ON
CONDUCT A STUDY
RELATED TO SELLING
STRATEGIES ADOPTED
BY IT COMPANIES
Submitted to:
(LOVELY INSTITUTE OF MANAGEMENT)
MBA Ist – B(Ist Sem.)
(Session 2009-2011)
Date- 05 Dec 2009
1
Table of Contents
Introduction ..............................................................................................................4
Overview ................................................................................................................6
Industry Trends and IT- BPO sector- overview......................................................8
Selling Strategies........................................................................................................9
The Selling Process ..............................................................................................14
Sales Forecasting Methods ................................................................................20
Sales Territory..........................................................................................................22
Developing And Conducting A Sales Training Program .........................................24
Output Factors used as Evaluation Bases .........................................................26
Dealing with Competition ........................................................................................28
Competitive strategies Of Mid- sized IT Company ...............................................31
Market Follower Strategy...................................................................................33
Conclusion…………………………………………………………………………………………………
………………………………………….34
Bibliography and
References………………………………………………………………………………………………
…………………35
2
ACKNOWLEDGEMENT
Suman Tiwari
3
Introduction
The Indian software industry has grown from a mere US $ 150 million in 1991-92
to a staggering US $ 5.7 billion (including over $4 billion worth of software
exports) in 1999-2000. No other Indian industry has performed so well against the
global competition.
The annual growth rate of India’s software exports has been consistently over 50
percent since 1991. As per the projections made by the National Association of
Software and Services Companies (NASSCOM) for 2000-2001 (April 1, 2000 -
March 31, 2001), India’s software exports would be around $ 6.3 billion, in
addition to $ 2.5 billion in domestic sale.
Today, India exports software and services to nearly 95 countries around the
world. The share of North America (U.S. & Canada) in India’s software exports is
about 61 per cent. In 1999-2000, more than a third of Fortune 500 companies
outsourced their software requirements to India.
With the formation of a new ministry for IT, Government of India (GOI) has taken
a major step towards promoting the domestic industry and achieving the full
potential of the Indian IT entrepreneurs. Constraints have been comprehensively
identified and steps taken to overcome them and also to provide incentives. Thus
for example, venture capital has been the main source of finance for software
industry around the world. However, majority of the software units in India is in
the small and medium enterprise sector and there is a critical shortage of venture
capital kind of support. In order to alleviate this situation and to promote Indian IT
industry, the Government of India has set up a National Task Force on IT and
Software Development to examine the feasibility of strengthening the industry.
4
The Task Force has already submitted its recommendations, which are under active
consideration. Norms for the operations of venture capital funds have also been
liberalized to boost the industry. The Government of India is also actively
providing fiscal incentives and liberalizing norms for FDI and raising capital
abroad.
India’s most prized resource in today’s knowledge economy is its readily available
technical work force. India has the second largest English-speaking scientific
professionals in the world, second only to the U.S. It is estimated that India has
over 4 million technical workers, over 1,832 educational institutions and
polytechnics, which train more than 67,785 computer software professionals every
year. Government of India is stepping up the number and quality of training
facilities in the country to capitalize on this extraordinary human resource. It is the
knowledge industry that will help take the Indian economy to a sustained higher
rate of growth and the policy makers are fully aware of this.
5
Overview
While historically, the domestic IT market has been overshadowed by the strong
export performance of the Indian IT industry, recent years have confirmed the
emergence and potential of the domestic IT market. Some of the encouraging
trends of the domestic IT market are:
• The domestic software and services market has grown from USD 6.7 billion
in 2005-06 to USD 8.2 billion in 2006-07, showing a CAGR of 23 %.
