Chapter 1

Introduction to Sales Management

Prof. Ramki - SIMSR

Personal selling strategies

1. Willingness to go to bat for the buyer within the supplier firm 2. Thoroughness and follow through 3. Knowledge of the sales persons product line 4. Market knowledge and keeping the buyer posted 5. Applying his product and services to buyers needs 6. Knowledge of the buyers product line 7. Preparation for sales calls 8. Regularity of Sales calls 9. Diplomacy in dealing with operating departments 10. Technical education

Evolution of personal selling

Negotiation Persuasion Consultative Selling Business Management Partnership Strategies

Marketing concepts
1) 2) 3) 4) 5) Production concept Product concept Selling concept Marketing concept Societal concept

Societal marketing concept

Production

Sales

Customers

(Sales Orientation)

Customer Needs

Production

Sales

(Marketing Orientation)

Emphasis on Sellers Needs

Emphasis on Customer Needs

Nature and role of sales management

The determination of sales force objective and goals Sales force organization, size, territory, and quota finalization Sales forecasting and budgeting Sales force selection, recruitment, and training Motivating and leading the sales force Designing compensation plan and control systems Designing career growth plans and building relationship strategies with key customers

Types of personal selling

Industrial selling Retail selling Services selling

Types of selling
Order taker sales people Order creators Order getters

Types of Selling
Inside Order Taker Order Takers Delivery Sales People

Outside Order Takers

Selling Function Order Creators Missionary Sales People New Business Sales People Front Line Sales People Order Getters Organizational Sales People Consumer Sales People Sales Support Sales people Technical Support sales People Merchandisers

Difference between sales and marketing

Starting point
Factory

Focus
Factory

Means
Selling and promoting

Ends
Profits though sales volume

Selling concept
Market Customer needs Coordinated marketing Profits through customer satisfaction

Market concept

MARKET ANTICIPATION Marketing mix

Producer
Marketer

Product Price Place Promotion

Consumer

Exchange offer of value

Marketing management process

Sales management process

Formulation of a strategic sales programme Implementation of the sales programme

Evaluation and control of sales force performance

Technology

Customer orientation

Emerging trends in sales management

Technology

Relationship selling

Global and ethical Issues

Diversity

New selling methods

Emerging trends in sales management

Chapter 2 Selling Skills and Strategies

Selling and buying styles

9
Concern for the customers
(1,9) People Oriented

(9,9) Problem Solving Oriented I consult with the customer so as to inform myself of all the needs in his situation that my products can satisfy. We work towards a sound purchase decision on his part, which yield him the benefits he expects from it.

I am customers friend,

8 7 6 5 4 3 2

I want to understand him and respond to his feelings and interests so that he will like me. It is the personal bond that leads him to purchase from me. (5,5) Sales technique Oriented
I have tried an effective routine for getting a customer to buy. It motivates through a blended personality and product emphasis

(9,1) Push the product Oriented I take challenge of the customer and hard sell him, polling on all the pressure it takes to make him buy

(1,1) Take it or Leave it

I place the product before the customer and it sells itself as and when it comes.

Selling situations
Sales task and function Maintenance selling Developmental selling

Selling skills
Effective communication skills

Problem solving skills

Selling Skills

Listening Skills Negotiation and bargaining skills Conflict management and resolution skills

Communication process
Feedback Intended Message Perceived Message

Encoding

Decoding

Noise

Sent Message

Received Message

Channel

Sender

Receiver

Communication process
Managing body language:
Personal Appearance Posture Gestures Facial Expressions Eye Contact

contd.

Space Distancing

Process of listening
Attendance Interpretation

Remembrance
Evaluations Response Action

Levels of listening
Feedback Paraphrasing

Clarifications
Emphatic listening

Active Listening
Barriers to Listening !

Conflict management skills

Models of conflict Components of conflict The conflict resolution process:
- lumping - avoidance - coercion - meditation - conciliation - arbitration - adjudication - negotiation

Conflict management process

Stage I
Potential opposition or Incompatibility

Stage II
Cognition &
Personalization

Stage III
Intentions

Stage IV
Behaviour

Stage V
Outcomes

Antecedent Conditions Communication Personal Variables

Perceived Conflict

Conflict handling Intentions Competing Collaboration

Increased group performance

Overt Conflict

Felt Conflict

Compromising
Avoiding Accommodating

Partys behaviour Others reaction

Structure

Decreased group performance

Negotiation skills
Situation and timing for negotiations Formulation for a bargaining strategy The theory and strategy of principle negotiations
separate the people from the problem focus on interests, not on positions invent options for mutual gains insist on objective criteria

Problem solving skills

Habit I: be proactive Habit 2: begin with an end in mind Habit 3: put first things first Habit 4: think winwin Habit 5: seek first to understand, then to be understood Habit 6: synergize Habit 7: renewal

