Sales and Distribution Management Study Material

Question 1: Define sales training, state various methods of providing training to the salesmen?
OR
Explain the various aspects of sales training?
OR
How will you plan and build a sales training program?

Answer:Sales training has been recognize as one of the vital factors in the success of the sales person. The essence of training in the belief that performance of people can be improved through the training. Training of the sales men is a process of selling skills development so as to increase the ability, knowledge and experience of the salesmen to perform well on the job.
OR
“Sales training is an organized activity involving fact finding, planning, coaching, placing and purposive attempt to develop selling skills and to add these skills to selected nature ability, causally acquired knowledge and experience.”
Aim of sales training/advantages:
1. Increasing sales.
2. Getting new accounts.
3. Factor turn round of stocks.
4. Selling a complete product line instead of just fast selling items.
5. Better merchandising and sales promotion.
6. Better product knowledge.
7. Improving sales presentation and sharpening sales skills.
8. Improving clinching skill in particular.
9. Customer education on products, their use and benefits.
10. Improving customer and dealer relations.
Successful training program consist of four phases:
1) Training assessment: In this phase a messenger must discuss the following points:
a. Training objective: The major objective of training is to improve the productivity of salesmen. Training programs also lower live employee turnover rates, leads to better morale, more effective communication & better self-management.
b. Who should be trained: It is the newly recruited salesmen who need training, but the existing sales force also needs training as things keep on changing. New products are introduced, buyers performance charges, so it becomes important to train dealers, distributers & sales manager.
c. Training needs: Assessment of training needs provides the starting point for getting training goals & designing the program. Setting the objectives also helps to trainer & the trainee focus on the purpose of training as well as provides the standard for measuring training effectiveness. d. How much training is needed- the amount of training required depends on the training objectives. For a new promotional program, only one day training might be sufficient.
2) Training program design: In this phase, the following questions need to be answered:
a. Who should do the training?: Regular line executives, staff personal, field specialist may serve as trainers. Any one of them or even a combination of persons can be used.
b. When should the training take place?: Training should be continual function as manager believes that everyone placed in the field should be fully trained, not only in company & product knowledge , but also in selling techniques.
c. Where should the training take place: The decisions of training program’s location involve the extent to which it should be centralized? There can be 2 types of training:
i. Decentralized: It takes several forms like- field sales office, use of senior salespeople, on the job training etc.
ii. Centralized: It may take place in organized or in period sales meeting at a central location.
d. What should be the content of the training?:The basic topics on which salesmen are gives training can be:
1. Knowledge about market.
2. Knowledge about customers.
3. Knowledge about products.
4. Knowledge about competitions.
5. Knowledge about company.
6. Salesmanship.
7. Team building skills.
8. Relationship building skills.
e. What training methods should be used?:Several different teaching methods may be used to present material in a sales training program. It is important to select those teaching methods that most effectively convey the desire contest.
3) Reinforcement: Most sales people would not change their behavior as a result of training unless there is same reinforcement. There can be many ways to reinforce training.
4) Training evaluation: Sales manager must assess the effectiveness of the training. This evaluation helps to determine the value of training & to improve the design of the future programs. Methods of sales training- The training methods can be categorized into:
1. Group training methods:
 a) Lectures / class room instructions: They are regarded as one of the simplest ways of importance knowledge to the trainees, especially when facts, attitudes, theories & problem solving abilities are to be taught. The lecture method may be used for a group containing good number of trainees, audio-visual equipments; VCR‟s, projectors also increase the effectiveness of lectures.
b) Group discussion methods: In this method, different groups are formed by limited numbers of persons. Each group seeks guidance under the leadership of a senior officer. The group discusses the sales problems with the leader & efforts are to be made to find out a commonly agreed solution to each problem.
c) Sales conference methods- It is a formal meeting conducted in accordance with an organized training plan. It lays emphasis on small group discussion, on specific subject matter. There are three types of conference, such as
1) Directed conference
2) Problem solving conference
3) Leadership discussions.
This method is used for training the persons holding managerial position.
d) Case study method: The trainees are given cases to analysis. They are asked to identify any sales problem & to recommended tentative solution for it. This method is useful for the manager to improve their decision making skills.
e) Role playing method: In role playing, trainees act as given role as in a stage play. Two or more trainees are assigned parts to play before the rest of the members. The role players are informed of a situation & of the respective roles they have to play. The idea of role playing involves action, doing & practice.
f) Gaming methods: Gaming method is a technique which duplicates, as nearly as possible & this method develops the decision making capacity of the trainees. The knowledge about various decisions methods such as selling efforts, advertising, sales force management, size of the orders time for getting orders are learnt through such training.
2. Individual training methods:
a) On the job training: The salesmen are appointed to do their duties under the guidance of experienced salesmen. This method is also known as training within industry.
b) Job rotation training: This method is used to provide knowledge to the trainees in respect of functions of different departments such as research department, accounts, advertising, packaging & public relations etc. This type of training develops the practical knowledge of the trainees.
c) Personal discussions: The salesmen contact his sales managers & senior manager from time to time & discuss with them the individual problems. The manager gives good advice & suggestions on the basis of their experience & their helps in improving the efficiency of salesmen.
d) Correspondence: When the sales trainees are at distant places, it becomes difficult for them to assemble every time for training. In such cases, training is imparted through correspondence. The training materials are printed & circulated to the sales trainee at different places where they are working. The trainees read the material carefully & learn to adopt or fallow the guidance & instructions received through the study material.
Question 2: Explain the process of sales management?
OR
Explain why sales management is considered as an important function?
Answer: There are major four steps in sales management
Although the role of sales management professionals is multidisciplinary, their primary responsibilities are:
• Setting goals for a sales-force
• Planning, budgeting, and organizing a program to achieve those goals;
• Implementing the program;
• Controlling and evaluating the results.
Even when a sales force is already in place, the sales manager will likely view these responsibilities as an ongoing process necessary to adapt to both internal and external changes.
GOAL SETTING
The overall goals of the sales force manager are essentially mandated by the marketing mix. The company coordinates objectives between the major components of the mix within the context of internal constraints, such as available capital and production capacity. The sales force manager, however, may play an important role in developing the overall marketing mix strategies. For example, the sales manager may be in the best position to determine the specific needs of customers and to discern the potential of new and existing markets.
One of the most critical duties of the sales manager is to estimate the market potential and sales potential of the company's offerings, and then to make realistic forecasts of sales. Market potential is the total expected sales of a given product or service for the entire industry in a specific market over a stated period of time. Sales potential refers to the share of a market potential that an individual company can reasonably expect to achieve. A sales forecast is an estimate of sales (in dollars or product units) that an individual firm expects to make during a specified time period, in a stated market, and under a proposed marketing plan.
Estimations of sales and market potential are often used to set major organizational objectives related to production, marketing, distribution, and other corporate functions, as well as to assist the sales manager in planning and implementing the overall sales strategy. Numerous sales forecasting tools and techniques, many of which are quite advanced, are available to help thesales manager determine potential and make forecasts. Major external factors influencing sales and market potential include: industry conditions, such as stage of maturity; market conditions and expectations; general business and economic conditions; and regulatory environment.
Planning, Budgeting, and Organizing
After determining goals, the sales manager of a small business must develop a strategy to attain them. A very basic decision is whether to hire a sales force or contract with independent selling agents or manufacturers' representatives outside of the organization. The latter strategy eliminates costs associated with hiring, training, and supervising workers, and it takes advantage of sales channels that have already been established by the independent representatives. On the other hand, maintaining an internal sales force allows the manager to exert more control over the salespeople and to ensure that they are trained properly. Furthermore, establishing an internal sale force provides the opportunity to hire inexperienced representatives at a very low cost.
The type of sales force developed depends on the financial priorities and constraints of the organization. If a manager decides to hire salespeople, the next step is to determine the optimal size of the force. This determination typically entails a compromise between the number of people needed to adequately service all potential customers and the resources available to the company. One technique sometimes used to determine sales force size is the "work load" strategy, whereby the sum of existing and potential customers is multiplied by the ideal number of calls per customer. That sum is then multiplied by the preferred length of a sales call (in hours). Next, that figure is divided by the selling time available from one salesperson. The final sum is theoretically the ideal sales force size. A second technique is the "incremental" strategy, which recognizes that the incremental increase in sales that results from each additional hire continually decreases. In other words, salespeople are gradually added until the cost of a new hire exceeds the benefit.
A sales manager who is in the process of hiring an internal sales force also has to decide the degree of experience to seek and determine how to balance quality and quantity. Basically, the manager can either "make" or "buy" his force. "Green" hires, or those without previous experience whom the company must "make" into salespeople, cost less over the long term and do not bring any bad sales habits with them that were learned in other companies. On the other hand, the initial cost associated with experienced salespeople is usually lower, and experienced employees can start producingresults much more quickly. But as Irving Burstiner noted in The Small Business Handbook, few star salespeople are ever unemployed, and a small business probably lacks the resources to find and hire those who are. Furthermore, if the manager elects to hire only the most qualified people, budgetary constraints may force him to leave some territories only partially covered, resulting in customer dissatisfaction and lost sales. Therefore, it usually makes more sense for small businesses to hire green troops and train them well.
After determining the composition of the sales force, the sales manager creates a budget, or a record of planned expenses that is (usually) prepared annually. The budget helps the manager decide how much money will be spent on personal selling and how that money will be allocated within the sales force. Major budgetary items include: sales force salaries, commissions, and bonuses; travel expenses; sales materials; training; clerical services; and office rent and utilities. Many budgets are prepared by simply reviewing the previous year's budget and then making adjustments. A more advanced technique, however, is the percentage of sales method, which allocates funds based on a percentage of expected revenues. Typical percentages range from about two percent for heavy industries to as much as eight percent or more for consumer goods and computers.
After a sales force strategy has been devised and a budget has been adopted, the sales manager should ideally have the opportunity to organize, or structure, the sales force. The structure of the sales force allows each salesperson to specialize in a certain sales task or type of customer or market, so that they will be more likely to establish productive, long-term relationships with their customers. Small businesses may choose to structure their sales forces by product line, customer type, geography, or a combination of these factors.
Implementing
After setting goals and establishing a plan for sales activities, the next step for the sales manager is to implement the strategy. Implementation requires the sales manager to make decisions related to staffing, designing territories, and allocating sales efforts. Staffing—the most significant of these three responsibilities—encompasses recruiting, training, compensating, and motivating salespeople.
Recruiting: The first step in recruiting salespeople involves analyzing the positions to be filled. This is often accomplished by sending an observer intothe field, who records the amount of time a salesperson must spend talking to customers, traveling, attending meetings, and doing paperwork. The observer then reports the findings to the sales manager, who uses the information to draft a detailed job description. The observer might also report on the characteristics and needs of the buyers, since it can be important for salespeople to share these characteristics.
The manager may seek candidates through advertising, college recruiting, company sources, and employment agencies. Candidates are typically evaluated through personality tests, interviews, written applications, and background checks. Research has shown that the two most important personality traits that salespeople can possess are empathy, which helps them relate to customers, and drive, which motivates them to satisfy personal needs for accomplishment. Other important traits include maturity, appearance, communication skills, and technical knowledge related to the product or industry. Negative traits include fear of rejection, distaste for travel, self-consciousness, and interest in artistic or creative originality.
Training: After recruiting a suitable sales force, the manager must determine how much and what type of training to provide. Most sales training emphasizes product, company, and industry knowledge. Only about 25 percent of the average company training program, in fact, addresses personal selling techniques. Because of the high cost, many small businesses try to limit the amount of training they provide. The average cost of training a person to sell industrial products, for example, commonly exceeds $30,000. Sales managers can achieve many benefits with competent training programs, however. For instance, research indicates that training reduces employee turnover, thereby lowering the effective cost of hiring new workers. Good training can also improve customer relations, increase employee morale, and boost sales. Common training methods include lectures, case studies, role playing, demonstrations, on-the-job training, and self-study courses. Ideally, training should be an ongoing process that continually reinforces the company's goals.
Compensation: After the sales force is in place, the manager must devise a means of compensating individuals. The ideal system of compensation reaches a balance between the needs of the person (income, recognition, prestige, etc.) and the goals of the company (controlling costs, boosting market share, increasing cash flow, etc.), so that a salesperson may achieve both through the same means. Most approaches to sales force compensation utilize a combination of salary and commission or salary and bonus. Salarygives a sales manager added control over the salesperson's activities, while commission provides the salesperson with greater motivation to sell.
Although financial rewards are the primary means of motivating workers, most sales organizations also employ other motivational techniques. Good sales managers recognize that salespeople have needs other than the basic ones satisfied by money. For example, they want to feel like they are part of a winning team, that their jobs are secure, and that their efforts and contributions to the organization are recognized. Methods of meeting those needs include contests, vacations, and other performance-based prizes, in addition to self-improvement benefits such as tuition for graduate school. Another tool managers commonly use to stimulate their salespeople is quotas. Quotas, which can be set for factors such as the number of calls made per day, expenses consumed per month, or the number of new customers added annually, give salespeople a standard against which they can measure success.
Designing Territories and Allocating Sales Efforts: In addition to recruiting, training, and motivating a sales force to achieve the company's goals, sales managers at most small businesses must decide how to designate sales territories and allocate the efforts of the sales team. Territories are geographic areas assigned to individual salespeople. The advantages of establishing territories are that they improve coverage of the market, reduce wasteful overlap of sales efforts, and allow each salesperson to define personal responsibility and judge individual success. However, many types of businesses, such as real estate and insurance companies, do not use territories.
Allocating people to different territories is an important sales management task. Typically, the top few territories produce a disproportionately high sales volume. This occurs because managers usually create smaller areas for trainees, medium-sized territories for more experienced team members, and larger areas for senior sellers. A drawback of that strategy, however, is that it becomes difficult to compare performance across territories. An alternate approach is to divide regions by existing and potential customer base. A number of computer programs exist to help sales managers effectively create territories according to their goals. Good scheduling and routing of sales calls can reduce waiting and travel time. Other common methods of reducing the costs associated with sales calls include contacting numerous customers at once during trade shows, and using telemarketing to qualify prospects before sending a salesperson to make a personal call.
Controlling and Evaluating
After the sales plan has been implemented, the sales manager's responsibility becomes controlling and evaluating the program. During this stage, the sales manager compares the original goals and objectives with the actual accomplishments of the sales force. The performance of each individual is compared with goals or quotas, looking at elements such as expenses, sales volume, customer satisfaction, and cash flow. According to Burstiner, each salesperson should be evaluated using both subjective (i.e., product knowledge, familiarity with competition, work habits) and objective (i.e., number of orders compared to number of calls, number of new accounts landed) criteria.
An important consideration for the sales manager is profitability. Indeed, simple sales figures may not reflect an accurate image of the performance of the sales force. The manager must dig deeper by analyzing expenses, price cutting initiatives, and long-term contracts with customers that will impact future income. An in-depth analysis of these and related influences will help the manager to determine true performance based on profits. For use in future goal-setting and planning efforts, the manager may also evaluate sales trends by different factors, such as product line, volume, territory, and market. After the manager analyzes and evaluates the achievements of the sales force, that information is used to make corrections to the current strategy and sales program. In other words, the sales manager returns to the initial goal-setting stage.
Question 3: What is sales forecasting? Describe any four qualitative methods of sale forecasting.
Answer:Managers use forecasts for budgeting purposes. A forecast aids in determining volume of production, inventory needs, labour hours required, cash requirements, and financing needs. A variety of forecasting methods are available. However, consideration has to be given to cost, preparation time, accuracy, and time period. The manager must understand clearly the assumptions on which a particular forecast method is based to obtain maximum benefit.Management in both private and public organizations typically operates under conditions of uncertainty or risk. Probably the most important function of business is forecasting, which is a starting point for planning and budgeting. The objective of forecasting is to reduce risk in decision making.
In business, forecasts form the basis for planning capacity, production and inventory, manpower, sales and market share, finances and budgeting, research and development, and top management’s strategy. Sales forecasts are especially crucial aspects of many financial management activities, including budgets, profit planning, capital expenditure analysis, and acquisition and merger analysis.
Which Area and Why Use Forecasts:Forecasts are needed for marketing, production, purchasing, manpower, and financial planning. Further, top management needs forecasts for planning and implementing long-term strategic objectives and planning for capital expenditures.
More specifically, here are who and why they need to forecast:
Marketing managers: They use sales forecasts to determine optimal sales force allocations, set sales goals, and plan promotions and advertising. Market share, prices, and trends in new product development are also required.
Production planners: They need forecasts in order to: schedule production activities, order materials, establish inventory levels and plan shipments. Other areas that need forecasts include material requirements (purchasing and procurement), labour scheduling, equipment purchases, maintenance requirements, and plant capacity planning. As soon as the company makes sure that it has enough capacity, the production plan is developed. If the company does not have enough capacity, it will require planning and budgeting decisions for capital spending for capacity expansion. On this basis, the manager must estimate the future cash inflow and outflow. He or she must plan cash and borrowing needs for the company’s future operations. Forecasts of cash flows and the rates of expenses and revenues are needed to maintain corporate liquidity and operating efficiency. In planning for capital investments, predictions about future economic activity are required so that returns or cash inflows accruing from the investment may be estimated. Forecasts are needed for money and credit conditions and interest rates so that the cash needs of the firm may be met at the lowest possible cost. Forecasts also must be made for interest rates, to support the acquisition of new capital, the collection of accounts receivable to help in planning working capital needs, and capital equipment expenditure rates to help balance the flow of funds in the organization. Sound predictions of foreign exchange rates are increasingly important to managers of multinational companies. Long-term forecasts are needed for the planning of changes in the company’s capital structure. Decisions on issuing stock or debt to maintain the desired financial structure require forecasts of money and credit conditions.
The personnel department:It requires a number of forecasts in planning for human resources. Workers must be hired, trained, and provided with benefits that are competitive with those available in the firm’s labour market. Also, trends that affect such variables as labour turnover, retirement age, absenteeism, and tardiness need to be forecast for planning and decision making.
Managers of non-profit institutions and public administrators:They also must make forecasts for budgeting purposes.
Hospital administrators: They forecast the healthcare needs of the community. In order to do this efficiently, a projection has to be made of: growth in absolute size of population, changes in the number of people in various age groupings, and varying medical needs these different age groups will have.
Universities: These forecast student enrollments, cost of operations, and, in many cases, the funds to be provided by tuition and by government appropriations.
The service sector: Today accounts for two-thirds of the U.S. gross domestic product, including banks, insurance companies, restaurants, and cruise ships, needs various projections for its operational and long-term strategic planning.
The bank: Banks have to forecast too. Demands of various loans and deposits Money and credit conditions so that it can determine the cost of money it lends.
Forecasting Methods
The company may choose from a wide range of forecasting techniques. There are basically two approaches to forecasting, qualitative and quantitative:
Qualitative: Using qualitative approach, a company forecasts based on judgment and opinion. Grouped under this approach are:
1. Executive opinions
2. Delphi technique
3. Sales force polling
4. Consumer surveys
Quantitative: Using quantitative approach, a company forecasts based on:
a. Historical data forecasts – Grouped under historical data forecasts are the followings:
1. Naive methods
2. Moving average
3. Exponential smoothing
4. Trend analysis
5. Decomposition of time series
b. Associative (causal) forecasts – Grouped under the associative forecasts are the followings:
1. Simple regression
2. Multiple regression
3. Econometric modelling
Selection of Forecasting Method
The choice of a forecasting technique is influenced significantly by the stage of the product life cycle and sometimes by the firm or industry for which a decision is being made. In the beginning of the product life cycle, relatively small expenditures are made for research and market investigation.
During the first phase of product introduction, these expenditures start to increase. In the rapid growth stage, considerable amounts of money are involved in the decisions, so a high level of accuracy is desirable. After the product has entered the maturity stage, the decisions are more routine, involving marketing and manufacturing. These are important considerations when determining the appropriate sales forecast technique.
After evaluating the particular stages of the product and firm and industry life cycles, a further probe is necessary. Instead of selecting a forecasting technique by using whatever seem applicable decision makers should determine what is appropriate.
Some of the techniques are quite simple and rather inexpensive to develop and use. Others are extremely complex, require significant amounts of time to develop, and may be quite expensive. Some are best suited for short-term projections, others for intermediate- or long-term forecasts.
What technique or techniques to select depends on six criteria:
1. What is the cost associated with developing the forecasting model, compared with potential gains resulting from its use?
2. How complicated are the relationships that are being forecasted?
3. Is it for short-run or long-run purposes?
4. How much accuracy is desired?
5. Is there a minimum tolerance level of errors?
6. How much data are available? Techniques vary in the amount of data they require.
The choice is one of benefit-cost trade-off. Quantitative models work superbly as long as little or no systematic change in the environment takes place. When patterns or relationships do change, by themselves, the objective models are of little use. It is here where the qualitative approach, based on human judgment, is indispensable. Because judgmental forecasting also bases forecasts on observation of existing trends, they too are subject to a number of shortcomings. The advantage, however, is that they can identify systematic change more quickly and interpret better the effect of such change on the future.
Qualitative Forecasting Methods
The qualitative (or judgmental) approach can be useful in formulating short-term forecasts and can also supplement the projections based on the use of any of the quantitative methods.
Four of the better-known qualitative forecasting methods are executive opinions, the Delphi method, sales-force polling, and consumer surveys:
1. Executive Opinions
The subjective views of executives or experts from sales, production, finance, purchasing, and administration are averaged to generate a forecast about future sales. Usually this method is used in conjunction with some quantitative method, such as trend extrapolation. The management team modifies the resulting forecast, based on their expectations.
The advantage of this approach: The forecasting is done quickly and easily, without need of elaborate statistics. Also, the jury of executive opinions may be the only means of forecasting feasible in the absence of adequate data.
The disadvantage: This, however, is that of group-think. This is a set of problems inherent to those who meet as a group. Foremost among these are high cohesiveness, strong leadership, and insulation of the group. With high cohesiveness, the group becomes increasingly conforming through group pressure that helps stifle dissension and critical thought. Strong leadership fosters group pressure for unanimous opinion. Insulation of the group tends to separate the group from outside opinions, if given.
 2. Delphi Method
This is a group technique in which a panel of experts is questioned individually about their perceptions of future events. The experts do not meet as a group, in order to reduce the possibility that consensus is reached because of dominant personality factors. Instead, the forecasts and accompanying arguments are summarized by an outside party and returned to the experts along with further questions. This continues until a consensus is reached.
Advantages: This type of method is useful and quite effective for long-range forecasting. The technique is done by questionnaire format and eliminates the disadvantages of group think. There is no committee or debate. The experts are not influenced by peer pressure to forecast a certain way, as the answer is not intended to be reached by consensus or unanimity.
Disadvantages: Low reliability is cited as the main disadvantage of the Delphi method, as well as lack of consensus from the returns.
3. Sales Force Polling
Some companies use as a forecast source salespeople who have continual contacts with customers. They believe that the salespeople who are closest to the ultimate customers may have significant insights regarding the state of the future market. Forecasts based on sales force polling may be averaged to develop a future forecast. Or they may be used to modify other quantitative and/or qualitative forecasts that have been generated internally in the company.
The advantages of this forecast are:
1. It is simple to use and understand.
2. It uses the specialized knowledge of those closest to the action.
3. It can place responsibility for attaining the forecast in the hands of those who most affect the actual results.
4. The information can be broken down easily by territory, product, customer, or salesperson.
The disadvantages include: salespeople’s being overly optimistic or pessimistic regarding their predictions and inaccuracies due to broader economic events that are largely beyond their control.
4. Consumer Surveys
Some companies conduct their own market surveys regarding specific consumer purchases. Surveys may consist of telephone contacts, personal interviews, or questionnaires as a means of obtaining data. Extensive statistical analysis usually is applied to survey results in order to test hypotheses regarding consumer behavior.
Common Features and Assumptions Inherent in Forecasting
As pointed out, forecasting techniques are quite different from each other. But four features and assumptions underlie the business of forecasting. They are:
1. Forecasting techniques generally assume that the same underlying causal relationship that existed in the past will continue to prevail in the future. In other words, most of our techniques are based on historical data.
2. Forecasts are rarely perfect. Therefore, for planning purposes, allowances should be made for inaccuracies. For example, the company should always maintain a safety stock in anticipation of a sudden depletion of inventory.
3. Forecast accuracy decreases as the time period covered by the forecast (i.e., the time horizon) increases. Generally speaking, a long-term forecast tends to be more inaccurate than a short-term forecast because of the greater uncertainty.
4. Forecasts for groups of items tend to be more accurate than forecasts for individual items, because forecasting errors among items in a group tend to cancel each other out. For example, industry forecasting is more accurate than individual firm forecasting.
Question 4: Describe AIDAS theory of selling. Explain the steps involved in prospecting.
Answer: AIDAS theory the initials of five words used to express it (attention, interest, desire, action, & satisfaction) is basis for many sales & advertising texts & is the skeleton around which many sales training programs are organized. During the successful selling interview, according to this theory, the prospects mind passes through five successive mental states: attention, interest, desire, action & satisfaction. Implicit in this theory is the notion that the prospect goes through these five stages consciously, so the sales presentation must lead the prospect through them in the right sequence if a sale is to result.
Prospecting involves the following steps:
Securing attention: The goal is to put the prospects in to a receptive state of mind. The first few minutes of the interview are crucial. The sales person has to have reason, or an excuse, for conducting the interview. If the salesperson previously has made an appointment, this phase presents no problem, but experienced sales personnel say that even with an appointment, a salesperson must possess considerable mental alertness, & be a skilled conversationalist, to survive the start of the interview. The sales person must establish good rapport at once. The salesperson needs an ample supply of conversation openers. Favorable first impressions are assured by, among other things, proper attire, neatness, friendliness, and a genuine smile. Skilled sales personnel often decide upon conversation openers just before the interview so that those chosen are as timely as possible, conversation openers that cannot be readily tied in with the remainder of the presentation should be avoided, for once the conversation starts to wander, great skill is required to return to the main theme.
Gaining interest: The second goal is to intensify the prospects attention so that it evolves into strong interest. Many techniques are used to gain interest. Some salespeople develop a contagious enthusiasm for the product or a sample. When the product is bulky or technical, sales portfolios, flipcharts, or other visual aids serve the same purpose. Throughout the interest phase, the hope is to search out the selling appeal that is most likely to be effective. The more experienced the salesman, the more he has learned from interviews with similar prospects. But even experienced sales personnel do considerable probing, closeness of the interview subject to current problems, its timeliness, & their mood, skeptical or hostile & the salesperson must take all these into account in selecting the appeal to emphasize.
Kindling desire: The third goal is to kindle the prospects desire to the ready to buy point. The salesperson must keep the conversation running along the main line toward the sale. The development of sales obstacles, the prospects objections, external interruptions, & digressive remarks can sidetrack the presentation during this phase. Obstacles must be faced & ways found to get around them. Objections need answering to the prospects satisfaction. Time is saved, & the chance of making a sale improved if objections are anticipated & answered before raises them. External interruptions cause breaks in the presentations, & when conversation resumes, good salespeople summarize what has been said earlier before continuing.
Inducing actions: If the presentation has been perfect, the prospects are ready to act that is, to buy. However, buying is not automatic and, as a rule, must be induced. Experienced sales personnel rarely try for a close until they are positive that the prospect is fully convinced of the merits of the proposition. Thus, it is up to the sales person to sense when the time is right. The trial close, the close on a minor point, & the trick close are used to test the prospects reactions. Some sales personnel never ask for a definite yes or no for fear of getting a no from which they think there is no retreat. But it is better to ask for the order straight forwardly. Most prospects find it is easier to slide away from hints than from frank requests for an order.
Building satisfaction: After the customer has given the order, the salesperson should reassure the customer that the decision was correct. The customer should be left with the impression that the salesperson merely helped in deciding. Building satisfaction means thanking the customer for the order, and attending to such matters as making certain that the order is filled as written, & following up on promises made. The order is the climax of the selling situation, so the possibility of an anticlimax should be avoided customers sometimes unsell themselves & the salesperson should not linger too long.
Question 5: What is a sales territory? How sales territories are designed? Why is it necessary for a company to establish sale territories?
Answer:A sales territory comprises a number of present and potential customers, located within a given geographical area and assigned to a salesperson, branch, or intermediary (retailer or wholesaling intermediary).
In this definition, the keyword is customers rather than geographical. To understand the concept of a sales territory, we must recognize that a market is made up of people, not places—people with money to spend and the willingness to spend it. A market is measured by people times their purchasing power rather than in square miles.
A company, especially a medium- or large-sized one, can derive several benefits from a carefully designed territorial structure (see the accompanying box “Benefits of Good Territory Design”). Unfortunately, poorly designed territories are all too common because sales executives fail to monitor and react to changes in the market. Over time, some territories gain potential customers at a faster rate than other territories. Some territories might even lose customers.Eventually, territories that once were fair and equal become unbalanced in terms of their sales potential. This is why sales executives must consider revising the territorial structure on a regular basis.
In select circumstances that typically involve small-sized companies, sales territories are not necessary. For example, formal territories may not be needed for a small company with a few people selling only in a local market. In this case,management can plan and control sales operations without the aid of territories and still enjoy many benefits of a formal structure. In addition, lack of territories may be justified when personal friendships play a large part in the market transaction. This is one reason automobile dealers and commodity and security brokers usually do not district their sales forces. Highly specialized sales engineers also may serve in troubleshooting assignments or be called in anywhere to help close an important sale.
Most organisations use sales territories. Some Companies do not clearly define their territories but they exist in an informal way. People usually use the following arguments against the use of territories:
1. Sales Representatives operate more effectively when unrestricted.
2. Establishing and supervising territories proves unnecessarily expensive.
3. Establishing territories leads to disputes between Sales Representatives. (“You have a better territory than I have.”)
4. Experience with well-defined and well-selected territories will change these beliefs.
The following advantages usually come from well-designed territories:
1. Better management of Sales Representatives’ activities – since each Representative operates within a specified area and deals with a specific group of Prospects/Customers.
2. Closer supervision. A Sales Manager knows which Sales Representative should deal with each account. They also know (at least roughly) where to find each Sales Representative if they wish to contact the Sales Representative urgently.
3. Easier to check on the organisation of each Sales Representative’s activities and important factors as – time spent on selling and travelling, efficiency of routing, and overall coverage of the territory.
4. Easier to study each territory thoroughly. Managers can gather much more detailed and accurate information about a well-defined area and a particular group of Prospects than about wide and general areas.
5. Saving selling time and expense. Sales Representatives can easily spend up to 40% of their working time on travel. Use of a well-defined territory allows careful planning of routes which decreases travelling time and increases selling time.
6. Arrange similar opportunities for sales for Sales Representatives. Managers can establish territories to give each Representative about the same share of the available and potential market – as measured by such factors as population, income, number of outlets and standards of living.
7. Meet competition better. Managers can more-easily appraise Competitors’ strengths and weaknesses (e.g. their coverage of, and call frequencies, within a territory) and compare this appraisal with their Company’s activities.
8. Sales Representatives know where they stand. No misunderstandings over such things as rights to certain Customers or the blame for neglected accounts should exist.
9. Easier to compare the performances of Representatives. As Sales Representatives operate under known and controlled conditions (for such factors as potential markets, amount of advertising, number of outlets, and appraisal of strength of Competitors), a more-accurate basis for comparing performances exists.
10. Better service to Customers. Representatives get to know the typical Customer problems within their territory and can find solutions more easily. Managers can select and train a particular type of Representative to service a territory with unusual problems. Without such clear objectives in setting territories Managers tend not to make decisions on such matters.
11. Marketing Research becomes easier and more accurate. Managers will find it easier to study various aspects of marketing within a defined area. They can more easily study potential sales, customer needs, buying motives, purchasing power, effectiveness of advertising, appraisal of competition, and facts relevant to the creation of sales quotas and budgets.
12. A clearly-defined task for Representatives leads to higher efficiency. Representatives with definite work standards tend to work harder and better than Representatives without standards.
Design Objectives
In designing a sales territory, Managers should aim to achieve each of the twelve advantages listed above.
Possible Objectives related to Territory Design
1. Provide between territories: (a) equality of work, (b) equality of sales potential, or (c) some combination of both. While Managers can achieve relatively equal potential fairly easily, more difficulty exists in arranging an equal task. Managers will need to consider such factors as: economic conditions, competition, demand, area size, standard of Dealers, and ability of opposition Sales Representatives.
2. Use Marketing Areas. A Marketing Area consists of a geographical area which has a central part to which most Buyers tend to come to satisfy their needs.
3. Usually distance proves the most important factor in deciding marketing areas. However other factors do have an effect. These factors include: (a) ease of travelling (public transport or a better road exists); (b) natural features (mountains, lakes, rivers with no bridges); (c) customs of people (status of buying from a certain shop, organisation etc.); (d) customer service (no companies provide service equally well to all parts of the territory); and (e) price (does it vary from one area to another; e.g. petrol priced higher in the country than a defined city area).
4. Many organisations use political units such as States and Cities as sales territories. Sometimes these areas do not prove the most efficient because they do not conform to the flow of trade. Better practice will make use of logical marketing units to build up sales territories.
5. Suit the size of the territory to the work required. If sales policy required all Customers to receive a call every week, the territory size must allow Representatives to do so.
6. This point depends on the availability of some factors which provide a fairly accurate measure of sales potential e.g. if sales correlate highly with (say) the adult population of a territory or the number of houses in it or the buildings started, it will prove fairly easy to select territories with equal sales potential.
7. This point assumes that sufficient bridges, tunnels, etc. exist for people to move easily from areas on one side of the river to areas on the other.
8. Combine sub-territories to make territories. Usually each territory will include several sub-territories, often grouped according to logical marketing areas related to the product and distribution method(s).
The Use of Sub-Territories
If someone changes territory boundaries it becomes difficult to compare the results of previous periods since they refer to a different area. Sub-territories provide one method of overcoming this problem provided people make changes in a whole territory by adding or subtracting one or more sub-territories. To use this approach, the Organisation must arrange to extract sales figures and other relevant data for each sub-territory. This approach will prove expensive in clerical labour costs but sometimes the advantages of control for marketing management make the cost worthwhile. Territories must consist of a reasonably-high number of sub-territories (say at least 6) for this approach to work.
Such an approach, especially during a period of substantial growth, may eventually need a complete overhaul.
Such a detailed approach to arrangement of sales territories will only prove worthwhile where Managers want to obtain appropriate information and have the ability to use it. Such an elaborate approach will not suit all Companies. However Companies should check they do not fall into the trap of spending money on getting some of the details when investigation would show that they should do the job in full – or not at all
Territory Boundaries
Managers should concentrate on Prospects rather than on physical features when defining territories. However many territories use some physical boundaries. In selecting boundaries Managers should consider:
1. Topographical features; such as mountains, lakes, etc.
2. Position of roads and their suitability for travelling
3. Statistical and retail areas as defined by the Commonwealth Statistician.
For the outdoor Sales Representatives, few Prospects usually occur in mountains, rivers, and lakes. Representatives will also want to avoid impassable roads or ones which they have to drive over very slowly since they add considerably to non-selling travelling time.
If a territory agrees with the areas used by the Commonwealth Statistician, Managers will have a ready-made source of classified information at no cost. This information will help to provide data on sales potential from such details as:
1. Population changes
2. Number of houses, firms, animals, etc.
3. Other information concerning different industries.
One other feature determines outdoor territory boundaries – State or political boundaries. They get frequent use since Companies legally have to trade within the States in which they have registration. Often an Australia-wide company will divide its operations into State Branches. Representatives in such Branches usually report to some person under the management of the State Manager. Thus territories, close to the State borders, often use the State limits as part of the territory limits. Managers should not use State boundaries blindly as territory boundaries since they sometimes divide an area which, from a marketing point of view, Marketing Personnel should treat as a whole.
Managers can look on a retail store as having certain “topographical” features. Thus a territory could equal the areas which a Sales person can see easily by standing at the Sales person’s usually selling base. Selling in a retail field will improve if Managers define territories or areas so that they coincide with the areas used for cost purposes – usually by Departments. However this approach should not ignore the advantages of helping in adjacent departments when they become busy.
Question 6: Write short notes on the following:
1. Sales Quotas
2. Evaluation of Distribution Effectiveness
3. Sales Force Structure
Answer: Sales Quotas: Any kind of sales figures given to any particular person or region or distributor is called Sales Quota. It can be measured either in terms money or the stock of goods sold. It is particularly an amount of target sales that is assessed on daily or monthly basis. In assessing an individual sales person the performance is looked at his or ability to meet the given target or to go beyond it.
Types of Sales Quotas:
This can include many things from cold calling, Marketing emails, advertisements, invitation to executives for events and many more things. It’s always in the interest of the sales team as to how they should get the stuff out.
1. Sales volume quota: This always includes sales in monetary terms or units sold for a specific period of time. This type of sales quotas is always set for a given year. The sales teams are then assigned their yearly quotas to be accomplished. These quotas are set in the areas mentioned below:
• Product line
• Product range
• Branch offices
• Individual sales person
2. Profit quotas: This type of quotas is very useful for multiproduct companies. Since various products add to varying levels of profits. The advantage of this type of sales quota is the sales person can use his time optimally. Hence he/she can strike a balance between high and low profit yielding products.
3. Expense Quotas: These are linked to selling costs with a realistic time frame. Few companies set quotas for expenses to different sales levels achieved by the sales person. The sales team may be given an expense budget which is a percentage of a particular regions sales volume. He or She should spend only that sum as expenses.
4. Activity Quotas: Under such quotas the sales team is required to execute other activities that will have a long term bearing on the company’s goodwill. Here certain objectives related to the job are set in attaining the performance targets of the sales force. When it comes to Indian companies we have few common types of these quotas mentioned below:
• Quantity of sales presentation made
• Amount of calls made
• Number of dealer visits.
• Recovery calls made.
• New clients procured.
2. Evaluation of Distribution Effectiveness: Evaluation of distribution effectiveness should be directed towards two things:
Distribution costs are bound to go up not only with increase in the volume of sales but also with the efforts towards achieving higher market share through better coverage and penetration into new markets. Complete elimination of distribution cost is not possible.
• How far is the distribution channels-mix adequate to enable the company to improve upon its market share?
• Whether the total cost of distribution is kept to the minimum.
As regards the minimizing the cost of distribution the following aspects are to carefully considered:
1. The major elements of distribution cost, are transportation, warehousing including storage insurance, material handling, credit and collection, finance and administration (invoicing, data processing) and interest on inventory carried at different selling points.
2. Distribution costs may be classified as fixed (Salaries of distribution staff, warehouse rent), semi-variable (travelling of staff, stationary and telephone charges) and variable packaging, insurance, transportation, interest on inventories. Budgets and norms should be established for each such major item of expense, under each category, and actual figures watched regularly may be on monthly basis.
3. Use of material handling equipment in warehousing, mechanized invoicing system, inventory control methods will help in cost reduction.
4. The overall distribution systems should be subjected to a thorough and objective review at regular intervals. This review will show up the resources of inefficiencies. Any significant change in the mode of distribution should be subjected to a detailed financial evaluation by cost benefit analysis.
5. Optimum Channels of distribution: Many alternative channels are available and the choice made will greatly affect distribution costs and efficiency. Moreover as a firm’s output grows, it is necessary to reconsider what channels can provide more efficient distribution and to revamp the structure of discounts and commissions.
6. Adopt profit and loss system for branches, individual salesman, product departments.
3. Sales Force Structure
Sales force organization structures tend to be left alone during stable economic times, when companies are doing well. They are more apt to come under scrutiny when times aren’t as good, or when a company is facing significant change. At present, in many companies, there is increasing scrutiny of how sales forces are designed and a willingness to consider changing the sales function in ways that will better serve customers and drive improved financial results. This is especially true at companies that continue to suffer revenue declines associated with the recession, that are struggling to return to previous levels of profitability, or that face disruptive market changes.
An interplay of factors typically drives a company to a sales force redesign. Given the inherent risks, most companies will only do it as a response to one or more of several reasons.
The first is slowing growth. Whether the cause is a lagging economy or declining demand for the seller’s core products, a slowdown or decline in revenue will often prompt companiesto take a fresh look at the design of their sales forces. In these situations senior management may feel it cannot afford to maintain separate sales forces, or that it needs to split up its existing sales force to get more market focus.
Declines in profitability in different product segments can also prompt companies to rethink their sales force designs. For instance, a company may determine that it can raise its overall profitability by doing a consolidation that lets its representatives sell a broader portfolio of its products. Or it may decide it can use lowercost channels (such as telesales or the Web) to sell products that are inexpensive and don’t require customer hand-holding.
Changes in the product and customer portfolio, whether a streamlining of the existing portfolio, an expansion into an adjacent product or service segment, or a move into a new geography, can also prompt a move toward a new sales force design. So can a company’s decision to pursue new customers or to pursue a given customer segment in a more dedicated fashion. Many technology companies, for instance, have increased their focus on specific industry verticals and the government, and often deploy specialists or dedicated selling organizations to serve these segments.
Finally, customer input often gets companies to rethink the design of their sales forces. It is not uncommon for a customer to impose some requirements such as a single point of contact to manage the relationship on its vendors as a condition of doing business. If the customer is important enough, not only does the selling company usually make the accommodation, but it may also see the change as an opportunity to redesign its sales force in more fundamental ways.
These issues have cropped up in many industries in recent years, causing more and more companies to embark on sales force redesigns. In these redesigns, some companies have decided to integrate multiple sales force organizations under a single global sales function to simplify the customer interface and to improve coordination and efficiency. Other companies have decided to “de-integrate” their sales structure by creating separate sales forces, often embedded in individual business units, to achieve greater customer or product focus.
Getting the sales structure right or wrong can have a huge impact on the future success of a company and mean billions of additional (or missed) revenues, increased (or reduced) customer satisfaction, and significantly improved (or reduced) profits.
Companies that want to rethink their sales force structure need to address two critical questions: How many sales forces do we need? And to what extent should our sales forces be embedded in individual business units, rather than integrated as part of a centralized sales function. Answering these two questions correctly is complex and critically important, given the inherent risk in a sales force redesign, the time and expense involved, and the likelihood of having to overcome some internal resistance. Fortunately, there is a way of rethinking sales force design that is highly structured. As such, it can help in formulating a redesign strategy and implementing the change.
This Perspective lays out the factors to be considered in addressing the two fundamental sales force questions how many sales forces a company needs and what the reporting structure should be and introduces some principles for making changes.
Two key questions must be asked: How many sales forces are needed? And what is the optimal reporting structure centralized or embedded in individual business units? Asking these questions helps in striking the best balance between focus mastery of a single product area and efficiency.
There is often no obvious answer and no easy route to redesigning a sales force. However, the challenges of doing a sales force redesign shouldn’t cause companies to pull up short if an analysis reveals it makes sense. In that case, move ahead and capture the higher revenue and efficiency and improved customer relationships that are the rewards of getting the sales design right.


