel to many places and especially in personal sales you will be meeting a lot of customers in a day and have to travel greater distances. Hence, the nature of the sales job requires that the representatives are personally fit for the job. d) Willingness to work anytime and any day Most of the times, the sales representative would work on weekends when the customers would be free and available at their residence. Hence most of the personal sales will take place during weekends. In industrial sales as discussed earlier in the unit, there will be instances where you need to take the sales call in the odd timing after office hours. Hence, sales representatives should be willing to work at all the times and not restrict themselves to working hours and weekdays only. 9.3.2 Identifying the skill set for a sales job The degree and variety of skill set varies from one sales representative to another depending upon the nature of the sales job and the type of product/service handled. But in general there are some necessary skills which would be useful for most of the sales representatives in making a sale. Let us now discuss some of such skills which the sales representative has to posses to perform the sales job effectively and efficiently. Some of the skills he/she requires are:a) Self-motivation: Sales representative should be self motivated. It is a fact that employees lose their interest in the sales job if sufficient amount of leads are not generated. It is necessary that the motivation levels are kept high to overcome any sort of discouragement occurs when the sales get rejected. Companies try to
motive their employees by both the intrinsic and extrinsic motivation methods whenever required. b) Fast learner: A sales representative should have the ability to grasp and understand the new concepts quickly. In a sales job the nature of tasks handled may keep varying according to the type of sale and the customer. You may not behave in a funny manner with a serious customer and hence you need to alternate your presentation style accordingly. Also the sales representative should be able to quickly grasp and remember the details of the new products/ services. c) Good communication skills: A sales representative should have a decent level of communication skills as required by the company. Communication skills involves not only speaking ability but also includes writing skills and listening skills. Listening skills are very important as the sales representative listen to the customer problem. Improper listening might end up in wrong product delivery which the customer does not expect. Writing skills are also important which helps the sales representative to write down the customer requirements accurately and as fast as possible. Customer time is precious and so in the available time the sales representatives may have to use acronyms, eliminate repetitions and record accurate information in writing. Verbal skills include ability to speak out clearly with proper voice modulation and convey what is supposed to. It is always considered better to speak in a neutral language which doesn’t have the influence of your mother tongue. d) Positive attitude and behaviour: It is said that attitude is one such skill set which unfortunately cannot be inculcated in the employees through training. Hence one has to develop positive attitude all by overself. Sales job requires the employees to have a positive attitude and behaviour towards the customers. There might be many instances during the sales presentation that the customer would frustrate the sales representative by asking a lot of questions. It is important that sales representative doesn’t lose his/her positive attitude and cool during the presentation.
e) Multi-tasking: sales job involves not only just selling but also involves being in touch with the customers regularly, knowing about various products/ services launched by the company and searching for more number of sales opportunities. Performing all these tasks in a single day throughout your career requires some level of multi-tasking capabilities. Hence this is an important skill set in present day in most of the sales job. Some of the companies believe that to achieve maximum results from a sales representative the level of multi-tasking should be decreased so that hence they can concentrate just on selling. But employees look forward for multi-tasking which makes their work a little vibrant rather than monotonous. Having discussed about the skill set, let us now look at the job design activities. SAQ2 1) Explain the nature of sales job 2) Explain the importance of having high motivation levels in a sales job
9.4 Job Design Activities Job design activity serves the purpose of creating a set of tasks or processes which the employee has to perform and also deals with aligning the right work to the employees to achieve the desired level of productivity from them. Aswathappa (2005) defines job design as “the effort to integrate the work content (tasks, functions, relationships), the rewards (extrinsic and intrinsic), and the qualifications required (skills, knowledge, abilities) for each job in a way that meets the needs of employees and the organizations”. 9.4.1 Steps for job design Aswathappa (2005) defined three steps that involves in job design. They are:1) The specification of individual tasks
2) The specification of method(s) of performing each task 3) The combination of tasks into specific jobs to be assigned to individuals Let us understand the performance of these steps for a sales representative job design. The first step “specification of individual tasks” refers to individual tasks the sales representative will perform. Some of the individual tasks for a sales representative can be preparing the customer list, gathering necessary material like presentations, brochures and other material, preparing presentations for the customer and so on. The second step “specification of methods of performing each task” involves describing how the individual tasks are to be performed. For example, if we take the task of preparing presentation, the method of preparing presentation varies depending upon the sale. For personal sales you will be already having companies printed material or slides or PowerPoint slides. In an industrial sale you need to prepare the presentation according to the customer requirement. Here, you have to work accordingly to the method provided in the job design and complete the presentation task. In case of a technical product like software, the job design may recommend you to take approval of various other stakeholders’ i.e. technical departments and their financial heads for the approval of the cost parameter mentioned in the presentation. The third step, “combination of tasks into specific jobs to be assigned to individuals” deals with describing job title and the nature of work to be handled. For example in many firms which handle industrial sales, it’s important that some of the sales representatives concentrate only on the development of good relationship with the customers while others help in assisting the sales representative in preparing the presentation, solution for customer and arranging the technical meetings with customer. The former falls under the “Sales Manager” and the latter falls under the “Pre-sales Manager” job titles. So the combination of tasks like preparing presentations, identifying solutions within the budgets, integrating the objectives of the internal team members of the company and the customer would be the work of pre-sales team. In this manner, a set of activities are combined to create the job titles for the employees.
Let us now look at various methods in which the jobs can be designed that are best suited for both the company and the employees in meeting their objectives and needs. 9.4.2 Job designing techniques Jobs which aim at meeting the expectations of both the company and the employee can be designed in mainly four ways as shown below:Job Designing Techniques
Job Simplification
Job Rotation
Job Enlargement
Job Enrichment
a) Job Simplification Job simplification aims at decreasing the complexity nature of job by breaking down it into various tasks. Each task is assigned to employees to master it and gain experience in that task. Hence each task acts as a specialization for the employees. This method aims at increasing the productivity for the company by decreasing the level of mental and physical effort and executing the tasks appropriately. For example, in telesales the sales representative will get the list of the customers most of the times and hence his/her task is reduced in identifying new customers. The only task will be to just dial the customer and try to make the sale. Job simplification has its own advantages and disadvantages. Some of the advantages include: increased productivity minimal training requirements
less qualified workforce can be used as the job is simplified decreased salary costs for the organization Job simplification may not always work for the company as it has some disadvantages which include: Employees might get bored of repetitive work Low satisfaction and motivational levels in the long run Increased attrition rates In order to overcome these advantages and create enough motivational level another job design technique “Job Rotation” is being employed. b) Job Rotation Job rotation aims at shifting the jobs for an employee in required intervals in order to remove the boredom and create enough motivational levels to work for the organization. Job rotation also aims at helping the employees in gaining more insight about the company processes. The employee might be put into an altogether new job in case he needs to improve his skill set. For example, a sales representative who is in telesales might be shifted into personal sales to improve his skill set and learn the job. Some of the advantages of job rotation include: Decreasing the level of boredom or monotony in the job Increasing the motivational levels Improving the skill set of the employees Helping the employees in their career growth and hence more satisfaction levels Decreased attrition rates Job rotation provides more number of benefits but it is not void of some of the disadvantages such as:-
Job rotation might leave the employee many challenges in performing and sometimes may de-motivate them if not performed well Training costs go up as new training is required for the new job c) Job Enlargement Job enlargement is the reverse of Job simplification which aims at decreasing the complexity of a job. Job enlargement deals with assigning additional tasks and responsibilities for the employee and expects them to work better. It is found that job enlargement would increase the power of an employee which motivates him/her to take up challenging tasks in the organization. For example, the sales representative who is handling the personal sales of only technical products might be given the consumer care products too. Another example would be the sales representative who is handling the pre-sales of software projects might be given the pre-sales of hardware products too. The advantages and disadvantage of job enlargement are similar to that of the job rotation. Another disadvantage which is seen in job enlargement is increased workload for the employee in future which he/she might not be able to handle. d) Job Enrichment Job enrichment is different from enlargement. In Job enlargement additional duties are assigned which enables different natures of job to be performed. Often Job enlargement is done to downsize the work force, where as job enrichment deals with improving the quality of job by assigning new responsibilities and increasing the autonomy. Here the emphasis is on the quality of work rather than the quantity. For example, the sales representative who is in presales would be given the duty of sales manager for a certain period of time providing him/her to meet the customer personally by travelling to the customer site which would usually be in other countries. Another example includes giving the employees the flexibility to work from home, allowing the employees to carry out the work the way they want to, informing the employees about the contributions he/she made to the organization, providing better working conditions with recreation facilities etc. Any part of activity which enriches the work place and the job is thought as job enrichment process. Advantages includes:-
Increased satisfaction and motivation levels Increased autonomy to decide about the execution of work Increased confidence levels Some of the disadvantages include: Increased cost in training for new jobs Difficulty in monitoring the performance regularly After the job design activity, it is time to start the recruitment and selection process.
SAQ3 1) Explain three steps of the job design process with suitable illustrations 2) Explain the advantages of job enlargement over job simplification 3) Explain the significance of job enrichment in improving the motivation levels of the employees
9.5 Recruitment and Selection The objective of recruitment and selection process is to select the right candidate for the required job description. There are many ways in performing the recruitment process depending upon the nature of job description. In this section we shall understand about the key parameters the recruiter should be looking at in the recruitment and selection process. 9.5.1 The recruitment process One of the activities of recruitment process is to select the candidates and short list them for the interview. The list of candidates can come from many sources. In broad the sources are referred to:-
a) Internal Sources: Identifying employees within the company who can take care of job. Here the employees from various departments may shift into the department where the vacancies are available or a promotion will be given within the same department and fill the vacancy. b) External Sources:
Here the candidates will be selected from outside the
company i.e. who are not currently working with the organization. Companies might advertise in newspapers, job portals, magazines etc to attract the talent available. Most of the times companies go to well known reputed educational institutes to get the list of candidates who are eligible for the section process. A successful recruitment process enables the highly talented list of candidates who could be employees of the organization. Recruitment process should be done carefully in short-listing the candidates for the selection process. Selection process should be done in such a way that the candidates skill set is matching with the required skill set as mentioned by the job description activity. There can be various parameters which the recruitment process would look at before short-listing the candidates such as the family background, employment history, educational qualifications, hobbies and interests. All these factors play important role in judging the candidate for the suitability for the job. 9.5.2 The Selection process Kujnish (2006) describes a typical selection process which is explained by the following diagram:-
Preliminary Interview
Application form
Testing
Interview
Employment offer
Physical examination
Reference checks
The preliminary interview is done as a process to filter out the candidates who do not fit the job description. Application form should be designed in such a way that it captures the necessary information which is required to evaluate the candidate across the skill set required by the job description. For sales representatives, attitude, communication skills and analytical skills are very important; hence the testing phase should be prepared so that it captures these skills. The testing phase can be just an interview or can have a written test and a group discussion. After the test has been completed, the candidates will be short-listed according to their performance for an interview round. During the interview much emphasis should be given in the attitude of the candidate rather than the skills. Two basic ways in which the interview can take place are:a) In a comfortable mode, where the recruiter would bring the atmosphere to the comfort level of the candidate and then start observing the behaviour of the candidate. b) In a stressed mode, where the recruiter would put the candidate under a lot of stress by asking a lot of questions and then observe the candidates reactions. Doing an interview in these two ways is important in order to judge the candidate for sales job as the sales representative would have to encounter both the serene and pressure environment while making the sale. Previous work experiences and references should be cross checked before selecting the candidate for the job. Physical examination is important to ensure the candidate is in good state of health as he/she requires traveling during the sales job. Finally after all the selection process and the candidate qualifies for it he/she will be given the employment offer which describes the nature of work, job title, salary, any contract period etc. SAQ 4 1) Describe the ways in which the candidates can be obtained during the recruitment process for selection. 2) Explain the important characteristics you would like to test the candidates in the interview for a sales representative job.
3) Explain the importance of reference checks and physical examination in the selection process.
9.6 Summary In this unit we have understood the job characteristic model which describes any job in terms of different dimensions which measure the nature and requirements of the job. We have also understood the job analysis by describing the nature of the sales job and the identifying the skills required. We understood that sales job is a challenging work and requires good communication skills, fast learning capabilities, positive attitude and behaviour, multi-tasking abilities and the ability to self motivate. We have later discussed about the steps that involve in creating a job design and understood these steps in the context for sales representatives. Later we have studied various job design techniques such as job simplification, rotation, enlargement and enrichment in creating the job which are beneficial for both the company and the sales representative economically and in career growth. In the last section of the unit, we have examined the critical nature of the recruitment process in identifying the right candidates for the selection process. We have understood the basic model of selection process and looked into various ways in which the selection process will be handled for a sales representative job. We have also examined the skill set that needs to be evaluated in the interview phase of the selection process.
9.7 Keywords 1) Extrinsic motivation
It is the motivation that is driven by external factors apart from the nature of work like the money, awards, recognition etc
2) Intrinsic motivation
It is the motivation that is driven by the nature of the task assigned in the work place.
9.8 References
1. K. Aswathappa (2005), “Human resource and personal management: text and cases”, Tata Mc-Graw Hill, India. 2. Kujnish Vashisht (2006), “A practical approach to sales management”, Atlantic Publishers and Distributors, India. 3. Ram Nath Sharma, Rachana Sharma (2004), “Guidance and counselling in India”, Atlantic Publishers and Distributers, India. 4. Stephan P. Robbins (1999), “Organizational behaviour: concepts, controversies and applications”, Prentice Hall, India.
9.9 Suggested Readings 1. Darin E. Hartley (1999), “Job analysis at the speed of reality”, HRD Press, USA. 2. Thomas N. Ingram, Raymond W. LaForge (1989), “Sales management: analysis and decision making”, The Dryden Press, New York, USA.