Problem solving process

Define the problem Generate alternative solutions

Decide the solution

Implement the solution Evaluate the solution

Problem definition techniques

Dunkers diagram 4 Present desired state analysis 3

Statement and Restatement 5

Problem Definition Techniques

Evaluate problem 6 statement Find out origin of the problem 1 Explore the 2 problem

Dunkers diagram
Achieve the desired state

General Solution
Possible path to the desired state

Path 1

Path 2

Path 3

Functional Solution

Solutions to implement & paths to desired solutions

Solution 1

Solution 2

Solution 3

Specific Solution

Statement restatement technique

Relax Constraints

Perceived problems

Generalize

Make an Opposite Statement

Re Statement

Re Statement

Final problem Statement

Components of a decision on the future course of action

Situation analysis

Problem analysis Past What is the fault

Decision analysis

Potential problem Analysis Future How to prevent future faults?

Solution implementation process

Decision on the best solution
I M P L E M E N T A T I O N

Approval

Planning
Carry through

Follow up
Evaluation

Chapter 3
The Selling Process

Stages in the selling process

Preapproach before the interview
Handling Customer Objections

Pre-sale preparation

Prospecting

Approach to the customer

Follow up action

Closing the Sale

Sales Presentation

Prospecting
Successful prospecting
50 potential prospects 15 Qualified prospects 6 Interviews 1 sale 50 potential prospects 25 Qualified prospects 17 Interviews 7 sales

No
Successful prospecting

Yes

Process of prospecting
Identify and define prospects

Search for sources of potential accounts

Qualify the prospects from the suspects

Methods of prospecting
Cold canvassing

Endless chain customer referral Prospect pool Centers of influence Non competing sales force Observation Friends and acquaintances Lists and directories Direct mail Telemarketing Trade shows and demonstrations

Selling process
Pre approach to selling Approach to the customer Sales presentation - approach to sales presentation
- attracting customer attention - creating interest - arousing desire and building conviction

Methods of sales presentation

- canned presentation - organized presentation - tailored presentation

Handling customer objections

Suggested by SMITH
Start with your highest expectations

Avoid conceding first BE sure the customer understands the value of a concession Make concessions in small amounts Admit mistakes and make corrections willingly BE prepared to withdraw a concession Avoid split the difference strategy Do not advertise willingness to concede

Methods of handling customer objections

Superior feature method YesBut method Reverse English method Indirect denial method Pass out method Comparison method Direct denial method Another angle method Narrative method Testimonial method Question or WHY method

Closing the sale

Methods of closing the sale Follow-up action

B2B selling

Chapter 4

Managing Sales Information

Forecasting market demand

It is the estimated rupee or unit sales for a specific future time Period based on the companys marketing plan and an assumed marketing environment.
Price/ Unit
Qty per Unit (A)
P1 P2

Price/ Unit Qty per Unit (B)

D D1

Price/ Unit

Total Market demand

Qty per Unit
D D1

Price / Unit

Price / Unit
D
Q1 Q2

D2

Price/ Unit
D
D2

Qty per Unit (D)

Qty per Unit (E)

Qty per Unit (f)

Market demand curve

Market demand function

QD = F (P, I, P0, T)

P- Price of the product I- Consumer Income T- Consumer preference P0 Price of other goods and QD = B + aP P + a1I + a0P0 + aTT services aP,, a I, a0, aT represents the one unit change in quantity associated with the variables.

Linear form of the demand QD = B + aP P equation

B represents the combined influence of all the other determinants of the demand

Market demand forecasting

marketing decision support system
- an MDSS is an ongoing future-oriented information structure designed to collect, collate, categorize, edit, store, and retrieve information on demand to aid decision making in an organizations sales and marketing programme

Marketing decision support system

TRANSACTIONAL SYSTEMS

USERS

MDSS

Forecasting process
The forecasting process is defined as the series of decisions and actions taken by a business organization in:
identifying the forecasting objectives determining the independent and dependent variables developing a forecasting procedure using the available data in the selected method to estimate the sales in future

Forecasting process
contd. Determine independent and dependent variables Develop forecasting procedure Forecast objectives

Select forecasting analysis method Comprehend total forecasting procedure Collect, collate, gather and analyze data

Evaluate performance results against the forecasts

Present all the assumptions about data

Make and finalize the forecast

Popular methods in forecasting

Qualitative methods
Sales force composite Delphi technique
History analogy

Expert opinion

Survey of buyers expectation

Quantitative methods

Test marketing

Nave method

Trend method

Moving average

Regression method

Exponential smoothening

Trend forecast of Sales

Observed sales Forecasted sales

Sales

Time

Nave method
Sales (at the period t) = Sales T+1 The following formula shows how to adjust the nave method to account for a change in rate of sales levels. The formula is stated this way: Next Years Sales = This Years Sales X This Years Sales Last Years Sales Freehand Method

Method of semi-averages
In this method available data are divided into two parts, usually with equal number of years on both the parts Year
1993
1994 1995 1996 1997

Sales
102
105 114 110 108

1998
1999

116
112

The average of the first three years will be:

102+105+114 321 ----------- = -------- = 107

Similarly, for the last three years,

108 + 116 + 112 336 ---------------------- = --------- = 112 3 3

Method of moving averages

The 3-yearly moving average can be computed with the following formula: a+b+c b+c+d c+d+e d+e+f

--------- , ----------- , ---------- , --------- , .