Question 6: Describe at length sales related marketing policies?
Answer: Sales related marketing policies impact upon the functions and operation of the sales department. These marketing delineate the guidelines within which the effort to reach personal selling objectives is made. There are three major types (1) product policies (what to sell) (2) distribution policies (whom to sell), and (3) pricing policies.
Product Line Policy
Policies on the width of a product line are classified as either short line or full line. The company following a short line policy handles only part os a line, while the company with a full line policy handles all or most of the items making up a line. Companies use short line policies for some product groupings & full line policies for others. The extent to which a short line policy should be pursued is governed by the amount of risk that management is willing to assume the narrower the line, the greater the risk. If a firm concentrates on a single product, the rewards can be great. Product specialization enables the manufacturing division to achieve low unit cost. In turn, this may make the company almost invulnerable to price competition, even though the product is of the highest quality. But the penalty for failure is also great. If the product is displaced by substitutes introduced by competitors, the company finds itself locked out of the market.
Changes in product offerings: All items in a product line should be reappraised at regular intervals. Reappraisals serve two purposes (1) to determine whether individual items are still in tune with market demand and (2) to identify those that should be dropped from, or added to, the line. Unless the product line is reappraised regularly, market demand may shift, and more alert competitors may capture larger market shares.
Reappraising the product line and line simplification: each item in the line is compared with similar and competing items in other manufacturer’s lines. The focus is upon identifying strengths and weaknesses, especially as to which features of each item consumers consider desirable or un desirable. Special attention is paid to significant trends in usage: how much is used? What is it used for? When is it used? Where is it used? The answer also has supplemental benefits they provide insights useful in constructing sales presentations and in motivating the sales force and dealer organization. The most critical factor in reappraising is profitability. Generally, an item in the line should not be retained unless it meets standards for profitability. Even if the item would continue with a poor profit showing regardless of changes in price or promotion, do other factors indicate its retention? Some companies cater to customers and dealers who, logically or not, expect a full line offering. Products with slow turnover rates should be discontinued if dealer place more emphasis on the better selling products in the line. Finally, any item not fitting logically into the line is a candidate for elimination.
Reappraising the product line and line diversification. Management makes reappraisal of the line relative to growth objectives. These objectives are restricted as an established product line approaches market saturation. They are restricted too, when the industry is dying or when competitors succeed in making permanent inroads in a company’s natural market. If action is long delayed in these situations the survival of the firm itself is at stake. Often the indicated action is to add new products or even entirely new product lines.

Ideas for new products: Companies tap both internal & external source of new product ideas. Product ideas coming from within the company generally are related to regular operations. The sales department identifies unsatisfied need in his day to day contacts with customers and prospects. The production department develops improvements in existing products. The research & development department turns up ideas for new products as a routine part of its activities.
Appraisal of proposed new products: As in the reappraisal of established offering the key question is: Will this item add to profitability? Other factor includes the nature & the size of markets, competitors, price policy, sales programs & legal implications. The marketing & production characteristics of a proposed product should be compared with those of the existing line. Ideally, an addition should be in alignment of both marketing & production sides.
Product Design Policy
The two main policy decisions on product design are (1) the frequency of design change & (2) the extent to which designs should be protected from coping. The policy on design protection is related to frequency of design change. The rapid change makes legal protection impractical. Success in high fashion fields depends upon the extent to which designs are adopted by competing firms so that the style becomes fashionable. Where design changes occur less frequently, design protection is practical & desirable, as in the home appliance, furniture & jewelry industry.
Product Quality and Service Policy
High quality products require less service & low quality products requires more service. Manufacturer’s service policies take different forms. The simplest merely provides for education of the buyer in the use and care of the product. Other service polices particularly for industrial products and such consumer lines as air conditioning and heating equipments provide for product installation, inspection & repair. An appropriate service policy facilitates the making of initial sales & helps in keeping products sold, stimulating repeat sales, and building customer good will.
Guarantee policy
Guarantees or warranties as they are sometimes called serve as sales promotional devices and as guards against abuses of the service policy. If the product does not perform as represented, the guarantor may promise to replace it, to refund the purchase price or a multiple of that price, to furnish the purchaser with competitive product at no expense or to remedy defects free of charge or for a small fee. When a guarantee is used for promotional purpose, its term is liberal. When used for protection, its term is hedged with conditions and restrictions.
DISTRIBUTION POLICIES—WHO TO SELL  
Distribution policies are important determinants of the functions of the sales department. The choice of a particular marketing channel sets the pattern for sales force operation, both geographically and as to the customers from whom sales personnel solicit orders. The decision on the number of outlets at each distribution level affects the size and nature of the sales organization and the scope of its activities. Related decisions concerning cooperation extended to and expected from the middlemen influence sales operations and salespersons jobs.
Policies on Marketing Channels
One of the most basic of all marketing decisions is that on marketing channels. Manufacturers selling to the consumer market have a choice of five main channels and those selling to the industrial market have four main options. Few manufacturers use only one marketing channel most use two or more. Firms that sell to both the consumer and industrial market are in this classification, as are the many who sell through both chain & independent outlets. Decisions on marketing channels are required more often than is commonly supposed. The obvious occasions are those following the initial organization of the enterprise, and when making additions to the product line. At these times, the desirability and appropriateness of different channel option are evaluated. The initial selection or reevaluation of marketing channels is a matter of determining which channel, or channels, affords the opportunity for the greatest profit. Channels, in other words, should be chosen as to obtain the optimum combination of profit factors. The policy makers keep in mind all three profit factor sales volume, costs, and resultant net profits and they consider the effect of different channel options and combinations on each factor over both short and long periods.
Sales volume potential: For each channel option the key question is can enough potential buyers are reached to absorb the desired quantity of product? The answer was found through marketing analysis. Raw data are secured from company’s own records, external sources of market statistics, and field investigations. When these data are analyzed, and after allowances are made for the strengths of competitors, the potential sales volume of each channel option is estimated.
Comparative distribution cost: Distribution cost studies show that the costliest channels are the shortest ones. When a manufacturer decides to sell directly to the consumer, it assumes responsibility for the addition performance of marketing function. It incurs higher cost as it steps up performance of selling transportation, storage, financing, and risk bearing. If the manufacturer chooses to use the door to door direct selling method, it faces problems on the selection, training, supervision, and general management of this class of sales personnel. Longer marketing channels results in lower selling cost for the manufacturers. When middlemen are used, they perform some functions that the manufacturer would otherwise perform. It is necessary to compensate middlemen for performing these functions.
Net profit possibilities: Sales volume potentials are meaningful only when considered in relation to distribute costs. A channel with high sales potential may involve high distribution costs, causing low net profit. A second channel might not produce a worthwhile sales volume, even though it involves low distribution cost.
Policies on Distribution Intensity
Choice of marketing channels is intertwined with policy on distribution intensity. At each level of distribution, decisions are made on the desired number of outlets. It is advisable to decide first upon the policy to be followed at the distribution level nearest the final buyer, because generally the same decisions must be applied at other distribution levels. Once the policy on distribution intensity is set, the sales executive’s responsibility is to interpret and implement it.
Mass distribution: The Company following a policy of mass distribution aims for maximum sales exposure by securing distribution through all those outlets from which final buyers might expect to purchase the product. This policy is used in distributing many consumer convenience items, cigarettes, candy, and chewing gum, for instance, can be food store, drug stores, cigar stores, candy shops, variety stores, restaurants, theater and hotel lobbies; at newsstands; and from vending machines. Often the manufacturers using this policy need not one but several marketing channels.
Selective distribution: Selective distribution means selecting only those outlets that can best serve the manufacturers interests. Criteria are set up to provide guidance in the selection of accounts. These criteria relate to sizes of orders. Volume of purchases, profitability, type of operation, and geographical location. The basic procedure is to set up criteria for the selection of accounts. It may reveal that a small percentage of the customer contributes a large proportion of total net sales and profits. It is not unusual for 20 percent of the accounts to produce 80 percent of the net sales, and even more of the net profits.
Exclusive agency distribution: Exclusive agency distribution is an extreme form of selective distribution. The manufacturer makes an agreement, either written or oral, with a middleman in each market area stipulating that the distribution of manufactures product or products within that area is to be confined solely to that middleman. Implementing a policy of exclusive agency distribution presents a number of problems. In some markets, the most desirable dealers may be under agreement with another supplier, and the company may have to select a second or third rate dealer or open up its own outlet. Some middlemen want no part of an exclusive agency contract, perhaps because of the history of exclusive agencies in the food field. If exclusive distribution is used at the wholesale level, the wholesaler may not reach certain desirable outlets on the dealer level.
PRICING POLICIES
The sales executives role is formulating pricing policies is advisory, but all sales executive are responsible for implementing pricing policies. Field sales personnel are the company employees whose jobs consists most directly of persuading  buyers to accept the products at the price asked. Field sales personnel do the actual implementing of pricing polices, but responsibilities for implementation is the sales executive alone. Because of their impacts upon the ease of making sales, then pricing policies are of direct interest to sales   executives and sales personnel.