UNIT 10 TRAINING THE SALES FORCE Structure 10.1 Introduction Objectives 10.2 Training process and objectives 10.2.1 Sales Training Process 10.2.2 Training program objectives 10.2.2.1 Imparting attitude skills 10.2.2.2 Notifying organization policies 10.2.2.3 Bestowing organization culture and values 10.2.2.4 Understanding the goals and objectives 10.2.2.5 Developing the team working skills 10.2.2.6 Developing the product/ service knowledge 10.3 Training process and analysis 10.3.1 Source and type of training program 10.3.2 Program Design 10.3.3 Action Planning 10.3.4 Feedback and Follow up 10.4 Summary 10.5 Keywords 10.6 References
10.7 Suggested Readings
10.1 Introduction In the previous module we have understood about the characteristics and the skill set required for a sales job. We have understood the significance of carrying out a well defined job analysis and design in creating the jobs that best suits the profile of the candidates. We have also understood the importance of recruitment and selection process in identifying and selecting the right candidates for the job. In this unit we shall understand the importance of training program in shaping up the employees to perform their job effectively. In this unit candidate means the employee who is undergoing the training program. Before the initiation of training program, it is very important to understand the objective of it. The main objective of the training program is to inculcate the required knowledge, skills and attitude and make employees more productive to the organization. In this unit, we shall understand the objectives of the training program and the benefit it provides to the sales representatives and the company. Identifying the sources for training is an important task which decides the quality and impact of the training program. We shall understand also understand the program design for the sales representatives in terms of contents, logistics and the feedback process. Once the training source and the needs are analyzed, the next step is about action planning i.e. the actual implementation of the training program. For a sales representative training, there might be a considerable difference of what is being taught in the training and what is being done in the market place. Hence, action planning has to deal with such problems using various teaching methodologies, technical tools etc and impart training program that is closely related to the market place. No training program would end without a feedback process. Feedback process should not end with just taking the trainees comments but has to include the follow up
process as well. In this unit we shall understand about the importance of the follow-up activity for a sales representative training program. Objectives After studying this unit you will be able to:1) Understand the steps in sales training process 2) Define the objectives of sales training program 3) Identify the importance of attitude skills for the sales representative 4) Identify the type of training program required 5) Explain the design of the training program 6) Understand the importance proper action planning 7) Highlight the need of feedback and follow up
10.2 Training Process and objectives After the successful recruitment process you will have the best talent your organization requires. It is now the duty of the organization to conduct the necessary training program and make use of the talent in increasing the revenue for the organization. 10.2.1 Sales Training Process Let us understand the typical sales training process as explained by Ingram (2009):Asses Sales Training Needs
Set Training Objectives
Evaluate Training Alternatives
Design Sales Training Program
Fig: Sales Training Process
Perform Sales Training
Conduct Follow up and Evaluation
The 1st step sales training need assessment deals with identifying the necessary skills, attitudes, perceptions and behaviours of the sales representatives. The 2nd step deals with setting up the training objectives i.e. the necessary measurable outcome of the training program. The 3rd step deals with identifying various alternatives to conduct the training. The 4th step deals with the design part of the training program which involves identifying the training program period and modules and the necessary skills to be imparted, logistics arrangements etc. The 5th step performing the sales training is the actual implementation of the sales training program which deals with the way how the training is conducted and the methodologies adopted by the trainer in imparting the necessary skill set. Once the entire training process is completed, follow-up and evaluation dealing with analyzing the quality of training program held and the benefit received by the candidates and the organization need to be conducted. We shall learn more about the individual steps in the training process in subsequent sections in this unit. 10.2.2 Training Program Objectives Training is a continuous process in the employer’s career. Training might be required whenever a new designation is given in the appraisal system. So having the set of objectives in place for any training program is an important task. Let us now look at some of the common objectives which most of the training programs would try to achieve:10.2.2.1 Imparting Attitude Skills We have already studied in the earlier units about the importance of positive attitude for a sales representative. Sales job is a challenging one which requires positive attitude and continuous self motivation. For a candidate who has passed out from college, imparting attitude skills is a significant task. Apart from positive attitude, there will be a necessity to impart professional behaviour skills as well. Sales representatives may notice other employees advance in their career by shortcuts. It is therefore very important that the training program highlights the importance of hard work. Hence, in brief some of the objectives in imparting the right attitude skills would include:-
Imparting positive behavioural attitude Encourage the candidates to depend on hard work rather than shortcuts Inculcate the willingness to work even in difficult times Recognizing the importance of self motivation Understand the importance of value system Improving the leadership qualities i.e. ability to take challenges 10.2.2.2 Notifying organization policies Clear understanding about the organization policies will decimate any future misunderstandings between the employees and the organization. Every training program should make it clear about the organization policies to the employees. In brief, Organization policies may include the following: Dress code of the employees Work schedules and facilities when working overtime Logistics provided like internet, telephone connections, faxes etc. Rules and regulations as per the government laws for proper behaviour with employees, smoking regulations etc. Salary structure, designation, employment type i.e. regular or contract and other benefits like Insurance, LTA etc. 10.2.2.3 Bestowing organization culture and values It is important that the employees/ candidates who have joined the organization are imparted with the organization culture and values. This is done as an attempt to increase the loyalty towards the organization. During the training programs a lot of importance is given in this activity. The main objective in doing so is to create a sense of feeling that the company is for the employees and the employees are an important
asset for the company. The candidate unless is a fresher, might have worked with several companies and will have a mixed feeling of self belonging with the present organization. The previous company might be the competitor of the present organization and he/she might have to compete with their friends to make the sale. So, for a sales representative it is very important that he/she shows a lot of dedication towards the work in the present organization and would overcome any personal relationships in making the sale. Hence, imparting the organization culture and values is very important for the sales representatives. Another important reason for inculcating the organization culture and beliefs is to convey that: Employees are working in a positive organization which cares for the employees all the time The group in which the employee work will be a positive group 10.2.2.4 Understanding the goals and objectives Before getting into any work it’s is important to understand the goals and objectives of the work. In any training program the goals and objectives should be clearly stated so that the employees can be mentally prepared to face the challenges in the work. For example, if you are the pre-sales representative and if you have been promoted as the sales representative for the Asia Pacific Region, then you should clearly know the objectives of the work and the goal that is to be achieved every quarter. Objective might be to gain some customers in the countries of Asia Pacific region where the presence of company is null. The goal may be to increase the revenue or sales by at least 15% of what it is in the previous quarter. Hence the employees must be given realistic goals and objectives for each training program. For the newly joined candidates, he/she must be explained about the expected objectives from the work and the goals to be achieved.
10.2.2.5 Developing the team working skills
The nature of work will vary upon the type of sale you make. In personal selling, the sales representative will be alone most of the times, hence there would be the needs of a team work. But when you come to the industrial/ institutional sales, team work plays a significant role. For example industrial sale can be selling a network platform to the telecommunication company or installing the technical product like servers in the customer company. In such cases, the selling process may involve the sales team, presales team, technical team, finance team, testing team and many more depending upon the sale. Hence the sales representative should know how to perform in the team and perform and effective sales process. Some of the team working skills include: Identifying the coordinator for the team Caring for the opinions of the entire team members Effectively managing the time available among team members Monitoring the performance of the team members and checking for any lag in the action plan Clearly assigning the duties among team members Ensuring a proper and timely feedback mechanism among the team members It is very important that the coordinator for the team has the leadership qualities to ensure proper functioning of the team in making the sale. 10.2.2.6 Developing the product/ service knowledge The basic requirement to sell a product/ service is to know completely about them. The training program must take care that the entire description and features of the product/ service is conveyed to candidates. The basic thing which the sales representative must know before going for a sale includes: About the company of the product/ service The list of competitors and their similar products/ services
The complete set of features of the product/ service The benefits the product/ service provides to the customer The key competitive advantages of the product/ service over the competitors The price and the maximum allowable discount for the product/ service The installation time and after sales service available with the product/ service In this section we have understood the training objectives and the necessary skill set required by the sales representatives. The following diagram helps in understanding SAQ 1 1) Explain the sales training process with a neat diagram 2) Narrate the importance of notifying the organization policies to the employees 3) Explain the need of developing organization culture and values in the training program 4) Identify the necessary product/ service knowledge required by the sales representative before going for a sale
10.3 Training program implementation and analysis The training objective might be excellent, but the outcome mainly depends upon the way the training process is implemented. The success of many training programs depends upon the trainer i.e. the source for training. Selecting the best trainer is a challenging task. Let us now examine the various sources available to train the candidates. 10.3.1 Source and type of training The sources for training can be internal and also the external to the firm. It depends upon the availability of the right trainer for the program. If there is no availability of the well qualified internal trainer within the organization, then the HR department may consult an external company who specializes in the training programs. The type of
training program for the newly joined candidates depends upon the recruitment process as stated below: If the recruitment process selected already well qualified candidates with work experience relevant to the job description, then only an induction program which is common to all the applicants would be enough If the recruitment process selected the fresher who doesn’t have any experience about the job, then a detailed training program would be required explaining about the job the candidate needs to perform If the recruitment process selected the candidate within the company as a part of the appraisal system, then the induction program may not be required and the training has to take care of the additional duties that have been assigned to the candidate Most of the times if the candidates have no time for training or the nature of job demands gaining expertise in the field rather than like a classroom setting, then the best way to train is by “on the job training”. On the job training involves training the candidate by assigning the actual work in the workplace with the real resources he/she would be using in the job. On the job training has many advantages and disadvantages too. Let us look at some of the advantages as stated below: Economical Way: On the job training may not require external training classes and may not incur the expenses for a good trainer and the logistics. Right from the day1, candidate will be presented with the job to do under the guidance of a supervisor who may be his/her higher authority at the work place Better test environment: This training process gives the opportunity to test the candidate’s performance in the real test environment throughout the training program. This might be very helpful for the supervisor to known the candidates key strengths and weakness and will be able to provide proper feedback for improvement
Proper Feedback: Since the trainer is the real candidate who has experienced the nature of work and faced challenges in the past, you as the candidate would get the right feedback that might help you to face the challenging tasks Some of the disadvantages of the on the job training program includes: Time consuming: Unlike in the regular training programs where the trainer will be available all the time, in on the job training program you may have little time spent per day with the supervisor as he/she may not be available all the day to train you since they have to perform their regular daily work. Lack of theoretical knowledge: A regular training program will provide the necessary theoretical knowledge which might be helpful for the candidate in his/her job when faced with unexpected challenges which he has not experienced in the past Monotonous way of cognitive development: The candidate may start thinking like the supervisor all the time when facing with the challenges in the job. It is important to know that the supervisor view point in handling a challenging situation may not be true all the time, hence the candidates have to use their own cognitive abilities to judge the problem and arrive at a solution Suited for a small group: This type of training might not suitable if the candidates are in larger numbers. A separate training program would be best in such a scenario 10.3.2 Program Design Program design deals with designing the program with necessary content, logistics and feedback mechanisms. Fortunately or unfortunately in most of the training programs the trainees are not involved in the design process. Some of the guidelines while designing the training program includes: Training program must be designed according to the time available
Feedback of previous participants must be taken into account to improve the current training program Desist the desire to pack in everything in a single program i.e. not more than a couple of skill set must be imparted in a training program Have multiple training programs at regular intervals to add on the required skill set, for example have the separate training programs for presales, sales and post sales activities for the sales process Design should be done in such a way that the candidate is not over burdened Training program should have a mechanism for obtaining the feedback from the candidates after their field work 10.3.3 Action Planning Action planning the training program deals with the actual implementation process. Action plan should deal with the program design in a manner to make it interesting and encouraging the participant to learn more from the training program. Some of the guidelines include the following: Training program should be a combination of lecturers, exercises, cases, simulations, role plays/ mock sessions etc., whichever is necessary to enhance the training program The training program shouldn’t be monotonous Make use of anthropological approach in handling the training program i.e. understanding the training needs of the candidates from the candidates perspective rather than your own judgments Treat the candidates as adults i.e. they have the necessary level of training requirements and only a proper direction in implementation is required
Don’t wish away the candidates objections in the training program i.e. the objections of the candidates are mostly real as they are from the field and have faced it in the past Training process should encourage a two way learning process between both the trainee and the trainer Don’t be penny bound while conducting the training program i.e. provide the best trainer even if it cost a little high for the company Identify a trainer who can go off the topic have discussions, bring in the mode of the candidates and then start the topic again. This is very useful in long training programs which may run into weeks or months. Provide decent logistics to the candidates as studies reveal that candidates learn faster in a better environment Training program should aim at developing the candidates to take responsibility and challenges, as in good organizations the sales employees take the target as compared to weak organizations where the targets are given Necessary training technologies should be used for example, if the sales representative uses CRM softwares then training program must use the actual application and handling techniques Avoid the classroom setting i.e. make use of a circular setting which favours group discussions Make use of outdoor training whenever required i.e. making the teams with the experienced employees and going on for actual sale process i.e. if you are in a training program for a personal sale then you and the experienced employee can go together and make a sale
10.3.4 Feedback and Follow up Training program should have a proper feedback process to know about how informative the training process is? The feedback mechanism also provides about the necessary changes that are required to be done in order to enhance the training programs in the future. Feedback process may also include the feedback given to the candidates by the trainee. Follow up activities are very important in the training process because of the following reasons: Training programs might be effective only for a limited period Employees might fall back to their own work style Employees might face new problems in the field and a follow up is required to remove such problems SAQ 2 1) Explain various types of training provided to the employee in an organization 2) List the advantages and disadvantages of on the job training method 3) Illustrate various guidelines to be followed while designing a training program 4) Identify various issues to be dealt with during the action planning stage 5) Explain the importance of feedback and follow up in an effective sales training program
10.5 Summary In this unit we have learned the various steps in performing the sales training process. Sales needs should be identified and the candidates for training are selected. Once the candidates are selected the training objectives should be set. We have understood various objectives of the training program like imparting positive attitude, self motivation capability, leadership qualities and many more which are essential for the sale representative to keep mentally fit in the challenging sales career. We learned that it is important for the candidate to know about the organization policies, culture and values,
goals and objectives, product/ service knowledge etc. before working in the job. Hence the sales training has to acknowledge all these and make the candidate aware of his duties and responsibilities. We have examined that the industrial sales need a lot of team work and hence sales training have to take care of imparting the team working capabilities among the candidates. In the latter half of the unit, we have want about the source and type of training required for candidates. We have understood the merits and de-merits of on the job training for the candidates. We have also examined various guidelines in the program design and the action plan to ensure an effective and efficient sales training program. We have observed the importance of selecting the best trainer and the facilitation of two way learning process on the candidates performance. We have seen that every objection from the candidates have to be acknowledged and cleared in the training program. Finally, we have understood the importance of the feedback and follow up to ensure that the candidates are applying the knowledge gained in the training period in their field.
10.6 Keywords 1) Anthropological Approach
Understanding the training needs of the candidates from the candidates perspective rather than your own judgments
2) Simulations
The act of stimulating the behaviour of a situation or a process in a suitable way i.e. performing the field situation in a training hall in a suitable manner
10.7 References 1. Thomas N. Ingram, Raymond W. LaForge, Ramon A. Avila, Charles H. Schwepker Jr., Michael R. Williams (2009), “Sales management: analysis and decision making”, M.E. Sharpe Inc., New York, USA.
10.8 Suggested Readings 1. Mark W Johnston, Greg W Marshall (2009), “Sales Force Management (9th Ed.)”, Tata McGraw Hill, New Delhi, India. 2. Ralph W. Jackson, Robert D. Hisrich (1996), “Sales and Sales Management”, Prentice Hall, New Jersey, USA.
UNIT 11 COMPENSATION AND MOTIVATION OF THE SALES FORCE Structure 11.1 Introduction Objectives 11.2 Role of the sales manager 11.3 Motivational factors 11.3.1 Compensation scheme/ package 11.3.2 Role of Incentive systems 11.3.3 Non-monetary reward systems 11.4 De-motivational factors 11.5 Summary 11.6 Keywords 11.7 References 11.8 Suggested Readings
11.1 Introduction In the previous unit we have understood the importance of a well planned training program in incurring the benefits both for the sales representatives and the company. We have understood that the performance of the candidate is a result of the type of training program employed. Once the training is finished, the candidate will be assigned the duties and responsibilities in the company. We have learnt already that the sales job
is a challenging one and requires constant self motivation. Motivation can depend on several factors. In this unit we shall understand the relationship of motivation and various factors which facilitate the candidate to be motivated all the time. Motivation is mostly seen as the direct outcome of the relationships between the sales manager and the representatives. In this unit we shall understand the role of a sales manager in keeping his/her representatives motivated all the time. We shall understand that compensation is only one of the factors which motivate the sales representatives to work. In the unit we shall understand that the sales representatives who newly join in the organization have enough motivational levels, but during their course of work various de-motivating factors results in low enthusiastic levels to work. Hence, the role of a sales manager includes identifying such de-motivating factors and eradicating them. In this unit we shall learn about various de-motivating factors and means to eradicate them from the work place. Various systems can be used such as monetary and non-monetary to develop the enthusiasm to work better. In this unit we shall discuss various monetary rewards like bonuses, commissions, profit or gain sharing etc. and various non monetary rewards such as stock options, better working facilities, recognition and awards. Objectives After studying this unit you will be able to:1) Understand the role of a sales manager in developing the motivation levels of the employees in the organization 2) Understand the guidelines to be followed in developing a better compensation package 3) Examine the role of incentive systems for keeping up the motivational levels in the employees
4) Explain the benefits of non-monetary reward system in sustaining the motivation levels in the employees 5) Identifying the de-motivational factors and steps to eradicate them from the work place
11.2 Role of a sales manager The sales for a product or service are carried out by different sales representatives. Hence, a sales manager is required to monitor the growth of sales, achievement target in time, coordinate various sales activities and controlling the staff to perform as expected by the company. Yet another important duty or responsibility of the sales manager is to take care of his employees at all times. Sales monthly involve field work i.e. going to the market place or to the customers and making the sale. Sales job involves less work at the office and more work in the field. Hence the level of interaction between various employees is quite less while compare to other job like software, testing etc. To keep up the team spirit within the company, it’s important that the sales manager interacts with all the employees socially after the office hours at regular intervals. He should be a boss in office, and a mentor/ philosopher outside office. Most of the sales people run into problems like family or health. A good sales manager should be able to understand the problems which the employees are facing and help in solving them. In most of the good organizations the sales manager would behave like one of the team members and help in leading the team to reach the targets and demonstrate leadership skills whenever required. Sales manager should also help in facilitating a proper feedback mechanism among employees and keep updating about the situation in their department. Sales manager has to find any training requirements required for the team and help to be provided with the same.