3 3 3 3

Method of Least Square

The least squares method is a formalization of the eyeballfitting or graphical technique. It is used to mathematically project the trend line to the forecasting period with the time as the independent variable that influences the dependent variable i.e sales.

Decomposition method
It is a time series method in which seasonality is taken in to account while doing demand forecasting. This method consists of three essential steps which are illustrated below.

Exponential smoothing method

(contd.)

It is similar to the moving- average forecasting method The forecaster is allowed to vary the weights assigned to past data points It allows consideration of all past data, but less weight is placed on data as it ages Exponential smoothing is basically a weighted moving average of all past data The method is used to forecast only one period in the future Exponential smoothing techniques vary in terms of how they address trend, seasonality, cyclical and irregular influences

Exponential smoothing method contd.

Next Years Sales = a (This Years Sales) + (1 a) (This Years Forecast)

Autoregressive moving averages

It uses a different procedure than the other models explained above in identifying the proper number of past observations to be included in the analysis and the weights that should be attached those observations

Correlation analysis
a correlation is basically the degree of linear association between two variables where one variable is treated as independent variable and sales as the dependent variable sales managers look for variables that correlate with or relate to sales correlation analysis involves the determination of whether a relation exists, and if it does, then measuring it, testing whether it is significant, and establishing the cause and effect relation the degree of relationships between the variables is called co-efficient of correlation

Regression analysis
regression analysis is another form of correlational technique reveals average relationship between two variables and this makes possible estimation or prediction a statistical method used to incorporate independent factors that are thought to influence sales into forecasting procedures
Sales Sales

Population (Liner Relationship)

Population (Curvilinear Relationship)

Market factor indices methods

the most commonly used market factor index method is Buying Power Index Method (BPI) BPI is used to predict sales for specific geographic regions for retailer and FMCG sector such as clothing, food, auto, and other consumer items BPI is also used to determine sales quota by many multinational organizations applications are limited in Indian organizations as we do not have data bases to support this method at different levels of the market

Market factor indices methods

contd.

Econometric techniques
Econometric techniques uses multiple independent variables where the assumption is that of a liner equation between the dependent variable (sales) and independent variables

Market factor indices methods

contd.

Factors affecting selection of a forecasting technique

data availability

cost variability consistency of the data the degree of detail necessary time horizon technical sophistication ability of the method to capture the level of risk and variability the level of accuracy of the forecast fundamental change indicators

MAPE (Mean Absolute Percentage Error)

level of accuracy is an explanation of the gap between the actual and predicted sales techniques with lower level of gap are more accurate statistic used to calculate the level of accuracy of a forecast is called MAPE (Mean Absolute Percentage Error)
MAPE is the average percentage forecast error and is a popular way to measure accuracy

Chapter 5

Sales Organization

Sales organization
an organization of individuals either working together for the marketing of products and services manufactured by an enterprise or for products that are procured by the firm for the purpose of reselling a sales organization defines duties, roles, rights, and responsibilities of sales people engaged in selling activities meant for the effective execution of the sales function

Sales organization
contd.

a structural body through which the functions of sales management are carried out sales organization always makes efforts to increase sales, thereby achieving the principle of profit maximization, which contributes to the overall growth of enterprise

Factors influencing structure

product and service related factors organization related factors
marketing mix related factors

external factors:
- the speed of market change - reduction in the number of vendors per buyer - closer to customer relationships - changes in regulations and international practices

Organizational principles
span of control unity of command hierarchy of authority

stability and continuity

coordination and integration homogeneity objectivity specialization

Organizational design
- formal and coordinated task - assigning territories - establishing flows of communication and responsibilities of sales groups and individuals to customers effectively

Line organization

Mr. Ratnakar Shetty President / Owner Mr. Chandrakant VP (Sales)

Five sales people

Typical structure of a line organization

Consumer market National Distributors Institutional market Corporate market

Direct to Home

Direct marketing

Distributors

Bundling

Gifting

Regional Distributors

Consumer

Retailers

Consumers

Design by territory
VP Marketing National Sales Manager

Divisional Manager (East) Regional Sales Manager

Divisional Manager (North) Regional Sales Manager

Divisional Manager (West) Regional Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