• In the total IT market, inclusive of software and hardware, share of software
in 2006-07 is more than the share of the hardware
• E-governance is high on the agenda of Central govt. and most state
governments
• Innovative business models e.g. PPP are beginning to be used in
Government projects
• Large Indian firms are outsourcing IT and ITES operations resulting in
large opportunities which are comparable to global deals in size
6
• Transformational investments in IT increasing
• IT infrastructure prices are showing a continuous downward trend
• Greater focus on increasing competitiveness of SME segment through
increased IT adoption
• Household consumer across income segments and geographies is being
exposed to technology through mobile penetration, B2C applications
(Railway reservation, e-chaupal, NSE, MCX, e-seva etc)
• Increasing availability of funding options for entrepreneurs
A key barrier for increased IT penetration in the domestic market is the absence of
active demand in key segments and industries. While there is latent demand
present in most segments, ways and means need to be identified to trigger the
latent demand and convert it into active demand. Some key challenges which need
to be addressed to accelerate the growth of the domestic IT market are as follows:
7
Industry Trends
IT-BPO sector-overview
• Total IT-BPO industry to reach USD 71.7 billion accounting for 5.8% of
India’s GDP; software and services revenues aggregated to about USD 60
billion
• Software and Services export revenues estimated to grow over 16-17% to
reach USD 47 billion
• Direct employment expected to reach nearly 2.23 million, an addition of
226,000 employees, while indirect job creation estimated at ~8 million
• India’s fundamental advantages—abundant talent and cost—are sustainable
over the long term. With a young demographic profile and over 3.5 million
graduates and postgraduates that are added annually to the talent base, no
other country offers a similar mix and scale of human resources
• Seven Indian cities account for 95 per cent of export revenues, focus on
developing 43 new locations to emerge as IT-BPO hubs
• Higher growth in European/Asian market
8
Selling strategies
Importance of Selling
Selling is the only activity that generates revenue everything else is a cost centre
only. It is the only opportunity to be in touch with the market. This allows for
understanding and designing the value offering. It contributes to the image of the
company and building of the Brand Equity. There can be two approaches to
selling. One is selling by looking at the short term gains and second by considering
the long term business.
• Transaction Selling
Get new accounts
Get the order
Cut the price to get the sale
Manage all accounts to maximize short-term sales
Sell to anyone
• Relationship Selling
Retain existing accounts
Become the preferred supplier
Price for profit
Manage each account for long-term profit
Concentrate on high-profit-potential accounts
Relationship Marketing: Four key issues
• Open communication
• Empowered employees
• Customers to be included in planning
• Working in teams
9
Selected Activities of Salespeople
10
• Face role ambiguity, role conflict, and role stress.
11
Executive Ladder in Team Selling
12
Strategic Planning
• Objectives are the broad goals around which a strategic plan is formulated.
• Strategies are the plans of action.
• Tactics are the specific activities that people must perform in order to carry
out the strategy.
13
Strategic Selling Trends
• Internet Selling
• Multiple Sales Channels
• Multiple Relationship Strategies
Transaction selling à Consultative selling
In this era of global warming, toxic waste, pollution, and other
concerns, marketing executives must act in a socially responsible
manner if they wish to succeed or even survive.
The selling process shows how to proceed with the process of Selling. It
covers all the critical steps to follow for selling a company’s product. Here all
the right steps are to be handled carefully in order to achieve the firms selling
objective. Here planning is the key which includes Determining the Sales
Objectives, Developing Customer Profile Customer Benefits and Developing the
Sales Call Presentation.
14
The Eight Steps of the Sales Process
1. Prospecting
It is the method or system by which sales-people learn the names of people who
need the product and can afford it. Leads or prospects can be identified through
- Referrals from customers
- Referrals from internal company sources i.e. from sales manager; Marketing
dept.; Telemarketing dept.
- Referrals from external agencies
- Published directories
- Industrial directories, Published data, governmental records
- Networking by the Salesperson
15
- Cold canvassing
A qualified prospect…
Has a need for the products being sold.
Can afford to buy the products.
Is receptive to being called on by the salesperson.
Pre approach: Planning the Sale
3. The Approach
4. Need Assessment
The stage in which the salesperson must discover, clarify, and understand the
buyer’s needs. The best way to uncover and understand needs is by asking
questions.
16
• Situational questions
How often do you change the cutting oil in your drill presses?
In addition to the hospital administrator, who else has an influence on
the decision?
If your inventories could be reduced by 20%, how much would that save
you?
If your rejection rate on final inspection was reduced to under one percent,
how much would that save you?
• Confirmatory questions
So, you would be interested in an inventory control system that reduced your
inventories by 20%?
If I can provide evidence to you that our products would lower your
rejection rate to under one percent, would you be interested?
5. The Presentation
A discussion of those product and/or service features, advantages, and benefits that
the customer has indicated are important. It is built around a forceful product
demonstration.
17
• Tips for effective presentations
Keep it simple
Talk the prospects language
Stress the application of the product/service to the prospects situation
Seek credibility at every turn.
Presentation of Product, Features, Benefits, Advantages
6. Meeting Objections
Objections should be welcomed because they indicate that the prospect has some
interest in the proposition.