The challenging task for the sales manager is to keep up the motivation levels of his employees. As we have already understood sales job is mostly a lonely and challenging job; it requires a lot of self motivation to sustain. Sales manager has to indentify the motivational factors for the employees. Since these factors can be different for different employees identifying the right factor is an important task. In next section we shall learn about various motivational factors such as incentives, awards, recognition etc. and the way they alleviate the motivational levels of sales representatives. Another important task of the sales manager apart from finding out the right motivational factor for the representatives is to find out the various de-motivating factors which are prevailing at the work place. The ultimate objective of the using the motivational factor like incentives, recognitions, awards etc. is to ensure that the sales representatives work with enthusiasm all the times. It is observed that the employees are having enough motivation levels when they join the organization and as the time progresses, due to various de-motivating factors they lose out their enthusiasm to work irrespective of the decent salary structure and incentives. Hence, identifying the de-motivating factors and eradicating them from the work place is an important task of the sales manager. In the subsequent sections we shall understand various de-motivating factors which can lower the enthusiastic levels of the sales representatives. Hence, in brief the role of a sales manager would include the following: Leading the team from the front on every challenge faced by the sales representatives Facilitating proper communication channels either in the work place or off the work place to ensure that at least minimum level of interaction taken place between the sales representatives Understanding the problems and needs of the employees and help in resolving them Keep up the motivational levels of sales representative all the time
Indentifying the de-motivating factors Identifying training needs and areas of improvement for the sales representatives
11.3 Motivational factors There was a time when employees were not given enough consideration and more emphasis was laid down in the production process. But it was later recognized that companies who retained talented employees have a greater survival rate in the industry and the market place. Employees are not treated as just another component in conducting business, but are considered as the prime resource for every business activity and as an important asset of the organization. Various studies have been done on the fact that success of organization depends upon the satisfaction levels of the employees. In an organization, sales representatives may vary across the spectrum of which satisfy them to keep up the motivational levels. So, in this section let us analyze various motivational factors which are used by the organizations to sustain enough enthusiastic levels among their sales representatives. 11.3.1 Compensation scheme/ package One of the most attractive and encouraging factor for motivation among most of the sales representatives would be the compensation scheme or package there are entitled to receive at the start of the job. Organizations tend to pull in the best talent by offering effective compensation packages. The sales manager has to understand that often compensation is seen as a level of loftiness among the representative within the same hierarchy level. Hence enough care has to be taken in designing the compensation package for the sales representatives. Jackson (1996) described a five step approach in designing a sales compensation package as mentioned below:a) Prepare job descriptions
b) Establishing sales and other objectives c) Determine appropriate general categories of compensation d) Develop and pretest the compensation plan e) Implement and evaluate the plan The 1st step “preparing job descriptions” states that an elaborate job description should be prepared to take care of all the job responsibilities that the sales representative will perform. Some of the sales representatives may actively involved in selling like the onsite sales manager in the industrial sale and some of the sales representative involve more in a support role like the presales function. After preparing the job descriptions they to be analyzed in terms of difficulty level and the compensations should be planned accordingly. The 2nd step “establishing sales and other objectives” highlights the importance of measuring the sales targets achieved and also other objective in determining the compensation package. This step clearly states that compensation package should not be prepared based on only the volume of sales made. In fact other objectives like the number of new customers increased the difficulty levels in the sale, the efficiency parameters like the conversion rates etc have to be taken into account. This step highlights the fact that not only the volume but also the effort that has been put in generating the leads have to be taken into account while awarding the compensation package. The 3rd step “determine appropriate general categories of compensation” states that the compensation packages have to be categorically prepared depending upon several factors like education, experience, skill set required, nature of work etc. This process will help to align the people of similar abilities or skill set receive the same compensation packages thereby eliminating certain level of bias. The 4th step “develop and pretest the compensation plan” highlights the importance of developing the structure of the compensation package and pretesting it before actual implementation in the organization. Developing the compensation package should take
care of the basic package which meets the living expenses of the sales representatives and the variable component should be reasonable enough i.e. at neither too high or too low percentage of the entire compensation. Developing the compensation plan has to take care of the commissions too. The 5th step “implement and evaluate the compensation package” deals with the actual implementation of the compensation package for the sales representative and monitoring the effect of the compensation package in maintaining the required motivation level and attracting the talented pool to the organization 11.3.2 Role of Incentives Incentives play an important role in keeping up the motivation levels of the employees. Incentives may include yearly bonuses, commission rates based on the individual sales figures and commission rates based on the group or team sales figures, stock options etc. Zoltners (2006) describes that the sales force incentive plans effective the sales people and in turn on the sales force activities followed by customer results and finally the company results. The same can be depicted by the following diagram:-
Fig: Effects of sales incentive plan Hence planning a right incentive system is an important task for the sales manager. Bernardin (2008) explains various incentive pay for performance level of the employees. Let us examine them in detail:a) Bonuses: These are one time payments provided as a reward for the level of work done or objective achieved. This type of incentive system is often used to encourage the sales representative to work much better and harder in future. The sales manager has to understand certain issues when dealing with bonuses such as:-
The type of impact created by the bonuses is considered to be positive most of the times The impact depends upon the bonus amount Normally it is considered that one month salary pay to be the ideal bonus amount The timing of giving the bonus amount also matters a lot Usually the bonus should be given when the sales representative is in need i.e. during the festival season b) Commission plans: Commission is the percentage of total sales amount given to the sales representative for successfully making the sale. Often sales representative participate to push the products/ service for sale which offers them more commission rates. Some of the issues which the sales manager or the organization has to understand before deciding on the commission plans are: Commission rates should neither be too high or too low when compared with the other similar products Commission pay entirely depends upon the sales volume and in turn may be seasonal for most of the sales Sales representatives depend a lot on the commission rates for their living expenses During off season sales manager or the organization has to take care of the employees need by providing them with increased commission rates which can later be cut out during the sales season If the commission is dependent upon the team, then the sales manager has to take care that every member in the team works with similar efficiency and effectiveness Make sure that the group incentive pay is not too high in the salary component as employees tend to think that why they are penalized for other mistakes
c) Profit or gain share: Companies may share their increased profits or gains for the year or quarter among the employees of the organization. Depending upon the basic pay of the employee the gains can be distributed. Such incentive gives a sense of feeling that the employee is working in a growing organization and he/she has a bright future in the organization. 11.3.3 Non-monetary reward systems Whenever a monetary reward fails, non-monetary reward system may achieve success in sustaining motivation and dedication of the employees towards the work place. Let us understand some of the non monetary rewards as stated below:a) Stock options: The employee stock option is usually a call option which is given as a non cash reward or incentive system. A lot of employee would like to have the stocks instead of the cash rewards like bonuses. There are a lot of advantages in giving the stock options to the employees. Some of the advantages include getting a feel of his/her own company once the stock options are given. Employees tend to work better to generate more sales and in turn increase the value of their company and the stocks. Care should be taken such that all the deserving employees in the group should be given the choice of choosing the cash reward or the stock options. b) Better working conditions: The sales representatives who work well and achieve the targets might be given options to work from home and visit the workplace once or twice in a week to report. Other examples of better working conditions include providing the necessary logistics like better variety of food, increased cabin space, free telephone and internet services at home to a certain limit of usage, free insurance policy, better training facilities etc c) Recognition and awards: Recognition and awards help the sales representatives to gain respect and help in creating a unique identity in the work place. This type of reward works effective for the managerial level employees who don’t depend upon the monetary rewards for survival. This system also highlights the mile stones achieved by an individual in his/her career and also encourage fellow employees to achieve it and hence they work much enthusiastically.
SAQ 1 1) Explain the role of the sales manager in maintaining the motivation level of the employees 2) List out the advantages of bonuses in maintain the motivation level of the employees 3) If you are the CEO of the organization and have to select a reward system for the state level heads of the organization. List out the type of reward systems you would employ to motivate the employees. 4) Explain the advantages of stock options over monetary reward systems in improving the motivation level of the employees 5) Explain in brief the five step process of creating a well planned compensation package
11.4 De-motivating factors After learning about the various motivating factors, it is necessary to identify various demotivating factors at the workplace too. However good the motivating factors be, demotivating factors can cause damage to the employee motivation. Some of the demotivating factors include:a) Assigning two employees the same role and tasks when their pay scale vary enormously This is one of the main reasons for reduced productivity of the employees. The employees with less salary might do less work leaving the rest of the task to the one drawing higher salary. This can increase the time of completion or produce unsatisfactory results and also leads to extension of deadlines. It is good practice to place the employees with same salary structure under the same job description. This trend is highly followed in the call centers. No matter whatever your education background and skill set are, you will be always placed within the group of same salary structure for a particular job. Whenever your performance improves your salary would be increased and you might be assigned various other tasks.
This trend is seen quite less when it comes to IT companies who try to get the best talent by awarding varying salary according to the skill set or the educational background. b) Appraisal system failures Whenever the appraisal system fails to perform as per the employee expectations, it leads to the lower satisfaction levels. For example, if the company policies states that a minimum of 10% per year, then the appraisal system has to stick to the policies. If the company profits are decreased due to low demand in the market, this should not be reflected in the appraisal system by decreasing the salary hikes unless there is a situation that company won’t be able to survive if the hike percentage is not decreased. The appraisal systems shouldn’t be affected just to make the balance sheets to look better. c) Improper or poor facilities Whenever the working conditions are not good the employee may not be motivated enough to work. Working conditions may include the following: Poor infrastructure at workplace like old computers, desks, lack of air conditioning, no proper power backup facilities, lack of hygiene conditions etc Lack of better supervisors who can take care of their employees needs at the work place Poor planning and facilities for working at odd timings i.e. if you work for an extra time you are supposed to get the transport facilitates. If there is no transport facilities available after the regular working hours this might discourage the employee to work overtime and complete the work before deadlines.
11.5 Summary
In this unit we have understood that the sales manager hast to take care of the sales representative needs and lead them in facing the challenges effectively. Sales manager has to understand various motivational and de-motivational factors of the sales representatives. We have learnt that it the duty of the sales manager to keep up the motivation level of their employees by identifying the right compensation packages. We have understood that a good compensation package can be designed in a five step process which takes care of preparing job descriptions, establishing sales and their objectives, identifying categories of compensation, developing and pre-testing the compensation plan and finally implementing and evaluating the compensation plan. In the later part of the unit, we have discussed various incentive plans which include the monetary benefits like bonuses, commissions and profit sharing to keep up the motivation levels and give a sense of feeling that company would always take care of their employees.
We have understood the benefits of non-monetary benefits in
improving the motivation levels. We have also discussed various guidelines to be followed
while
given
monetary
or
non-monetary
benefits
among
the
sales
representatives. Finally in this unit we have looked into various de-motivating factors and steps to avoid or eradicate them from the work place.
11.6 Keywords 1) Call Option
The stock options where the buyer has the right to buy the option but not an obligation to buy at a expiry date of the option at a certain price as stated in the agreement
11.7 References 1. Ralph W. Jackson, Robert D. Hisrich (1996), “Sales and Sales Management”, Prentice Hall, New Jersey, USA.
2. John H. Bernardin (2008), “Human Resource management”, Tata McGraw Hill, New York, USA. 3. Andris A. Zoltners, Prabhakant Sinha, Sally E. Lorimer (2006), “The complete guide to sales force incentive compensation”, Amacom, New York, USA.
11.8 Suggested Readings 1. Terence Jackson (1989), “Evaluation: relating training to business performance”, Kogan Page Ltd, London 2. Earl D. Honeycutt, John B. Ford, Antonis C. Simintiras (2003), “Sales management: a global perspective”, Routledge, New York, USA
UNIT
12
MONITORING
AND
PERFROMANCE
EVALUATION Structure 12.1 Introduction Objectives 12.2 Role of a job description in objective settings 12.2.1 Direct sales force 12.2.2 Indirect sales force 12.3 Role of sales manager in monitoring and performance evaluation 12.3.1 Sales force monitoring guidelines and objectives 12.3.2 Quantitative and qualitative factors of monitoring 12.4 Building better team working skills 12.4.1 Advantages of team work 12.4.2 Ten step process in building better team working skills 12.5 Summary 12.6 Keywords 12.7 References 12.8 Suggested Readings
12.1 Introduction In the previous unit we have understood the importance of motivation in performing the sales job and the role of a sales manager in identifying the motivating and de-motivating factors of the sales representatives. In this unit we shall understand about the importance of monitoring and performance evaluation of the sales force performance in both the direct and indirect sales. The main objective of monitoring the sales force is not about finding faults in the performance of the sales team but the process of monitoring and evaluation should be used as a mechanism to identify the problems and areas of improvement. Once the areas of improvement are identified they have to be inculcated into the sales force through the proper training methodologies. The ideal question which comes to every sales manager while monitoring and performance evaluation is “what factors need to be measured to identify the true potential of his/her sales force?” In this unit we shall identify the two ways of measuring the sales force efforts in terms of quantitative and qualitative factors. We shall also understand the advantages and disadvantages of measuring only quantitative factors. Ultimately at the end of the day it is the sales target which matters to most of the sales managers. We shall understand the relationship between the efforts and the sales target achieved in this unit. It is ideal that the sales force is well informed about the monitoring factors and the time periods of evaluation well in advance. It would be much better if they are mentioned in the job description so that the employees would perform well to meet the performance parameters. In this unit we shall understand the job description of the sales force and the ways of improving the job performance activities. Finally in this unit we shall understand about the importance of a good team work. We shall discuss about various advantages for the organization by helping the sales force to work in teams. We shall also understand various steps that help in facilitating a better team work in the organization.