Sales Staff (City wise)

Sales Staff (City wise)

Sales Staff (City wise)

Design by management function

Mr. Dara singh, VP (Marketing)

Staff Function

Line Function

Mrs. Chitra Mohanty (Advt / Sales Promotion Mgr)

Mr. Dibya Behera (Sales Manager)

Mr. Chandra De Manager (MR)

20 Sales People

Design by product
President, Marketing

Product Manager (A)

Manager (Sales) Product Manager (B)

Manager (Training)

Manager (Promotion)

Manager (Sales)

Manager (Training)

Manager (Promotion)

Design by customer
President (Marketing) Vice President (Marketing)

Sales Manager Industrial Relations

Sales Manager Wholesalers

Sales Manager Retail Sales

Sales People

Sales People

Sales People

President

Functional

Vice President (Production)

Vice President (Marketing)

Vice President (HRD)

Geographic Marketing Manager

India G.M Consumer care

Marketing Manager Combined International Sales Org. Design G.M International Sales Divisional Manager Food

Customer

G.M International Sales Divisional Manager Paper

Divisional Manager Soaps

Product

Eastern Sales Division

Western Sales Division

Northern Sales Division

Europe Division

America Division

Gulf Division

Sales Organization
Key account sales
- focus on CRM - customer profitability and value analysis - the few accounts give incremental returns - national accounts

Sales process automation

- EDI Electronic Data Exchange

Emerging organizational design

agency and distribution selling shared sales force telemarketing TQM and team-based selling
Customer

Sales

Marketing

Technical Support

Manufacturing

Supplier selling team

Number of sales people

determined by:
- territories vary in their demand structure for prospecting - product mix demands - levels and types of prospecting - nature of the customer segments
Affordability method (based on sales budget)
Incremental method Workload method Number of sales people =
(Number of existing customers)

(Number of Potential customers)

(Ideal X frequency of calls)

(Length of X a call)

Ideal selling time available for a salesperson

Chapter 6

Management of Sales Territory

Sales territory
a group of present and potential customers assigned to

an individual sales person, a group of sales person, a branch, a dealer,

a distributor or a marketing organization at a given

period of time

Sales territory

(contd.)

Advantages of designing a sales territory :

it ensures better market coverage effective utilization of the sales force efficient distribution of workload among sales people it is convenient to evaluate the performance of sales people to control over the direct and indirect costs of the sales function optimum utilization of sales time by sales people

Designing sales territories

Factors influencing the modifications of a territory:
mergers market consolidation split in division sales force turnover customer relocations product life cycle change product line change Select the basic geographic control units Decide on the criteria for allocation Decide on the starting point Combine control units adjacent to starting point Compare territories on allocation criteria and conduct workload analysis Assign sales force to new territories Modify territorial boundaries to balance workload and potential

Territory shapes

circle

wedge

Clover leaf

Strategic Planning Matrix

Opportunity

Opportunity
The account may represent a good opportunity. The sales organization needs to overcome its competitive disadvantages and strengthen its position to capitalize on the opportunity.

H i g h

The account offers a good opportunity. It has high potential and the sales organization has a differential advantage in serving it.

Strategy
Commit high levels of sales resources to take advantage of the opportunity.

Strategy
Either direct a high level of sales resources to improve the position and to take advantage of the opportunity or shift resources to other accounts.

L o w

Opportunity
The account offers stable opportunity since the sale organization has differential advantages to serving them.

Opportunity
The account offers little opportunity. Its potential is small and the sales organization is at a competitive disadvantage in serving it.

Strategy
Allocate a moderate level of resources to maintain current advantage.

Strategy

Strong

Either commit a minimal level of resources to the account or consider abandoning the account altogether.

Weak

Sales territories
New Territories..?
Use of Information Technology IT enabled services computer programmes simulation techniques

Chapter 7

Management of Sales Quota

Sales quota
a quota is an expected performance objective a quota is a sales assignments or goal to be achieved in a specific period of time it is routinely assigned to the sales units (e.g. departments, divisions, and individuals) sales units proceed to reach quotas in their respective domains
A sales quota is the sales goal set for a product line, company division, or sales representative. It is primarily a managerial device for defining and stimulating the sales effort.. Kotler

Principles of quota setting

setting of sales quotas is a challenge to the sales manager and should be handled with precision and adequate skill objectivity to be observed while fixing quotas and should be based on facts and figures drawn from the market it must be simple to understand both to the manager and the sales people

quotas set above the achievable limit often demotivate and result in high turnover in the organization

Principles..
contd.

flexible to the prevailing and emerging market conditions there should be a level of definiteness in the quota set for a salesperson it should be fixed either in terms of geographic territory, on money value, or on the basis of units of product(s) a participatory quota setting procedure followed jointly by the sales manager and sales people together serves as a tool of motivation and leads to the realization of the organizational sales goals

S M A R T
P E CI FI C E A S U R A B L E T T A I N A B L E

R I E M SPECIFIC A E L I S SBO T I MBO in the Sales C domain?