Policy on Pricing Relative to the Competition
Every company has a policy regarding the level at which its products are priced relative to the competition.If competition is price based; a company sells its products at the same price as its competitors. If there is no price competition, the choice is one of three alternative policies.
Meeting the competition: Meeting the competition is the most common choice. Companies competing on a no price basis meet competitors price, hoping to minimize the use  of price as a competitive  weapon. A meeting-the- competition price policy does not mean meeting every competitors prices, only the prices of important competitors- “important” in the sense that what such competitors do in their pricing  may lure customers away.
Pricing above the competition: Pricing above the competition is less common but is appropriate in certain situations. Sometimes higher-than-average prices convey impressions of above-average products quality or prestige. Many buyers relate a products quality to its price, when it’s difficult to judge quality before buying. A policy of pricing above the competition needs the support of strong promotion by both the manufacturer and the middleman.
Pricing Under The Competition: Not many manufacturer at least those with sales forces, willingly, price under the competition. However, some, such as in the clothing industry price under their competitors and appear to have demonstrated at least to their own satisfaction, that aggressive pricing  increases market, demands and keeps new competitors  from entering the field. Sales executives quite generally, dislike this alternative and contend that it causes sales personnel to sell price more than the product.
Policy on Pricing Relative to Costs
Every company has a policy regarding the relationships between its products prices and the underlying costs. Long run sales revenues must cover all long run costs, but short run sales revenues do not have to cover short run cost. Sales revenues, of course, equal the unit volume solid times price. Most companies follow a full-cost pricing policy under most circumstances, but most also spell out the circumstances under which departures are permissible.
Full-cost pricing:  Under full-cost pricing no cost is made under at a price lower than that covering total cost, including variable costs, and allocated fixed costs. The reasoning is that if short run sales revenues cover short-run costs, they also cover long-run costs.
Promotion pricing: Particularly in industries producing consumers nondurables, pricing is a promotional tool. Thus, for instance, a company launching a new packages convenience food may offer it at a “special low introductory price.”
Contributing pricing: Using a contribution pricing policy means pricing at any level above the relevant incremental costs. Suppose that a seller is offered a special contract to supply a large buyer, who will not pay the going price. The buyer argues that the lower price is justified because of savings to the seller in selling time, credit costs, handling expenses and the like.
Policy on Uniformity of Prices to Different Buyers
In pricing to different buyers, companies choose between (1) a one price policy, under which all similar buyers are quoted the same price and (2) a variable price policy under which the price to each buyer is determined by individuals bargaining. In the United States, most marketers of consumer’s goods adhere to a one price policy. Even though many vary among different classes of customers and form one geographic region to the next.


Policy on List Pricing
A marketer distributing through middleman either (1) does not suggest standardized resale (list) price or (2) seek to control middleman’s resale prices through list pricing. List pricing take a variety of forms, the two most common being that of printing the price on the package or requiring sales personnel to suggest the resale price to buyers. List pricing is easiest to implement when the marketer utilizes selective or exclusive distribution. In as much as the difficulties of enforcement of suggested list prices multiply with the increase in the number of middlemen. Effective enforcement of list pricing means assigning the additional role of “resale price reporter” to sales forces personnel.
Policy on Discounts
Trade discounts: A manufacturer selling to both wholesalers and retailers may quote different prices that are offer different “trade discounts” to each class of customers.
Quantity discounts: Quantity discounts are price reductions granted for purchases in a stated quantity or quantities and are normally aimed to increase the quantities customers buy. Though price reduction, sellers increase sales by passing on to buyer’s part of the savings that results from large purchases.
Geographical Pricing Policies
One pricing policy of particular interest is that of who should pay the freight for delivering the product to buyers. The answer to this question is important to the sales executive, because it affects price quotations to buyers in different geo¬graphical areas. The farther away the customer is from the factory, the greater are the freight charges for a given size order. No matter what policy the company adopts, freight differentials are reflected one way or another in price quotations. Regardless of the policy on payment of shipping charges, its administra¬tion is the sales executive's responsibility
F.O.B. pricing: The marketer using this policy quotes selling prices at the fac¬tory (or other point from which it makes sales), and buyers pay the freight charges. Each buyer adds freight to the factory price and determines total deliv¬ered cost. F.O.B. pricing results in variations in the resale price that middlemen put on the product in different areas. In consumers-goods marketing, F.O.B. pricing is used for items that are heavy or bulky relative to their value, for exam¬ple, canned goods and fresh vegetables. In industrial marketing of raw materials and heavy machinery, FO.B. Pricing is also in widespread use.
Delivered pricing:  The marketer using delivered pricing pays freight charges and includes them in its price quotations. The price is really an "F.O.B. destina¬tion'' price, and the net return to the seller varies with the buyer's location. Deliv¬ered pricing is appropriate when freight charges account for only a small part of the product's price. It is a necessary policy when a marketer uses list prices. Standardized resale prices are likely to be obtained if middlemen pay a uniform na¬tionwide delivered price--sometimes called a "postage stamp,' price. Makers of chewing gum, candy bars, and many drug items, particularly patent medicines, use postage stamp pricing. Because middlemen all pay the same price, the resale price is roughly the same throughout the entire market.
Policy on Price Leadership
All marketers should decide whether they will initiate or follow price changes. In some industries there are well established patterns of price leadership. In selling basic industrial materials, such as lumber and cement, one company is the price leader and is usually the first to raise or cut prices; other industry members sim¬ply follow or, sometimes, fail to follow, as occasionally happens in the case of a price increase, thus causing the leader to reconsider and perhaps to cancel the announced increase. Similar patterns exist in marketing such consumer prod-ucts as gasoline and bakery goods, where, usually market by market, one com¬pany serves as the price leader and others follow. Generally, price leaders have large market shares and price followers, small market shares
Product Line Pricing Policy
Pricing the individual members of a product line calls for policy decisions. Tile different items in a product line "compete" with each other; that is, a buyer buying one member of the line does so to the exclusion of others. One decision relates to the "price space" between the prices of individual members of the line. Having the right amount of price space is critical; too little may confuse buyers, and too much leaves "gaps" into which competitors can move and make sales. Sales executives contribute major inputs to this decision through their knowl¬edge of the market, of buyers' motivations, and of competitors' offerings and prices.

Competitive Bidding Policy
In purchasing certain products, industrial and governmental buyers solicit com¬petitive bids from potential suppliers and award the business to the bidder offer¬ing the best proposal. A proposal may be selected as best for a number of reasons (for example, price, delivery dates, reputation for quality), depending on which is most important to the buyer. In some industries, competitive bidding is the general rule, and individual manufacturers have no choice but to participate. In other industries, only a part of the volume is sold on this basis, and each manu¬facturer decides whether to participate. In competitive bidding the sales executive and the sales personnel play im¬portant roles. Their close contact with the market puts them in a good position to estimate how low a particular price must be to obtain the order. Furthermore, the long-term relationships developed between salespersons and their customers are important in giving the company a chance to make a "second bid" in those cases where industrial buyers give favored suppliers the chance to meet lower bids submitted by competitors
Question 7: What are the commonly used methods of recruiting the sales force? Discuss advantages and disadvantages of the same.
Answer: Recruitment & Selection: - Both the HR functions are an important part of implementing the selling strategy. But it is not enough. Training is also very necessary. The implementation of this process is not simple. It has to consider both the kind and number of the sales personnel.
INTERNAL SOURCES OF RECRUITMENT
Company Sales Personnel: - Most of the people apply in the company in which they know some employee in any of the department of the organisation, as recommendation of thesepeople exerts influence in recruiting process.
Advantages
a) These people are aware of the company policies so can start their work immediately.
b) This is a good method when jobs are to be filled in remote areas.
c) Sales people of a particular area know much more about that area so their recommendation should be considered.
  Disadvantages
a) Sales personnel may show discrimination and less potential employees may be selected.
Internal transfers: - The other sources of recruitment are internal transfer from other departments and non-selling section of sales department.
Advantages
a) These people know each and everything about the company.
b) Company on the other hand also know everything about the employees.
c) These people exhibit excellent knowledge about the product.
Disadvantages
Nothing is known about the selling aptitude of these persons.
Direct unsolicited applications:-Every company receives uninvited, “Walk in” and “Write- in” application for sales positions, these are direct unsolicited applications.
Advantages
a) This is quite a useful method because most of the managers think that these people are imitative takers and exhibit selling aggressiveness.
b) This is economical method.
Disadvantages
a) Sometimes the proportion of the qualified applicants from this source is low. b) It does not provide a steady flow of applicants.
Employment agencies: - Seeking and taking help of these agencies is other method of recruitment. Employment agencies maintain a record of qualified applicants and provide the organisation, when required for fees.
Advantages
a) A lot of time of employees is saved, as recruitment and selection are very long processes.
b) Agencies often conduct a number of tests to find out the potential candidate, best suitable to an organisation.
Disadvantages
a) Sometimes agencies nominate wrong people just to get the placement fees.
Sales people making calls on the company: - Here the purchasing Director is in contact with the sales personnel from other Companies and in a position to evaluate their on –the –job performance.
Advantage
a) High calibre people may be approached.
Disadvantages
a) Salary offered to them is usually high. Thus it is more costly b) These people are less trust worthy.
Employees of Customers:-Some companies regard their customers as recruiting source and attract Sales staff from them.
Advantages
a) Usually customer recommends top calibrated people for the job.
b) Such transfers may have favourable effect on the morale of the customer’s organisation.
Sales Executive Club: - Many sales executive clubs operates placement services at Club meeting exchange of useful information jay occur by informal discussions. The platform may be used to attract a performing executive in an organisation.
Sales Force of Non-competing Companies: - In these source individuals who are working as sales personnel in other non-competing firms are attracted to fill in a vacancy in an organisation.
Advantages
a) Selling experiences.
b) These people can tell about product line if they are working in related companies.
c) This source provides a channel for career advancement for dead end jobs.
Sales force of competing companies:-In these source individuals who are working as sales personnel in other non-competing firms are attracted to fill in a vacancy in an organisation. Advantages
a) They have experience of selling similar products to similar markets. b) Require minimal training.
Disadvantages
a) Costly method as attract a competitor’s sales force may require offering an attractive package.
b) The selected person may be less trust worthy.
Educational Institutions:-Here recruitment is done from Colleges and Universities, Community Colleges, Business Schools, High Schools and night schools.
Advantages
a) These people are mature enough and have reached a certain educational level.
b) These students would be in search of job and new to the industry so work with full energy.
Disadvantages
a) Lack of experience
b) A rigorous and expensive training session is required. An appropriate and effective method should be used.


Question 8: Explain various sellers oriented and buyer’s oriented theories of sales management?
Answer:There has been a lot of research by behavioural scientists and marketing scholars to examine whether selling is an art or science and various theories have been developed to explain the buyer-seller buying process. The process of influencing others to buy may be viewed from four different angles on the basis of different theories: thus there are four theories of selling viz.
1. AIDAS theory of personal selling
2. “Right Set of Circumstances” theory of selling
3. “Buying Formula” theory of selling
4. “Behavioral Equation” theory
The first two of the four above-mentioned theories, are seller oriented and the third one is buyers oriented. The fourth one emphasizes the buyer’s decision process but also takes the sales-person’s influence process into account.
AIDAS Theory of Selling:
This theory, popularly known as AIDAS theory (attention, interest, desire, action and satisfaction), is based on experimental knowledge. This theory is very common.
According to this theory potential buyer’s mind passes through the following stages:
1. Attention Getting:
It is the crucial step in the AIDAS process. The objective is to put the prospect into the right state of mind to continue the sales talk. The salesperson has to convince the prospect for participating in the face-to-face interview. A good beginning of conversation may set the stage for a full sales presentation. The salesperson must apply his social and psychological skills to draw the attention of the prospect to his sales presentation.
2. Interest Creating:
The second step is to intensify the prospect’s attention so that it involves into strong interest. To achieve this, the salesperson has to be enthusiastic about the product. Another method is to hand over the product to the prospect and let him handle it. Brochures and other visual aids serve the same purpose. Throughout the interest phase, the hope is to search out the selling appeal that is most likely to be effective.
3. Desire Stimulating:
After the attention getting and creating interest, the prospect must be kindled to develop a strong desire for the product. This is a ready-to-buy point. Objection from the prospect will have to be carefully handled at this stage. Time is saved and the chances of making a sale improved if objections are anticipated and answered before the prospect raises them.
4. Action Inducing:
If the presentation has been perfect, the prospect is ready to act, that is, to buy. Very often there may be some hesitation on the part of the prospect at this stage. The salesperson should very carefully handle this stage and try to close the deal effectively. Once the buyer has asked the seller to pack the product, then it is the responsibility of the seller to reassure the customer that the decision was correct.
5. Satisfaction:
The customer should be left with the impression that the salesperson merely helped in deciding. After the sale has been made, the salesperson should ensure that the customer is satisfied with the product. The salesperson should sense the prospect’s mind and brief his talks.
“Right set of circumstances” Theory of Selling:
It is also called the “situation-response” theory. It has its psychological origin in experiments with animals. The major emphasis of the theory is that a particular circumstance prevailing in a given selling situation will cause the prospect to respond in a predictable way. The set of circumstances can be both internal and external to the prospect. This is essentially a seller-oriented theory and it stresses that the salesman must control the situation in such a way as to produce a sale ultimately.
“Buying Formula” Theory of Selling:
The buyer’s needs or problems receive major attention, and the salesperson’s role is to help the buyer to find solutions. This theory purports to answer the question: What thinking process goes on in the prospect’s mind that causes the decision to buy or not to buy? The name “buying formula” was given to this theory by strong.
The theory is based on the fact that there is a need or a problem for which a solution must be found which would lead to purchase decision, as shown below:
Whenever an individual feels a need, he is said to be conscious of a deficiency of satisfaction. The solution will always be a product or service or both and they may belong to a producer or seller. The buyer develops interest in buying a solution.
In purchasing, the “solution” involves two parts:
1. Product or service or both,
2. The brand name, manufacturer or the salesperson of the particular brand name:
The product or service (Brand name) must be considered adequate to satisfy the need and the buyer must experience a pleasant feeling or anticipated satisfaction. This ensures the purchase.
Behaviour Equation Theory of Selling:
This theory is a sophisticated version of the “right set of circumstances” and this theory was proposed by Howard, using a stimulus response model and using large number of findings from behavioural research. This theory explains buying behaviour in terms of purchasing decision process, viewed as a phase of the learning process, four essential elements of learning processes included in the stimulus response model are drive, cues, response and reinforcement, which are given below, in brief:
1. Drive is a strong internal stimulus that impels buyers’ response. Innate drives stem from psychological needs and learned drives such as striving for status or social approval.
2. Cues are weak stimuli that determine when the buyer will respond. Triggering cues activate the decision process whereas new triggering cues influence the decision process.
3. Response is what the buyer does.
4. Reinforcement is any event that strengthens the buyers’ tendency to make a particular response.
Howard believed that selling effort and buying action variables are multiplicative rather than additive.
Therefore, Howard incorporated these four elements into a behavioural equation that is:
B = P × D × K × V
P = Response or internal response tendency, i.e. the act of purchasing a brand or a particular supplier.
D = Present drive or motivation level
K = “Incentive potential” that is, the value of product or brand or its perceived potential value to the buyer.
V = Intensity of all cues: triggering, product or informational.
Question 9: Define Personal Selling? What are its objectives? Explain the steps involved in personal selling process?
OR
Explain the steps involved in personal selling process? What are the advantages and disadvantages of personal selling?
Answer:Personal selling is a promotional method in which one party (e.g., salesperson) uses skills and techniques for building personal relationships with another party (e.g., those involved in a purchase decision) that results in both parties obtaining value. In most cases the "value" for the salesperson is realized through the financial rewards of the sale while the customer’s "value" is realized from the benefits obtained by consuming the product. However, getting a customer to purchase a product is not always the objective of personal selling. For instance, selling may be used for the purpose of simply delivering information.
Because selling involves personal contact, this promotional method often occurs through face-to-face meetings or via a telephone conversation, though newer technologies allow contact to take place over the Internet including using video conferencing or text messaging (e.g., online chat).
Personal selling is used to meet the five objectives of promotion in the following ways:
1. Building Product Awareness – A common task of salespeople, especially when selling in business markets, is to educate customers on new product offerings. In fact, salespeople serve a major role at industry trades shows (see the Sales Promotion tutorial) where they discuss products with show attendees. But building awareness using personal selling is also important in consumer markets. As we will discuss, the advent of controlled word-of-mouth marketing is leading to personal selling becoming a useful mechanism for introducing consumers to new products.
2. Creating Interest – The fact that personal selling involves person-to-person communication makes it a natural method for getting customers to experience a product for the first time. In fact, creating interest goes hand-in-hand with building product awareness as sales professionals can often accomplish both objectives during the first encounter with a potential customer.
3. Providing Information – When salespeople engage customers a large part of the conversation focuses on product information. Marketing organizations provide their sales staff with large amounts of sales support including brochures, research reports, computer programs and many other forms of informational material.
4. Stimulating Demand – By far, the most important objective of personal selling is to convince customers to make a purchase. In The Selling Process tutorial we will see how salespeople accomplish this when we offer detailed coverage of the selling process used to gain customer orders.
5. Reinforcing the Brand – Most personal selling is intended to build long-term relationships with customers. A strong relationship can only be built over time and requires regular communication with a customer. Meeting with customers on a regular basis allows salespeople to repeatedly discuss their company’s products and by doing so helps strengthen customers’ knowledge of what the company has to offer.
Advantages of Personal Selling
One key advantage personal selling has over other promotional methods is that it is a two-way form of communication. In selling situations the message sender (e.g., salesperson) can adjust the message as they gain feedback from message receivers (e.g., customer). So if a customer does not understand the initial message (e.g., doesn’t fully understand how the product works) the salesperson can make adjustments to address questions or concerns. Many non-personal forms of promotion, such as a radio advertisement, are inflexible, at least in the short-term, and cannot be easily adjusted to address audience questions.
The interactive nature of personal selling also makes it the most effective promotional method for building relationships with customers, particularly in the business-to-business market. This is especially important for companies that either sell expensive products or sell lower cost but high volume products (i.e., buyer must purchase in large quantities) that rely heavily on customers making repeat purchases. Because such purchases may take a considerable amount of time to complete and may involve the input of many people at the purchasing company (i.e., buying center), sales success often requires the marketer develop and maintain strong relationships with members of the purchasing company.
Finally, personal selling is the most practical promotional option for reaching customers who are not easily reached through other methods. The best example is in selling to the business market where, compared to the consumer market, advertising, public relations and sales promotions are often not well received.
Disadvantages of Personal Selling
Possibly the biggest disadvantage of selling is the degree to which this promotional method is misunderstood. Most people have had some bad experiences with salespeople who they perceived were overly aggressive or even downright annoying. While there are certainly many salespeople who fall into this category, the truth is salespeople are most successful when they focus their efforts on satisfying customers over the long term and not focusing own their own selfish interests.
A second disadvantage of personal selling is the high cost in maintaining this type of promotional effort. Costs incurred in personal selling include:
High cost-per-action (CPA) – As noted in the Promotion Decisions tutorial, CPA can be an important measure of the success of promotion spending. Since personal selling involves person-to-person contact, the money spent to support a sales staff (i.e., sales force) can be steep. For instance, in some industries it costs well over (US) $300 each time a salesperson contacts a potential customer. This cost is incurred whether a sale is made or not! These costs include compensation (e.g., salary, commission, bonus), providing sales support materials, allowances for entertainment spending, office supplies, telecommunication and much more. With such high cost for maintaining a sales force, selling is often not a practical option for selling products that do not generate a large amount of revenue.
Training Costs – Most forms of personal selling require the sales staff be extensively trained on product knowledge, industry information and selling skills. For companies that require their salespeople attend formal training programs, the cost of training can be quite high and include such expenses as travel, hotel, meals, and training equipment while also paying the trainees’ salaries while they attend.
A third disadvantage is that personal selling is not for everyone. Job turnover in sales is often much higher than other marketing positions. For companies that assign salespeople to handle certain customer groups (e.g., geographic territory), turnover may leave a company without representation in a customer group for an extended period of time while the company recruits and trains a replacement.
Steps in personal Selling process: Personal Selling consists of the following steps.
1. Pre-sale preparation: The first step in personal selling is the selection, training and motivation of salespersons. The salespersons must be fully familiar with the product, the firm, the market and the selling techniques. They should be well-informed about the competitor's products and the degree of competition. They should also be acquainted with the motives and behavior of prospective buyers.
2. Prospecting: It refers to locating or searching out prospective buyers who have the need for the product and the ability to buy it. Potential customers may be spotted through observation, enquiry and analysis of records of existing customers. Social contacts, business associations and dealers can be helpful in the identification of potential buyers.
3. Approaching: Before calling on the prospects, the salesperson should fully learn their number, needs, habits, spending capacity, motives, etc. Such knowledge helps in selecting the right sales appeal. After such learning, the salesperson should approach the customer in a polite and dignified way. He should introduce himself and his product to the customer. He should greet the customer with a smile and make him feel at home. He should introduce himself and his product to the customer. In case he is busy with some other customer, he should assure the new customer that he would be attended very soon. The salesperson has to be very careful in his approach as the first impression is the last impression.
4. Presentation: For this purpose, the salesperson has to present the product and describe its features in brief. The presentation should be matched with the attitude of the prospect so that the salesman can continuously hold his attention and create interest in the product.
5. Demonstration: In order to maintain customer's interest and to arouse his desire, the sales-person must display and demonstrate the product. He has to explain the utility and distinctive qualities of the product so that the prospect realizes the need for the product to satisfy his wants. He should not be in a hurry to impress the customer and should avoid controversy. He may suggest uses of the product and may create an impulsive urge to possess the article by appealing to human instincts.
6. Handling objections: A sale cannot be achieved simply by creating interest and desire. Every customer wants to make the best bargain for the money he is spending. Presentation and demonstration of the product are likely to create doubts and questions in his mind. The salesman should clear all doubts and objections without entering into a controversy and without losing his temper. Testimonials, money-back guarantee, tact and patience are popular means of winning over s hesitant buyers. The salesman should convince the customer that he is making the best use of his money by purchasing the product. For this purpose, the salesman should prove the superiority of his product over the competitive products. He should not lose patience if the customer puts too many queries and takes time in arriving at any decision. If the customer does not buy even after meeting rejections, the salesman should let him go without showing temper. He must believe in the universal rule that the customer is always right.
7. Closing the sale: This is the climax or critical point in the personal selling process. Completing the sale seems to be an easy task but inappropriate handling of the customer can result in loss of sale. The salesman should not force the deal but let the customer feel that he has made the final decision. He should guide the customer in making the choice without imposing his own view. Some adjustment in price or other concession may sometimes be necessary for a successful closing. The salesman should show the same interest in the customer which he exhibited during approach stage. Sales should be closed in a cordial manner so that the customer feels inclined to visit the shop again. In closing the sale, the article should be packed properly and handed over to the customer with speed and accuracy. Once the customer has purchased the article, the salesman should show and suggest an allied product. For instance, he may suggest socks, ties, handkerchiefs, vests, etc., to a customer purchasing a shirt. This is known as additional sales and requires great skill and tact.
8. Post-sale follow-up: It refers to the activities undertaken to ensure that the customer is satisfied with the article and the firm. These activities include installation of the products, checking and ensuring its smooth performance, maintenance and after-sale service. It helps to secure repeat sales identify additional prospects and to evaluate salesman's effectiveness.