• In responding to an objection…
Listen to the buyer
Clarify the objection
Respect the buyer’s concern
Respond to the objection
7. Gaining Commitment
It relates to asking the buyer to commit to some action that moves the sale forward.
• Common Sales Closes
The Assumptive Close
“Now what size do you want?”
Special Offer Close
“If you buy this product today, we’ll double the length of the
warranty.”
Summary Close
“You have agreed that our product is the best on the market.
Correct? Then I suggest that you place your first order today so
we can have it to you by the end of the week.”
Planning
This includes
• Sales Forecasting
• Quotas and Territories
• Management Information Systems
Importance of Sales Forecast
• Basis for all the activities for the company
• Help decide the levels of production
• The need of raw materials required
19
• Leads to the level of funds needed
• Level of working capital required
• Calls for decisions on the level of activity
• This helps in the manpower planning
• Sets the level of activities required
• Decision on the level of operational expenses
Sales Forecasting Methods
20
Analysis of Objective Unforeseen changes in When market factors are
market Fairly accurate and the market can lead to stable and predictable
factors simple inaccuracy
21
Sales Territory
23
Routing is the managerial activity that establishes a formal pattern for sales reps to
follow as they go through their territories. It reduces travel expenses as it ensures a
more efficient territory coverage. It is best for routine sales jobs with regular call
frequencies.
24
Developing and Conducting a Sales Training Program
25
Procedure for Evaluating Salespeople
26
• Sales volume
In rupees and in units
By products and customers (or customer groups)
By mail, telephone, and personal sales calls
• Sales volume as a percentage of:
Quota
Market potential (i.e., market share)
• Gross margin by product line, customer group, and order size
• Orders
Number of orders
Average size (dollar volume) of order
Batting average (orders / calls)
Number of canceled orders
• Accounts
Percentage of accounts sold
Number of new accounts
Number of lost accounts
Number of accounts with overdue payment
27
Qualitative Input Factors Used as Evaluation Bases
28
Dealing with Competition
Competitive Forces
Michael Porter has identified five forces that determine the intrinsic long run
attractiveness of a market or its segment. These five forces of competition include
three sources of “horizontal” competition: competition from substitutes,
competition from entrants, and competition from established rivals; and two
sources of “vertical” competition: the bargaining power of suppliers and buyers.
The strength of each of these competitive forces is determined by a number of key
structural variables, as shown in figure below.
29
Fig: The structural determinants of the Five Forces of Competition
Competition from Substitutes
It is the extent to which switching costs and brand loyalty affect the likelihood of
customers adopting substitute products and services. The price customers are
willing to pay for a product depends, in part, on the availability of substitute
products. The absence of close substitutes for a product, as in the case of
automobiles, means that consumers are comparatively insensitive to price (i.e.,
demand is inelastic with respect to price). The existence of close substitutes means
that customers will switch to substitutes in response to price increases for the
product (i.e., demand is elastic with respect to price).
30
The extent to which substitutes limit prices and profits depends on the propensity
of buyers to substitute between alternatives. This, in turn, is dependent on their
price performance characteristics. The more complex the needs being fulfilled by
the product and the more difficult it is to discern performance differences, the
lower the extent of substitution by customers on the basis of price differences.
Threat of Entry
It is the ease or difficulty with which new competitors can enter an industry.If an
industry earns a return on capital in excess of its cost of capital, that industry acts
as a magnet to firms outside the industry. Unless the entry of new firms is barred,
the rate of profit will fall toward its competitive level. The threat of entry rather
than actual entry may be sufficient to ensure that established firms constrain their
prices to the competitive level.
Intensity among rivals increases when industry growth rates slow, demand falls,
and product prices descend. For most industries, the major determinant of the
overall state of competition and the general level of profitability is competition
among the firms within the industry. In some industries, firms compete
aggressively – sometimes to the extent that prices are pushed below the level of
costs and industry-wide losses are incurred. In others, price competition is muted
and rivalry focuses on advertising, innovation, and other non price dimensions. Six
factors play an important role in determining the nature and intensity of
competition between established firms: concentration, the diversity of competitors,
product differentiation, excess capacity, exit barriers, and cost conditions.