Objectives After studying this unit you will be able to :1) Identify the role of job description in objective settings 2) List the factors that affect the performance of sales force in direct sales 3) List the factors that affect the performance of sales force in indirect sales 4) Explain the importance of identifying the true performance of sales force for the organization 5) Explain the procedure for evaluating the sales force 6) Understand the objectives and guidelines in sales force monitoring process 7) Explain the list of Qualitative and quantitative factors in monitoring and performance evaluation 8) List the advantages of good team working skills and explain the steps in creating better team working skills
12.2 Role of job description in objective settings Job description as discussed earlier units informs the employees about their duties and responsibilities at the work place. One must identify the set of tasks he/she needs to perform according to the job description. Objectives have to be set and employees have to work towards achieving them. In most of the job descriptions the nature of work and various accountability factors will be mentioned. In some of the job descriptions you may find the working conditions also such as extensive travelling, working on the net all the time, taking continuous phone calls etc. In this section let us understand about the job description which helps in setting the objectives for the employees. Company makes a practice that monitoring and
performance evaluation would be on the objectives set according to the job description. Let us now look at the direct and indirect sales force job description or activities they need to perform. 12.2.1 Direct sales force Direct sales force involves mainly a one to one selling scenario. Several tasks need to be performed in order to effectively handle the sales such as:a) Contacting the prospect b) Communicating with the prospect c) Ensuring logistics during the sales process d) Performing after sales service activities e) Building rapport and keep in touch It can be observed that no where the objectives indicated to generate revenues to the organization. It is intrinsically implied that when all the objectives are performed well, it leads to the maximum revenue generation. Hence the main objective of evaluation process should be to identify the efforts rather than the revenues. The main objective is to create demand for the products/ services by performing all the tasks in an efficient and effective way possible. Whenever the sales force doesn’t perform well, various factors needs to be analyzed. Less revenue generated need not be exactly due to the inefficiency of the sales force. Various internal and external factors might be responsible for the low revenue generation. Some of the internal and external factors that can be responsible are: Poor performance by the marketing department Change in market dynamics Change in the customer preferences Inefficiency of the MIS division
Marketing division plays with the tools of marketing mix in creating a demand for the product by identifying the right product, place, place and promotion strategies for the target segment. If the marketing department couldn’t perform well in identifying and executing the right strategies, then it can be a difficult time for the sales force in generating leads for the product/ service. Hence marketing department can influence the sales figure considerably. This factor should be analyzed before determining the performance of a sales force. The next factor is change in market dynamics. Market dynamics as discussed by businessdictionary.com states that it is “interaction between forces of demand and supply and the pricing signals they generate. In most free or open markets any significant part of market dynamics is beyond the control of any firm or group”. Hence it should be understood that the change in market dynamics such as the supply-demand changes may sometimes lead to a decreased sales revenue and the sales force couldn’t have fore-fended it by any means. The third factor “changes in customer preferences” might affect sales revenue. The reason might be due to the presence of many alternatives to the customer. Whenever a product/ service are launched for the first time by your company, it may result in good sales revenue. But in today’s world the competitors copy your strategy and introduce similar products/ service leading to the presence of many alternatives. This can happen both in direct and indirect sales. Another reason might be that the customer is offered prefers much better services. For example, if you are the sales representative who sells an ozone purifier and if the customer prefers the “RO+ UV+ ozone” purifier, then you may not have much to do to convince the customer rather than getting the similar product from your company. The final factor is about the “Inefficiency of MIS division” within the company. MIS stands for Management Information System which helps the company employees in taking strategic decisions before the start of any product/ service. MIS helps in formulation of marketing strategies. When effective MIS systems are not in place then due to insufficient information generated by such systems might lead to the improper strategy implementations and finally in lesser lead generation by the sales force.
Hence we have understood that the sales revenue shouldn’t be the only factor for evaluating the sales force performance and external factors have to be analyzed too in order to know the true performance of the sales force. Now let us look at some of the factors that need our attention in indirect sales force monitoring and evaluation process. 12.2.2. Indirect sales force In direct sales, the sales force are not directly employed by your organization but are entitled by a contract to sell your product/ services. Indirect sales force can be resellers, whole sellers, retailers etc. to whom your company sales force sells the product. Let’s us now understand some of the factors which needs to be analyzed in making up the conclusion on performance evolution of the sales force who sell the products/ services to the indirect sales force. Some of the factors are: Availability of stock Visibility of stock Stock piling in the pipeline The first factor to be analyzed is the availability of stock. There can be many situations where the demand for the product is high and the availability of the product is less. Nothing can be done by the sales force if the manufacturing department doesn’t supply with necessary product stock. In such cases the competitor may gain the customer. Hence comparing your sales figures with the competitor doesn’t help in correct evaluation of the performance of the sales force. The second factor visibility of stock refers to the efforts made the sales force in shelves making the product/ service visible to the customer. In retailing the products end up in shelf’s where the customer will be looking for them. If the product is placed in such a way that it is not at all visible to the customer, it may result in decreased sales figure. Most of the times, the sales force wouldn’t be having any control on the way the retailer places your products. Hence such scenarios have to be identified and the sales force must negotiate with the retailer to get better placement of the product in the retail store.
Hence this factor should also be analyzed before analyzing the performance evaluation of the sales force. The third factor stock piling in the pipeline is an important factor which the sales manager has to take into account for proper evaluation of the sales force. Let us look at a typical scenario how the goods move in the indirect sales before reaching the final customer by the help of following diagram:-
Company
Primary
Distributor
Secondary
Retailer Tertiary
Customer
Fig 1: Indirect sales force pipeline In the above diagram it can be understood that in indirect sales the company produced goods will reach the distributor through the company sales force. The distributor is known as the primary customer, the retailer as the secondary customer and finally the customer who consumes the product/ service is known as the tertiary customer. The distributor distributes the goods among various retailers who in turn sell the goods to the final customer. In such cases the sales figures are determined by the number of products sold to the distributor. In the start the sales might be less but as time progress the sales figure might improve drastically showing almost double or triple figures in sales volume. This increase might be due to the efficient work done by the sales force and can be used to determine the performance of the sales force. But sometimes the increase in sales might be just due to the piling of the stock. When the products are sold to the distributor they might get piled up at that level and may not move to the retailer due to various reasons. Sometimes the good might get piled up at the retailer in his/her store due to low sales. Hence it is important to analyze these situations before arriving at a conclusion about the sales force performance. Sales
manager has to look at how many products/ services have be sold to the tertiary consumer rather than just looking at the sales to the primary consumer. In some other models of the indirect sales, you might also have the whole-seller within the pipeline. Irrespective of the number of intermediaries in the sales process, the sales figure should be arrived by looking at the sales done to the final customer who consumes the product/ services. SAQ 1 1) Explain various factors that affect the performance of direct sales force. 2) Explain various factors that affect the performance of indirect sales force.
12.3 Role of a sales manager in monitoring and performance evaluation One of the main objectives of the recruitment process is to hire a sales team which performs well as per the organization expectations. Once the recruitment process is finished it is the role of the sales manager to duties to various sales representatives within the team. Once the jobs are assigned, they need to be monitored and evaluated to identify the true performance of the sales representatives. Identifying the true performance of the sales force is an important task because of the following factors: Identifying the performance helps in identifying the areas of strengths and weakness in the sales force Proper training can be provided to improve the performance of the sales force When performance evaluation identifies the true potential of the sales force, it would be easy to identify the ideal goal setting Unrealistic goal setting can be avoided and the motivation levels can be kept high
The attrition rate of the organization can also be decreased if realistic goals are set and the sales force could achieve them with their efforts Hence it is clearly understood that the sales force performance evaluation plays a key role in the organization. It is the role of the sales manager to identify the performance of the team in a correct way. Spiro (2003) explains a procedure for evaluating the sales people which is depicted by the following diagram:-
Establish basic Policies
Select Evaluation bases
Set performance standards
Compare performance to standards
Discuss results with sales people Figure 2: Procedure for evaluating sales people The procedure states that establishing basic policies will help in identifying the people who will monitor the entire process. The next step is to select an evaluation bases and then set the performance standards. Once the standards are set then compare the results in the evaluation process with the standards and then discuss them with the sales people. Identifying the objectives and guidelines play an important role in the procedure for evaluating the sales people. Let’s us now understand certain guidelines and objectives the sales manager should be looking at in the monitoring and performance evaluation process. 12.3.1. Sales force monitoring guidelines and objectives Sales manager has to be clear about the objectives he/she wants to achieve through the monitoring process. Monitoring process may vary from company to company, but all the monitoring processes have some common guidelines and objectives. Let us look at some of them in the following:-
a) Don’t monitor too closely and frequently Monitoring would be done at regular time intervals by the sales manager. The time interval depends upon the product/ service, the frequency of sales and organization policies. Most of the companies make a habit of reviewing the performance at least once in every quarter. Quarterly reviews would be done and performance sheets will be prepared for every department. We have discussed in earlier units the salary component includes a variable component whose amount is determined by the individual/ team/ department performance. In many companies the quarterly linked pay performance is determined and given once in every quarter. Apart from quarterly reviews, many companies adopt even monthly, weekly or daily reviews. The sales manager might adopt one of the intervals for monitoring and performance evaluation. The guideline for the sales manager here includes not monitoring too closely and frequently. Frequently may be everyday or every week or every month depending upon the business. For example, the sales force for insurance product will be given mostly monthly target such as 20-30 customers per month for each sales representative. In such cases daily monitoring is considered as frequent. Whereas, if the sales representative who sells the mobile connections may be involved with higher targets and hence more sales figures. It would be ideal to monitor the sales daily. Sometimes the sales manager would monitor two times in a day, once in the afternoon and verify the sales figure and might push for better performance by evening if the sales are low. Too close monitoring might result in a decreased motivation levels when the target are not achieved by the sales representatives. Such cases of decreased motivation levels are seen frequent in telephone sales at the call center. Mostly the sales representatives at the call center will be monitored at the end of the day and their performance chart will be prepared and reviewed in the morning next day. Any representative who misses the target by small margin shouldn’t be treated as a low performer. Hence too close monitoring should be mostly avoided and the sales manager has to work with the sales force for improvement in the sales process.
b) Identifying the gap in skill set After identifying the low performers in the sales force by monitoring and performance evaluation, the next is to identify the real problem for low performance. One of the main reasons could be lack of skill set required to perform well. In such cases a proper training process should be identified to improve the individual skill set. For example, the sales force in a call center would be evaluated daily for their performance. If the sales representative cannot perform well and the reason for his low performance is poor communication skills, then the sales manager has to work on it and provide proper training. Many a times the communication skills are poor due to the influence of one’s mother tongue, hence it has to be worked out and develop a neutral accent which is acceptable by the company need to be developed. If the reason for low performance is lack of attitude and behavioural skills, then the sales manager has to remove him/her from the work force and put into a training program and evaluate his/her performance in the training process. Once the trainer is satisfied about his/her improvement then the sales manager might induct him back into the workforce. Hence, identifying the gaps in skill sets is a very important objective of the monitoring and performance evaluation process. Converting the process to mentoring or training should be the primary objective in such cases. c) Identifying other problems at the work place like poor working conditions, trade conflicts etc. The reason for low performance might be due to several de-motivating factors as discussed in the earlier unit. The sales manager should have to work in identifying such factors and try to remove them. One of the important factors for low performance in direct or indirect sales is “trade conflicts”. This is a major problem in many companies and the sales manager has to clearly identify them and resolve. The entire region such as city of a country would be divided into different regions for easy monitoring. Every region will be assigned a sales
force for selling in that region. As per the company policies, most of the times the sales force are not allowed to get into another region and promote sales activities. Whenever such cases arise where the sales representative of one region entering into another region and sells, it might lead to the higher sales figure for that representative and also the conflicts between the sales representatives who are authorized to sell in that region. This result in the following problems such as: Improper performance evaluation of the sales force Unethical practices Trade conflicts Hence the sales manager has to identify such reasons in the monitoring process and try to resolve them to identify the true performance of the sales force of different regions. The sales manager should identify the points of sale and look for any violation in following the terrestrial jurisdiction by the sales force. 12.3.2 Quantitative and qualitative factors of monitoring To determine the performance of the sales force, sales managers make use both the qualitative and quantitative factors. Most of the time quantitative factors play a major role in deciding the performance of the sales force. There are many reasons why the sales manager prefers the numbers. One of the reasons is that the quantitative factors lead to an unbiased way of performance evaluation process. It should be understood that the evaluation process shouldn’t just rely on the quantitative factors and we also need to analyze certain qualitative factors as well in determining the true performance of the sales force.
a) Qualitative factors Some of the quantitative factors monitoring and performance evaluation include the following:-
Number of sales Revenue generated Expenses incurred Percentage growth in sales compared to last week, month, quarter, year etc. Net profit generated b) Qualitative factors Some of the qualitative factors monitoring and performance evaluation include the following: Improved customer satisfaction levels Improved team management skills like taking responsibilities, being accountable etc. Improved behavioural skills within the team Decreased conversion rate i.e. improved success rate in gaining the customer Improved time management skills It is important that both the qualitative and quantitative factors must be analyzed before making a conclusion about the performance of the sales force. It is observed that the team management skills and better team work would have a direct affect on the performance of the sales force. Hence, let us understand in the final section of the unit about the steps in developing a better team work in the organization.
SAQ 2 1) Explain the procedure for evaluation sales people.
2) Explain the importance of identifying true performance of sales force for the organization 3) List various quantitative and qualitative factors and explain their significance in understanding true performance of sales force
12.2 Building better team working skills One of the main success factors in sales is the ability to work in teams. This is a very important skill set especially in industrial and institutional sales. The team working capability posses a lot of advantages which help in improving the performance of the sales force. In brief, let us understand some of the benefits of team work. 12.4.1 Advantages of team work Following are the list of some advantages of a team work for the organization: Improvement in the speed of operations due to collective efforts Decrease in the error rates due to collective decision making Improvement in the problem solving capabilities in the sales process Better way to learn the process for the fresher Development of team managing capabilities Generating enough enthusiasm in the work place Leads to an increase in motivation levels Ability to handle bigger sales in terms of revenue since the workload would be distributed
12.4.2 Ten step process in building better team working skills Now let us take a look at the steps which will ensure better team working skills among the sales force. They are:a) Clear goals and objectives within the team b) Meaningful appropriate leadership for the team c) Motivation and empowerment d) Facilitating effective communication process within the team e) Monitoring the team performance on a regular basis f) Taking care of individual development within the team g) Developing the support and trust among team members h) Giving fair rewards and incentives to individuals within the team i) Establishing a sense of belonging and pride of association among the team members j) Regularly identifying problems within the team and resolving them in time This ten step process will help in improving the team working skills and every sales manager should help in developing excellent teams within the organization. SAQ 3 1) Explain the advantages of working in a team for the individual and the organization. 2) List the ten step process in creating a better team working skill set
12.5 Summary In this unit we have understood the importance of job description in objective setting of the sales force. We analyzed various internal and external factors that affect the performance of the sales force. We understood the role of the sales manager in handling the performance evaluation process and discussed a standard procedure for evaluating sales people. Later we have looked at various guidelines and objectives of the sales force monitoring and evaluation process. We have learnt that identifying the gaps in skill set and other problems like trade conflict and resolving them is very important to improve the performance.
We also looked at various qualitative and
quantitative factors in determining the true performance of the sales force. We finally agreed that the better team working capabilities will facilitate in better performance and examined various advantages of working in a team. Finally in this unit we looked at the ten step process in building better team working skill set.
12.6 Keywords 1) MIS
MIS
stand
for
“Management
Information
Systems” which provide the information which is needed to run the business effectively. It helps to provide information to respective departments for strategic decision making.
12.7 References 1. Spiro Stanton Rich (2003), “Management of a sales force”, Tata Mc-Graw Hill, New York, USA
12.8 Suggested Readings 1. Andris A. Zoltners, Prabhakant Sinha, Sally E. Lorimer (2006), “The complete guide to sales force incentive compensation”, Amacom, New York, USA. 2. Mark W Johnston, Greg W Marshall (2009), “Sales Force Management (9th Ed.)”, Tata McGraw Hill, New Delhi, India.