Organization of the sales job

Defining annual objectives

Individual Goal setting form

Procedure for setting sales quota

Output Name Year Your territory Results expected Pessimistic Realistic 1. Volume per month 2. Expenses per month 3. Gross margin per month 4. Market share per month 5. Key account coverage per month

Optimistic Results

Conferencing with each sales person

Types of sales quota

sale volume quota

sales budget quota

sale activity quota

combination quota

Methods of setting sales quota

Quotas are based on
sales forecasts and potentials forecast past sales and experience executive judgment

sales people judgment

compensation

Problems in setting sales quota

1. There is a high level of individual difference in every organization 2. A perfect quota is a combination of selling and nonselling activities 3. Often sales people do not give proper attention to the non-selling activities (e.g. searching for prospects, handling customer objections, and creating market for probable entry of new products)

Chapter 8

Recruitment and selection of the sales force

The sales manager

performs sales management +HR management ! recruits, selects, trains, motivates, leads, controls, and compensates sales teams selection and recruitment of efficient sales people is always a process of building competitive advantage for an organization

Turnover Establish hiring objectives Planning

Strategic position analysis Decide on the number of people to hire

Job qualification
Job description

Identify best sources of recruitment: internal and external sources Recruitment Generate database of candidates Evaluate candidates Selection Socialization Select and induce candidates to accept positions Socialize

Organizational characteristics, company image and climate, styles of supervision, compensation, and motivation of the company

The hiring process

Challenges in sales force selection

personality types matching to job profiles one of the measures that the organization looks in an employee is:
- the ability to perform by an employee = ability x motivation

level of motivation

Planning for recruitment

1. Strategic position analysis 2. Turnover 3. Job analysis
gathering and organization of information concerning the tasks, duties and responsibilities of a specific job

3. Task inventory analysis and KSA matrix

job qualification job description

Sales force recruitment

recruitment is an act of inducing qualified and appropriate people to get interested in and apply for a salespersons position within a sales organization

internal sources

- existing employees - lateral and upward moves - interns and cooperative students - employee referral programmes

external sources
- industry sources

- educational institutions and campus recruitments - employment exchanges - placement consultants - walk in interviews

External sources

contd...

- networking referrals - web consultants - responses to direct open advertisements

Selection procedure
- inviting application forms - personal interviews - reference checks - physical examinations - psychological tests - intelligence - personality - aptitude and skills - determination of terms of service - appointment - initial orientation

Socialization process
process of orienting a new salesperson to the sales organization, territory, or division in which he or she will be working three stages
Anticipatory stage Encounter stage Settling stage

Chapter 9

Training the Sales Force

Challenges in sales training

Will the training programme be effective in solving a problem? Will the investment in it be justified? Will it produce the desired or intended results?

Role of the trainer

The success of the training programme depends on the ability, skill, and motivation of the sales trainer

The training process

Training need assessment

Design and conduct of a training programme

Evaluation of a training programme

Training need assessment phase

Organizational level analysis
Task level analysis

Individual level analysis

Training needs
Identification of specific problems Anticipating impending and future problems Management requests Interviewing and observing the personnel on the job Performance appraisal Questionnaire survey Checklist Attitude survey Interpersonal skill test

Designing and conduct phase

Location Job Instruction Training (JIT) Presentation options

Types of training
Cross-functional training Team training Creativity training Literacy training

Training methods
Didactic method
structure the lecture reinforce the Message aid concentration material used for the lecture make it memorable for the participants deliver with dynamism use questions

Visual support Participative Conferences

Training methods

Seminars Discussions Role play Case study Fishbowl Workshops Sensitivity training Transaction analysis In-tray exercises Transcendental meditation

contd..

Deciding a sales training programme

Aim

Content
Contents Knowledge Proficiencies Location

Evaluation

Process of socialization

Anticipatory socialization

Accommodation stage
Outcome stage

Chapter 10

Sales Force Motivation

Process of motivation

Motive

Behaviour

Tension reduction

Goal

Motives

Primary General Secondary

Motivational drives

Principles Security Achievement Approval Loyalty Advancement Leadership Human behaviour

Theories of motivation
Content Process Reinforcement

Content theories
Need hierarchy theory Hertzbergs two factor theory Alderfers ERG theory