Question 10: Explain briefly the steps involved in designing an effective compensation plan.
Answer: Nowadays many companies have began to revise their sales incentive and compensation plans to reflect changes in sales strategies and tactics. For instance, the growth of international marketing requires that sales incentive and compensation be changed to reflect cultural, political and economic differences in other countries. Sales practices and operations are likely to be different and as a result management will be challenged to find the best way to motivate global sales personnel. The variety of sales commission plans make compensating individuals in a sale more complicated than with employees in others parts of a company. A salesperson's compensation often includes combinations of salary, commission, bonus, sales contests, and nonfinancial rewards and recognition programs.
1. Sales force motivation
One of the most difficult problem a sales manager faces is the motivation of the sales force. Motivation is the process that produces goal-directed behavior in an individual. It helps to initiate desired behavior in an individual and direct it toward the attainment of organizational goals. Motivation consists of three elements - need, drive and goal. Satisfaction of the need in the individual cuts off the drive in him to work toward satisfaction of the need. The effectiveness of thesales force plays a crucial role in the success and growth of an organization. In order to attain the goals of the organization, it is essential that the sales force is highly motivated.Motivation in the sales function refers to the amount of effort a salesperson is willing to expend in the selling job. While some salespersons are self-motivated, there are others who need to be motivated to perform. Sales managers can motivate their team by following any of the theories of motivation, namely, Maslow's hierarchy of needs theory, Herzberg's two-factor theory, goal-setting theory, expectancy theory, and job design theories. Maslow's hierarchy of needs theory classifies the needs of an individual into five categories - physiological, safety or security, social, self-esteem and self-actualization needs. Physiological needs are the lowest order needs while self-actualization needs are the highest order needs.
Further, as lower order needs get satisfied, an individual strives to satisfy higher order needs. Herzberg's two-factor theory states that the job environment of an individual is characterized by two types of factors - hygiene factors and motivational factors. The goal-setting theory presumes that people have specific needs and aspirations to fulfill for which they set certain goals for themselves. They then go about achieving these goals by taking purposeful action. Further, setting higher goals produces higher output. The expectancy theory states that an individual is motivated by the perceived consequences of his or her actions. According to this theory, motivation is a function of expectation, valence and instrumentality. Job design theories assume that all individuals have the same needs, and that ensuring certain job characteristics can satisfy these needs.
A salesperson's motivation plays a crucial role in influencing his performance and thereby his productivity. Salespersons having a high level of motivation tend to perform well in the selling job and have high productivity. On the other hand, salespersons who lack motivation tend to be poor performers and fail to achieve their sales targets. Such salespersons hence tend to have low productivity. Creating desire is part skill and technique, and part behaviour and style. In modern selling and business, trust and relationship (the 'you' factor) are increasingly significant, as natural competitive development inexorably squeezes and reduces the opportunities for clear product advantage and uniqueness.
Sales managers can take various measures to motivate the sales force and boost its productivity. These measures can be in the form of sales quotas, sales contests, well- designed compensation plans and reward systems, etc. The sales compensation plan has a greater impact on the company's results than any other single document. It impacts the behavior of the sales organization in a direct fashion. Salespeople are generally paid differently than all other functions within the company. Their performance is easily quantified and measured. As a result, their compensation is generally comprised of a base salary, and a quota or commission.
2. Sales Commission Plans
The best sales compensation programs are ones that are fair, motivating and will achieve the goals of the company. Setting unrealistic sales goals, orputting unrealistic ceilings on earnings power will create discord in the ranks of thetop salespeople. Sales commission plans can be rewarding and motivating if done correctly. It can have a negative impact on motivation resulting lower sales when structured poorly. There is no one size fits all process for developing a compensation plan. There are considerations to help develop a compensation plan that contributes to a high performance sales team.
• Sales commission plans should not be developed in a vacuum. Make sure the compensation plan and budget are developed in conjunction with the Company's overall planning process. It is a good idea to involve the sales team when creating the compensation plan. They can contribute ideas and practical feedback borne from experience.
• Develop the compensation plan to focus on both tactical sales objectives and the company's strategic objectives and goals. Consider organizational goals including profit, growth, market share, product line revenue, and business development when creating the plan.
• Make certain the plan does not direct sales behavior away from organization objectives. Salespeople always maximize a sales plan to their personal benefit and reward. The Company job is to make sure the plan benefits everyone.
• Create metrics and measurable criteria for the tactical and strategic objectives mentioned above. Just looking at gross sales may cause other critical issues like customer satisfaction, customer retention, new business development, competitive sales, profitability, and individual product line sales to suffer.
• Keep your plan simple yet complete. It has to achieve the company objectives, but not be so complicated the salesperson cannot accurately determine how they are being rewarded. You do not want your sales people spending the first few days of each month arguing about compensation.
• Relationship building and consultative selling with major clients requires long-term engagements and often necessitates a fixed salary component to the plan.
• Design the compensation plan so it discourages turnover among the top sales people. Paying a little extra to keep top performers happy is far cheaper than the turnover caused by a poor compensation plan.
• Reward your sales team based on their contribution and worth, not just level of activity. Many top salespeople work smarter and more efficiently. Both performing tasks and achieving results are important, and the plan needs to be crafted to create the right balance.
• Create the sales commission plans so it differentiates between top, average, and inadequate performers. An effective plan will motivate top performers to continue performing high levels, average performers to improve their performance and poor performers to hopefully consider other lines of work. A plan without the right differentiation runs the risk of retaining poor performers and causing top performers to leave.
Perform benchmarking. If in improving sales target is to become the best in everything they do, sure benchmarking possible to know if he has reachedthe goal or when it will be achieved. This is the only instrument that teaches us how "good'' can become" best''. Well done, benchmarking will tell you directly what is now "the best'' and how to achieve this level of excellence2
• Try to create plans that do not create direct competition between salespeople. The best plans do not have the entire sales team competing against each other for a fixed pot of compensation dollars. Reward salespeople for concentrating on customers, corporate objectives, and out selling your competition.
• Sales commission plans should be evolutionary, not revolutionary. Don't change the sales plan too radically or quickly. Completely revamping a compensation plan may appear arbitrary and confusing to the sales team. Involve the salespeople for ideas and feedback, and take it slow. There are times when a sales plan has to be changed quickly due to new products, mergers and acquisitions, or new market penetration. In this case, develop the new plan completely, and implement it swiftly so salespeople can immediately begin maximizing their rewards.
• A properly designed compensation plan allows above average performers to find a comfortable level of income without penalty. Remember that individuals are motivated differently by the types of sales jobs and their individual and personal agendas.
• The right sales commission plans have a positive impact on customers and the marketplace. A poor plan has the opposite effect.
• Use the sales contests judiciously. They can often motivate sales for short period of time, but they can also violate characteristics of a carefully crafted compensation plan, and make it hard for you to get your team back on track.
3. Types of commission plans
There are many forms of commission plans. A commission plan can include many types of compensation and can include multiple formulas. Here are the basic components of most sales commission plans.
a) Salary Only
A straight salary compensation plan for salespeople is used for one of several reasons. It is first used when a new sales rep is brought into a company. It is also used when a new territory is opened or a person needs time to come up to speed and perform at the proper level. A salaried compensation for a period of time gives a new person that opportunity. Another reason to use salary only is when management is trying to motivate a salesperson to achieve key success factors that are not revenue or sales volume related. Salary only compensation is also used when is difficult to determine an individual's impact on the total selling effort.
Sometimes in team selling, or in global and multinational sales accounts, customer care and relationship building is the key focus. One way of guaranteeing properaccount involvement is to compensate a sales rep using salary only. The advantages of salary only compensation are management can ask the sales people to spend their time completing tasks and activities that are important to the company's initiatives and objectives. Salary only plans are used when salespeople are expected to perform customer service, market research, customer problem solving, education, or other promotions. Also, straight salary plans can be used effectively where extensive high-tech integration and design services are required to get a product approved and sold. Another advantage to salary only plans is they are easy to compute and administer. They also give management more flexibility in positioning their sales force in a way that best meets corporate goals.
Another added bonus for management is cost of sales stays fairly constant even with increasing sales volume. This results in cost per unit sold dropping and profitability rising. The disadvantage is when sales go down, salaries remained constant for a time, and they represent an ever-increasing percentage of sales. The other key consideration of a salary only commission plan is that financial rewards are not tied to a specific job performance. This causes performance evaluation to be more subjective. Since salaries are fixed, it does not provide an incentive for improving the rep's performance. Over long run, this type of compensation plan tends to attract security oriented sales people rather than the true high-performance hunters and business development reps.


b) Straight Commission
Having a compensation plan based entirely on commissions is an excellent way to motivate highly aggressive selling behavior. Straight commission is the right choice if the goal is to turn sales reps loose in a market or territory to maximize sales volume. Straight commission assumes that the non-selling tasks have been minimized in their importance at the expense of sales volume. Another consideration of a straight commission plan is companies have a harder time controlling sales force activities. Straight commission sales commission plans can be very motivational.
Individuals who are motivated to improve their financial compensation are motivated to improve their sales production. However there is a point where further incremental effort and activity increases become less attractive to each person, and at that point sales productivity plateaus. Sale commission plans compose only of commission are simple and have a perceived sense of fairness. As long as each rep's territory is properly defined with approximately equal potential, compensation equals productivity. A straight commission plan makes it easy to compute and administer compensation. Compensation costs move up and down with sales volume which makes this attractive to companies that may be trying to save working capital. The company doesn't need to worry about paying higher wages and salaries unless sales volumes increase.
There are some disadvantages to straight commission plans. There is less control over sales reps, and less control over directing other corporate objectives. Itmay be difficult to get reps to think about relationship building activities that do not lead to short-term sales when every sales rep is trying to maximize sales.
Developing new accounts takes more effort than getting business from existing accounts. As a result, straight commission plans often encourage milking existing customers rather than developing new business. Getting market data, feedback, and analysis from your sales team may also be problematic with this type of plan.
Many sales people dislike straight commission plans because earnings are unstable and unpredictable. When business conditions are poor, turnover rates are likely to be high. Some companies try to compensate this with a draw advanced to the salesperson against future commissions. Draws need to be paid at a future date from commissions earned. Often though, the salesperson may fail to earn enough commissions to repay the draw or they may quit or be fired before the draw is repaid. In those cases, the company has to absorb the loss.
c) Combination Sales Commission Plans
Combination sales commission plans offer both a base salary plus an incentive based on production. These pay plans are popular with many companies because they have many advantages while avoiding many of the limitations of the other plans. The salesperson gets a stable salary that smoothes out the highs and lows. Management gets the advantage of having more ability to direct and reward their salespeople to perform tasks and activities not directly related to short-term revenue. The incentive portion of the plan motivates a salesperson to increase sales revenue and profitability. The incentive program can be structured in a tiered format to incentivize top sales reps to achieve on an open-ended basis. All revenues a sales rep brings in above their quota, is very profitable business for a company.
The company gains additional revenue and profit, but the fixed expenses for the wage and benefits for the sales rep does not increase. There are aspects of this plan that can vary. Sometimes incentives are left open-ended and sometimes they are capped. Occasionally an extremely large windfall deal is won by a sales rep that throws the incentives out of balance.
Another consideration is defining exactly when a sales rep is credited with a completed sale and is due commission payments. The ratio of the base to incentive is something each company needs to determine. When a sales rep's activities are mostly related to short-term sales, the incentive portion of the pay is usually higher. When a sales rep is asked to do more relationship building and activities that don't bring in short-term revenue, the base salary is usually adjusted upwards. Increase the incentive portion of the plan when selling the product is difficult, and the salesperson is key to the sales success. The incentive portion should be reduced when the salespeople are largely order takers.
Question 11: Explain the following in determining the size of the Sales force.
1. Work load method
2. Sales potential method
3. Incremental method
Answer: Work Load Method: In the work load method the basic assumption is that all sales personnel should shoulder equal work loads. Management first estimates the total work load involved in covering the company's entire market and then divides by the work load that an individual salesperson should be able to handle, thus determining the total number of salespeople required. Companies applying this approach generally assume that the interactions of three major factors customer size, sales volume potential, and travel load determine the total workload involved in covering the entire market. The six steps in applying the work load approach are shown in the following example:
1. Classify customers, both present and prospective, into sale volume potential categories. (Classification criteria, other than sales volume or sales volume potential can be used as long as it is possible to distinguish the differences in selling effort required for each class.) assume that there are 880 present & prospective customers, classified by sales volume potential as

Class A, large            150
Class B, medium 220
Class C, small            510

2. Decide on the length of time per sales call and desired call frequencies on each class. (Several inputs are used in making these two decisions, for exam¬ple, personal judgment, the opinions of sales personnel, and actual time studies). Assume that both present and prospective customers require the same amounts of time per sales call and the same call frequencies per year as follows

Class A: 60 minutes/call x 52 calls/year = 52 hours/year
Class B: 30 minutes/call x 24 calls/year = 12 hours/year
Class C: 15 minutes/call x 12 calls/year = 3 hours/year

3. Calculate the total work load involved in covering the entire market. In our ex¬ample, this calculation is

Class A: 150 accounts x 52 hours/year = 7,800 hours
Class B: 220 accounts x 12 hours/year = 2,640 hours
Class C: 510 accounts x 3 hours/year   = 1,530 hours
                   Total 11,970 hours

4. Determine the total work time available per salesperson. Suppose that manage¬ment decides that salespeople should work 40 hours per week, 48 weeks per year (allowing 4 weeks for vacations, holidays, sickness, etc.), then each salesperson has available

            40 hours/week x 48 weeks = 1,920 hours/year

5. Divide the total work time available per salesperson by task. Assume that man¬agement specifies that sales personnel should apportion their time as follows:
Selling tasks   45%   864hours
Nonselling tasks 30%   576hours
Traveling                      25%   480 hours
                                               100% 1,920 hours

6. Calculate the total number of salespeople needed. This is a matter of dividing the total market work load by the total selling time available per sales¬person:

11,970 hours = 14 salespeople needed
   864 hours

The work load approach is attractive to practicing sales executives. It is easy to understand and easy to apply. Such large firms as Celanese, IBM, and AT&T have used this approach. A basic flaw in the work load approach is that, as usually applied, it disre¬gards profit as an explicit consideration. However of course, management can take profit criteria into consideration in determining lengths and frequencies of sales calls. But the optimum length and frequency of any particular sales call de¬pends upon many factors other than account size (in terms of sales volume or sales volume potential). Such factors as the gross margin on the product mix purchased by an account, the expenses incurred in servicing an account, and an account's likely responses to changed levels of selling effort all influence profitability. Still another shortcoming traces to the inherent assumption that not only should all sales personnel have the same work load but that they all can and will utilize their time with equal efficiency. Although a relation exists between the amount of time spent on calling on an account and the size of the order received, some salespeople accomplish more in a shorter time than others can. The "qual¬ity of time invested in a sales call" is at least as important as the "quantity of time spent on a sales call."

Sales Potential Method

The sales potential method is based on the assumption that performance of the set of activities contained in the job description represents one sales personnel unit. A particular salesperson may represent either more or less than one sales personnel unit. If the individual's performance is excellent, that individual may do the job of more than one unit; if the individual's performance is below par, he or she may do less. If management expects all company sales personnel to per¬form as specified in the job description, then the number of salespersons required equals the number of units of sales personnel required. Generally, it must be noted, sales job descriptions are constructed on management's assumption that they describe what the average salesperson with average performance will accomplish. With that assumption, then, one can estimate the number of dollars of sales volume that each salesperson (that is, each sales personnel unit) should produce. Dividing this amount into forecasted sales volume--the company's sales volume objective and allowing for sales force turnover results in an esti¬mate of the number of salespeople needed. These relationships are summarized in the equation



N= S    +   T S
      P               P

This reduces to

N =-S (1 + T)
                                                  P
Where
N         = number of sales personnel units
S = forecasted sales volume
P = estimated sales productivity of one sales personnel unit
T = allowance for rate of sales force turnover

Consider a firm with forecasted sales of $1 million, estimated sales produc¬tivity per sales personnel unit of $100,000, and an estimated annual rate of sales force turnover of 10 percent. Inserting these figures in the equation, we have

  $1,000,000
N=     $100,000 x 1.10
 
N = 11 sales personnel units.

This is a simplified model for determining the size of a sales force. It does not, for instance, include the lead times required for seeking out, hiring, and training salespeople to the desired level of sales productivity. Actual planning models have built-in lead and lag relations to allow for such requirements. If two months of full-time training are required to bring a new salesperson up to the desired productivity, recruiting must lead actual need for the new salesperson by two months. Another assumption implicit in this simple model is that sales po¬tentials are identical in all territories, which is similar to the assumption that the number of sales personnel units required is the same as the number of salesper¬sons needed; where this assumption does not hold, the model should be adjusted accordingly. Difficulties in making estimates for ~his model vary with the factor being estimated (N, S, P, or T) and the company. The crucial estimate of the sales pro¬ductivity of one unit of sales strength relies heavily on the accuracy and com¬pleteness of the sales job description; it depends also on management's appraisal of what reasonably may be expected of those who fill the position. Estimating the sale~ force turnover rate is a matter of reviewing previous experience and antici¬pating such changes as retirements and promotions. In addition, both the esti¬mates for unit sales productivity and the sales force turnover rate require man¬agement to have some means of evaluating the efficiency of individual salespersons and of determining the probabilities that individuals will remain with or leave the sales force during the planning period.
In a new and rapidly growing company, potential sales volume often de¬pends chiefly on the number and ability of its sales staff. Management, actually, may derive the sales forecast by multiplying the estimated sales productivity of its average salesperson by the number it has, can expect to keep, and can recruit and train during the planning period. As a company expands distribution geo¬graphically and its growth rate slows down, the procedure reverses itself. Under these circumstances, the number of sales personnel units required is determined by making the sales forecast first, and dividing it by the expected sales productiv¬ity of an individual salesperson, making adjustments for anticipated sales force turnover, lead times for recruiting and training, and other relevant factors.

Incremental Method

Conceptually, the incremental method is the best approach to determining sales force size. It is based on one proposition: net profits will increase when addi¬tional sales personnel are added if the incremental sales revenues exceed the incremental costs incurred. Thus, to apply this method, one needs .two important items of information: incremental revenue and incremental costs.
To illustrate, assume the following situation. A certain company has found that its total sales volume varies directly and significantly with the number of salespeople it has in the field. Its cost of goods sold does not vary significantly with increases in sales, but holds steady at 65 percent of sales. All company sales personnel receive a straight salary ($20,000 annually per person) and in addition are paid commissions of 5 percent on the sales volume they generate. In addi¬tion, each salesperson receives a travel and expense allowance of $12,000 per year, that is, $1,000 per month. The company now has fifteen people on its sales force and wants to determine whether it should add additional staff. Its sales executives estimate the following increases in sales volume; costs of goods sold, and gross margin that would result from the addition of the sixteenth, seven¬teenth, eighteenth, and nineteenth salespersons.

There Will Be Additional

With the
Addition of Sales Volume Cost of Goods Gross Margin
Salesperson No. of - Sold of = of

$250,000 - $162,500 = $87,500
200,000 - 130,000 ~ 70,000
150,000 - 97,500 = 52,500
100,000 - 65,000 = 35,000

There Will Be. Additional
With the
Addition of    Gross           Sales     Travel &            Net Profit
Salesperson     Margin ---- Salaries + Commissions +    Expense
     Allowances         = Contribution
No.   of     of       of        of            of

$87,500 - ($20,000     + $12,500 + 12,000)            = $43,000
70,000 - (  20,000      +  10,000 + 12,000)            =   28,000
52,500 - (  20,000      +   7,500 + 12,000)            =   13,000
35,000 - (  20,000      +   5,000 + 12,000)            =  (2,000)

Next, they calculate the net profit contribution resulting from the addition of each salesperson. Adding the eighteenth salesperson brings in an additional net profit contribution of $13,000, but adding the nineteenth salesperson produces a negative net profit contribution of $2,000. Thus, tile optimal size of' sales force here is eighteen people.
Although this method is the most conceptually correct, it is also the most difficult to apply. It requires, first, that the company develop a sales response function to use in approximating (in terms of sales volume) the market's behav¬ior in relation to alternative levels of personal-selling effort. (A sales response function is a quantitative expression that describes the relationship between the amount of personal-selling effort and the resulting sales volume.) For the re-sponse function to be  useful in setting the size of the sales force, sales volume must be sensitive to changes in the number of sales personnel? Not many com¬panies have the research sophistication required for development of sales re¬sponse functions, but some apply the basic concept.6 It is doubtful that the incre¬mental method is appropriate where personal-selling is not the primary means of making sales, that is, in cases where other forms of promotion, such as adver¬tising, have stronger influences on sales volume than does personal-selling ef¬fort.

Question 12: Describe the steps involved for evaluating and controlling sales force performance?
Answer: Performance Evaluation Process: Assessing the performance of sales people includesallocating a relative score to reflect a sales person performance on the identified dimension for measuring both sales performance and behavioural aspects of the employee in the job. Performance evaluation must have to linked with the strategic mission of the sales force and the performance standard taken for measurement, it should be specific, measurable, attainable, realistic and time specific which reflect the quality of the sales person how well the employee perform on the expected terms of the sales objective secondly it address the quantity how much work the employee produce comparing to expected value third timeliness represent how quickly the work is produced and finally it provides the cost effectiveness which measure the aspects of performance as maintaining or reducing the cost of sales providing service to the company.Strategic evaluation of sales people is used to determine the effectiveness of given strategy in achieving the sales objective and taking corrective action wherever required. Now it has to find out whether the strategy being implemented is guiding the sales force towards the intended objective or not if the strategy producing desired effect then we can say the mechanism is correct.
STRATEGIC EVALUATION OF SALES PERSONNEL
Performance standards are designed to measure the performance activities that the company consider most important. Setting standards of performance for the sales executive in the evaluation process requires consideration of the nature of the selling job. In other words sales job analysis is necessary to determine the job objectives, duties and responsibilities. Setting performance standardfor sales personnel relying upon company products and dealership network and the marketing channels through which company effort to push the product into market. Whereas some unique sales job require some important skill to evaluate at the time selling so it is necessary to recognize the nature of selling job before selecting the standard of performance.
Standards of performance also require considerable market knowledge such as total sales potential of each sales territory is capable of producing sales. Standards of performance facilitate the measurement of progress made towards sales organization objectives which may vary according to company’s marketing situation but the general objective is to increase the sales volume, profit & growth. Performance standard can be done in two form they are quantitative and qualitative type in quantitative side it measure success in achieving profit objectives such as sales generated in terms of volume number of customer generated which includes high user segment, low user & moderate user segment to gauge the progress sales quota is expressed in absolute terms for the specific territory next this selling expense ratio is to be measured which determine the expense conditions and sales volume potential in each territory. In quantitative methods number of factors to be consider while using the evaluation process such as call frequency ratio, calls per day, order call ratio, average cost per call, average order size & non-selling activities.
The second aspect of performance of standards is qualitative form measuring sales personnel which includes behavioural part of the sales executive, such as personal effectiveness in handling customer relation problem, customer satisfaction & customer service. In qualitative method degree of excellence can be evaluated of each sales person by detailed check list of subjective factors such as product knowledge, awareness of customer needs, relationship with customer, service follow up& personal factors like Punctuality, general attitude, dress & appearance, diligence, cooperation, accuracy, adaptability & reliability.