UNIT 13 SALES PLANNING Structure 13.1 Introduction Objectives 13.2 Sales planning process 13.2.1 Elements of sales planning 13.2.2 Types of sales planning 13.3 Role of sales plan for B2B and B2C markets 13.3.1 B2B markets 13.3.2 B2C markets 13.4 Summary 13.5 Keywords 13.6 References 13.7 Suggested Readings
13.1 Introduction In the previous unit, we have understood about the sales force monitoring and performance evaluation. We have also looked at the advantages of team work and steps in creating better team working skills. In this unit we shall understand about planning the sales and the sales team. The objective of planning the sales and the team is to carry out the sales process in an easy, accurate and profitable manner for the organization. Sales planning should ensure that the resources are used to the maximum
capacity such as the sales representatives, CRM systems like office automation tools, IVR, analytics etc. for the benefit of the organization. Sales planning activity should be able to take care of all the present customers needs and also work for generating leads from them in future. In this unit we shall understand about various elements of sales planning. Sales plan starts with sales objectives which are to be attained at the end of sales planning process. Forecasting plays an important role in laying down the objectives for the sales team that are attainable within the given time period. Sales policies, procedure and rules help the sales representatives to handle day to day situations in sales. Sales programme provides the necessary training needs to develop the required skill set to make the sales. We shall also learn about the various types of sales plans depending upon market, selling functions, customers, products and time period. Sales planning process varies for B2B and B2C markets and hence in this unit we shall understand various activities that the sales plan has to perform to manage the sales in these markets. Handling distribution channels, warehouse, retail stores and price changes are very important to ensure sales in a profitable manner. We shall discuss about various issues that needs to be planned and executed properly and monitored at regular intervals in B2B and B2C markets. Objectives After studying this unit you will be able to :1) Explain the objectives of the sales planning process 2) Understand the importance of forecasting in objective setting in the sales planning process 3) Explain the role of policies, programme, rules and procedure in the sales planning process.
4) Identify the role of a sales plan for B2B and B2C markets and explain the need for handling warehouse, retail, distribution channels, and price changes to make sales in a profitable manner. 5) Explain the importance of sales strategy in winning the market place in all times 6) Explain the various types of sales plans
13.2 Sales planning Sales planning process includes a set of activities that needs to be performed to achieve the goals or objectives of the sales force. It is the duty of the sales manager to create a plan that is well documented and which ensures proper management of logistics, finance, manpower, inventories and purchases. Sales planning document is the single most important document which ensures a proper direction on how to handle the sales functions. Let us now understand the various elements and types of sales planning as described by Mukesh (2006) in the following section. 13.2.1 Elements of sales planning The main elements of sales planning include the following:Selling Objectives Sales Policies Sales Programme Elements of Sales Planning
Sales Procedures Sales Rules Sales Forecast Sales Budget Sales Strategy
a) Selling objectives This includes the list of objectives that need to be attained after the completion of the sales planning process. The objectives should be realistic and attainable. For example, if the sales representative is selling insurance products to the customer, a target of 20 to 30 insurance product sales per month is mostly an achievable or realistic target. If the sales planning document sets the objective as 100 insurance products, then it might not be achievable most of the times by many sales representatives. Hence the objectives must be achievable and be completed in time. The objectives may be short term or long term in nature. Short term objection include those that have to be achieved in a quarter or a year and long term may include several years. Some examples of short term objectives include improve the sales figure by 15% as compared to the previous year. Long-term objectives may be to establish the company presence in new countries or continents in the next 2-3 years. Another important objective is to maintain a contact with all the key customers on a weekly or monthly or quarterly basis. Since we have already discussed that attaining a new customer would be costlier than trying to retain the existing customer, it is very important to contact the customer and take his/her feedback or problems on a regular basis. The time period of contact may vary from company to company and from sale to sale. Once the objectives are created it‟s time to look at the overall sales policy. b) Sales Policies Sales policies provide the guidelines to the sales staff to help them in performing the sales activities. Policies help the sales representatives in achieving their targets. For example, when a sale gets returned by the customer, the refund policy will guide the sales representatives how to deal with the situation effectively, so that the customer will be handled with care rather than getting into an argument. The sales policies also help in clearly identifying the right pricing for the customer depending upon the relationship the customer shares with the company. For example, if the customer is loyal to the
company and is doing sales from several years, the policy would inform the sales representative about the maximum discounts that can be given to such customers. We encounter may such cases where the sales representative look at the previous transaction and gives discount to make customers stay loyal to the company in future. For instance, when you renew the existing software like educational software or antivirus for another year, then the sales representative would give you a discounted price most of the times. Hence the policies would help in achieving the targets easily and help the sales representative in handling the day to day sales tasks effectively. After the sales policies let‟s now look at the next element namely sales programme. c) Sales Programme Sales programme are essential to ensure the sales representative can handle any sales situation which they are entitle to perform. Sales planning should clearly mention the required skill set in handling the sales and the programme appropriate to incur those skills in the sales representative. Sales programme may be necessary whenever the a new product/ service is introduced by the company. Sales programme is also necessary when the sales representatives handle sales from new territories which they haven‟t sold any product/ service in the past. Cross-cultural training would be given most of the times, when the sales include the customers other than the native country. Sales programmes help to develop the necessary skill set in achieving the sales objectives effectively and in given time period. Let us now look at the next element of sales planning namely “sales procedures”. d) Sales Procedures Sales procedure is the sequence of various activities that need to be performed for different sales functions. The sales procedures vary from sales to sale and from market to market. Sales procedure for a business to consumer sales varies greatly from
business to business sales. The sales procedure may include meeting the customer, explaining the product / service through slides, use closing techniques, take the order and following up. The procedure for B2B sales may indicate to take a complete team from various departments who are the stakeholders in the project to carry out the explanation of the product/ service. The procedure for the B2C sales may indicate that a single representative is enough to handle the task. Even the time intervals for follow-up activities are mentioned which vary for B2B and B2C sales. Let us now look at the next element “sales rules”. e) Sales Rules Sales rules indicate the set of actions that need to be performed and not performed depending upon the situation. For example, in credit card payments, if the customer is asking for the refund of the late payment fee, then the rule says clearly not to refund if the amount is received after the due date. Hence, the sales staff is not permitted to refund the amount no matter how loyal the customer is with the company. In some cases, refund could be done. For example, when there is some genuine reason for the late payment, such as the due date is on a non-working day for the bank due to festival, curfews or any other natural disasters etc. In such cases the sales staff would refund the amount if the rule mentions to refund the amount. Even in personal sales, the sales representative would be given rules that the maximum discount to be given on the product and the maximum amount of credit that the sales staff can give to the customer to pay the dues. Hence, it‟s the duty of the sales staff to contact the customer within the stipulated timeframe and collect the dues. Let us now look at the next element “Sales Forecast”. f) Sales Forecast Sales forecast lays the foundation of sales planning and objective setting. Based on the sales forecast the sales manager would know the sales that could be attainable for the coming period (next quarter or year). Various time series analysis tools such as trend estimation, moving average, weighted moving average, exponential smoothing etc may
be used to forecast. Forecast can be also done based on the predictions done by the industry experts. Methods can be many but the aim of forecasting is to identify clearly the demand and plan the sales activities to generate more leads to the business. Sales forecast also help in identifying the strategies to gain the market share. If the forecast turns out to be negative i.e. the industry sales are going to dip, then the company may execute their operations effectively to retain the existing customers and attract the new customers.
Hence, forecast is a very important element in sales
planning and we shall discuss more about this in the coming units. Now, let us look at the next element “Sales Budget”. g) Sales Budget Sales budget identifies the necessary expenditure that is occurred in making the sales. The sales budget estimates the revenue based on sales that would be generated and identifies the profit for the organization after subtracting the operation costs of the sales staff. The sales budget would clearly set the standards for the sales team in terms of the expenditure that is permitted to incur upon the sale. For example, when the sales staff goes for selling the product, the maximum expenses that can be incurred would be mentioned and the sales representative has to maintain his travel expenditure and other costs within that limit. Maintaining the operations within the budget becomes a complex task in B2B sales where the sales team had to travel to the customer site many times before the sale happens. Hence the sales manager has to see that the operation costs are under control and provide some mechanisms like video conferencing to reduce the travelling costs. Once the operational costs are under control, attaining the profitable level in sales would be a little easier to achieve. Let‟s us now discuss the next element “sales strategy”.
h) Sales Strategy Sales strategy involves how the company is going to act in the market place with the products/ services. The market is dynamic and competitive in nature which makes the companies alert all the times with their pricing and position strategies. Positioning the product is very important since in the past many excellent products have failed due to improper positioning. The product/ service which need to be sold have to be properly priced when compared to the competitors. The strategies have to be in place to justify the price if it‟s higher than the other similar products in the market. The sales staffs have to be given proper training before employing any strategy in the market place. If the product/ service price is not changed even when the rivals have dropped their prices, then the sales staff have to make sure that they can explain to the customer clearly about the reason for high price stating any competitive advantages of the product/ service over the rivals. Acting smart and ensuring that the sale is generated is the part of the sales strategy. The company, who can handle the sales strategies in the market place, is likely to be the winner. Hence the sales planning process contains the above discussed elements and helps in attaining the sales objectives in the required time period. Let us now discuss the various types of sales plans that can be created to ensure the sales staff works effectively for the organization at all times. 13.2.2 Types of sales planning Let us look at various types of sales plans in an organization:a) Sales plan on the basis of market area Whenever the sales are done in the entire country, then the entire region would be divided into several areas depending upon certain characteristics. A simple segregation would be dividing the entire country sales into different states and assigning a head for each state. For example, the in the telecommunication business, the telecom plans
varies from state to state and within the state it remains the same. There are some services which are applicable for the entire country too. Even the promotional offers vary from state to state depending upon the nature of the business in these states. Some products in FMCG sector are very strong in south and have a little presence in North and hence the companies may introduce special promotional campaigns which are available only to the northern states to improve leads. Hence the sales plan would vary from region to region. b) Sales plan on the basis of selling functions Sales team performs several functions such as promotions, follow up activities, presales and sales activities etc. Hence the company lays out various sales plans for each activity if necessary. c) Sales plan based on type of customers Most of the companies believe that 80 percent of the business comes from 20 percent of the key customers. Although each and every customer is important to the company, the survival of the company depends on those 20 percent in difficult times. Hence following the same sales plan for all the customers wouldn‟t be practical since the key customer have to be handled more effectively. Hence the companies may have different sales plan for the key customers. Also the company may have different sales plan for customer depending upon the markets like B2B or B2C. d) Sales plan based on the type of products Every product/ service may not have the same selling activities. Hence having different sales plan is essential to handle the sales effectively. For example, if the company produces technical products, services, FMCG goods etc. it needs to have separate sales plan for the FMCG goods and the technical products and services. e) Sales plan based on the time period There are different sales plan for long term and short term objectives of the company. For example, increasing the sales in the already existing territory and getting sales in
new territories can‟t have the same sales plan. Acquiring the new territory would be a long term objective where as increasing the sales in existing territory would be a short term objective which would be a 1 year time period. For the both, strategies would be different and the operation costs would be different. Hence having a separate sales plan would be good for both the short term and the long term objectives. SAQ 1 1) Explain the importance of setting the objectives in the sales planning process 2) Illustrate the importance of sales policies, program and rules in the sales planning process 3) Identify the problems with wrong forecasting in the sales planning process 4) Explain the various types of sales planning.
13.3 Role of sales plan for B2B and B2C markets Sales planning process would be different for B2B and B2C markets most of the times. Hence let us understand the essential activities that need to be performed and monitored in these markets to make the sales profitable to the company. 13.3.1 B2B markets B2B markets deals with the business to business deals where the time management is a critical factor for the customer satisfaction. Since the sales process takes place for months, maintaining the progress in sales is very important. The sales staff has to stick with the timings given by the customer and ensure that all the team members are present at the right time. The sales plan would deal with customers and plan the activities. There is no standardization of activities which can be applied to several customers. Since the requirements differ from customer to customer, the B2B sale plan has to deal with a flexible plan and plan the resources accordingly.
Forecasting plays a very important role in preparing a sales plan for B2B customers. The customer health in financial terms is very important and hence the customer business trend is observed time to time. Most of the times the sales are on credit basis with timely payments in regular intervals. Monitoring the forecast of the customer business will give a clear picture of the company future sales. For example, if the company is selling product „X‟ to the customer who in turn sells it to the customers as an accessory in his product, and if the customer business in future sees a down trend for the product „X‟ then it clearly indicates that the leads in future will take a downturn. In such case the company has to use appropriate sales strategies to sustain in the market place. Let us now look at B2C markets and some of the sales planning activities.
13.3.2 B2C markets B2C markets deals with business to the customer who uses the product/ service for his/ her own benefit. Sales plan in B2C market has to deal with several issues related to the warehousing, distribution channels and retail. Let us look at each one of them in detail:a) Handling warehouse effectively The sales plan has to take care that the stock of goods are ensured at all the times to handle the demand. Hence the sales plan deals with the right forecasting of the demand and give it to the manufacturing department at regular intervals so that they have the clear picture of how much and when to product the products. Problems may occur when the goods are produced more or less than the required quantities by the market. In case of over production, goods lie in inventories there by adding up the inventory costs. In case of low production, companies may lose the customer to their competitors if the goods are not available. Hence the sales plan has to ensure that the correct information is being supplied to the manufacturing department which meets the demand and supply effectively for the organization.
Another important activity which the sales plan has to take care is to plan the warehouse according to the tax structure. For example, in India if the product in a state is not selling well and the stock has been lying idle in the warehouse, then taking the idle stock and selling in adjacent states may incur the tax of that state. Hence double taxation may take place and the profit on the product may go down to such a level where it incur loses to the company. Hence knowing the taxation structure is very important to plan the warehouse accordingly. Having the knowledge about the no tax zones also helps in decreasing the costs.
b) Handling distribution channels The sales plan has to ensure that the regular checks are done so that the products may not end up lying in the distribution channel i.e. with the distributors due to less demand. Sales plan has to take care that the goods are distributed in necessary quantities only and are not pushed excessively into the market when the demand is less. Excessive distribution of good may damage the relationship between the distributors and the company. This process is very critical in case of perishable goods like fruits, vegetables etc. If they lie more time in the distribution channels then the chance of them getting sold to the end customer gets decreased. It is the task of the sales plan to ensure that proper checks are done to remove excessive stock of perishable goods from the distribution channel and store them appropriately in inventories and sell them when the demand rises. c) Handling retail stores The sales plan has to ensure that the sales staff visits retail outlet on monthly basis and check for the stock of goods. Products that are lying for more time means that more costs have to be incurred for the shelf space. In organized retail, the shelf space comes at a cost and in case of unorganized retail, excessive stock means the company might enter into credit situation with the retailer as he/she will not be able to pay. More credit in retail may lead to untimely payments and bad relationships.
Hence the sales plan has to deal with such situations and ensure that the stock is sold properly and any excessive stock has to be removed from the retailer place. Sales plan also has to ensure that the stocks are made available all the times incase when the demand rises. Retailer interests have to be taken care of and ensuring required supply will improve the relationships. d) Handling the price changes Since the tax rate may go up in developing countries in small time periods and also issue of inflation, the cost of the product needs to be increased to meet the operating costs and profit margins of the company. Hence the sales plan has to handle any such situations where the price needs to be increased. As on date the government allows 1015 days time to sell the old stock above the MRP. Hence necessary sales activities have to be performed to deal with the price changes in the market place. SAQ 2 1) Explain the role of sales plan in B2B markets 2) Explain the role of sales plan in handling the warehouse, distribution channel and the retailer to make sales in profitable manner.
13.4 Summary In this unit we understood that the sales planning process helps in achieving the sales in a profitable manner. We saw that the sales planning process consists of several elements. The selling objective deals with setting realistic and attainable objectives which the sales team would work for. We learned that forecasting plays a very important role in predicting the future sales and setting the realistic objectives. We understood that the sales procedures, rules and policies provide guidelines to the sales representative in handling the sales task effectively. We have understood that sales plan includes the programme which ensures that the necessary skill set is inculcated to the sales staff to handle the sales. We have also understood the importance of sales strategy to win the
market place in all times. Later in this unit we learnt about the various types of sales plan depending upon the market, selling functions, customers, products and time period. Finally in this unit we have discussed the role of sales plan in managing the sales in B2B and B2C market. We have also understood that the sales plan has to effectively manage the warehouse, distribution channels, price changes and retailer in making the sales in a profitable manner to the company.