McGregor Theory X and Y

Z theory of William Ouchy

Maslows hierarchy of needs

Self actualisation need
Esteem need Social need Security need Physiological need

Process theories
Equity theories Expectancy theories

Reinforcement theories
Hulls drive theory Skinners reinforcement theory

Factors influencing the motivation of the salesperson

Personal characteristics
Environmental conditions Organizational policies

Designing a motivational programme

Programme objective Motivational tools Individual methods

Group methods
Communication Auxiliary environment Feedback

Chapter 11

Sales Force Compensation

Factors influencing the design of a compensation plan

Financial stability

Size of the market

Nature of the product

Types of compensation plans

Financial compensation Non-financial compensation

Financial compensation

Straight salary plan Straight commission plan Bonus and incentive Salary plus incentive (combination plan) Drawing account and commission plan Allied methods

Non-financial compensation

Promotions Recognitions programmes Fringe benefits Expense accounts Perks

Sales contests

Steps in designing a compensation plan

Determine sales force and compensation objectives

Determine major compensation issues

Implement long-term and short-term compensation plans

Relate rewards to performance

Measurement of performance
Appraise the compensation plan

Chapter 12

Evaluation of the Sales Force

Deciding on the criteria for measuring performance Deciding in the conduct of the performance appraisal Deciding on the evaluation of individuals and teams Comparison of actual performance with standards Deciding on the frequency of the performance appraisal The external variables and their influences

Sales force performance appraisal process

Sales force performance appraisal process

Appraisal criteria Relative and absolute judgments Trait-based Outcome-based Behaviour-based Performance rating Force choice scales Behavioural observation scales Call reports Silent call monitoring scores Activity reports Combinational methods

Conduct of performance and individual vs team appraisal Example of a Role result Matrix
Position Developing a new business Servicing existing customers Key account manager Regional sales manager

Application engineer
Customer service staff Technical support staff Installation and quality engineer Financial staff

Chapter 13

Distribution channel management - an introduction

Role of distribution channels

To adjust the discrepancy of assortment through the process of sorting, accumulation, allocation, and assorting

To minimize the distribution costs through routinising and standardizing transactions to make exchange more efficient and effective
To facilitate the searching process of both buyers and sellers by structuring the information essential to both the parties To provide a place for both parties to meet each other and reducing uncertainty

How do distribution channels contribute

Intermediaries can improve the efficiency of the exchange process Channel intermediaries adjust the discrepancy of assortment through the performance of the sorting process

Marketing intermediaries hang together in channel arrangements to provide for the routinisation of transactions
Channels facilitate the searching process

Discrepancies in the process of exchange

Spatial discrepancy
Temporal discrepancy

Need to break the bulk

Need to provide assortment

The cost and control aspects of intermediation

Cost efficiency

Control

Direct Distribution

Indirect distribution

Distribution channel strategy

Setting distribution objectives in terms of the customer requirements

Finalizing the set of activities that are required to be performed to achieve the channel objectives
Organizing the activities so that the responsibility of performing the activities is shared among the entities who are meant to perform these activities Developing policy guidelines for the smooth functioning of the channel on a day to day basis

Distribution channel management

(contd.)

Distribution channel management encompasses all activities dealing with the distribution function of the firm The distribution strategy provides guidelines for decision making The distribution management function can be viewed as happening in two phases: the ex ante phase and the ex poste phase

Distribution channel management

(contd.)

The ex ante phase involves all the activities that are associated with the design and establishment of the distribution channel. These activities actually take place before the distribution channel actually starts functioning.
The exposte phase involves managing the day to day activities of the channel wherein the behavior of the individual channel members are coordinated

Channel Management tasks

Design of the channel structure

Ex ante

Phase
Establishing the channel

Distribution Channel Strategy Channel Objective Activity Finalization Organizing the activities Developing Policy Guidelines

Motivating Channel Members Ex Poste Phase Resolving Conflicts among channel members

Chapter 14

Designing customeroriented marketing channels

Channel Design

The channel design is normally meant to give a clear idea about: The number of channel entities in the channel network, The way in which they are linked, The roles and responsibilities of the entities in the network The rewards for participating in the activities and also Clear cut guidelines for the major activities to be performed during the normal functioning of the channel.

What are the service outputs

Waiting time Breaking the bulk

Spatial convenience
Assortment

Distribution channel design

To consume a product

Channels

Service outputs have to be delivered

Participates in channel flows

Activities have to be performed

Thus performs activities

Example of a service output delivered template

Sl.N Service o. dimension
1. 2. Bulk-Breaking

Service output delivered

Units are delivered in ones

Spatial convenience There is at least one outlet for almost every 3 km radius excluding of course thinly populated areas Waiting time Assortment Not more than 2 days for any model Other consumer goods items including that of other competitors are available at all the outlets where the products are otherwise Available Available

3. 4.

5.