The functionality outlined above diagram shows both qualitative and quantitative objectives of the sales department which is linked with a series of performance standards that help sales organization for consistent effective evaluation of sales people. The sales contributed by the sales people have to be checked by both measurement method in terms of volume as expected in theobjective, here another focus have to give on the product line which consist of highly, moderate and slow running product each line has their own importance and competence in the market. Volume can be generated by targeting on highly running product so before evaluation it has to be specified that what to be achieved in definite time interval. The second parameter focus on Customer who plays the most significant part in the business, in fact customer is one who uses the product and services and judges the quality of the same, here to manage the customer we have segmented into three groups
High level: - in this category loyal customer who are potentialbuyer for any product or services is been targeted, customer especially less in numbers but promote more sales and profit as compared to others. These customers purchase the product or services on a regular basis and invest much time and effort as they are highly satisfied.
Moderate level: -represent the discount customer who also makes frequent purchase but when offered with discount on regular products more is the discount more they tend towards buying. These customers focus on low or marginal investment on products. Focus on these customers is also important as they also promote distinguished part of profit into business.
Low level: - This segment includes the impulsive customer,need based customer & wandering customer. Impulsive customers are difficult to convince as they don’t have any specific item in their product always urge to buy what they find good and productive at the point of time. Handling these customers is a challenge as they are not specific towards any product they ask to supplier to display all products they have in their content. There is probability of high percentage selling if these customers are treated according to their need & want. Secondly this segment contains need based customers who are product specific tend to buy the product which they are habitual or have specific need to them so it is difficult to satisfy. These customers can also productive if tackled efficiently with positive interaction otherwise there are chances of switch over to other similar products and brands. Lastly this segment contains wandering customers who are not sure what to buy comprises of fresh customer mostly visit the supplier to investigate the features and conform their needs on the products & show least interest in buying. To grab such customer proper information about the positive features should be provided about the product to develop the sense of interest.Setting Quantitative evaluationcriteria for customer generation sales quotas specify for each territory should be measured in terms of call per day, call frequency ratio, order call ratio, average order size, Sales planning are done on territory-by- territory basis where the total market is break down into smaller unit to make control of sales operation in more effective way, for achieving specific objective individual sales person are directed to emphasize solely along geographical lines. So in this criteria sales person evaluation can be done by number of territory covers as assigned to him further it can be calculated by number retailer, wholesaler & dealer he make in one visit this can be multiply into number visit made in the given period of evaluation.
In quantitative method selling expense is another account of evaluation which is incurred directly by the sales personnel in performing their jobs it vary from territory to territory so target of selling expense ratio should be set individually for each person on the sales force which can determined after analysis of expense condition and sales volume potentials in each territory, the selling expense ratio is calculated by simply dividing the salesperson’s compensation by volume.




Qualitative Dimension

Qualitative dimension includes two major areas one is job factors and another is personal factors in job factor customer Satisfaction is most important part inthe evaluation process. The success of any sales person can be understood by how well sales executive handles the customer,customer satisfaction in evaluation context has specific meaning which brings positive influence on retaining customer among variety of service and product in a business enterprise, service quality directly affect customer satisfaction which result in repeat purchase; loyalty; positive word of mouth and increased long term profitability therefore companies should measure their customer satisfaction to fortify their strengths and improve their weakness. In the other side of job evaluation the appraiser have to gaugethe nature of service provided by sales executive before, during and after a purchase. Service consists of series of activities designed to enhance the level of customer satisfaction- that is, the feeling that a product or service has meet the customer expectation. It varies by product, industry and customer which play an important role in evaluating the sales person ability to generate new and retain customer. Measuring the service quality provided by sales person such as  proper information regarding the product, involvement in decision making in purchasing the  product or service, friendliness in handling the customer objection and finally fulfilling the needs of customers is measured by using the graphical rating method. The second dimension of qualitative analysis is personal factor of salesperson which the executive represent to perform the job, in this criteria to be measured are punctuality that means about the time he attend the customer timely submission and also delivery of product and services. Dress & appearance also play an important role in the sales job where the executive create an impression on the customer so proper formal dress code should and handsome personality should have to be seen during the evaluation of the salesperson, salesperson should show diligence in their job and also cooperation to other member surrounding to him beside this appraisal should consider the factors like accuracy, adaptability & reliability while evaluating the sales employee.
QUALITATIVE VS QUANTITATIVE PERFORMANCE EVALUATION PROCESS
This section explores the difference between qualitative and quantitative methods of evaluation. Sales organization weighted equally importance to both methods in the evaluation process whereas the criteria are different which can viewed in table No.2

BEHAVIOUR BASED EVALUATION
Attribute Concerned: Effective performance evaluation drive is made on factors such as quality of sales, quantity of sales, cooperation to dealer, decision making ability or creativity can be typically scored using descriptors ranging from unsatisfactory to outstanding performance. Such characteristics are easy to apply in evaluation procedure and can be quantify in the evaluation process. Measuring sales people based on trait system are common in every sales department which also have some limitations, as the entire process based on sales supervisorassumptions so it is not free from bias another drawback of the approach is that the individual sales person is measures in subjective rather than objective job performance data, here sales people may simple become defensive rather than trying to understand the appraisal system is shaping their job performance.Second method evaluating the sales person performance is comparing against with other sales person in the sale field in this case sales person are ranked from best performer to the poorest performer. In simplest form sales supervisor rank each sales executive and establish a  performance hierarchy such that the best performer receive the highest ranking on the basis of overall trait or any individual characteristics. A third comparative technique for ranking sales executive is paired comparison where sales supervisor can compare each sales executive to every other sales executive, identifying the better performer in each pair. Comparative methods are best suited for the companies having lesser number of sales employees. As do trait & comparison approaches have limitations they tend to encourage subjective judgement, which increase the chances for rater error and biases. In addition, small difference between the employees may  become exaggerated by using such methods.
Behavioural Observational Scale:In contrast to trait & comparison method behavioural system focused on sales executive behaviour which they display in performing the sales. When correctly developed and applied, behavioural models provide results that are relatively free of rater errors and biases. Normally behavioural system measured by three types of technique first one measure the critical incident of the sales job which distinguishes successful performance from unsuccessful ones. The sales supervisor observes the sales executive and records their performance on thecritical job aspects. Usually, sales supervisors rate the sales employee on how often they display the behaviour described in each critical incident, this procedure require extensive documentation that identifies successful and unsuccessful job performance and also demand continuous and close observation of the sales executive.
Second technique in this approach is behaviourally anchored rating sales which are developed in a manner that sales executive is expected to complete the task in a timely fashion here the expectation are clearly cited to the sales executive in order to rate the  performance. In this method the sales supervisors list the expectation of the job which are believe to be most significant aspects the sales executive must perform. A typical evaluation method might have 8 to 10 dimension each with separate rating sale which reflects the range of performance on the job dimension from ineffective performance to effective performance. Among all subjective method of performance evaluation this technique is most defensible in court because it is based on actual observable job behaviours it also encourages all raters to make evaluation in same way. Perhaps it has limitation of data require making it effective.
Third technique of performance evaluation in the above approach is behavioural observation scale where the sales supervisor rates the sales executive behaviour to the extent which he performs in a consistent manner. Scores of each performance are averaged to provide an overall rating by using the same instrument used in the above method. Wherever it assure to accurate appraisal but time consuming to develop and maintain.
Management by Objective:Executing MBO process in performance evaluation is almost common in every successful business. MBO-centric performance evaluation can be powerful tools for motivating and retaining the sales force. It is effectivewhen sales department has insufficient data to measure individual sales performance and appropriate for direct selling and promotional activity to meet the requirement of major chain store and also useful in team selling &customer-facing non sales roles. The technique allows both sales supervisor and sales executive to determine particular objective tied to corporate strategies. Sales executive are expected to attain these objective during the rating period. At the end of rating period, the sales executive fill the performance report explaining his or her progress toward the accomplishing the objectives and the sales supervisor appraise the sales executive’s performance based on accomplishment of objectives.
Management by objective can promote effective communication between sales executive and supervisor, on the down side the management by objective is time consuming and require a constant flow of information between executive and supervisor. Moreover the appraisal systems particularly focus on sales volume generation. The purpose is to ensure customer satisfaction and build loyalty to the product and the network channels. Goal oriented system are a component of  broader development programs that help the sales executive to achieve career goals with  performance discussion between sales supervisor and the sales executive these discussion review a number of topic including [1] the strength and accomplishment during the year, [2] significant milestone achieved by the sales executive [3] rating on each corporate competency area [4]  personal goal for the coming year [5] development suggestion for future growth [6] ideas for next assignment or placement. In addition to the annual review sales supervisors will engage a mid-year review which check the learning and development of the individual sales executive to ensure the sales executives are on the road to success.
OUTCOME- BASED EVALUATION
In this outcome of the salesperson is to be measured by comparing with the preset standards. Outcome based evaluations helps in improving the job attitude of the sales person when he understand what is expected and is able to modify his or her work strategy to meet the expected goals.This process require territory wise sales figure of each sales person for a particular period. When these sales figures of each sales person converted into percentage we can observe the bestsales growth of each individual in the sales force working in the territory. Whereas in the other side of this method do not adequately measure the conditions faced by the sales people in the field, in this case potential difference of the sales person can be measured in comparing to the potential available in each territory. Sales quota is another method of evaluating the sales force potential where actual achievement is compared with predetermined quota of the particular territory by which contribution of each salesperson can be identified where profit review can be made by recognizing the net sales for each territory, from which the cost of goods sold and sales commission are subtracted this gives the contribution margin when these contribution are divided  by the sales it gives the percentage of the individual sales person contribution towards the objective of the company.
As the objective is to identify the evaluation process that suitably easy for the company to appraise the salesperson for this both behaviour & outcome based approach can be used for evaluation the most convenient method used is four factor model which includes four measures of performance. Individual input is gauged by the number of days worked and the total number of calls made. The output of the salesperson is measured by the number and average size of order. This model indicates that sales can be increased by working more days, making more calls per day, closing more sales with customer, and increasing the sales per order. The model has one limitation as the above factors have a positive correlation with sales but often have a negative relationship with sales per order. To increase the sale volume the sales people make more call that means they spend less time with the customer due to which order size may decline, in this case care must be taken to increase the order size however large order increase the total sales by making fewer and longer sales calls.
Ranking Procedures:A second way to combine sales force evaluation is to use ranking procedures which can provide overall measure of efficiency where each individual salesperson is ranked on variable factors. The performance of each individual ranked across the variable factors 5 for the best and 1 for the least performance finally the rank are added to give an overall measure of performance.
EXPLORING THE PERFORMANCE EVALUATION PROCESS
Performance evaluation represents company’s way of telling employees what is expected of them in their job and how well they are meeting those expectations. Typically performance evaluation require sales supervisor to monitor the sales executive performance and make discussion about their performance which serve as basic for awarding the incentives pay, promotions & pay increase. The most difficult step in sales force evaluation is comparing of actual performance with standards because this step requires judgement as the same standards cannot applied to each salesperson this may difference sue to individual territory, sales potential, the impact of competition, and the personalities of sales person and their customers. The appraiser may take territorial difference and set sale employee standards for each territory. Evaluating sales personnel require both a comparison of performance with quantitative standards and appraisal against qualitative performance criteria. Sales person with poor performance, measured by quantitative standards should have good qualitative characteristics sales person who does not meet sales quota and keeping the prescribed sales call for building a future relation with customer, retailers, dealers & distributors so it require judgement and deep understanding of market factors and conditions.


As shown in figure 2 performance of salesperson is based on job analysis concept, the process of gathering, documenting, and analysing information in order to describe the job content or job duties, work requirements, and working conditions. Whereas the job analysis defines the sales job through specific task or activities that determine the minimum educational requirement to perform the sales job. A job description is developed which is the summary of the job analysis where job duties and work specification are mentioned. This provide a clear picture about the requirements of sales job, next step is to develop the performance standards which serve in evaluating the salesperson on the basis of these standards.


Performance is a function of several factors the above concern given in the diagram has its one importance in evaluation process in addition to this other factors in the work environment which includes personal, family and community concerns can affect performance of salesperson. Although performance appraisal system can identify the strength &weakness of the sales employee which help in increasing the motivation and improve in the quality of sales process, the diagnoses also required for the sales training program and finally it support the implementation of strategic approach of the company. In the above figure performance data is been collected from multiple source for appraisal of the salesperson where appropriateness of the information is to judged first it should match to the objective of the sales department second the appraiser must continuously observe the sales executive on the job third the evaluator should capable of determining whether the salesperson performance is satisfactory.
Question 13: What are the steps involved in setting up a Sales organization? Explain them.
Answer:  SETTING UP A SAILES ORGANIZATION: Not often is a sales organization built entirely from scratch, as some structure usually exists. Most problems of sales organization, in other words, are problem of reorganization--the sales organization exists and the goal is to make it mo, effective. It is appropriate, nevertheless, for the sales executive to approach the organizational problem, each time it arises, as though a completely new organization were being built. There are five major steps in setting up a sales organization:
1. Defining the objectives.
2. Delineating the necessary activities.
3. Grouping activities into “jobs" or "positions."
4. Assigning personnel to positions.
5. Providing for coordination and control.
Defining Objectives
The initial step is to define the sales department's objectives. Top management, of course, defines the long-run objectives for the company, and from these, the general, or long-run, objectives for the sales department are derived. Consid¬ered collectively, general objectives constitute top management's vision of the company at some future time. Top management, for instance, may want the firm not only to survive but to achieve industry leadership, develop a reputation for outstanding technical research, diversify its product lines, provide excellent service to customers, furnish investors with a generous return, establish an im¬age of public responsibility, and so on. From such composites, sales management determines the implications for the sales department and articulates a set of qualitative personal-selling objectives. Quantitative personal-selling objectives, in turn, are set with an eye on the qualitative objectives. Survival, for instance, is the most basic qualitative objective of any enterprise as well as its sales department, and this requires, among other things, a continuing flow of sales revenue; so, securing a given level of sales volume is an important sales department quantita¬tive objective.
Survival also requires profits. Hence, a second qualitative personal-selling objective is to produce profits, not only by making profitable sales but by control¬ling departmental costs and expenses. Furthermore, survival requires growth in both sales and profits; otherwise, in a growing economy the company is destined to fall behind competitors or even risk being forced out of business. It follows that a third qualitative personal-selling objective is to realize long-term growth in sales and profits. Therefore, three of the sales department's general objectives all traceable to management's desire for survival of the firm may be summed up in three words: sales, profits, and growth.
Qualitative personal-selling objectives are indispensable for long-range planning and must be kept in mind in short-range planning. Quantitative personal-selling objectives are required as operating guideposts. Thus, the quali¬tative personal-selling objective of producing profits may be translated into specific quantitative personal-selling objectives such as "to increase our market share of the hand-held calculator business to 20 percent by the end of the cur¬rent year" and "to secure four wholesalers in Australia and one in New Zealand to introduce our vest-pocket calculators in those markets next year." People in the sales department, as those elsewhere, work more effectively, with less wasted time, effort, and money, when assigned definite goals. The sales department as a whole, similarly, operates more smoothly, and its activities are more purposeful, when it has specific quantitative objectives.
The qualitative objectives set for the sales department form the basis the general policies governing its long-term performance. The quantitative, objectives set are the foundations from which to develop day-to-day operating policies and programs. A thorough examination perhaps even a restatement of the qualitative and quantitative goals of the sales department is logical place to begin the task of reorganization.
Determination of Activities and Their Volume of Performance
Fundamental to sound organizational design is recognition that activities are being organized. Only after determining all necessary activities and estimating their volume of performance is it possible to answer such questions as: What executive positions are required? What should be their relationships to other positions? What should be the duties and responsibilities of persons who fill the positions?
Determining the necessary activities and their volume of performance is a matter of analyzing the sales department's qualitative and qualitative quantitative. Thorough examination discloses which activities must be performed in what volume. The activities involved in modern sales management are similar from firm to firm, and although individual sales executives think that their operations are different, most differences are more apparent than real. Almost ever sales department carries on the same general activities; differences among departments are those of detail, of relative emphasis placed upon individual activity and in volume of performance.
Grouping Activities into Positions
Next, the activities identified as necessary are allocated to different position The planner must keep in mind that activities are aimed at achieving certain objectives ultimately the composite provides the raw material from which job descriptions are compiled (in terms of reporting relationships, job objectives, duties and responsibilities, and performance measures).
Activities are classified and grouped so that closely related tasks are signed to the same position. Each position should contain not only a sufficient number of tasks but sufficient variation to provide for job challenge, interest and involvement. Only in very large organizations, where extreme specialization is practiced, should a position comprise only a single activity, and even here the burden of proof should be on those proposing such a move. Pressures of administrative economy are generally strong enough that most position holders are responsible for a number of diversified, although related, activities.
Certain activities are of crucial importance to success of the sales department, and this has implications for organizational design. For example, in; highly competitive field, product merchandising and pricing are assigned to positions high up in the organizational structure. Activities of lesser importance, assigned to lower-level jobs.
When a large number of positions is being set up, groups of related jobs are brought together to form departmental subdivisions. In most cases, a number of intermediate-level positions would, in turn, have to be coordinated by the top sales executive. Nevertheless, the planner should guard against building too many levels into the department. The smallest number of administrative levels that permits the organization both to perform its activities and to operate smoothly is best.
Assignment of Personnel to Positions
The next step is to assign personnel to the positions. This brings up the question of whether to recruit special individuals to fill the positions or to modify the posi¬tions to fit the capabilities of available personnel. This is a question that has long been controversial. Compromises are frequent. On the one hand, some position requirements are sufficiently general that many individuals possess the neces¬sary qualifications, or can acquire them through training. On the other hand, some individuals possess such unique talents and abilities that it is prudent and profitable to modify the job specifications to fit them. Nevertheless, planners prefer, whenever the situation permits, to have individuals grow into particular jobs rather than to have jobs grow up around individuals.
Provision for Coordination and Control
Sales executives who have others reporting to them (that is, those with line au¬thority) require means to control their subordinates and to coordinate their ef¬forts. They should not be so overburdened with detailed and undelegated re¬sponsibilities that they have insufficient time for coordination. Nor should they have too many subordinates reporting directly to them--this weakens the quality of control and prevents the discharge of other duties. Thus, in providing for coordination and control, consideration must be given the span of executive con¬trol.
Control and coordination is obtainable through both informal and formal means. Strong leaders control and coordinate the efforts of their subordinates largely on an informal basis. Through sheer force of personality coupled with unusual abilities to attract and hold the loyalty of followers, the strong leader tends to make minimal use of formal instruments of control and coordination. But all sales executives, whether strong leaders or not, can improve their effec-tiveness through formal instruments of control.
The most important formal instrument of organizational control is the written job description. This instrument sets forth for each job: reporting rela¬tionships, job objectives, duties and responsibilities, and performance measure¬ments. The most critical section is that of setting forth the job objectives---many planners argue that the job objective section should be the part emphasized and, to the extent possible, the person who holds the job should be allowed to deter¬mine how to achieve these objectives. This not only encourages position holders to use their own initiative but makes it clear that they are to achieve stated jobs objectives even if that requires performing duties and responsibilities beyond those contained in job descriptions. Few sales executives will dispute this argument, but most are also convinced that there is merit in detailing duties and responsibilities and in defining the measures for evaluating the position holder’s performance.
Good job descriptions provide clear pictures of the roles job holders are play in the sales organization, and are also useful in other situations. Written job descriptions find use in employee selection processes. They are used, too, in matching job specifications with applicants' qualifications--where recruits cannot be found with all desired qualifications, job specifications form the basis for training. Position holders, in addition, can use their job descriptions as yardsticks against which to appraise their own performances.
An organizational chart, another control instrument, shows formal relations among different positions. A chart reduces confusion about the individual's role. An organizational chart delineates formal relations and, because 0fthi rarely provides a true picture of how the organization actually works. Nevertheless, availability of an organizational chart enables members of a sales department to learn the nature of' their formal relations with others, to know with whom they are expected to cooperate, and to clarify their formal roles.
      An instrument of organizational control used increasingly is the organizational manual. It is an extension of the organizational chart. Typically, it contains charts for both the company and the departments, write-ups of job descriptions and specifications, and summaries of' major company and departmental objectives and policies. The organizational manual brings together a great deal of information and helps its users to learn and understand the nature of their responsibilities, authorities, and relations with others.
Question 14: Write short note on the following:
1. Flows in marketing channels.
2. Functions of distribution channels.
3. Channel structure.
Answer: Flows in marketing channels: A conventional channel of distribution consist of a manufacturer, a wholesaler, a retailer and the ultimate consumer. Not all the channels include all these marketing institutions. At times the product passes directly from the manufacturer to consumer. When a marketing channel has been developed a series of flows emerge. These flows provide the links that tie channel members and other agencies together in the distribution of goods and services. There are five most important flows namely:
• Product flow
• Negotiation flow
• Ownership flow
• Information flow
• Promotion flow

The Product flow refers to actual physical movement of the product from the manufacturers through all the parties who take physical possessions of the product from the point of production to the final consumer.
In the negotiation flow, this represents the interplay of the buying and the selling functions associated with the transfer of title. If you note the diagram you find the transportation firm is not included in the flow because it does not participate in the negotiation function, also you can find the arrows flow in both the directions, indicating the negotiation is mutual at all levels of the channels. The ownership flow shows the movement of the title to the product as it is passed along from the manufacturer to the consumer, here as well we find the transportation function missing since the transportation firm does not take title or is actively involved in the facilitating function. It merely involves in transporting physical products
In case of the Information flow, we can see that the transportation function has reappeared and all the arrows are two-directional. All the parties participate in the exchange of information. For example Coke may obtain information from the transportation company about its shipping schedules and the rates, while the transportation firm may seek information regarding when and in what quantities it plans to ship its products. Some times the information bypasses the transportation company directly to the wholesaler or the retailer when the information does not concern the transportation firm. If there is an offer, or a price reduction these information are not needed by the transportation firms.
Finally the Promotion flow refers to the persuasive communication in the form of advertising, personal selling, publicity. There is a new component that is added to the flow and that is the advertising agency and this actively provides and maintains theinformation flow. The organizations work closely with the promotional organizations sowe find a two-directional arrow. From the management view, the concept of channel flows provides a useful framework for understanding the scope and complexity of channel management. Changing scenario does make the role of the firms’ complex, as a result of which innovative channel strategies and effective channel management are needed to make this happen.
2. Functions of distribution channels
Some of the major functions performed by the intermediaries are mainly physical distribution, communication and facilitating functions. When we talk about physical functions, they include braking bulk, accumulating bulk, creating assortments, reducing transactions and transporting and storing.
Breaking bulk: One of the important role intermediaries perform is bulk-breaking function. Here these organizations buy in large quantities and break them into smallerquantities and pass them to the retailers, wholesalers or even to the customers. By doing so, the intermediaries reduce the cost of distribution for the manufacturers as well as theconsumers. This particular function is also termed as ‘resolution of economic discrepancies’.

Accumulating Bulk: At times the intermediaries also do the task of accumulating the bulk. The intermediaries may buy bulk from different small producers accumulate them and offer to those buyers who prefer large quantities. The intermediaries in accumulating the bulk are mostly found in the agricultural businesses, whereby the intermediary will procure vegetables from local farmers and assemble them and sell it to the wholesalers.
Once the marketers accumulate bulk they start to sort the products identifying differences in the quality, grades and classify them into different categories.

Creating Assortments:The third important function of the intermediaries is creating assortment. When we take the case of magazines, on an average there are around thousands of magazines being published in a month and it is impossible for a particular newsstand to get it going, here big distributors and agents work in creating assortments and enable a speedy process. This needs a lot of teamwork and timing. Certain magazines become outdated within certain period of time.
Reducing Transactions: One of the biggest reasons that keep the economy moving and the customer smiling is the presence of intermediaries, they reduce the number of transactions necessary to accomplish the exchange of goods.

In the above exhibit, we find that it becomes a complicated process for the manufacturers to work on with different retailers, when a intermediary comes in the form of a wholesaler we find the whole situation becomes different. Intermediaries do not only reduce the number of transactions but also help in the reduction of the geographical distances that both buyers and sellers have to cover. Channel intermediaries doing the roles of a buying agent for their customer and selling agents for the manufacturers does simplify the process of transaction considerably.

Transporting and Storing: Apart from breaking, accumulating, creating assortments and reducing transactions they also perform two key marketing functions namely transporting and storing. The final product has to be moved from the point of production to the point of consumption. This means it involves storing the product along the way till it is delivered. Most of the big retailers hold enough of the product in order to cater to the consumers
Credit Services: Apart from the function of physical distribution the intermediaries also help in offering credit services. Even though there are firms like Metro, which are predominantly cash and carry kind of intermediaries, most of the intermediaries provide credit facility or even paying in parts. Many intermediaries offer about 30 to 45 days to the retailers for paying back.
Risk Taking: one of the vital functions of the intermediaries is risk taking. Not every product finds favor in the eyes of the customer, much fallout within few months, as a result of which the intermediaries would be at risk. An uncontrollable factor like floods, earthquakes or even contamination or fire could pose a serious threat. The intermediaries have to bear these risks along with the market risks. These are some of the core functions intermediaries perform enabling goods and services to reach consumers at the right time.
3. Channel structure
Channel structure is distinguished on the basis of the number of intermediaries. There are different levels in a channel structure. The common levels are zero-level, one-level, two level, three-level. Each level presents both opportunities and challenges for the marketer.