13.5 Keywords 1) IVR
Interactive Voice Response, is a technology that allows computer technology to interact with humans
2) Logistics
Management of the supplies and transport required for an operation
13.6 References 1. Mukesh Trehan, Ranju Trehan (2006), “Advertising and sales management”, V.K. Enterprises, New Delhi, India
13.7 Suggested Readings 1. Matthew Schwartz (2006), “Fundamental of sales management for the newly appointed sales manager”, Amacom, New York, USA.
UNIT 14 SALES ORGANIZATION Structure 14.1 Introduction Objectives 14.2 Introduction to Sales organization 14.2.1 Need for sales organizations 14.2.2 Sales organizations challenges 14.3 Sales organization structures 14.3.1 Different sales organization structures 14.3.2 Principles of a sales organization 14.4 Summary 14.5 Keywords 14.6 References 14.7 Suggested Readings
14.1 Introduction In the previous unit we have understood the role of sales planning process. We have seen a sales plan for B2B and B2C markets and looked at various sales plan. In this unit, we shall understand about the sales organization and its structure. Sales organization is important for the organization to ensure that the sales plan is executed in a profitable manner within the organization. Sales organization defines the span of control within the organization. It also defines the hierarchy levels among the employees and decision making system within the organization. We shall understand the need for a sales organization structure within the organization to improve the productivity of the sales department. Sales function is a job that requires to be monitored at regular intervals. The monitoring process would be done by the sales manager who has the span of control over the sales representatives. Sales job requires continuous motivation as discussed in earlier units. We shall understand the role of sales organization structure in improving the motivational levels of the employees and making them more productive for the organization. Every sales organization has some challenges to face internal and external to the organization that it needs to face. Hence it is important to understand some of the challenges which the sales organization structure would have to deal with in this unit. We shall understand that a sales organization is a function of product and selling method. Depending upon these two factors the sales organization structure would be different for the organizations. There are mainly two different types of sales organization structures namely flat and tall sales organizations. We shall understand about these and examine the advantages and disadvantages. Every sales organization structure lies on certain principles which results the structure to be more profitable to the organization. We shall look finally at some of the principles of sales organizations.
Objectives
After studying this unit you will be able to:1) Explain the needs of a sales organization structure 2) Explain various sales organization challenges 3) Explain different sales organization structures 4) Explain the various principles of sales organization
14.2 Need for sales organization Execution of the sales plan largely depends upon the nature of the sales organization. A sales organization is essential to plan sales functions. Sales organization provides a framework to carry out the sales plan in an effective manner. The development of a sales organization is a continuous process which depends upon changing market environment and also on the company’s interests. 14.2.1 Need for sales organization Sales organization is essential for many reasons. Some of them include the following:a) Determining span of control From day to day the organization size grows with respect to growing market size and demand. In a small organization there could be a single sales manager who takes care of the entire organization sales and the representatives. But when an organization grows it would be practical for a single sales manager to monitor the entire sales and the representative, hence the sales would be divided based on
some segments.
Segments can be formed on the basis of area, product or even customers profile. High value customer may be handled by a separate team of sales representatives or the country would be divided into north, south, east and west territories and handled separately by separate sales managers. Hence there is a need for determining the span
of control for the employees in the organization and define which employee is under the control of which manager. Another importance of having a well laid out span of control is to build strong relationships within the organization and establishing proper communication channels. b) Defining the decision making process Sales organization also helps in identifying who can take the decisions related to the sales and the customer accounts. There are two main ways of assigning the power to make decisions regarding the sales and the customer accounts. They are centralized decision making and de-centralized decision making. In a centralized decision making organization, the right to make a decision lies with the top management of the organization. The top management may or may not consult the respective sales team and the managers before taking the decision. For example, for an organization that has twenty branches in the country, but any decision related to the sales and customer accounts in these twenty branches will be taken by the top executives who sit in the head office. This type of centralized decision making organization works well when the size of the company is less. In a decentralized decision making organization, the right to make decision lies with the manager of the individual branch and the manager may or may not take the advice of the top management before making the decision. However any important decision such as setting up a new sales territory will be informed to the executives in the head office, but most of the decisions which need to be taken on a regular basis will solely taken by the manager itself. c) Assigning specialties Sales organization structure determines the tasks and roles for the sales people. A set of activities will be put under a role which the sales representative is expected to specialize. For an entry level, middle level and the top level the set of activities and specialties are defined by the sales organization. For an example, in sales organization the pre-sales executive is responsible for RFP handling, coordinating the team or
stakeholders within the company, monitoring the time, checking for the deadlines for submission of proposal and establishing proper communication channels among several team members to carry out the RFP handling process effectively and efficiently. The role of the sales team will be defined by set of activities such as travelling to the client side, interacting with client face-to-face, getting the RFP, submitting the RFP, knowing any issues with the proposal, arranging video/ audio session between the client and organization employees to better understand the client’s requirement and finally managing to get the lead for the organization. Hence the set of activities is known to the employees who join the organization as they will be assigned some specialty. d) Making a career path After the employee or the sales executive is assigned with a set of tasks under the specialization, he/she is expected to master the execution of duties in an effective and efficient manner. Once the employee has excelled in the given specialization, he/she will be promoted to the next level according to the sales organization structure. For example, in many companies when the employee has performed well in the presales role which is mostly done in off-site i.e. in the country where the company is established will be promoted to a sales role where the employee would get the chance to travel to the client location if the client is in another country. All the expenses would be taken care by the organization. e) Motivating the employees Since the career path is well known to all the employees, they try to work hard and with dedication to reach higher levels according to the organization structure. Also in the decentralized organization, due to the increased authority the employees would be motivated enough to work harder and generate leads that match up to company expectations.
14.2.2 Sales organization challenges Sales organization aims at improving the sales operations by defining the span of control and assigning duties and tasks to the employees of the organization. However, each and every sales organization structure may not be appropriate to the organization and may also result in lower productivity in the organization. Hence, there are some challenges for the organization which have to be taken care before selecting a sales organization structure which aims at improving the productivity of the organization. Let us discuss some of the challenges in detail. a) Selecting the appropriate sales organization structure In an organization, the sales organization is a function of mainly two attributes namely:-
i) Product
ii) Selling method : Direct or In-direct selling
Same sales organization structure may not be effective for each product or selling method. Hence identifying the right sales organization structure which is effective for the type of product and selling method is a challenging task.
For example, if the product involves an indirect sales method, let us say through retail outlets, having a centralized decision making process may not work effectively in making day to day decisions in sales. Hence the organization structure may require a decentralized system. Also for the non-durable goods which are also called as soft goods, the decisions for sales have to be taken quickly and most of the time the sales representatives or manager at the small division level would take the decisions and then inform to the higher authorities. Here also some level of decentralized organization structure is required. Some organization like IT companies that create services for their clients follow mostly a centralized decision making process. Here the clients would be companies who will invest heavily in acquiring the proprietary softwares and hence any decision regarding the client account would require higher authority permission. For example, if you are going to increase the cost for the software, then the permission would be required from the higher authorities or executives at the head office to implement your decision. Since these sales fall under industrial sales, it would be appropriate to have a decentralized system of decision making where the highly qualified and experienced employees make the decision. For consumer sales, as discussed earlier a decentralized decision making process would be beneficial as the real problems would be faced by the lower level employees at the branch offices and giving the decision making authority to those managers would solve the problems effectively. Sales organization also deals with the reporting structure between the employees of the organization. The same reporting structure may not be applicable for the direct sales and the indirect sales all the time, hence the sales organization structure needs to be different for direct and indirect sales. b) Accommodating the sales management trends The way how the sales are done differ from time to time. As discussed in previous units, the sales of the organization initially focused on the product rather than the customer. Nowadays, the customer has become more important than the product itself. Product is
seen just a single factor in making the sales effectively. Most of the sales functions involve in managing the customer relationships with the organization. You can refer to the CRM module to recognize the importance of customer relationships for an organization. Thomas (2009) mentions some of the sales management trends that have occurred in the changing world of sales management. Let us discuss few of them and the way the sales organization structure have to accommodate those trends in the organization. Some of the sales management trends include:i) Individuals Teams: In the changing world of sales management, the productivity for most of the industrial and to some extent in consumer sales depends on more than one sales representative. Hence there is a team which is responsible to handle the sales function. In such a case, the decisions would be appropriate if the entire team advice is not taken into account. In industrial sales, centralized decision making process exists most of the time, but the decision making executive has to take the feedback of the team who are involved in the sales function. Hence, the sales organization structure should be flexible enough to accommodate that change in its structure. Another important issue which the sales organization structure has to address is the span of control. This factor becomes very important and may lead to problems when the team members are from different departments. Since the team members are from different departments, their reporting would be to their respective managers in their departments. For example, an industrial sale may involve the team members from different departments like sales, technical, testing, finance, marketing etc. In such a team the sales manager who is looking after the sale cannot force the technical team or the finance team to do their work within given time frame as he may not have the authority. Hence the sales organization structure has to clearly mention the span of control in such situations. Another important issue is to identity the team manager who can clearly take the entire responsibility. Lack of leadership may result in many fights between several teams who
don’t want to take the responsibility when the sale fails. The sales team may blame the technical team for giving a solution which the client was not impressed and the technical team may blame the finance team for being the project costs too high and so on. Hence, such situations have to be avoided by creating a proper sales organization structure. ii) Local Global: The same sales organization structure may not work effectively when the company moves from being a local player to a global player. For example, let us assume that a company manufactures consumer goods both durable and non-durable. It also deals with the industrial and Institutional sales with several products and services in its kitty to offer. Such a company may follow an organization structure where the local market may be divided into regions and for each region a sales manager would be appointed. This sales manager might be given the responsibility to handle all the products that the company offers to the customers i.e. let us say, the sales manager of the Southern India is responsible for the sales figure for all the products and services of the company. Now the company plans to move into markets other than the local country where it might be the strong player. During globalization the company may not introduce all the products in the global market and might only introduce only few products/ services which have been a huge success in the local market and hence the organization structure may not be the same. A better sales organization structure would be to divide the products or services and appoint a sales manager responsible to take of only a particular product or service rather than all the products. Since the company is selling the products or services for the first time in global market, it is appropriate to have the sales managers depending upon the product rather than the regions. This leads to the changes in the sales organization structure. SAQ 1 1) Explain the needs of sales organization structure for motivating employees in an organization
2) Explain span of control and various decision making systems 3) Identify the outcomes of selecting an inappropriate sales organization structure to the organization. 4) Describe some of the management trends that the sales organization structure has to accommodate.
14.3 Sales organization structures Depending upon the type of product and selling method the company may adopt the sales organization structure. Many a times, the market situation also results in changing the sales organization structure. Let us understand some of the sales organization structures in the following section. 14.3.1 Different sales organization structures Sales organization structure differs depending upon the span of control and the number of management levels. Thomas (2009) defined two types of sales organization structures as shown below:Sales Organization Structures
Flat sales Organization
Let us understand them in detail:-
Tall sales Organization
a) Flat sales organization In a flat sales organization structure the number of management levels tend to be less while compared to the tall sales organization structure. The organization structure is explained by the following diagram:-
Fig 14.1: Flat sales organization In such a structure the span of control is large for each sales manager thereby creating a de-centralized system. Since the management levels are less, the reporting structure is also less complicated. Lot of companies try to have a flat sales organization structure where they can decentralize the system and give more authority to the employees at the lowest level to take most of the decisions without the influence of the higher authorities at the head office. There are several advantages and disadvantages of this sales organizational structure. Some of the advantages include: Increased speed of operations: since most of the decisions can be taken at the branch level and doesn’t require the higher authority permission, the day to day activities can be done efficiently. Better communication channels: Since the number of levels between the top management and the middle management are less, this leads to a better and faster way of communicating the information in the organization Decreased costs: Since the number of levels is reduced, the number of employees to manage the organization also decreases. This leads to the lower
wages to be paid and fewer resources like office space, computers etc. would be required. Some of the disadvantages include: Lesser control over employees: Due to decentralization, lesser control would be there on the decision making process which may affect the entire organization. Lesser promotion levels: Due to the decreased number of levels, the employees at the bottom level have to work hard to earn a promotion. Several employees work hard and stay in their current positions are there are no vacancies in the higher posts. This might become a de-motivating factor for the employees at work place. b) Tall sales organization In a tall sales organization structure, the number of management levels tends to be more while compared to the flat sales organization structure. The organization structure is explained by the following diagram:-
Fig 14.2 Tall sales organization
A tall sales organization, levels it has a centralized control of decision making and carrying out daily operations due to more hierarchy. Some of the advantages of the tall sales organization are: More promotion levels: Due to more management levels the employees can have a clear idea of to which level they will be promoted next. This leads to greater satisfaction levels and motivates the employees to work effectively and efficiently. Increased responsibility and control:
Due to lower span of control each
employee knows clearly their managers and the manager knows clearly which employees or sales representatives they have to take care of and control. The tasks are defined clearly to the employees who will be responsible for the outcomes. Some of the disadvantages include: Increased costs: Due to the more management levels, more employees need to be hired and hence more costs would be incurred to the organization. Decreased speed of operations: since the decisions have to approved by the higher authority due to centralized decision making process, the operation might take place slowly when compared to the flat organizational structures More supervision for employees: This might be a good from the organization point of view to improve the productivity, but from the employee point of view more supervision may become a de-motivating factor. 14.3.2 Principles of a sales organization Mukesh (2006) defines several principles of a sales organization. Let us look them in detail:a) Principle of unity of objectives: This principle states that within an organization there needs to be a unity of objectives. An organization may have several sales suborganizations depending upon the product and the selling method. Every sales sub-
organization has a set of objectives that it wants to achieve for the organization. Hence there would be several sales objectives within an organization. The principle states that all the objectives of the sales sub-organization must have the objectives linked to the main objective of the organization. If the main objective of the organization is to grow at least by 15% every year, then all the objectives of different sales sub-organization has to work to attain the main objective. b) Principle of Specialization: This principle aims at matching the employees skill set to the right set of tasks and in turn the right specialization. If the employees in the organization are given different set of tasks or specialization in which they have no skill set to perform the duties may result in low productivity for the organization. Organization may have to spend more money, resources and staff to train the employees to develop the skill set. In order to avoid such problems it is the duty of the sales manager and HR to clearly identify the skill set of the employees and assign those tasks which match the skill set. This results in more productivity and employee satisfaction. c) Principle of coordination: In an organization, the sales organization structure should provide a framework where it can easily integrate itself to various other departments within the organization. This can ensure that the products/ services are reached in time to the customer. After the sale, if the technical team were not able to process the customer requirement, then the technical product may not reach the customer within the required time period. Hence there should be some sort of integration between the sales department and the technical department so that the problem can be identified and the technical team may be reminded to speed up the operations. CRM systems can be implemented within the organization to seamlessly integrate the entire department within the organization and ensure the timely information between various departments. d) Principle of parity of authority and responsibility: This principle states that if an employee is given a set of tasks to perform, he/she must be given the required level of authority to perform those tasks. For example, if a pre-sales executive is asked to prepare the company competitive advantages presentation for the client to present in the sales meetings, and then he/she should be given the access to the knowledge
management system of the company. Every company has the KM systems which acts like a repository of the information about the previous projects executed successfully by the company. Hence the authority has to be given that is required for the task to complete. e) Principle of flexibility: This principle states that there can be many external and internal factors which might affect the organization operations. Hence the sales organization structure should be flexible enough to accommodate any required changes in future. For more principles, you may refer to the book mentioned in the reference section. SAQ 2 1) Explain various sales organization structures 2) Explain the principle of coordination and identify the problem due to lack of coordination to the sales department
14.4 Summary In this unit we understood about the need of sales organization in improving the productivity of the organization. We learnt that determining span of control is an important task which the sales organization structure would determine. The sales organization would also define whether the organization would follow the decentralized or centralized system of decision making process. We have understood that the sales organization helps in assigning the specialties to the employees so that they can master the set of tasks given under the specialty. Once the employee excels in the given job he/she will be promoted to the next level. We have looked at how the sales organization makes a career path for the employees and motivate them to improve the productivity levels for the organization. We have also looked at various challenges of the sales organization structure. We have understood that sales organization is a function of product and the selling method. We have recognized the importance of sales
organization to be flexible to accommodate any required management trends. Later in this unit we have understood the various types of sales organization structure namely the flat and the tall sales organizations and looked at various advantages and disadvantages of the same. Finally in this unit we have looked at various principles a sales organization must possess to ensure better productivity levels for the organization.