Installation support

Channel flows and contribution to service outputs

Flow
Physical Possession Ownership Promotion Negotiation Risk taking Financing Spatial convenience, waiting time, bulk breaking Bulk breaking, spatial Spatial convenience, bulk breaking

Direct contribution
Spatial convenience, bulk breaking, waiting time

Indirect contribution
Assortment

Other contributio n

Spatial convenience Spatial convenience Assortment Waiting time, bulk breaking, spatial convenience Assortment

Is a service output in itself

Ordering

Channel design effort decisions

The service output levels The flows or activities that are associated with the achievement of the service output levels The type of entity who would be entrusted with the performance of each of these flows

Parameters for comparing channel designs

Efficiency Effectiveness Equity Scalability Flexibility

The channel establishment plan

(contd.)

The main purpose of the channel to be set-up The profile of the customers who are the target market for the channel The needs and requirements of the target market with regard to the identified service outputs provided by the proposed/ existing channel:

Analysis of the operations of the existing channels that deal in similar product/service lines
Detailed activity chart for achieving the service

output objectives

Plan..

Contd.

Details about the various channel constituents who will be performing these tasks The cost of performing the activities The designated roles and responsibilities of the channel constituents The proposed remuneration for these roles and responsibilities Procedures sharing for reporting and performing

Standards for measuring the performance information

Monitoring mechanisms
Criteria for appointing the channel members

Chapter 15

Customer-oriented logistics management

Logistics strategy
Cost reduction Capital reduction Service improvement

Logistics Planning
Inventory Management
Inventory levels Deployment of inventories Control methods

Transportation decisions
Modes of transport Carrier routing/scheduling Shipment size /consolidation

Customer Service goals

Location decisions
Number, size and location of facilities Assignments of stocking points to sourcing points Assignment of demand to stocking points

Generic types of outbound logistics strategies

Direct shipment

Warehousing
Cross-docking

Functions of warehousing operations

Movement Storage Information transfer
Stock keeping locations Inbound and outbound shipments Facility space utilization Order fulfillment data Receiving Transferring Order picking/selection Shipping

Relationship between logistics, cost, and number of warehouses

Total cost

Total cost

Inventory cost
Transportation cost Warehousing cost

Number of warehouses

Why Inventories?
To improve customer service To smoothen the operations of the logistics system To reduces costs Inventory procurement costs Inventory carrying costs Stock out costs Cost associated with inventory

Components of inventory carrying cost

Capital cost Inventory Investments

Inventory carrying cost

Inventory service costs

Storage space costs Inventory carrying cost

Insurance and Taxes

Warehouse rent, maintenance charges Obsolescence Damage& Pilferage Shrinkage Relocation costs

Echelon inventory
Stockist echelon lead time

Supplier

Stockist echelon Inventory

Stockist

Retailer

Retailer

Retailer

Retailer

Retailer

Factors affecting transportation cost

Product related factors
The density of the product Stow ability Difficult in handling Liability

Market related factors

Intramode competition Location of markets Balance or imbalance of in freight traffic in and out of the market Seasonability of the product movements

Chapter 16

Managing Channel Member Behaviour

Channel relationships
Perceptions of organisational power Dependence Control Trust Commitment Co-operation

Discrete relational exchange continuum

Arms length relationship

Relational exchange relationship

Channel control

Distributors profit earned

Tolerance Function

PayOff Function

Zone of acceptance

Supplier authority

Role of persuasion, authority, and coercion in channel control

Channel members profit Tolerance function B

Pay off function

Coercion

persuasion

Authority

control

Components of channel offering

Manufacturer sales force incentives

Promotional Responsiveness support systems Financial returns Quality products Technical Reliable delivery assistance Competitive price National reputation Company

Training

policies

Market research

Distributor sales force incentives

Incentive programme

Distributor firm incentives

Channel core elements

Capability building programmes

Influenc e Strategy group

Indire ct influen ce strate gies
Direct Unmedi ated Strategi es

Types of Influence strategy

Information exchange Information control Modeling

Explanation

Where information on general business issues and the channel program is merely exchanged with channel member personnel. In this type of strategy the consequences of the acceptance or rejection of the channel programme or its implementation are stressed, but these consequences are based on a response from the market environment,

Recommendation Warning Positive normative Negative normative.

Influence strategy types

(contd.)

Reward and Punishme nt Strategies

Direct unweighte d strategy

Economic reward Non-economic reward Economic punishment Non-economic punishment Direct request

In this type of strategy rewards and punishments are directly given to channel members This strategy involves making a direct request to the channel member where the Principal mainly communicates desires or wishes concerning the channel members acceptance of the channel program.
In this type of strategy specific action is requested; consequences of acceptance or rejection are stressed and are based on the mediation of the channel principal.

Direct Mediated strategies

Personal plea Promise Threat and Legalistic reference.

(contd.)