Zero-level structure is one of the simplest forms of the channel structure. Here organizations like Avon, Eureka Forbes use direct selling mode to take the products from their production houses to the consumers directly. A lot of money has to be spent in orderto make this channel structure effective, as there is no third party to take your product to the consumer. Even a bakery can come as a firm, which bakes cakes and sells it directly to the consumers. Marketers who use the mailing services, toll-free numbers are also using this service.
One-level structure is one in which we have one intermediary acting as a link between the manufacturer and the consumer. Here the retailers procure goods directly from the manufacturer and supply it to the consumers. Retailers like Viveks, Wal-Mart deal directly with the manufacturer. In some cases in order to retain profitable and reputed retailers the manufacturers act as wholesalers. One of the advantages for the intermediaries is the customization and the discounts they receive.
Two-level channel has two people interceding before the product reaches the consumer. Here there would be a wholesaler and a retailer who takes the efforts for a speedy delivery and this is one of the most commonly used structures for consumer goods. In the case of Metro, most of the small retail and Kirana stores buy all the merchandise from Metro and in urn sell them to the consumer. One of the advantages of the four-level structure is the benefit of using the wholesaler in the distribution of services.
Three-level channel happens predominantly when the firms plans to go global. When a manufacturer enters another country, it always holds good when he uses the help of agents to operate in that environment. The agents are people who know the legal procedures and who can negotiate with the host country in case of a problem. Most of the airline firms that operate in different countries take the help of agents to penetrate the market.

Example for Consumer Markets

When it comes for Business-to-Business operations, the channels differ from the consumer markets, in this structure, firms predominantly may use their existing sales force to sell the products to the customers, they may even use industrial distributors to take their products to the industrial customers.
B2B Marketing Channels

Mark Andy is one of the big names in the printing machines industry. In India Mark Andy supplies its printing machines to the industrial customers through Heidelberg, an industrial distributor. It also has its own representatives who pitch in when thecustomer needs information. In case of Industrial Channel, the zero-level, one-level andtwo-level are the most commonly used method. When it comes for Business-to-Business channels agents become the integral point of the whole process, since the characteristic of the business-to-business market is oligopolistic and are huge buyers.
In this digital economy, a shift has started in the channels on either side of the markets i.e. in both the consumer marketing channels and the business-to-business market channels. The web has created a platform whereby organizations can now directly communicate with the customers, as a result of which many of the channels are being disintermediated. This disintermediation does not necessarily mean that they completely eliminate the intermediaries, but rather when it comes to shipping the products it may outsource some of the distribution functions like the storage, transportation from third party firms.
Question 15: Identify the different marketing activities and other departments co-coordinating with personnel selling.
Answer: COORDINATION OF PERSONAL SELLING WITH OTHER MARKETING ACTIVITIES
Sales and Advertising
The sales and advertising departments work toward the same objective--the stimulation of demand--but they use different approaches. Personal selling techniques are the province of the sales department and non personal selling techniques that of the advertising department. The two types of selling effort need skillful blending to achieve an "optimum promotional mix." This requires coordination of plans and efforts. The activities of the sales force are planned and directed along lines that increase advertising's impact, and advertising geared to help salespeople where and when they need it most. The sales department assists the advertising department in selecting themes and media, in pre. paring schedules, and in securing dealers' support for cooperative advertising programs. The advertising department helps the sales department in such ways as furnishing sales aids for the sales force and for dealers and by providing sales leads. Advertising conserves the sales force's time, for prospects presold through advertising are easier to convert into customers. Proper timing and coordination of advertising and personal selling are essential, and promotional programs need skillful administration by executives who understand both types of selling effort.
Both departments work toward the same goals, so formal coordination best achieved by having both department heads report to the same high-ranking executive, for example, the marketing vice-president. However, because many matters are of joint interest and so many require frequent communication, most coordination between these two departments are on an informal day-to day basis, with frequent interactions of department heads and subordinates.
Sales and Marketing Information
To obtain maximum returns per dollar spent  for marketing information, the sales department works in close harmony with the department or department producing marketing information. In some instances, this information is provided by marketing research, but in companies with sophisticated marketing in. formation systems, marketing research is only one of the subsystems providing information inputs. Marketing information systems assist the sales department by gathering data needed for analyzing sales problems, assisting in determining sales potentials and setting quotas, measuring the effectiveness of the sales effort, assisting with sales tests, and in other ways. The sales department provides the information system with many of the raw statistics and other information needed for sales and market analysis and forecasting
As marketing information systems and marketing research become more sophisticated, the sales department works ever more closely with information personnel. Surprisingly little systematic research has been done in evaluating the relative effectiveness of' alternative personal-selling appeals and method of making sales presentations.
The data processing unit may or may not combine the sales department's own information inputs with inputs from elsewhere. Both in designing and operating a management information system, continuing formal and informal cooperation and communications are of the highest importance. The distribution systems of many companies provide customers with auto rustic ordering procedures. Many apparel makers, for instance, have set-ups allowing store buyers to punch out their orders on in-store console teleprocessing stations linked to a central computer at the seller's plant or warehouse, which, in seconds, scans the customer's account for a credit okay, examines inventory records to see whether the styles, sizes, and colors can be supplied, discerns the age of the account, types out a shipping order, and stores the new inventory information in memory
Sales and Service
In companies manufacturing technical products or products requiring installation and repair services, cooperation and close contact of the sales and service departments are essential. Availability of service, such as technical advice on the installation of a new product, is a powerful selling argument, and there are implications for the service department in sales person’s promises to buyers. Moreover, in many industries (commercial refrigeration, for example), the recommendations of service personnel often influence buyers' decisions, and in selling vacuum sweepers and other household appliances, service personnel act in a sales making capacity.
Where service is important in sales strategy, provisions for formal coordi¬nation are built into the organizational structure. When both sales and service departments are decentralized, the organization should provide for bridging the gap between the home office and the field. Sales and service should relate usually by locating sales and service personnel in the same field offices, with regional managers responsible for both activities.
Sales and Physical Distribution
Achieving effective coordination of Selling and physical distribution operations is important. Most firms accept the notion that all business operations should be geared toward serving customers at a profit. This requires the maintenance of favorable relations between sales volumes, arid costs of various kinds, including physical distribution costs.
Proper packing’s accurate freight rate quotations and promptness in delivery--all physical distribution activities--are important in securing ~les volume. Unless costs of performing these activities are kept under control, sales volume yields less profit than it should. Sales policies, such as those on delivery schedules, are coordinated with the capabilities of the physical distribution oper¬ation and its costs.
The benefits of effective coordination with physical distribution are signifi¬cant. These benefits, all of' which can help to generate additional sales volume and profit include the following:
1. Minimize out-of-stock occurrences (helps to reduce sales lost because of "outs" and helps raise the level      of customer satisfaction).
2. Reduce customers' inventory requirements. (If a company develops a more responsive distribution system than competitors, its customers obtain an economic advantage by doing business with it. This is a strong selling point.)
3. Solidify relations with customers (through integrating company deliver facilities with customers' receiving facilities, consignment of stocks to customers, and similar devices).
4. Allow greater concentration on demand creation. Development of a well-organized physical distribution activity, in which a separate admin¬istrative group is set up to plan and operate the distribution system, can free marketing and sales personnel, allowing them to concentrate more on their basic responsibility-4emand creation. In many companies this has led to an increased number of warehouses and a consequent reduction in total distribution costs.
COORDINATION OF PERSONAL SELLING WITH OTHER DEPARTMENT
Sales and Production
Coordination of sales and production activities is essential. Whereas at one time production was started only after orders were on hand, today most production is in anticipation of future sales. Similarly, although some products, such as defense materials for the armed forces, are manufactured to specifications established by buyers, most products today are manufactured according to specifications set within the company itself.
Coordination is important both in planning and operations. In planning joint consultation is required when deciding the products to manufacture, the quantities to produce, the production schedule, inventories, and packaging. But even carefully made plans rarely work out as originally visualized. On the sales side, the sales estimate (on which production schedules are based) may prove in error, or the sales department may accept rush orders, necessitating reshuffling oi production schedules, addition of extra shifts, or payment of overtime wages. On the production side,, output may not conform to planned quantities because of labor difficulties, material shortages, adverse weather conditions, and the like, these and other operating situations require changes in plans that must & worked out jointly by sales and production personnel.
        Methods for achieving interdepartmental coordination vary, but, because sales and production are both of critical importance, top management generally' retains the primary responsibility. If the company has a separate merchandising department, top management delegates to it the authority to coordinate many sales and production activities through staff channels. In other companies, merchandising committees with representatives from both sales and production obtain formal coordination. Formal coordinating mechanisms are valuable, but close informal contacts between personnel at many levels are important in handling many complex problems arising in the course of operations with minimum expenditure of executive time.

Sales and Research and Development

In large firms and in most firms oriented toward product innovation, research and development (R&D) is organized as a separate staff department. In smaller and more conservative firms, responsibility for R&D may be placed in the marketing or production department. Research and development work consists of scientific and engineering efforts to develop new products and to improve established products.
1. New Product Departments charged with responsibility for developing new products through coordination of       R&D, production, and sales and marketing personnel.
2. New Product Managers--one-person units responsible for developing new products through coordinating    R&D, production, and sales and marketing personnel.
3. New Product Project Management Team composed of persons home. Based in other departments brought together to work on a new product,
4. Product Development Committee similar to (3), but with a permanent existence and dealing with continuing problems of innovation relating to a given product group.

Sales and Personnel

Because of unique problem in managing employees located away from company offices and facilities, most personnel departments are ill-equipped to service sales personnel. Sales departments ordinarily handle nearly all their own personnel problem, and the personnel department acts mainly in an advisory capacity. Personnel department specialists in job analysis, recruiting, selecting, training, and motivation often are consulted by sales executives. Some routine personnel work, such as maintaining records or personal data, is performed by the personnel department. The two departments cooperate in formulating policies on pensions, vacations, sick leaves, safety, health checks, and similar matters. Formal coordination is through top management, and there is significant in¬formal coordination.

Sales and Finance

The sales department assists the finance department by furnishing sales esti¬mates for the company budget, by developing the sales department's budget, and by assisting in control of selling cost. The finance department assists the sales department by providing rapid credit checks on prospective accounts, keeping sales people informed of customers’ credit standings, helping locate prospective accounts, and providing credit information on candidates for sales positions. In some firms, salespersons represent the financial department in making collections and securing credit information. These interdepartmental activities require good communications, consistent policies, and close working relationships. Most organizational plans provide for formal coordination through budget and executive committees.
Coordination of sales and finance takes place informally by personal con¬tact, in a mutual effort to overcome the natural conflict of interest in credit pol¬icy. Credit terms are significant factors in obtaining orders. Length of the credit period, size and nature of discounts, relative liberality in granting credit all can be instrumental in persuading prospects to buy.
Sales end Accounting
Traditionally the sales department relied upon the accounting department to bill customers, handle the department's payroll computation and disbursement problems, and provide data for sales analysis and marketing cost analysis. With development of companywide management information systems, performance of these functions shifted away from the accounting department. That depart¬ment, however, may retain primary responsibility or even, organizationally speaking, have the centralized data-processing unit under its jurisdiction. More and more companies have set up such units, sometimes called "computer cen¬ters,'' to handle data-processing and analysis functions for all, or nearly all, de¬partments.

Sales and Purchasing
The sales and purchasing departments cooperate in three main ways. First, the sales-department provides purchasing with sales estimates so that adequate stocks of raw materials, fabricating parts, and other items can be procured in advance of scheduled production runs. Sometimes these data are furnished through an intermediary such as the production department or data processing unit. Second, the purchasing department informs the sales department, again sometimes through an intermediary, of material surpluses and shortages, sales emphasis can be changed with regard to products made from these materials. Third, data on sales department needs (for example, office supplies and fixtures, and company cars) are furnished the purchasing department so that purchases can be made on advantageous terms.
A fourth point of cooperation exists in companies where reciprocity is al~ proved policy. The two departments coordinate their efforts, buying as much~ possible from customers and selling as much as possible to suppliers. Coordination is achieved formally through top management and informally through personal contacts.
Sales and Public Relations
The sales department works closely with tile public relations department. Public relations is consulted on any contemplated moves that might have public relations repercussions, and the sales department assists public relations personnel by relaying information, secured through its contacts with various publics, that bas public relations significance. Relations between the two departments are nor¬mally informal and with frequent personal contacts, with formal coordination being the responsibility of top management.
Sales and Legal
Legislation regulating and affecting marketing activities makes effective coordination of the sales and legal departments imperative. Every sales departmental activity has, or can have, legal implications. Sales executives require legal advice on contracts with sales personnel, pricing, relations with competitors and trade as¬sociations, salesperson recruiting policy and practice, and disputes with custom¬ers. Sales executives and legal officers are in continuing communication to avoid costly litigation and unfavorable publicity. Formal coordination of the sales and legal departments is achieved through top management, but interdepartmental coordination on legal matters is informal.
Question 16: Define the term Distribution Channel. Illustrate the criteria for designing distribution channel?
Answer:Different people perceive marketing channels in different ways, some see it as a route taken by a product as it moves from the producer to the consumer, and others describe it as a loose coalition of business firms that have come together for purpose of business. Customers may view marketing channels as simply ‘a lot of middlemen’ standing between the producer and the product. Given all these different perspectives it is not possible to have one single definition for marketing channels. Marketing channels can bedefined as the external contractual organization that management operates to achieve its distribution objectives.
There are four terms in this definition that has to be given a special mention namely external, contractual organization, operates and distribution objectives. The term external means that the marketing channel exists outside the firm. Managing of the marketing channel therefore involves the use of interorganizational management (managing more than one firm) rather than intraorganizational management (managing one firm). The term contractual organization refers to those firms who are involved in the negotiatory function as the product moves from the producer to the end user. The function of these firms involves buying, selling and transferring of goods and services.
Transportation companies, public warehouses, banks ad agencies do not come under these and are referred to as facilitating agencies. The third term operates suggests the involvement of management in the channels and this may range from the initial development of the channel structure to the day-to-day management. Finally the distribution objectives explain the distribution goals the organization has in mind. When the objectives change, variations can be seen in the external contractual organizations and the way in which the management operates. In simpler terms a channel then consists of producer, consumer and any intermediary.
Marketing channel strategy is one of the major strategic areas of marketing. In most cases eliminating middlemen will not reduce prices, because the amount that goes to the intermediaries compensates them for the performance of tasks that must beaccomplished regardless of whether or not an intermediary is present. In simple terms, acompany caneliminate intermediaries but cannot eliminate the functions they perform.
DESIGNING DISTRIBUTION CHANNELS
Channel design refers to those decisions that involve in the development of new marketing channels or modifying the existent ones. The channel design decision can be broken down into six steps namely:
1. Recognizing the need for channel design decision
2. Setting and coordinating distribution objectives
3. Specify the distribution tasks
4. Develop alternative channel structures
5. Evaluate relevant variables
6. Choose the best channel structure
Recognizing the need for a channel design decision
First and foremost task for the organization is to recognize the need for a channel design. An organization would go in for a new channel design for the following reasons namely:
• When a new product or product line is developed, mainly when the existing channels are not suitable for the new line.
• When the existing product is targeted to a different target market. This is common when an organization is used to catering the B2B, plans to enter the consumer market.
• When there is a change in the marketing mix elements, when an organization reduces its prices on certain offering the channel worked out will be based on the price points, they may look in for discounters.
• When facing major environmental changes namely in economic or technological or in legal spheres.
• Finally when the organization opens up new geographic marketing areas.
The list by no means is comprehensive, but gives a picture about some of the most common conditions when channel design decisions are worked out.
Setting and Coordinating Distribution Objectives
Once a need for a design is recognized the next task for the channel manager is to work out to develop the channel structure, either form the scratch or by modifying the existing one. It is necessary for the channel manager to carefully evaluate the firm’s distribution objectives. In order for the distribution objectives to be effective and well coordinated the channel manager need to perform three tasks namely:
1. Become familiar with the objectives and strategies in other marketing mix areas and other relevant objectives and strategies of the firm. In most cases the person or the group that sets the objectives of the other marketing mix elements will also set the objectives for distribution as well.
2. Set the objectives and state them explicitly. A good objective is one, which is clear, and explicit, and has a greater role in achieving the firm’s overall objectives. Some examples of a good distribution objectives are as follows, at the start of the new millennium, Apple Computers set a distribution objective to reach more consumers with what it refers to as the ‘Apple experience’. So, Apple reinvigorated and re-established relationships with large retail chains, which it had neglected in recent years .In the same way Coca-Cola seeks tobroaden its penetration in schools and college markets, as a result of which it has entered into contact with many schools and colleges, whereby these institutions would sell only Coca-Cola products on their campuses.
3. Check and see if the distribution objectives set are congruent with marketing and other general objectives and strategies of the firm. This involves verifying if the distribution objectives do not conflict with the objectives in the other areas of marketing mix or even to the overall objectives of the company. In order to cross check, it is essential to examine the interrelationships and hierarchy of the objectives of the firms.




Interrelationships & Hierarchy of Objectives

Specifying the Distribution Tasks
Once the objectives are formulated, a number of functions need to be performed in order for the distribution objectives to be met. The manager therefore has to specify the natureof the tasks that needs to be carried out in order to meet the objectives. The tasks need to be precisely stated so that it meets the specified distribution objectives. For e.g. a manufacturer of a consumer product, say a high quality cricket bats aimed at seriousamateur cricket players would need to specify distribution tasks such as gathering info ontarget markets shopping patterns, promote product availability to the target, maintain inventory, and timely availability, compile info about the product features, provide hands on experience using the product, process and fill customers orders, transport the product, arrange for credit provisions, provide warranty, provide repair and service, establish product return to make the offering readily available. Sometimes these functions may appear to be production oriented rather than distribution tasks, but when we talking about meeting customers, they are indeed distribution tasks.
Developing Possible Alternative Channel Structures
Once the tasks have been specified by the channel manager he should find out alternate ways of allocating these tasks. In most cases the channel manager chooses from more than one channel to reach the consumer effectively. Britannia would sell their biscuits thorough wholesale food distributor, departmental stores, convenience stores and even in pharmacies. Whatever may be the channel structure, the allocation alternatives should be in terms of (a) the number of levels in the channel (b) the intensity at various levels, and (c) the types of intermediaries.
The number of levels can be from two level upto five levels. The channel manager can think of going for a direct way of meeting the customers to using two intermediaries as an appropriate way. Intensity refers to the number of intermediaries at each level. Generally the intensities can be classified into three categories namely intensive, selective and exclusive. Intensive saturation means as many outlets as possible are used at each level of the channel. Selective means that not all possible intermediaries at a particular level are used. Exclusive refers to a very selective pattern of distribution. A firm like Parle may use intensive distribution channel structure, while Rolex may use high degree of selectivity. The types of intermediaries, third component has to be carefully dealt. The firms should not overlook new types of intermediaries that have emerged in recent years particularly the auction firms such as baazee, bid or buy as possible sales outlet for their products.
Evaluating the variables affecting Channel structure
Once the alternative structures have been outlined, each channel structure has to be evaluated on a number of variables. There are five basic categories namely:
Market variables:marketing management is based on the philosophy of marketing concept, which stresses on the consumers needs and wants, the managers have to take the cues from the market. The subcategories that have a greater influence on the market structure are market geography, market size, market density and market behaviour.
Product variables:some of the most important product variables are bulk and weight, Perishability, unit value, degree of standardization, technical vs. non-technical and newness. Heavy and bulky products have a high handling and shipping costs relative to their value. The manufactures of such products have to keep in mind to ship in large lots to a fewer possible points. It would always be better if the channel structure remains short. Food products, flowers are considered to be highly perishable. When products arehighly perishable, the channel structure should be designed to provide rapid delivery from producers to consumers. One important consideration is lower the unit value of a product, the longer the channels should be as low unit value leaves small margins for distribution costs.
If the product flows directly from manufacturer or producer to the user the degree of customization is more, but as the product becomes more standardized it passes through many channels. Mostly the B2B machinery has a great degree of customization as it passes from the manufacturer to the industrial user, while many consumer market is predominantly a standardized one. When it comes for the technical component, the industrial products are mostly distributed through direct channels because of the technical expertise and service while many technical consumerproducts do use shorter channel structure. When the product is new and is in the introductory stage in order to capitalize on the aggressive promotion, a shorter channel is preferred to gain awareness.
Company Variables:the important variables that affect a good channel design are size, financial capacity, managerial expertise and objectives and strategies. Larger the firms in terms of size it enables them to exercise a substantial amount of power in the channel. The size does give flexibility for the firm in picking the channel structures. The same hold true when it comes for the financial capability. Greater capital available with a firm, less dependency is seen on the intermediaries. When a firm is into industrial marketing, it prefers to have its own sales force, warehousing, order processing capabilities and larger firms with good financial backing are better able to bear the high cost of these facilities.
When a firm lacks quality managerial skills, a comprehensive channel structure ranging from wholesalers to brokers are needed to perform the distribution activity, once the firm gains experience it can change or reduce the number of intermediaries. The objectives and strategies a firm has may limit the use of intermediaries. These strategies mayemphasis on aggressive promotion and may even alter the distribution tasks. Overall this is one of the prime variables used for evaluating.
Intermediary Variables:the important intermediary variables are availability, costs and services offered. The availability is one of the key variables as this influences the channel structure. If we take the case of Dell Computers, due to lack of a proper channel structure he designed a direct mail order channel, which provided a strong technical backup as well. The cost is another variable a channel manager considers. If the cost of using a particular intermediary is too high compared the services it offers the manager may consider in minimizing the use of intermediaries. The services performed by the intermediaries is another integral component, a good intermediary is one, which offers efficient services at the lowest cost.
Environmental Variables:the uncontrollable or the macro environmental forces may affect the different aspects of channel development and management. Forces like the Sociocultural, economic, technological, legal forces have a significant impact on the channel structure. The other variables are those the organization can work upon or change to the situation but the environmental forces are those the organization has to cope upwith.
Choosing the ‘Best’ Channel structure
In deciding the manager should choose an optimal channel structure that would offer desired level of effectiveness at the lowest possible cost. Even though there is not one set method to pick an optimal channel structure, it all depends on the orientation of the firm. If the goal of the firm were profit maximization, the channel structure would be in line with the goal. Most channel choices are still however made on the basis of managerial judgment and the data that is available.
Question 17: Enumerate different approaches for making the distribution channel more efficient.
Answer: Securing and maintaining harmonious working relationships with the dis¬tributive networks is as important as building and maintaining favorable reputations with final buyers. Distributive outlets are customers for the products, and collectively they bear responsibility for making the "payoff" sales do final buyers. Unless the supply of product flows through to final buyers, market¬ing channels clog, and all previous personal selling and other marketing efforts are wasted.