14.5 Keywords 1) RFP
A document which invites the vendor to submit the bid for the projects including the solution documents
2) CRM
Customer relationship management system is an information system which integrates the various
sales
departments
departments
within
the
with
organization
other for
information sharing about the customer.
14.6 References 1. Mukesh Trehan, Ranju Trehan (2006), “Advertising and sales management”, V.K. Enterprises, New Delhi, India 2. Thomas N. Ingram, Raymond W. LaForge, Ramon A. Avila (2009), “Sales management: analysis and decision making”, M.E. Sharp Inc., New York, USA.
14.7 Suggested Readings 1. Darlene M. Coker, Edward R. Del Gaizo, Kathleen A. Murray, Sandra L. Edwards (2000), “High performance sales organizations: creating competitive advantage in the global market place”, Tata McGraw Hill, USA.
UNIT 15 SALES FORECAST AND SALES QUOTAS Structure 15.1 Introduction Objectives 15.2 Introduction to Sales forecast 15.2.1 Importance of sales forecast 15.2.2 Preparing for a sales forecasting process 15.3 Sales forecasting methods 15.3.1 Non-qualitative forecasting methods 15.3.2 Quantitative forecasting methods 15.4 Planning the sales quotas 15.4.1 Factors in setting sales quotas 15.5 Summary 15.6 Keywords 15.7 References 15.8 Suggested Readings
15.1 Introduction In the previous unit we understood about the sales organization structure its challenges. In this unit we shall discuss about the sales forecast and quotas. Sales forecast is often
seen as an important function in an organization which provides valuable information about the market potential in future. We shall discuss the importance of sales forecast for the organization and the benefits it provides. Planning the sales forecasting process is very important as the outcome of the entire forecast depends upon how well the planning has undergone. During the planning stage, the data sources have to be determined and the right forecasting techniques are to be used. Based on the quality and quantity of the data and the method of forecasting employed, the accurate information about the market potential and various other management trends would be determined. There are mainly two broad categories of forecasting namely non-quantitative/ qualitative methods and quantitative methods. We shall several qualitative methods like jury of executive opinion, Delphi and scenario methods of forecasting. We shall also look at various quantitative methods like time series, regression and correlation methods. Planning the sales quotas is an important function of the sales manager which determines the level of achievement of the organization objectives. Several factors govern the way the sales manager assigns quotas to the employees. We shall understand that market size, competition levels, organization objectives, skills of the sales people and several other factors play a very important role in planning the right sales quota by the sales manager. Objectives After studying this unit you will be able to:1) Identify the importance of sales forecast 2) Explain various issues that have to be analysed in the sales forecasting process 3) Understand various non-quantitative/ qualitative methods of forecasting 4) Understand various qualitative methods of forecasting
5) Discuss the importance of a sales quota planning for the organization 6) Explains various factors to be analysed in setting the sales quotas.
15.2 Introduction to sales forecasting Sales forecasting plays a very important role in setting the objectives of the sales department. The accuracy in forecasting becomes the backbone for planning the company operations and business plans. Sales forecast provides the organization the information about the future sales which can help to plan the marketing mix and generate required leads. Let us look at the need of sales forecasting and the benefits it provides to the organization. 15.2.1 Importance of sales forecast In the earlier times the demand was more and the supply was less. Hence there was not much need of a sales forecast in the organizations. As the time progressed, due to the industrial revolution the companies were able to manufacture the goods in an economic way for the customers. Due to the decreased costs of operations more and more players have entered into the market to serve the customer needs and wants. During the present times the number of players for almost every business is more and the customers are increasing day by day, creating better opportunities for the industry to expand. More and more companies are increasing their territories through expanding their business operations and business acquisitions. Hence, planning the operations of the company and identifying the right sales and marketing strategies have become an important task for the managers in the organization. Sales forecast would help in better planning for the organizations in future. The following are some of the advantages of a sales forecast for an organization: Sales forecast helps in getting information about sales figures for the organization in future
Sales forecast help in understanding the business trends from time to time. For example the Health service industry is increasing adopting the CRM system and many hospitals and medical institutions are planning to adopt in future to service the customers in a better way. The increase in sales for the CRM systems would clearly help the CRM software vendors to understand the trend and plan their operation accordingly. Sales forecast helps us in understanding the customer preferences. For example, the DVD and CD player sales are increasing but the forecast provides the information that percentage increase in DVD player market is much more than the CD player. This provides the information that most of the customers are going to prefer the DVD player over the CD player and based on this, companies can align their manufacturing department to produce more DVD and less CD players. Sales forecast helps us to know the health of the industry as a whole. The percentage increase in sales clearly provides whether the industry is going to maintain their balance sheets in a profitable manner and according to the company objectives. Sales forecast helps in planning the manpower in the organizations. If the sales forecast shows that the market for the net books are increasing and the market for the desktops are decreasing, then the organization can plan to train more sales representatives to sell the net books rather than the desktops. Sales forecast helps in hiring the right number of employees in the organization. If the sales forecast informs that the industry is going to witness a high growth rate in next year, then the organization can plan to hire more staff to serve the demand in future. If the sales forecast predicts bad times for the organizations, then the organizations may plan to manage the expenses and the balance sheets.
Sales forecast helps in planning budgets. Once the organization identifies the promising businesses in future, it may invest the right amount for advertising and creating more brand awareness. Hence we have understood that sales forecast helps the organization in many ways. A right sales forecast is very important and the sales forecasting errors may prove fatal for the organization. Let us look at the necessary preparation required to start a better sales forecast and the way to utilize the information provided by it. 15.2.2 Preparing for a sales forecasting process Sales forecast helps the organization in many ways as discussed earlier. In this section we shall understand several issues that have to be analyzed before, during and after the sales forecasting process. Some of the issues are:a) Identifying the data sources: Identifying the data that would be used in forecasting techniques is a challenging task. The data sources can be primary and secondary. Primary data can be collected through the market surveys and the focus groups. This might involve more expenditure as the data collection process is started from scratch. On the other hand, secondary data can be the data other than the organization sources. Economic indicators of the region like population figures, GDP growth rates, stock prices, unemployment rates, growth rate of other related industries who produces supplement products etc can be used as a secondary data for forecasting. The sales history within the organization is often considered as the important data source which is used for forecasting. b) Deciding the frequency of forecasting: It is good to have the right market potential in future. Hence so forecasting every month wouldn’t be practical for many organizations due to high costs that are incurred and the manpower spent. Hence the organization has to decide the time period of forecasting and planning accordingly based on the information of the forecast. An ideal time to forecast would be every quarter or half-yearly or yearly. If the market dynamics and the customer base changes very fast then having the quarterly forecast would sound good. If the market is having a constant increase for many years, then a yearly forecast would be better.
c) Choosing the forecasting technique: This is a serious question which every organization would debate before adopting one. John (2005) describes that there are too many forecasting techniques available and there are more than 70 different types of time series techniques for forecasting. However before selecting a forecasting technique the organization has to look at the advantages and purpose of the technique. The company may check whether the forecasting technique served the purpose in the past or else take the recommendations of an industry expert before selecting one. Choosing forecasting techniques by an organization depends upon the variables of interest that they would like to monitor in the forecast i.e. whether the organization wants to know the customer preferences or the sales trends or the market competition and so on. d) Planning your efforts after forecasting: After the forecasting process you would get the information about the regions where the market potential is increasing and decreasing. You will be able to know your strengths and weaknesses and will plan to improve the way the business is conducted. The employees have to match the forecast to the regions of profitability and objectives of the organization. All the regions in the country may not be equally profitable for the organization. The regions which you pick up to invest the efforts of the employees would depend upon the following factors: Highly profitable regions Easier to gain the competitive advantage Ability to monitor the regions easily Optimal transportation and management costs
SAQ 1 1) Explain the need of sales forecast for an organization in improving the productivity levels. 2) Explain various data sources that are utilized for a sales forecast
3) Discuss various factors which help the organization in planning the efforts after forecasting.
15.3 Sales forecasting methods As discussed earlier there are a huge number of forecasting methods and so discussing all of them wouldn’t be possible. Hence let us see at some of the commonly used forecasting techniques described by Jackson (2000) who categorized under nonqualitative and qualitative forecasting methods. 15.3.1 Non quantitative forecasting methods Non-quantitative or qualitative methods of forecast are used when the organizations doesn’t have sufficient amount of primary or secondary data to measure to conduct the forecast of the variables in interest. Some of the non-quantitative forecasting methods include:Qualitative Forecasting Methods
Jury of Executive Opinion
Delphi Method
Scenario Method
Let us discuss these methods in detail. a) Jury of executive opinion In this method the organization would ask the senior executive to forecast the sales figures. After getting the figures from several senior executive the average of those
figures are determined. This will remove any errors to an extent. The average figure is considered as the forecast information and the strategies are adopted accordingly. b) Delphi method This method has been extensively used by companies for forecasting in the past and is still used in the present. In this method a group of knowledgeable people is formed where each group member doesn’t have any contact or know the other group member. From such a group the forecast is requested from each member of the group. The moderator of the group is responsible to collect the entire replies and collaborate to form a single document mentioning the group estimations of the forecast and the management trends. This document is circulated to all the group members and they are requested for comments. Again the moderator collects those comments and analyzes them and prepares a document with necessary changes and circulates back to the group members for comments. This process repeats until the moderator feels that the majority of the group has reached some consensus. It should be noted that the output may not have a single forecast figure but can have a set of figures which most of the members agree upon. c) Scenario method In this method the assumptions are made for the possible scenarios that would prevail in the industry in future. For each possible scenario the indicators or factors are selected. The behaviour of those indicators or factors in the past is analysed. Based upon the analysis the future business environment is predicted and sales are estimated. For example, for the computer industry the sales of newly launched tablet PC’s are to be forecasted. For this the possible future scenarios are predicted such as increase in the speed of the tablet PC making them at par to the laptops or net books, decreased cost of the products, increasing number of players in this business, better technologies to provide all the features which a laptop posses, improved screen resolutions and graphics etc. The effect of these indicators upon the sales is understood and the future sales are predicted under each scenario.
15.3.2 Quantitative forecasting methods Let us now discuss some of the quantitative forecasting methods. These forecasting methods make use of the data and perform certain mathematic calculations and provide the sales forecast. The credibility of the forecast depends upon the quality and quantity of data that is being provided to the method. Some of the methods include:Quantitative Methods of Forecasting
Time series analysis
Regression and correlation analysis
Let us discuss them in detail. a) Time series analysis method Time series analysis involves examining the organization’s past or historic data and making the forecast about the future sales. The pattern may be divided among four basic components such as trend, seasonal variation, cyclical effects and erratic changes. Trend analysis aims at observing the past trend in sales figures and predicting the future sales figure. It is assumed that the trend would continue in future. There are basically three methods to do trend analysis namely percentage change, moving average and curve fitting. The next component, seasonal variation, deals with the changes in sales figures during a particular season in the past. Hence, if the same season runs in future the expected sales figures can be calculated. For example, the sale of Air conditioners is high in summer as compared to winter season. The next component is cyclical effects, which deal with any changes in the sales figures other than the seasonal variation. If a behavior which a repeating every year is observed in the historic data, such changes can be observed in future too. Finally the erratic
changes are those which are observed in the sales figure without any pattern or regular time intervals in the historic data. The changes may occur due to market situation like inflation or less raw materials or poor staff etc. b) Regression and correlation analysis Regression analysis is used to find the value of one variable with respect to the changes in another variable. In sales forecasting, the sales forecast can depend upon several variables and regression analysis aims at finding out the degree to which the sales depends upon the other variables. In this context, sales potential is the dependent variable and the other variables are the independent variables. During the regression techniques, we would do a correlation analysis to find out the nature of relationship between the dependent and the independent variables. The range of correlation co-efficient ranges from -1 to +1 where -1 denotes negative relationship and +1 denotes a positive relationship. For example, the improvement in literacy rate indicates that the demand for computer product also increases. Hence the literacy rate which is an independent factor is having a positive correlation with the dependent factor sales potential. For many products or services, the price would show a negative correlation with the sales i.e. increase in price lower the sales figure. If we know the list of independent factors then using a correlation analysis we can identify the nature of relationship and using a suitable regression technique we can identify the sales potential in future. The simplest regression technique is the “Linear Regression Analysis”. For more information about various forecasting techniques you may refer to the books mentioned in the reference and suggested reading sections. SAQ 2 1) Explain the differences between the qualitative and qualitative method of forecasting and identify situations when you would use them. 2) Explain Delphi method of forecasting 3) Discuss the various components of the time series analysis method
15.4 Planning the sales quota Setting the sales quotas to the sales representatives is an importance task for the sales manager. Setting the right quota motivates the employees to achieve them and have the bonuses. On the other hand, setting the quotas that are too small or too large to achieve may de-motivate the sales representatives. Hence planning the quotas and assigning them involves several factors. Let us understand such factors in detail. 15.4.1 Factors in setting sales quotas Planning the sales quotas involves identifying the right quota depending upon several factors and assigning them to the sales representatives. We know that sales representatives of each region or territory may not be assigned the same sales quota. Let us understand the list of factors which help in setting the sales quotas to sales representatives. Some of the factors include:a) Market size and potential For each territory or region the market size and potential must be analysed. The market potential can be known by the forecasting techniques which were discussed earlier. The Once the existing market size is determined, quotas have to be planned accordingly so that the market potential is fully utilized to achieve the maximum productivity levels. It must be remembered most of the times that the sales quotas would be proportional to the size and potential of the market. The quotas would not only depend upon the size and potential because various other factors have to analysed which will be discussed in this section. b) Level of competition Even if the market size and potential is huge, the sales quotas may not be high due to the level of competition. For example, if the potential for the mobile connections in a particular region is 1 million, then you cannot assign quotas to grab that 1 million. Quotas must be realistic in nature taking the account of competition. If there are 5-6 mobile operators then assigning the quotas to generate 30 – 40 percent of the potential
is practical. Again the quotas depend upon another factor current position of the organization in that region. c) Current position of the organization In the previous example, gaining a 30-35 percent market potential is a practical task if the organization is one of the top players in that region. But if the organization is a low level player or an entrant, then getting 10 percent of the potential also would be a huge task. Hence the sales quotas have to be planned accordingly based upon the current position of the organization. d) Skills of the sales person All the employees within the organization may not be able to generate huge number of leads. Hence, setting same quotas for all the employees may not be achievable and may become a de-motivating factor. The sales manager has to plan the quotas according to the skill of the sales manager and may increase it in future. The new employee may need to have a different sales quota while compared to the already existing employee. If the quotas are not achievable, some time should be given by the sales manager to improve the selling skills and help in achieving the sales quota by the sales representative. If required necessary training should also be provided. e) Organization/ market objectives When an organization expands to new territories or launches new products, it needs to, plan the sales quotas very carefully. When it enters a new territory, the organization objective may be to test the market or to become a leading player. Hence sales quotas have to be planned accordingly with the objectives. If the organization objective is to hold in the market in difficult times, the sales quotas may not be necessary to increase from year to year as the objective of the organization is to generate the same sales each year. Hence, the organization objectives have to be kept in mind by the sales manager before planning the sales quotas to the representatives.