Influence strategy types

Influence situations in channel relationship

Attitude towards the channel progranmme Positive Neutral Negative

+ ve
Behaviour
Reinforcement process Behavioural reinforcement Inducement process Behavioural change Moderate rationalization Attitude change Moderate confrontation Behavioural and attitudinal change Radical rationalization Attitude change Radical confrontation Behavioural and attitudinal change

towards the channel programme

- ve

Stages in channel conflict

Attitudinal sources of conflict Cognitive/ Affective conflict Manifest conflict Conflict outcomes

Structural sources of conflict

Conflict resolution

CAUSES OF CONFLICTS Attitudinal Causes Structural causes

Conflict management methods at different stages of conflict

Institutional approaches
Latent conflict Joint membership of associations Exchange of executives Cooptation Dealer councils Third party mechanisms Mediation arbitration

Felt conflict

Manifest conflict

Negotiation

Negotiation strategies
HIGH
Accommodative Collaborative/problem solving

Concern for the others interest

Avoidance LOW

Compromise

LOW

Competitive /aggressive Concern for own interest HIGH

Chapter 17

Retail Management

Retail marketing mix

Merchandise characteristic Customer service characteristic Trading format Customer communication

Retail marketing mix

(contd.)

How merchandising functions affects profitability? (i) the merchandise in the store affect the volume of sales as it is primarily the merchandise that attracts customers (ii) since profitability is based on the turnover rate of the inventory, the choice of merchandise and the quantity of merchandise of each category stocked affects the overall profitability of the establishment

Factors affecting choice of retail strategy

Companys strategic objectives in terms of the level of profitability desired Space availability Preferences of target customers

Relationships with manufacturers

Availability of trained salespeople etc.

Availability of stock and stock holding cost

Stock holding cost
+20%

Percentage of availability

80%

90% 100%

Financial method of merchandising

Cost method
Retail method

Merchandise planning process

Develop a sales plan

Plan reductions Develop a stock plan Plan merchandise needs

Calculated planned Purchase

Plan mark ups based on profitability targets

Customer services
Product services Service products Support activities

Customer performance measuring techniques

Frequency or browsing visits Frequency of purchase visits

Average transaction per visit

Items purchased Range purchased Customer service facilities used

Purchase process for service requirement identification

Purchase process
Pre-purchase phase Service requirements Search Comparison Product related

Augmentation of the product Purchase phase Transaction related

Delivery Installation
Post purchase phase Use extension Repeat visits

Attitude towards trading format and store environment

Shopping Attitudes Task Oriented Pleasure Oriented

Pre-purchase Stage During Purchase

Convenient Locations Exclusive Store Merchandise Ample Parking Wide Choice Close to Other Task Oriented Prestigious Image Stores Relevant Merchandise Selection High Availability Competitive Pricing Rapid Cash Handling Ambience and Excitement Visual Merchandising In-store Facilities Product Services Centers

Post-purchase Stage

Product Displays Customer Advice Areas

Theme Displays Customer Advice Areas

Chapter 18 Managing the International

Channels of Distribution

Factors affecting international trade

Differences in customer expectations across countries Differences in channel structure and trade practices Differences in governmental policies and regulations Differences in the quality of physical infrastructure

Market entry strategy

Indirect exporting

C O N T R O L

Direct exporting
Licensing Franchising Contract manufacturing Strategic alliance

R I S K

Joint venture
Wholly owned subsidiary

Success factors in manf. overseas distributor relationships Distribution Outcomes Remedies inhibitors
Separate ownership Divided loyalties Seller buyer atmosphere Unclear future intentions Communication blocks Negative attitudes Problems in physical distribution Vertical trading restrictions Offering good incentives, helpful support schemes, frank discussions, and high levels of interactions Making judicious ways of two way visits, establishing a well managed communication programme Full compliance with law,drafting a strong

Geographic, economic, and cultural gaps

Differences in the legal and regulatory

International logistics management

International distribution system

International suppliers
Offshore manufacturing

Fully integrated global supply chain

Export procedure
1

Exporter
4 5 5

Importer
2

Bank in exporters Importers bank country 3

Import warehouse
9

Manufacturing
8 6

Customs
9

Freight forwarder

Transportation and Documentation formalities secured

Ship Contd.

Customs broker

Contd.

Stat e
1

Process
The Sale
Importer makes enquiry from potential supplier Exporter sends catalogue and price list Importer requests samples Exporter sends Proforma invoice Importer sends purchase order

2 3 4 5 6

Importer arranges bank financing. Letter of credit send by importers bank Exporters bank notifies that the LOC has been received Exporter produces or acquires goods Exporter arranges transformation and documentation and space reserved on ship or aircraft Exporter ships goods to importer Exporter presents documents to bank for payment

7 8

International logistics intermediaries Freight forwarder

a) To forward an export shipment from the point of origin to the ultimate destination and b) To deal with transport carriers to get space for the shipment.

Customs broker

Exporting documents
Letter of credit Bill of lading Commercial invoice Commercial invoice Consular invoice Certificate of origin

Thank you