SETTINGS UP COOPERATIVE PROGRAMS
To implement its overall marketing strategy, the manufacturer needs the coop¬eration of its distributive outlets. In consumer-goods markets, for instance, re-milers must have adequate stocks of a product on hand prior to the launching of national consumer advertising campaigns. Retailers must provide support orders they had written for other dealers, acted as though they were doing a favor for the dealer, carried gossip from dealer to dealer, hinted at great favors in the future, and acted as though they were entitled to business just for making calls. Such tactics are more common than many sales executives admit.
First-line communications with distributive outlets are initiated and main¬tained by the manufacturer's sales force, so the utmost care is needed in their selection, training, and supervision. Nothing damages the reputations of a com¬pany and its products more than a salesperson who fails to win and hold the respect and confidence of the customers. Sales management relies upon the salespeople to treat customers fairly.
OBJECTIVES AND METHODS OF MANUFACTURER-DISTRIBUTIVE NETWORK COOPERATION
The manufacturer and its distributive outlets share a common objective to sell the manufacturer's products at a profit. To achieve this objective, manufacturers set more specific objectives. These objectives, of course, differ with the market¬ing circumstances, even though many variations of specific objectives fit into definite categories. Manufacturers undertake cooperative programs (1) to build distributive network loyalty, (2) to stimulate distributive outlets to greater selling effort, (3) to develop managerial efficiency in distributive organizations, or (4) to identify the source of supply for the product line at the final buyer level.
Building Distributive Network Loyalty to the Manufacturer
Whether distributive outlets actively promote, simply recommend, or just handle the product line depends upon their relationships with the manufacturer and its sales force. I f they value these associations, the manufacturer's chances of securing active promotion are good. If they stock the product line merely for the convenience of the customer. In short, in many situations a manufacturer meets sales resistance from the distributive outlets. When this resistance evolves into obstructive tactics, the net result is a progressive deterioration in final buyer respect for, and confidence in, the manufacturer and its product. The manufacturer s problem is to inspire in its distributive outlets a feeling of mutual interest and trust and to convince them that it appreciates their contribution to the marketing success of the product. The sales department and the sales force play significant roles in solving such problems. Any program designed to build or strengthen distributive outlet loyalty includes two important components. First, there must be appraisals of the manufacturer's policies and their manner of implementation, with a view to identifying the impacts on distributors' and dealers' attitudes. Second, there must be analysis of the communications system with the distributive network. In other words, most cases of disloyalty have their roots in the manufacturer's policies, which may be inappropriate or misapplied, or in shortcomings of the communications system.
Stimulating Distributive Outlets to Greater Selling Effort
Dealer apathy is common. Some manufacturers invest millions of dollars in pro¬motion, but dealers, outwardly at least, are not only unimpressed but unmoved. Many dealers fail to see why they should tie in with the manufacturer's promo¬tion or provide extra push for the product. They feel, sometimes rightly, that the manufacturer wants more assistance from them than it is willing to extend--and frequently these feelings trace to inadequacies in salespeople's presenta-tions. Under these circumstances, coordination of promotional efforts is difficult. The first step in overcoming dealer apathy is to identify the reasons lying behind it. The second step is to take positive action to increase dealer sell¬ing effort.
Changing policies: It may be that inappropriate or outmoded sales policies are the cause of dealer apathy. Alert competitors may have adjusted their poli¬cies to the changing situation, while the company, whose dealers are apathetic, may have lagged behind. Management may have clung to policies for sentimen¬tal reasons. Bringing policies into line with marketing conditions stimulates dealer effort.
Developing Managerial Efficiency in Distributive Organizations
To make its dealers more enthusiastic about its product, the manufacturer should consider increasing dealer efficiency. The dealer's primary concern is to make, or better yet, to increase, profits, the manufacturer, who frequently has access to superior managerial know how, can search out improved methods for its dealers. It is not enough for the manufacturer to find better operating meth¬ods for the dealers to use; the manufacturer must see that they learn how to incorporate these methods into their operations. The manufacturer recognizes that an important key to success lies in how dealers operate their businesses. More efficient dealers move the manufacturer's products more rapidly through the marketing channel and produce larger sales and profits both for themselves and for the manufacturer.
Dealer training programs~ Not ail manufacturers benefit from providing dealer managerial training programs; payoff from these programs varies with the product. Management training programs for dealers are most beneficial when the products require considerable personal-selling effort. Such programs are less beneficial where final buyers buy as a matter of habit or on impulse~ Dealer training programs are important, when the product's unit price is high, trade is are common, the final buyer's purchase decision is postponable, the product requires demonstrations, and dealers' recommendations play a major role in making sales.
Assistance in sales force management. To develop managerial efficiency in distributive organizations, the sales executive's role often is to improve dealer sales force management. Dealers are advised on sources and methods of recruit¬ing new sales personnel, sales compensation plans, and supervision and control of sales personnel. Sometimes, dealers are provided with exhaustive "audits" of their entire personal-selling programs, together with recommendations for im¬provements.
DISTRIBUTIVE NETWORK CHANGES AND MAINTAINING RELATIONS
The evolution of new types of distributive outlets has been a recurring phenomenon. Over the years, many new marketing institutions have appeared and grown in importance department stores, mail-order houses, corporate chains, cooperative and voluntary chains, producers' and consumers' cooperatives, supermarkets, rack jobbers, discount houses, and discount department stores, to name but a few. Older, better established types of distributive outlets proclaim loudly that each new institution is "illegitimate." They plead with manufacturers for protection against such unfair and unorthodox competitors. Consequently, the newborn institutions fight all the harder to make sales and even to secure sources of supply--perhaps that is why new institutional forms seem more virile than older ones. Whenever new types of distributive institutions have been suc¬cessful, they have filled a market niche that went unfilled up to the time of their appearance. Manufacturers who do not allow their marketing channels to "freeze," those with truly dynamic marketing and sales policies, have less difficulty in maintaining adequate overall distribution. It may be appropriate oc¬casionally for a manufacturer to assist its conventional outlets in coping with their new competitors, but the manufactures also ensure that the products are represented in new outlets.
Question 18: Write short notes on the following:
1. Vertical Marketing System, Horizontal, Multi-Channel Marketing Systems.
2. Types of Vertical Marketing Systems
3. Retail Cooperative Marketing Strategies
Answer: Vertical Marketing System:Like any other concept, channel systems do change according to the development and the need of the hour. With consumers becoming conscious of where they buy and how they want things to be delivered there has emerged different systems namely the vertical, horizontal and multichannel marketing systems.
The conventional or the traditional marketing channel encompasses a producer, one or few wholesalers and one or few retailers. The objective of theses different players is to see that they make enough profits, they are highly independent and don’t have control over other channel members. By contrast, in a conventional marketing system the channel members have no affiliation with one another. All the members operate independently. If the sale or the purchase of a product seems like a good deal at the time, an organization pursues it. But there is no expectation among the channel members that they have to work with one another in the future.
The Vertical Marketing System (VMS)has the three members acting as one unified team, there is one channel member who owns the other members or allows franchising but ensures a greater role in the execution. Many organizations have started to operate in this format as strong channel members try to dictate terms for the producer as well as when they found the objectives of different channel members differ from that of the producer. There are three variants of vertical marketing system namely corporate, administered and contractual vertical marketing system. In case of corporate the organization combines the production and the distribution under one roof. Organisations like Asian paints, Amul are not only involved in the production of the products but they also own a considerable no of outlets. An administered vertical marketing system coordinates the production and distributionefficiencies but use their size as a dominant influence. HLL commands a greater shelf space or Samsung gets better displays in retail outlets purely because of their size and the reputation they carry with them. The third variant namely contractual vertical marketing system coordinates the activities of individual firms at different levels integrating their programs at contractual levels. Firms like McDonalds, KFC use this type of vertical marketing systems for the integration of their businesses.
In a vertical marketing system, channel members formally agree to closely cooperate with one another. (You have probably heard the saying, “If you can’t beat ’em, join ’em.”) A vertical marketing system can also be created by one channel member taking over the functions of another member.
Procter & Gamble (P&G) has traditionally been a manufacturer of household products, not a retailer of them. But the company’s long-term strategy is to compete in every personal-care channel, including salons, where the men’s business is underdeveloped. In 2009, P&G purchased The Art of Shaving, a seller of pricey men’s shaving products located in upscale shopping malls. P&G also runs retail boutiques around the globe that sell its prestigious SK-II skin-care line.
Franchises are another type of vertical marketing system. They are used not only to lessen channel conflicts but also to penetrate markets. Recall that a franchise gives a person or group the right to market a company’s goods or services within a certain territory or location. McDonald’s sells meat, bread, ice cream, and other products to its franchises, along with the right to own and operate the stores. And each of the owners of the stores signs a contract with McDonald’s agreeing to do business in a certain way.
The Horizontal marketing systems is one where two or more unrelated businesses come together pull in resources to exploit the emerging opportunities. Many private players especially banks have got into the act of tie-ups with retail stores or even with fuel outlets in order to gain greater market. ICICI bank has got tied with Big Bazaar, and this has greatly enhanced the reputation of both these firms as well as increasing the customer base respectively.
A horizontal marketing system is one in which two companies at the same channel level—say, two manufacturers, two wholesalers, or two retailers—agree to cooperate with another to sell their products or to make the most of their marketing opportunities. The Internet phone service Skype and the mobile-phone maker Nokia created a horizontal marketing system by teaming up to put Skype’s service on Nokia’s phones. Skype hopes it will reach a new market (mobile phone users) this way. And Nokia hopes to sell its phones to people who like to use Skype on their personal computers (PCs).
The Multi-channel marketing systems as the term simplifies it is one in which a firm uses multiple channels to reach different customer segments. In the present scenario most organizations have started to use multiple channel method because it helps in the expansion of the market coverage, it costs little when the target segment is small instead of using a bigger channel and mainly helps in customizing the offering according the need of the segments.When distribution when goes overseas they are bound to face a lot of restraints and problems like the host country laws, the laws of the country to which the goods are shipped, the laws of the nations through which the goods pass must be abided by the company. Apart from this, other environmental factors do play an active role when considered from a macro-marketing perspective. In the next lesson, we deal with the role of retailers, wholesalers and logistics in this value chain and how do they facilitate theprocess of performing the channel function effectively
2. Types of Vertical Marketing Systems
Vertical marketing systems is a kind of cooperation that exists between the distribution channels that are available in various levels with different members working together for promoting the efficiency and also the scale of economies in way that the products can be promoted towards customers, products get inspected, credit can be provided to the customers and also can be delivered to the customers.
There are various marketing systems available in the vertical type. According to the category of the VMS, you should be able to do the various things that are related with the marketing.
The vertical marketing system comprises of mainly three components. Producer, wholesaler and retailer are the three major components included in this kind of marketing system. Producer can be considered as the manufacturer who is involved in the making of the product. The wholesaler usually purchases the products from these producers and then they manage the distribution to the retailers. The retailers are the people who markup the price of the products depending on wholesaler and also can sell the products to the final users or the customers.
Corporate
A corporate vertical marketing system can be involved with the ownership that of the levels of distribution or production chain that is associated with a single company. An example for the corporate is Apple who is responsible for doing everything related with their products.
Apple Company has place for the designing and also the making of the products. These products that are made by the company are sold in the retailer shops of the company itself. They need not have to depend on any of the other people for the purpose of production or even selling of the products.
Contractual
This is a kind of vertical marketing system that has formal agreement involved in it that exists between various levels that of the production or it can be between the levels of distribution channel. This is done for coordinating the overall process that is related with the particular company. A common form of contractual VMS is franchising.
Administered
This is a kind of VMS that has one member from the production as well as the distribution chain has more dominance and they organize the whole nature that is associated with the vertical marketing system in an informal manner. This is due to the sheer size that is associated with the company.
This is a kind of the vertical marketing system that is similar to that of Walmart which is the huge kind of retailer available in the market. They usually dictate their terms and conditions to the companies that are small and are involved in a kind of making some products who come under the category of producers a base component of the VMS.
It is not a possible thing for the smaller companies to exert such a kind of influence for running that kind of system but there are chances for them to find it necessary for dealing with producer or wholesaler who is functioning under such a kind of system.
3. Retail Cooperative Marketing Strategies
Cooperative marketing involves combining advertising, promotion or branding efforts in ways that help all involved businesses. Choosing the right partners is vital. For example, collaboration with a direct competitor might hurt business more than it helps. Instead, businesses must choose marketing partners that can contribute to a mutually beneficial relationship. Two retail stores that sell entirely different products, for instance, could collaborate successfully and strengthen each other.
Co-Branding
Co-branding occurs when two or more distinct brands contribute funds or resources to a joint marketing endeavour. Three basic categories of co-branding exist: ingredient branding, cooperative branding and complementary branding. Ingredient branding works well for non-retail businesses. For example, a cake manufacturer might advertise that its icing contains a famous brand of chocolate. Cooperative branding and complementary branding are more appropriate for retail businesses.
Cooperative Branding
Cooperative branding occurs when two or more businesses participate in joint advertising or promotional campaigns. For example, various retail stores within a mall might participate in a mall-wide promotional event, such as a special holiday discount, or a supermarket might advertise that customers with loyalty cards receive a discount if they buy fuel at particular gas stations. The key is that the businesses involved each receive a benefit for funding or participating in the joint marketing endeavour.
Complementary Branding
Complementary branding occurs when two or more businesses advertise themselves as fitting naturally with each other. For example, a clothing store might collaborate with a shoe retailer to convince customers to combine items from each store to create a full ensemble.
Practical Cooperation
Other retail marketing strategies are based on practical arrangements. For example, an auto parts store has little reason to sell candy or beverages, so it might allow vendors to install machines outside its entrance. The vendor makes money from the machines, while the auto parts store gets to satisfy its customers. Retail stores also often form practical marketing relationships with non-retail partners. For example, a large department store might allow a coffee franchise or fast-food restaurant to set up shop and serve its customers. The food and beverages make customers happy and perhaps allow them to shop for longer periods.
Considerations
There are no limits to the number or types of cooperative marketing relationships in which a retail business can participate. The only caveat is that all the brands must strengthen each other. Otherwise, for example, a disreputable brand could drag down a retail business’s good reputation. The general goal of a retail business should be to participate in as many cooperative marketing activities as possible without jeopardizing its reputation and without distracting itself from other profitable marketing activities.
Question 19: What are the different training methods applicable for salesman? How would you select the different training methods?
Answer: For an initial sales training program to contribute maximally toward pro paring new sales personnel, it must cover all key aspects of the salesperson's job. Content varies from company to company, because of differences in products, markets, company policies, trainees' ability and experience, organizational size, and training philosophies. No two programs are, or should be, alike. However, different companies tend to cover the same general topics despite the fact that variations exist in exact content. Every initial sales training program should devote some time to each of four main areas: product data, sales technique, markets, and company information.
Product Data
Some product training is basic to any initial sales training program. Companies with technical products devote more than half their programs to product training. But in many situations, especially with standardized products sold routinely new sales personnel require only minimal product training. In all cases, new salespeople must know enough about the products, their uses, and application to serve customers' information needs. Product knowledge is basic to a salesperson's self-confidence and enthusiastic job performance
Some training on competitors' products is desirable. Salespeople should know the important characteristics of competitors' products and their uses and applications. They should know the strengths and weaknesses of competitive products. Thus informed, salespersons gain a decided advantage. They can structure sales presentations to emphasize superior features of the company's products. Training on competitors' products must be continuous, the focus shifting as changes are made in both competitive and company products.
Sales Technique
Most new sales personnel need instruction in sales techniques. Some sales man¬agers believe, however, that careful selection of sales personnel and product training are sufficient to ensure effective selling. They believe, in other words, that if an individual has an attractive personality, good appearance and voice, and reasonable intelligence and knows the product, he or she will sell it easily. But the predominant view is that new sales personnel need basic instruction in how to sell. This is reflected both in company sales training programs and in industry wide programs offered by such groups as the National Association of Food Manufacturers and the National Association of Machine Tool Builders.
Markets
The new salesperson must know who the customers are, their locations, the par¬ticular products in which they are interested, their buying habits and motives, and their financial condition. In other words, the salesperson needs to know not only who buys what but, more important, why and how they buy. When trainees are not given adequate instruction on the market, they take years to acquire the needed understanding. During this trial-and-error learning, through no fault of their own, productivity is low. In fact, left to their own devices, some trainees never gain important market information. For instance, a salesperson who is un¬aware of prospects' potentials as buyers may neglect completely to canvass them. Markets are always changing, so training in this area should be continuous, the content changing with market changes.
Company Information
Certain items of company information are essential to the salesperson on the job; others, not absolutely essential, contribute to overall effectiveness. The training program should include coverage of all sales-related marketing policies and the reasoning behind them. The sales person must know company pricing policy, for instance, to answer customers' questions. The salesperson needs to be fully informed on other policies, such as those relating to product services, spare parts and repairs, credit extension, and customer relations.
The initial training program must equip the salesperson to perform such tasks as recording and submitting customers' orders for processing and delivery, preparing expense and other reports, handling inquiries, following up on cus¬tomers' requests, and so forth. Each firm develops its own systems and proce¬dures. If trainees are to perform properly, the initial sales training program must provide the needed instruction. Otherwise, company systems and proce-dures are learned, if at all, through trial and error.
It is worthwhile to provide formal training on general company informa¬tion. But a common failing is that too much time is spent on company back¬ground, history, and prestige building. The challenge is to provide sufficient general company information, but not to allocate instructional time dispropor¬tionate to its importance.
SELECTING TRAINING METHODS
The planners next select training methods (the M in A-C-M-E-E). There is a wide variety of methods, but the program content often limits those that are ap¬propriate. If, for example, the content is a new policy on vacations and holidays, the training method almost certainly will be the lecture, supplemented, perhaps, with visual aids. In this instance, such methods as role playing and the demon¬stration would be ruled out. It is important to select those training methods that most effectively convey the desired content.
The Lecture
This ancient instructional method, in use before the invention of printing, is used extensively in sales training. Trainees mainly watch and listen, although some versions of lecturing permit questions. The lecture features passive, rather than active, trainee participation. Its main weakness is that teaching is empha¬sized more than learning. But a lecture can be effective, provided that the lec¬turer is able and enthusiastic and uses examples, demonstrations, and visual aids. Compared with other training methods, the lecture is economical in terms of time required to cover a given topic.
Some lecturing in sales training is necessary. If initial sales training is brief, for instance, lecturing may be the only way to cover the desired content. It may be the only practical way to handle instruction when the training group is too large to permit constructive audience participation. Given longer training peri¬ods and smaller training groups, however, lecturing is most appropriate for in¬troductory and orientation sessions and for providing summaries of major topics taught through methods such as case discussion and role playing. It is used, in continuing sales training programs for providing new information about the company, its policies, products, markets, and selling programs.
When using the lecture method, learning is improved through a multime¬dia approach. The room is equipped with two to six projectors and screens, and the entire lecture is projected visually on succeeding screens across the front of the room. Further support is provided by projecting illustrations, charts, and graphs and through sound effects. This version of the lecture increases atten¬tion, comprehension, and retention.
The Personal Conference
The potential of this method often goes unrecognized, because many people as¬sume that learning occurs on!y in structured situations. However, learning oc¬curs in structured and unstructured, formal and informal situations. In the per¬sonal conference, the trainer (often a sales executive or sales supervisor) and trainee jointly analyze problems, such as effective use of selling time, route plan¬ning and call scheduling, and handling unusual selling problems. Personal conferences are held in offices, restaurants, bars, motel rooms, and elsewhere. One
Version, the curb stone conference, takes place immediately after the trainee(accompanied by the trainer) has called upon a customer or prospect. The per¬sonal conference is an unstructured and informal method--it varies with the personalities of the trainer and the trainee and the topics discussed.
Demonstrations
The demonstration is appropriate for conveying information on such topics as new products and selling techniques. Demonstrating how a new product works and its uses is effective, much more so than lecturing on the same material. In initial sales training, demonstrating techniques to use in "closing sales" is more effective than is lecturing, Effective sales trainers use demonstrations to the maximum extent since the beginning of time, showing has been more effective than telling. Demonstrations are generally used with other methods--they en¬liven an otherwise dull lecture, and they reinforce the interchange in a curbstone conference on, for instance, how to inform the next customer of an impending price increase.
Role Playing
This method has trainees acting out parts in contrived problem situations. The role-playing session begins with tile trainer describing the situation and the dif¬ferent personalities involved. The trainer provides needed props, and then desig¬nates trainees to play the salesperson, prospect, and other characters. Each plays his or her assigned role, and afterward, they, together with other group mem¬bers and the trainer, appraise each player's effectiveness and suggest how the performance of each might have been improved.
Role playing presents few problems, but there are some. Those playing roles must become actively and emotionally identified with the characters they portray; audience interest must be maintained throughout, even though sponta¬neous reactions are suppressed. Achieving these conditions is not easy. It is even more difficult when role players "ham it up" or when there is laughter or other involuntary audience reaction. Nonparticipants' comments.
1. Trainees learn to accept criticism from others, and the group soon rec¬ognizes that sound suggestions benefit everyone.
2. When a trainee criticizes another's performance, that individual has an incentive not to perform similarly later.
3. Role players practice introspection through participating in the ap¬praisal of their own performances. Videotaping makes self-criticism even more beneficial and objective.
4. The free-wheeling nature of role playing is conducive to generating new ideas and approaches. Defects inherent in stereotyped solutions be¬come apparent.
5. In role-playing sessions for mixed groups, junior people have a chance to learn valuable tricks, and experienced personnel are kept alert as a matter of personal pride.
6. Role players gain acting experience, which may help later in handling difficult selling situations.
Case Discussion
This method, originated by business educators as a partial substitute for learning by experience, is widely used in sales training. Write-ups of selling and other problems encountered on the job provide the bases for group discussion. Some¬times, the cases, particularly when they are long and complex, are assigned in advance--if this is the situation, then it is imperative that participants come pre¬pared to the session otherwise, valuable time is wasted in rehashing the situa¬tion. In most sales training situations, however, the cases used are short (one or two pages at most) and trainees are given ten or fifteen minutes to read them before group discussion starts. Each case either describes a real selling problem or is developed around a situation sufficiently real to stimulate emotional in¬volvement by the trainees.
Trainees discussing a case should identify the issue(s), Marshall the rele¬vant facts, devise specific alternatives, and choose the one most appropriate. Most trainers believe that securing a thorough grasp of the problem situation is more essential to learning than the rapid production of solutions. To derive maximum benefit from case discussion, each session should conclude with the drawing of generalizations on lessons learned.
Impromptu Discussion
This method, sometimes called a sales seminar or buzz session, begins with the trainer, group leader, or some member of the sales force making a brief oral presentation on an everyday problem. General give-and-take discussion follows. Group members gain an understanding of many problems that otherwise acquired only through long personal experience. Many complexities and implications that might go undetected by individuals are revealed to all, and trainee learns a valuable lesson: fixed selling rules and principles are often less importance than are analysis and handling of specific situations. Impromptu group discursion improves the salesperson's ability to handle problems.
Gaming
This method, also known as simulation, somewhat resembles role playing, highly structured contrived situations, based on reality, in which players assume decision-making roles through successive rounds of play. A unique feature (that players receive information feedback. In one game, for example, trainees play the roles of decision makers in customers' organizations, using data 0~narily available to make decisions on the timing and size of orders, managing sales forces and advertising efforts, and so on. The results of these decisions then are calculated by referees (using computers) and are fed back for the players to use in the next round of decisions.
Among the limitations of gaming are (1) some minimum time is required for playing, usually three or four hours, to generate sufficient decision "rounds" to provide the desired learning experience; (2) since game designs are based on ordinary decision-making processes, their rules often prevent payoffs on un¬usual or novel approaches; and (3) players may learn some things that aren't so, a limitation applying especially to poorly designed games. These limitations are overcome through careful game design and administration.
On-the-Job Training
This method, also called the coach-and-pupil method, combines telling, showing, practicing, and evaluating. The coach, sometimes a professional sales trainer but more often a seasoned salesperson, begins by describing particular selling situations, explaining various techniques and approaches that might be used effectively. Next, accompanied by the pupil, the coach makes actual sales calls, discussing each with the trainee afterward. Then, under the coach's super-vision, the trainee makes sales calls, each one being followed by discussion and appraisal. Gradually, the trainee works more and more on his or her own, but with continuing, although less frequent, coaching.
On-the-job training is an important part of most initial sales training pro¬grams. No more effective way exists for learning a job. This method is appropri¬ate for developing trainees' skills in making sales presentations, answering objec¬tions, and closing sales. Training in these selling aspects requires practice, and this method provides expertly supervised practice.
Programmed Learning
This method breaks down subject matter into numbered instructional units called frames, which are incorporated into a book or microfilmed for use with a teaching machine. Each frame contains an explanation of a specific point, plus a question or problem for the trainee to use in testing his or her Trainees check answers by referring to another designated frame.
Programmed instructions have not been widely adopted for sales training. Most applications have been aimed at providing needed information. The Schering Corporation, for instance, provides programmed instruction on the clinical and pharmacological background of its drug products. This meth0dh not used for training in sales techniques and market information because difficulties in preparing appropriate programmed instructional materials. Preparation requires expert skills and thorough grounding in the psychology of learning.
Correspondence Courses
This method is used in both initial and continuing sales training. In the insurance field it is used to acquaint new salespeople with industry fundamentals and to instruct in basic sales techniques. Companies with highly technical products and small but widely deployed sales forces use correspondence courses to ac¬quaint experienced salespeople with new product developments and applica¬tions. This method is used also to train, non company sales personnel, such as distributors' salespersons, to improve their knowledge of the manufacturer's product line and selling techniques. Few companies use this training method exclusively.
Correspondence training is most appropriate as an interim training method when trainees are scattered geographically but are assembled periodically for lectures, seminars, role playing, and other instruction. Initial sales training
Successful use of the correspondence method requires administrative skill. The greatest problem is to motivate trainees to complete assignments on schedule. Not only are enrollees engaged in full-time work requiring that correspon¬dence lessons be done after hours, but few have sufficient self-discipline to study without direct supervision. It is necessary to provide regular examinations, prizes for completing work on time, or other incentives.
Group versus Individual Training Methods
Of the ten training methods discussed, five are group methods, four are individ¬ual methods, and one can be either. Lecturing, role playing, case discussion, im¬promptu discussion, and gaming are group methods. The personal conference, on the job training, programmed learning, and correspondence course are indi¬vidual methods. The demonstration is either a group or an individual method, depending on whether the audience is a group or an individual.
Question 20: What do you understand by Channel Management? List the four broad steps of channel management?
Answer:Marketing channels can be defined as the set of externalorganizations that a firm uses to achieve its distributionobjectives. Essentially, a channel is the route, path, orconduit through which product s or things of value flow,as they move from the manufacturer to the ultimate user of the product. The marketing channel (interorganizational network of institutions comprised of agents, whole-sellers, and retailers), by performing a variety of distributiontasks, plays a significant role in the flow of products fromproducers to consumers and on company profitability. Thus,manufacturers are increasingly concerned about the level ofperformance their channel institutions provide.
Like other areas of business, marketing channels requirecareful administration, as superior channel managementpolicies and strategies help a firm attain a differential ad-vantage but concomitantly are difficult to duplicate marketing channel management refers to the process of analyzing, planning, organizing, and controlling a firm’s marketing channels. As discussed in numerous articlesand textbooks, it comprises seven decision areas: (1) formulating channel strategy, (2) designing marketing channels,(3) selecting channel members, (4) motivating channelmembers, (5) coordinating channel strategy with channelmembers, (6) assessing channel member performance, and(7) managing channel conflict. All seven areas arecritical to superior market performance and long-term customer loyalty. Consequently, the linkage of theseseven channel functions with sales management is thefocus of our investigation. Although viable companiesmust skilfully manage all of their channel activities, which sales managers are doing which of the seven areas is unclear. Ambiguity surrounding the responsibilityfor and performance of any of these important channelfunctions can adversely affect customer relationships andcompany profits.
Procedure for Selection of Effective Marketing Channels
Channel strategy decisions involve (1) the selection of most effective distribution channel, (2) the appropriate level of distribution intensity and (3) degree of channel integration.A company has to consider factors related to the market and customers, its own situation, the product and the competitive environment.