SAQ 3 1) Explain the role of quotas in managing the sales force 2) How would you plan the sales quotas based on the market size and potential? 3) Discuss the planning of sales quotas based on competitive level and skills of the sales representative.
15.5 Summary In this unit we understood the importance of sales forecast for the organization in improving the productivity. We observed that sales forecast determines the organization strategies to win the market place and manage the internal resources like man power, budgets etc effectively. Sales forecasts also help in identifying the customer buying behaviour and the health of the industry. We later identified that various factors such as selecting the data source and right forecasting techniques play an important role to forecast correctly about the market potential.
We discussed about importance of
planning the efforts in a right manner after the forecast. Later in this unit we have discussed the sales forecasting methods. We also discussed several qualitative methods like jury of executive opinion, Delphi method and scenario method of forecasting. In the qualitative methods we learned about the time series, regression and correlation analysis methods of forecasting. We also examined the four components of time series analysis. In the final section we understood the need of planning the sales quotas. We studied various factors such as market size and potential, level of competition, current position of the organization in the market place, skills of the sales person and organization/ market objectives in planning the sales quota in an effective manner for the organization and the sales force.
15.6 Keywords 1) GDP
It is the indicator of the economy of the country and is equal to the amount of goods or services produced by a country over a period of time, usually 1 year.
15.7 References 1. John T. Mentzer, Mark A. Moon (2005), “Sales forecasting management: a demand management approach”, Sage Publications, California, USA. 2. Ralph W. Jackson, Robert D. Hisrich (1996), “Sales and Sales Management”, Prentice Hall, New Jersey, USA.
15.8 Suggested Readings 1. Spiro, Stanton, Rich (2003), “Management of a sales force”, Tata McGraw Hill, New Delhi, India.
UNIT 16 SALES BUDGETING AND CONTROL Structure 16.1 Introduction Objectives 16.2 Sales Budgeting Concepts 16.2.1 Financial concepts in budgeting 16.2.2 Issues in sales budgeting 16.3 Monitoring and controlling the sales budgeting 16.3.1 Need for a sales budgeting control system 16.3.2 The need of variance analysis and control in sales budgets 16.4 Summary 16.5 Keywords 16.6 References 16.7 Suggested Readings
16.1 Introduction In the previous unit, we have understood sales forecast and sales quotas. In this unit we shall understand about sales budgeting and control. After the successful sales forecast by the organization we arrive at the sales figures for the next time interval. Depending upon the sales figure, budgets are created for various departments within the organization. The marketing department would get more budgets for advertising and sales promotions if the sales forecast predicts higher sales in the next year. Similarly the budget allocation for the sales department also depends upon the sales forecast. Once the sales figures are known, the expected revenue and net profit are estimated. This gives a fair idea of the growth rate of the organization for the next year. Depending upon the increase of decrease in net profits, the budgets would be increased or controlled respectively in all departments. In this unit, we shall look at various financial concepts of budgeting and the manner in which
net profit is generated. All the
expenses within the sales department and other departments should be taken into account to arrive at the net profit. We shall understand that expenses are of two types direct and indirect expenses. We shall just look at the basic financial concepts and indepth understanding is outside the preview of this unit. Sales budgeting have to deal with several issues like identifying the right budget allocation according to region wise, dealing with NPA accounts, developing new territories, identifying and analyzing the variances, creating new revised budgets etc. Hence understanding these issues is an important task and the analysis should be done at regular intervals. In the next half of the unit we shall understand about controlling the budget by setting up the control systems. These systems not only take care that the expenses doesn’t over shoot the budget allocations but also help in analyzing the competitor’s activities and budget allocation mechanisms. Control system should be able to monitor the customer preferences and help in providing valuable information for the sales department.
Objectives After studying this unit you will be able to:1) Explain various financial concepts in budgeting 2) Identify various issues in sales budgeting 3) Recognize the importance of a control system for the sales budgeting 4) Explain the need of various control in sales budgeting for the sales department
16.2 Sales budgeting concepts Sales budgeting would be an important task after the sales forecast. Once the sales figure for the next time period are known, the revenue for the organization would be calculated. 16.2.1 Financial concepts in budgeting Various expenses would be taken into account before arriving at the operating profit and the net profit for the next time period. Expenses for an organization would be of two types :-
Type of Expenses
Direct Expenses
Indirect Expenses
Direct expenses would include those expenses which are directly involved in the creation of the product or service. Some of the direct expenses would include the
material required for the product or resources used by the service, wages of the direct labour i.e. labour involved in creating the product or service, travelling costs of the direct labour etc. On the other hand, indirect expenses include those expenses which are not directly related to the production of goods or services. For example, sales activities, marketing activities, wages of sales representatives etc. fall under the indirect expenses. The revenue can be identified by multiplying the number of units with its cost. After identifying the expenses and revenue and removing the taxes we get the net profit for the organization. One of the primary objectives of sales budgeting is to see that the net profit doesn’t go below the organization objectives. For most of the organizations the objective for net profit margin would be at least 10-20 percent. 16.2.2 Issues in sales budgeting There are several issues in budgeting and allocation which needs to be analysed. Sales budgeting are mainly done at the macro level but the actions takes place at the micro level. The top management allocates the budgets and may take the feedback from the local sales managers which again depend upon whether the organization follows a centralized or decentralized decision making process. There can be many other issues which the sales budgeting process has to look at. Some of them are:a) Establishing the need for budget The budget would be established for different regions depending upon the need. Hence the sales manager should be able to establish the need for budgets. The real activities of the sales process happens at the micro level i.e. at the branch level and the expenses in incurring the sales would be best known by the sales managers at a branch level. The exact need of budget should be established by taking into account for all the expenses such as travel expenses, office rents and bills for electricity, phone lines etc. The budgets should be allocated at the local level by taking the feedback from the sales managers. b) Having multiple views of the sales budget The sales budget created should clearly identify the sales from multiple views such as:-
Sales by the region/ territory Sales by the product or service Sales by the sales representative Having multiple views will help in answering some of the questions about why the sales budgeting is not as per the expectations of the sales forecast. c) Identifying NPA’s and planning the events Having created the sales budgeting from multiples views enables the sales manager to identify the NPAs in his region/ territory. In sales we refer Non-performing assets as NPT which stand for Non-performing territories. For example, the overall sales figure for the city is increasing but due to multiple views the sales manager can easily see that one of the territories in his region is showing a down trend in sales figures. Hence necessary action can be taken to improve the sales figure. It is understood in business world that a market leader will work to develop new territories and may leave the territories which are under performing whereas a market follower would safe guard existing underperforming territories and strive for development. The NPA can be the sales representative too if they are not able to attain their sales quotas. Hence sales manager can identify such representative and give necessary training to improve their productive levels. d) Monitoring the forecasted figures to the actual sales Most of the companies divide the yearly forecast figures into monthly sales which could be attained by the sales representatives if they achieve their assigned quotas. But there would be chances that the forecast may go wrong and the quotas set were not realistic. In such cases it is always important to monitor the actual sales figures with the forecasted sales figures at regular intervals. Sales manager may use the variance analysis technique like ANOVA to check the variance. e) Time interval for monitoring sales budgets
The time interval to check for variance and sales budgeting depends upon the sales manager and may be done daily or weekly or monthly or quarterly or half yearly or yearly. However one must understand that too frequent monitoring may result in wastage of time and money on trivial or uncontrollable factors. On the other hand, too loose monitoring process may result in lower performance levels as it’s the human nature to adopt slackness when the control system is weak Let us now discuss about the control system and its functionality for the sales budgeting process. SAQ 1 1) Explain the direct and indirect expenses for an organization 2) Explain the advantages of having multiple views of the sales budgets 3) Identify the importance of timely monitoring of a sales budget
16.3 Monitoring and controlling the sales budgeting Monitoring and controlling the sales budget is an important task to maintain a healthy balance sheets in an organization and meeting the organization objectives. Having an appropriate timeframe for monitoring is very important for the organization. Too frequent monitoring implies wasting time and money on trivial or uncontrollable factors. Whereas too loose monitoring with large time gaps means not taking sufficient care in reviewing the sales budget. This may also lead to poor performance by the sales representatives. In fact, no one likes a job which is not monitored as everyone expects some sort of appreciation after their job done. Recognizing the work of the sales representatives by monitoring their performance will also help in framing the appraisal system. Let us now understand the need of a control system for monitoring and controlling the sales budget.
16.3.1 The need for a sales budgeting control system Sales budget control system is required by the organization for many reasons. Let us now understand them in detail:a) To monitor the performance Monitoring sales budgets implies monitoring the sales figures generated by the employees and checking whether the sales quotas have been achieved. The control system should be able to monitor in regular intervals as it is the natural tendency for humans to adopt slackness. The biggest question is what to monitor? Is it the sales figures or efforts or expenses or direction and so on? In many times the organization would go by the sales figures and revenue generated. Efforts and direction would be left out but to get a holistic picture of the performance of a sales representative every factor must be taken into account. Hence, control system should be able to get a holistic picture of the performance evaluation for the sales representatives. b) Identifying areas of improvement for sales representatives Control system should identifying the areas of improvement by monitoring the performance of the sales representatives. Once the performance is monitored the control system should be able to find out the necessary skills to be improved and then proper training should be provided to improve those skills set. c) Identifying areas of weakness Control system should be aiming at identifying goals of the organization and improving the organization performance to achieve them. In doing so, many functions within an organization have to be integrated. Control system should be able to identify the cost in generating the required sales figures. If the cost of operations is high then the net profit would be low even if the sales figures are decent. Control system should identify weaknesses in the organization and develop the system where the resources are put to maximum use. For example, if the control system finds out the reason for increased costs for generating a lead is due to the improper communication channels between the
marketing and sales department, then making use of CRM in the organization would be the solution to the problem. d) Identifying trends and monitoring competitor activities Control system is required by the organization to identify the market trends. In this competitive world, the preference of the customer changes too frequently and the competitors would be ready to grab the opportunities. Hence it is necessary to have a system to monitor the competitor movements closely and then identify the necessary changes that needs to be done in the strategies of various departments to sustain the competition and achieve required sales.
e) Analyzing deviations Many times there would be deviations from the sales objectives. Monitoring and analyzing the deviations would be an important task. For example, the organization may put the sales objective for the branch office 10000 units/ month. The branch office may start with nice figures over 10000 for the first two months but later on from the third month the sales figures take a dip and fall below 10000. The reasons for such deviation should be analysed. There can be many reasons such as: the increased market competition, decreased sales especially if the sales are seasonal, for example the sales for air conditioners and refrigerators are high in summer when compared to winter season Changing customer preferences or consumption pattern High attrition rate i.e. due to the high attrition rate the required number of sales representatives are not available to generate the expected sales figures. Such reasons have to be identified. Therefore, a control system may be required by the organization.
f) Input for organization strategies Control system helps in provide valuable information in setting the strategies in the right direction to achieve the organization objectives. By identifying the right strengths and weaknesses of the organization, its strategies can be set. For example, if the control system identifies that the organization has good products, but low sales due to high costs over the competitors then necessary marketing activities have to be planned to justify the price and the benefits or else the prices have to be reduced to boost the sales. g) Identifying the losing market share The forecast would be done at the start of the year or required time interval and targets or quotas would be set. Achieving the required quotas may not necessarily mean achieving the organization objectives at all the times. Control system is necessary to monitor the situations not only where the organization has improved its sales but also lost market share too. The objective of the organization may be to serve the maximum number of customers at all times and be the industry leader. Whenever the market is growing too fast, the sales figures should also be increasing. Just performing by the sales quotas would be helpful in being the leader in the market place. Hence, control system is necessary to identify the growth in the industry and adjust the sales quotas accordingly so that the organization can maintain its position in the market place. 16.3.2 The need of variance analysis and control in sales budgets The sales variance according to Ghosh (2005) is the operating profit variance due to sales. It is the difference between the budgeted operating profit and the margin between the actual sales and the standard cost of those sales. Variance analysis acts as a cost controlling mechanism for the organizations. The deviations or irregularities in the operating profits can be analysed by the variance analysis and control systems. The sales variance is of two types namely: Operating profit due to sales volume: This deals with the variance in the operating profit which may be more or less than the forecasted operating profit.
The reason may be due to the changes in the volume of sales generated by the sales department. The operating profit would be less when the sales figures are less than the forecasted figures and vice-versa. Here, the price of the unit is kept constant for the forecasted sales and the actual sales. Operating profit variance due to selling price: This deals with the variance in operating profit due to the decrease or increase in selling price. Even though the sales quotas are achieved, the sales department may not be able to generate the required operating profit due to the changes done in the selling price when the actual sales have taken place. Usually in many situations the variance would be due to both the reasons mentioned above. This type of variance is known as mixed variance. The sales budgets have to be controlled in such a manner that the organization objective is achieved with the right variances in place. It is not always practical for the organization to stick to a constant selling price. The price keeps on changing due to the changing environment at the market place. The selling price would be lowered whenever the demand is less or the competitors lower their prices. The variance analysis and control would involve the following points: Improving the sales figures to decrease the variance : Whenever the sales variance is increasing due to the low sales, then organization have to revise their strategies to make sure that the sales figures are improved and thereby creating a lesser variance Identifying the right selling price: In an attempt to grab the sales opportunity the organizations or the sales departments tend to decrease their selling price. Before any such attempt, the variance should be analysed and the affect on the overall balance sheets and profit figures should be estimated. It should be noted that for each penny decrease in selling price the operating profits would be decreased. Hence identifying the right selling price is a challenging task for the organizations. The decrease in selling price should justify the increase in sales figures so that the overall operating profit doesn’t decrease for the organization.
Variance control with proper strategies: As discussed earlier in this unit, right strategies help the organization to achieve more sales and lesser variances. Variance control by improving the organization efficiency: By improving the organization efficiency by making use of CRM products and the right organization structure, the operating costs can be reduced thereby decreasing the variance in the operating profits. This is very important at present times where the prices are kept low due to the competition and the operating profits are to be maintained unaffected. The only way this can be achieved is by decreasing the cost of operations in various departments like marketing, IT, sales etc. SAQ 2 1) Explain the need for sales budget and control system 2) Explain the two types of sales variance 3) Identify the measure for controlling variance for an organization
16.4 Summary In this unit we understood about the sales budgeting concepts. We have understood the differences between the direct and indirect expenses for an organization. We also saw the issue in sales budgeting.
We examined the need for the sales budget for an
organization and identified the importance of having multiple views of the sales budget by region/ territory, product/ service and by the sales representative. We learned the importance of timely monitoring of the forecasted and the actual sales and identifying the NPA and plan for their improvement. We saw that sales budget control system is required by the organization for many reasons such as to monitor the performance of the sales staff, identifying areas of improvement, identifying areas of weakness, identifying trends and competitor activities, analyzing deviations and the reasons for losing the market share. We have analyzed the importance of budget control system as an input for organization strategy planning. We finally examined the need of variance
analysis and control for the sales budgets. We understood the reason for variance in sales budgets due to the volume of sales of the selling price. We also understood how to control the variance by improving the sales and identifying the right selling price which can improve the sales figures and decrease the variance. Finally, we looked at the variance control by proper strategies and improving the organization efficiency.
16.5 Keywords 1) Operating profit
Profit figure attained after subtracting the direct and indirect costs from the revenue generated.
2) Net profit
Profit figure attained after subtracting the organization total expenses including the tax from the total revenue generated.
3) NPT
Non-performing territories are those territories which are not able to achieve their sales quotas assigned by the organization.
16.6 References 1. N Ghosh (2005), “Management control systems”, Prentice-Hall, New Delhi, India
16.7 Suggested Readings 1. Robert N Anthony, Vijay Govindarajan (2008), “Management control system”, Tata McGraw-Hill, New Delhi, India.