It is the degree to which buyers have the market strength to hold sway over and
influence competitors in an industry. The firms in an industry operate in two types
of markets: in the markets for inputs and the markets for outputs. In input markets
firms purchase raw materials, components, and financial and labor services. In the
markets for outputs firms sell their goods and services to customers (who may be
distributors, consumers, or other manufacturers). In both markets the transactions
31
create value for both buyers and sellers. How this value is shared between them in
terms of profitability depends on their relative economic power. The strength of
buying power that firms face from their customers depends on two sets of factors:
buyers’ price sensitivity and relative bargaining power.
The relative number of buyers to suppliers and threats from substitutes and new
entrants affect the buyer-supplier relationship. Analysis of the determinants of
relative power between the producers in an industry and their suppliers is precisely
analogous to analysis of the relationship between producers and their buyers. The
only difference is that it is now the firms in the industry that are the buyers and the
producers of inputs that are the suppliers. The key issues are the ease with which
the firms in the industry can switch between different input suppliers and the
relative bargaining power of each party.
SWOT Analysis
32
Strength Weakness
GOOD NOW BAD NOW
Maintain, Build, Remedy, Stop
Leverage
Opportunity Threat
GOOD FUTURE BAD FUTURE
Prioritize, Optimize Counter
Mid sized firms that occupy lower ranks in the industry are often called runner-up
or trailing firms. These firms can adopt one of the two strategies. They can either
attack the market leader and competitors in an aggressive bid for further market
share as market challengers, or they can play ball and not as market followers.
Many market challengers have gained the ground or even overtaken the leader.
Toyota today produces more car than General Motors. Challengers set high
aspirations, leveraging their resources while the market leader often runs the
business as usual. A market challenger must first define its strategic objective.
They most aim to increase their market share and must choose whom to attack.
Attack market Leader: this is a high risk but potentially high payoff strategy and
makes good sense if the leader is not serving the market well. It often have the
added benefit of distancing the firm from other challengers. An alternative way is
to out innovate the leader across the whole segment.
33
Attack Firms of its Own Size: These firms have aging products, are charging
excessive prices, or are not satisfying customers in other way.
Attack Small, Local and Regional Firms: Several major banks grew to its major
size by gobbling up smaller regional banks. Tapal Tea of Pakistan is a good
example of how a local company comes out of the shadow of a giant multinational
and become a challenger in the market.
Frontal Attack: In a pure frontal attack, the attacker matches its opponent’s
product, advertising, price, and distribution. The principal of force says that the
side with the greater resources will win. A modified formal attack such as cutting
price can work if the market leader doesn’t retaliate and the competitor convinces
the market that its product is equal to the leader’s.
Flank Attack: A flank attack can be directed along two strategic dimensions,
geographic and segmental. In the geographic attack, the challenger spots areas
where the opponent is under performing. A flank attack can also be done by
identifying the shifts in market segments that are causing gaps to develop, then
rushing in to fill the gaps and develop them into strong segments.
34
means of attack. This includes selective price cuts, intense promotional blitzes and
occasional legal action.
Counterfeiter: The counterfeiter duplicates the leader’s product and packages and
sells into the black market or through disreputable dealers. Music firms, Apple, and
Rolex have been plagued by the counterfeiter problems.
Cloner: The cloner emulates the leader’s product, name and packaging with slight
variation.
Imitator: The imitator copies something from the leader but maintains
differentiation in terms of packaging, advertising, pricing or location. The leader
doesn’t mind the imitator as long as the imitator doesn’t attack the leader
aggressively.
Adaptor: The adopter takes the leader’s product and adopts or improves them. The
adopter may choose to sell to different markets, but often it grows into the future
challenger.
CONCLUSION
It is found that applying selling strategies by IT companies
examined in changing competitive environment to offer useful
insights into the strategies adopted need to formulate and put in
place with efficiency and team work to develop tactics and along
with that an alternative selling off.
However, problem faced with mid- sized generators or enterprise
are having critical connectivity and problems faced in context of
liberalization and increased competition.
35
BIBLIOGRAPHY
1). Marketing Management by Philip Kotler, Kevin.L. Keller,
Abraham Koshy and Mithileshwar Jha.
2) Davis, Jeffery H. N/D. Chapter 1, Managing and Achieving Organization Goals. American
Management Association, New York, NY. http://www.flexstudy.com/catalog/index.cfm?
location=sch&coursenum=95086
36
3) ) Barton, R.B. 2000. Chapter 7, Organizational Goal Setting and Planning. Murray State
University, Murray, KY.
http://campus.murraystate.edu/academic/faculty/rb.barton/40mgmt07.ppt#256,1,chapter7
37