All these factors have a strong bearing on the type of distribution channel selected.A company should be very deliberate in deciding upon a distribution channel as it is expensive, cumbersome and can invite litigations to dismantle a distribution channel once it is established because interests of independent intermediaries are involved.

Marketing factors:
1. Buyers may mandate that products be sold to them only in a certain way. They may prefer to buy from a particular type of outlet, and only at a particular time, and a supplier needs to match customer expectations if it wants their business.
A supplier also needs to be mindful of customer needs regarding product information, installation and technical assistance. Buyers’ level of need regarding such services has to research. The company has to decide whether the channel intermediary can meet these needs in terms of expertise, commitment and cost, or it has to set up its own infrastructure to serve customers’ needs effectively.
For instance, car service can be provided by dealers or independent authorized service providers, or by service centers run by the company. The company has to decide as to who will provide the service.
2. The willingness of channel intermediaries to sell and distribute a company’s product strongly influences its decision to use one channel arrangement over another. A company has to resort to direct distribution if distributors refuse to distribute its product.
For an industrial product company, this will mean recruitment of salespeople, and for a consumer product company, this will mean selling through direct mail, telephone, or internet. This situation may arise if the brand or the product is not well established, the intermediaries feel that there would not be enough buyers, selling the product is difficult and complicated, and there is not enough margin.
For such products the manufacturer will have to increase margins for the intermediaries and provide them more support. Alternatively, the manufacturer has to create demand among final consumers for the product, so that intermediaries get interested in keeping it. Investment in branding is a good option for marketers of consumer products and even the marketers of industrial products should not rule out the option of branding their products.
When customers will demand products, it will be in the self-interest of retailers to keep such products. In fact, manufacturers should look at branding as their weapon for the long term, against powerful intermediaries. Once they have made the initial investment in building a strong brand, they can reduce the margins of the intermediaries and plough back the money in more branding efforts.
3. The profit margins demanded by wholesalers and retailers and the commission rates demanded by sales agents also affect their viability and attractiveness as a channel intermediary. These costs need to be assessed in comparison with those that will be incurred if the company decides to sell directly to customers.
As the power of retailers has increased, they are demanding higher margins from manufacturers. While most manufacturers are complying due to retailers’ command over a huge base of customers and lack of alternate means of reaching customers, some companies are trying to bypass retailers by opening their own stores. If retailers’ dominance continues, some radical response to bypass the powerful retailers should be expected from manufacturers in the near future.
4. The location and geographic concentration of customers strongly affects channel selection. Direct distribution is feasible if the customer base is clustered, and is local. Direct distribution is also feasible when customers are few in number and buy in large quantities, as in the case of industrial customers.
When a company has large number of customers who buy in small lots, and are widely dispersed, it has to use channel intermediaries to reach them-direct distribution would be prohibitively expensive, and can be justified only if unit price is high and the company is able to customize the product in the time between the customer placing an order and the company delivering the product, as Dell does.
Manufacturer factors:
1. Most manufacturers are good at designing and producing products, and hence want to delegate the task of selling and distributing to channel intermediaries. Some manufacturers lack the financial and managerial resources to take on the tasks of selling and distributing.
Therefore, the company does not open its own stores or hires its own salespeople, and uses distributors or agents to sell and distribute its product. A manufacturer of consumer products will need huge investment in setting up infrastructure for distribution because the number of customers is large and are geographically dispersed.
The distribution channels of consumer products are long, and managing such a wholly- owned distribution infrastructure will be an arduous task even for the mightiest manufacturers. Also, most manufacturers do not have customer-based skills to sell and distribute their products, and hence have to rely on intermediaries.
2. A wide mix of products makes direct distribution feasible, as the cost of setting up and operating a common distribution infrastructure is distributed over a larger number of products.
Narrow or single product companies find the cost of direct distribution prohibitive unless the product is expensive and its customers buy in bulk. Therefore, they have to use channel intermediaries to sell and distribute their products.
3. When a company uses independent channel intermediaries, it loses control over the way the product is sold to customers. The company loses control of the price charged to customers and the way the product is stocked and presented to customers.
There is no guarantee that the channel intermediary will stock its new products or its full range of products. It may just be interested in stocking products which sell more or on which it earns higher margins. Manufacturers of electronic products are opening wholly-owned megastores to showcase their full range of products.
Channel intermediaries are obliged to perform certain tasks like in-store promotion in retail stores, promotion in the local media by retailers, or appointing a minimum number of salespersons in a region by a wholesaler. It is very important for manufacturers to constantly monitor whether channel members are performing the agreed functions.
Product factors:
1. Design and production of large and complex products need personal contact between the manufacturer and customer. These products are also expensive, and hence direct selling and distribution of such products is economically viable.
The manufacturer and customer remain in active contact during the lifetime of the equipment, as both need to collaborate during its installation, operation and service.
2. Perishable products require short channels to supply the customer with fresh stock. Bulky or difficult to handle products may require direct distribution because distributors may refuse to carry them in their stores due to space constraint or because expensive provisions will have to be made to handle and store them. Intermediaries may have difficulty in displaying such bulky products.
Competitive factors:
If competitors control traditional channels of distribution, for instance, through exclusive dealership arrangements, a company has to decide to sell directly or set up its own distribution network. It recruits salespeople to sell directly or builds its own distribution infrastructure in terms of setting up distribution centers and opening retail outlets, to reach customers.
Players of an industry sell and distribute in a particular way, but a manufacturer should not assume that channels of distribution used by competitors are the only way to reach their customers. It should explore alternate means of reaching customers i.e., use distributors and retailers not used by competitors to reach customers.
It should also explore the possibility of using direct marketing and distribution. Alternate distribution channels may be used as a means of attaining competitive advantage. For instance, Dell uses direct marketing to gain a substantial competitive advantage by customizing personal computers to suit customer requirements.
Deciding the number of outlets in a region or for a population, i.e., the intensity of outlets is a critical decision. If the number of outlets is more than required, the cost of serving a customer goes up.
If the number of outlets are less than required, customers will face difficulty in accessing the outlets and they may buy an alternate brand or product or forgo purchase altogether. There are three options for a company:
Intensive distribution:
The product is inexpensive and customers can choose from large number of equally good brands. Intensive distribution is required for such products, which provides maximum coverage of the market by using all available outlets. Sales are a direct function of the number of outlets penetrated in case of mass market products such as cigarettes, food and confectionaries. This happens because customers have a range of acceptable brands from which they choose. If a brand is not available in an outlet, an alternative is bought. The convenience aspect of purchase is paramount in such products, and the customer will buy an alternate brand if his preferred brand is not stocked in the store he is shopping. Some such purchases are also unplanned a fid impulsive in nature. They are bought because the products happen to be in sight. If the product or the brand not spotted by the customer, sales are lost. New outlets should be sought which have not stocked the product or brand so far. The retailers who have been stocking the product do not mind when the manufacturer signs up more retailers to carry the product because the revenue generated from each customer for such products are low.
Wider availability and display of such products across many outlets act to make them popular, which increases the sale of the product in every outlet. Also, most of these purchases happen in grocery stores for which customers show high amount of loyalty. Therefore it is important that the store has all the products that its customers may want and expect the store to stock. It is not very worrying if the next store has them, too.
Selective distribution:
For products like electronics goods and home appliances, a manufacturer uses a limited number of outlets in a geographical area. It selects the best outlets in the area in terms of their location, space, decor and the owners’ enthusiasm to carry its products.It develops close relationships with the outlets and trains their salespeople. It ensures that the salespeople are motivated to sell its products and that they are well compensated. Retail outlets and industrial distributors prefer such an arrangement as it reduces competition amongst them. Selective distribution works well when the product’s characteristics are such that the customers are willing to spend time to learn about the product and evaluate alternatives. The company cannot make its products available in all possible outlets because customers expect a minimum amount of assistance in making the purchase.
They may also expect the product to be delivered and installed at their homes. They may also expect the retailer to arrange loans and insurance for the product that they plan to buy. Therefore only the retailers who can provide such services can be signed up to carry the product. And when these retailers have made such investments, they do not expect the next shop to be selling the same product. They expect some territory to themselves. Retailers would be aggrieved if the manufacturer tried to add more outlets in their region as the new outlets would eat into their sales. The customer makes such purchases after deliberation and is purposeful about buying a brand from a set of brands. He will be willing to travel some distance to find his preferred brand or brands, and therefore, storing the brand in stores which are very close to each other is really not required.
Exclusive distribution:
The product is important to the customer and he is willing to travel to buy his preferred brand. The product is expensive and hence the company will incur high inventory holding costs if it is stocked at too many locations. Only one wholesaler, retailer or industrial distributor is used in a geographical area. Car dealers are an example. Customers cannot negotiate prices between dealers since to buy in a neighbouring town or from a dealer in a distant location, may be inconvenient when repairing and servicing are required It allows close co-operation between the manufacturer and the retailer over servicing, pricing and promotion.
The right to exclusive distribution may be demanded by a distributor as a condition for stocking a manufacturer’s full product line. The manufacturer may agree for exclusive dealing where the distributor agrees not to stock competing lines. But before granting exclusive dealership to a retailer in a region, the manufacturer should deliberate if his brand has strength enough to be able to make the customers face the inconvenience of traveling some distance to buy the brand. In categories like automobiles where the manufacturers have strong brands and customers have strong preferences, exclusive dealership should be granted.
Since establishing such dealerships involves big investments, it is wise not to fritter away resources in having too many dealers. Not many customers buy a particular brand of car because its dealer happens to be next door. The purchase is too expensive for customers to engage in such whims. But the same arguments do not hold in categories like apparel where exclusive dealerships are provided Customers’ choice criteria are not crystallized in such categories and customers do not have strong preferences.

It is unrealistic to expect a customer to travel to the other end of the city to buy his favourite shirt. But super premium brands, even in such categories command high brand loyalty and exclusive dealership can be granted for such high-end brands.
Exclusive dealing can reduce competition and make the dealer lackadaisical. This may be against the customer’s interest as he has no alternate recourse. There is another danger in an exclusive channel arrangement. Since the level of commitment of both the channel member and the manufacturer are higher, in case of estrangement, both are likely to fight bitterly.
Question 21: How motivation plays an important role in sales management. Explain any one theory of motivation.
Answer: MEANING OF MOTIVATION
Motivation is goal-directed behavior, underlying which are certain needs or de¬sires. The term "needs" suggests, a lack of something that reaching the goal could satisfy, while the term "desires" suggests positive and strength of feeling. The complex of needs and desires stemming from within individuals leads them to act so as to satisfy these needs and desires.
Specifically, as applied to sales personnel, motivation is the amount of ef¬fort the salesperson desires to expend on the activities associated with the sales job, such as calling on potential accounts, planning sales presentations, and filling out reports. Expending effort on each activity making up the sales job leads to some level of achievement on one or more dimensions of job performance total sales volume, profitability, sales to new accounts, quota attainment, and the like.
MOTIVATION "HELP" FROM MANAGEMENT
Most sales personnel require motivational "help" from management to reach and maintain acceptable performance levels. They require motivation as individ¬uals and as group members. As individuals, they are targets for personalized motivational efforts by their superiors. As members of the sales force, they are targets for sales management efforts aimed toward welding them into an effec¬tive selling team. Four aspects of the salesperson's job affect the quality of its performance. The following discussion focuses on these aspects, each is an im¬portant reason why sales personnel require additional motivation.
Inherent Nature of the Sales Job
Although sales jobs vary from one company to the next, sales jobs are alike in certain respects. Every sales job is a succession of ups and downs, a series of ex¬periences resulting in alternating feelings of' exhilaration and depression. In the course of a (lay's work, salespersons interact with many pleasant and courteous people, but some are unpleasant and rude and are difficult to deal with. They are frustrated, particularly when aggressive competing sales personnel vie for the same business, and they meet numerous turndowns.' Furtherer more, sales personnel spend not only working time but considerable after-hours time away from home, causing them to miss many attractive parts of family life. 'these con¬ditions cause salespersons to become discouraged, to achieve low performance levels, or even to seek non selling positions. The inherent nature of the sales job, then, is the first reason that additional motivation is required.
Salesperson's Boundary Position and Role Conflicts
The salesperson occupies a "boundary position" in the company and satisfy the expectations of people both within the company (in the sales department and elsewhere) and in customer organizations. There are linkage groups: (1) sales management, (2) the company organization that handles fulfilment, (3) the customers, and (4) other company sales personnel. Group imposes certain behavioral expectations on the salesperson, and, in these different roles, the salesperson faces role conflicts, such as:
1. Conflict of identification arises out of multi group membership. As the salesperson works with the customer, identification is with the rather than the company. On returning to the company, drops identification with the customer and identifies with the company.
2. Advocacy conflict arises when the salesperson identifies with and advocates the customer's position to other groups in the organization. This may be important and may be encouraged by sales management group, but the advocator is in a difficult position.
3. Conflict is inherent in the salesperson's dual role as an advocate customer and the company and the salesperson's pecuniary ' entrepreneur. As an entrepreneur paid directly or indirectly on the basis of sales volume, the salesperson has an interest in selling as much as able in the shortest time. However, the salesperson may over looked or unknown to the customer, indicating that difficulties the customer's organization limit the product's usefulness. person tells the customer about these conditions and that, in all ability, the product will not meet the customer's needs, the risks losing the sale and the income that goes with it?
Tendency toward Apathy
Some sales personnel naturally become apathetic, get into a rut. Those who, year after year, cover the same territory and virtually the same customers, lose inter¬est and enthusiasm. Gradually their sales calls degenerate into routine order tak¬ing. Because they know' the customers so well, they believe that good salesman¬ship is no longer necessary. Their customer approach typically becomes: "Do you need anything today, Joe?" They fail to recognize that friendship in no way obviates the necessity for creative selling and that most customers do not sell themselves on new products and applications. The customer's response, as often as not, is: "Nothing today, Bill." Later a competing salesperson calls on the same account, uses effective sales techniques, and gets an order. Many salespeople re¬quire additional motivation to maintain continuing enthusiasm to generate re¬newed interest in their work.
Maintaining a Feeling of Group Identity
The salesperson, working alone, finds it difficult to develop and maintain a feel¬ing of group identity with other company salespeople. Team spirit, if present at all, is weak. Thus, the contagious enthusiasm--conducive to improving the en¬tire group's performance does not develop.
If sales management, through providing added motivation, succeeds in de¬veloping and maintaining team spirit, individual sales personnel strive to meet group performance standards. Few people who consider themselves members of' the sales team want to appear as poor performers in the eyes of there. Colleagues. Providing the kind of working atmosphere in which all members of the sales force feel they are participating in a cooperative endeavor is not easy never the less, effective sales management works continuously to achieve and maintain it.
Motivation-Hygiene Theory
Frederick Herzberg and his co-researchers developed the motivation-hygiene theory. According to this theory the factors that lead to motivation and job satis¬faction are not the same as those leading to apathy and job dissatisfaction. In other words, the contention is that job dissatisfaction is not the opposite of job satisfaction--two separate groups of needs are involved, one related to job satis¬faction and the other to job dissatisfaction. While most needs have potentials for influencing the relief of job dissatisfaction and the increase option, each need serves predominantly either a hygiene or motivator
      Deficiencies in fulfilling the hygiene needs because job needs relate to the working environment, compensation, fringe benefits, type of supervision, and other factors extrinsic to the job. Fulfilling the hygiene does not lead to job satisfaction, but in the achievement of a neutral as a fair day's work. Performance at this point does not result from
At the "fair day's work" point, the individual is ripe for influence b' motivation factors, ones intrinsic to the job itself. These factors personal growth, including achievement, recognition, nature of the job responsibility, and opportunities for advancement. The motivation factors sent needs that, when fulfilled, lead to job satisfaction.
Motivation-hygiene theory has two important implications for sales management. The first is that management must see that the job provides the conditions that prevent job dissatisfaction (to get a fair day's work from the salesperson). This means that management needs to provide an acceptable w0rkinI environment, fair compensation, adequate fringe benefits, fair and reasonable Supervision and job security. The second implication is that management must provide opportunities for achievement, recognition, responsibility, and advance¬ment (to motivate performance beyond that of a fair day's work).
Question 22: Write short notes on the following:
1. Channel Integration.
2. Franchising.
3. Relationship between Manufacturer and Channel Partners.
Answer: Channel Integration:Degree of channel integration varies widely. The manufacturer or any particular intermediary has minimal control when independent wholesalers, dealers and agents are part of the distribution channels. At the other extreme, in the wholly-owned distribution infrastructure, the channel members are owned by the manufacturer who exercises complete control over them. Somewhere in between are arrangements like franchise operation where both franchiser and franchisee exercise power and discretion in their areas of jurisdiction.
Conventional marketing channels:Channel intermediaries are independent businesses with their individual profit goals. The channel intermediaries are independent business entities, and they would look after their own interests. Therefore, manufactures cannot unilaterally force them to do their bidding. Independence of channel intermediaries makes it imperative that relationship between the manufacturer and its channel intermediaries be based on fairness and equitable distribution of rewards. Manufacturers have to put money-value on the tasks that the channel intermediaries perform for them, and then compensate them adequately.
It is also important that they jointly decide as to what tasks will be performed by whom—one party may be in a better position to perform an activity, and hence that party should be assigned to perform that activity. For example, retailers are expected to hold inventory for most durable products, resulting in large amount of safety inventory being held at multiple locations. A manufacturer can hold inventory for all its retailers of a particular region, and the product can be sent to customers directly from manufacturer’s storage area—retailers can concentrate on selling.A manufacturer who dominates a market through its size and strong brands may exercise considerable power over intermediaries though they are independent.Traditionally, manufacturers exercised control over intermediaries because their brands drove business in retail stores and retailers felt dependent on them. The manufacturer rationed the supply of hot brands, forced the retailers to carry their full range, and made them participate and contribute in their promotional programmes. But with consolidation and emergence of retail chains, the balance of power has shifted dramatically. They know the preference of customers, and know which brands are selling and how much.
The retail chains enjoy enormous clout with customers and they have huge buying power. The retail chains also have strong brands of their own in most categories. The manufacturers now are dependent on the retailers and the latter are extracting their pound of flesh. The retailers demand slotting fees for new products, carry only the hot selling brands, require frequent replenishment from manufacturers, and expect the manufacturer to participate and contribute in the store’s promotion programmes.
The relationship between the manufacturer and the intermediaries is governed by balance of power between the two parties. Both manufacturers and retailers have been guilty of exploiting the vulnerable party whenever they have been strong. Manufacturers did it earlier, retailers are doing now. But this is not a good ploy. The economics of a supply chain dictates that an activity should be done at a point in the chain where it can be done most efficiently and effectively, so that the cost structure of the supply chain is improved and there is more profit for every player. The extra profit should be divided among the partners depending on the efforts expended by the players.
A supply chain operated by dictum of the more powerful party will be inherently inefficient compared to the one based on co-operation between the parties. The powerful player will shift activities to the more vulnerable player even when the powerful player could do that particular activity more efficiently and effectively. The result is an inefficient supply chain with less profit for all the players. And a large part of the smaller profit is appropriated by the powerful player, leaving the weaker players disgruntled and less willing to co-operate. And more dangerously, the vulnerable players are always looking at ways to get back at their tormentors. It is time the manufacturer and the independent channel intermediaries shifted the basis of relationship from power to rational distribution of activities in the supply chain and equitable distribution of profit amongst themselves.
2. Franchising
A franchise is a legal contract in which the manufacturer or the producer and the intermediary agree to each member’s rights and obligations. The intermediary receives marketing, managerial, technical and financial services from the producer in return for a fee. For instance, McDonald’s combines strengths of a large sophisticated marketing oriented organization with energy and motivation of a locally owned outlet. Franchise operations give the manufacturer a certain degree of control over its intermediaries.
A franchise agreement is a vertical marketing system in which there is a formal co-ordination and integration of marketing and distribution activities between the manufacturer and its intermediaries. Roles and functions of each party are clearly defined, and each is expected to look after the interest of the other.Franchising occurs at four levels:
1. Manufacturer and retailer:The retailer sets up outlets in which manufacturer’s cars are sold, and it also sets up repair and service facilities for the car. The retailer is motivated. The manufacturer gets retail outlets for its car and repair facilities without the capital outlay required with ownership.
2. Manufacturer and wholesaler:The wholesaler gets the right to produce, bottle and distribute Coke’s product in a defined geographical area.
3. Wholesaler and retailer:The wholesaler acquires the right to distribute manufacturer’s products or purchases its product, and then signs up retailers to sell the product to final consumers. This arrangement is common in hardware stores.
4. Retailer and retailer:A retailer expands geographically by means of franchise operations. For instance, Benetton and McDonald’s have used this approach to expand their operations geographically.
In all franchising arrangements, it is imperative that profits are distributed equitably among both parties. The structure of the agreement between the two parties should be such that profits are divided equitably. When intermediaries are required to pay a fat upfront fee and the manufacturer takes only a small or no share of the profit generated at the intermediaries’ end, the manufacturer has no major financial motivation to ensure that the intermediaries earn profits.
But when the intermediaries pay small or no upfront fees and the manufacturer shares the profit generated at the intermediaries’ end, the manufacturer becomes interested in the profitability of the intermediaries. McDonald’s follows this practice and ensures that its franchisees earn profits and takes a share in the profits.
Channel ownership:
Total control over distributor activities comes with channel ownership by the manufacturer or an intermediary. Channel ownership results in creation of a corporate vertical marketing system. When a manufacturer purchases a chain of retail outlets, it begins to control the purchasing, production and marketing activities of these outlets.
In particular, the manufacturer’s control over purchasing means a captive outlet for its product. For example, Purchase of Pizza Hut by Pepsi has tied these outlets to Pepsi’s soft drink brands. Retailing is a specialized business, and most manufacturers may find it difficult to manage retail operations.

3. Relationship between Manufacturer and Channel Partners
It is important that the manufacturer and his channel partners understand and appreciate each other’s requirements. Most manufacturers believe that if they get more help and support from their distribution channels, they could substantially increase volumes and have even greater impact on profits. But manufacturers too must understand the needs of the channel members and must respond to them.
The prime objective of each member of the channel is to generate profits through a combination of turnover i.e., sales per time period, and gross margin as a percent of sales.Supermarkets operate on a low gross margin but high turnover. Specialty stores and industrial distributors work on high margins and low turnover. Each channel member must be compensated by the manufacturer for his efforts in selling the manufacturer’s products. The manufacturer will expect to receive greater sales and greater channel motivation. It will be useful for the manufacturer to determine what he should do for the channel members and what he should receive from them.
The manufacturer should take care on two counts. The manufacturer should not ask the channel members to do things that they cannot do. A retailer can try to push the manufacturer’s products but he cannot generate demand for his products. The manufacturer should accept that it is primarily his responsibility to generate consumer demand for his products. Secondly, the manufacturer should perform those tasks which are important to the channel members but is difficult for them to do on their own.
For example, the manufacturer can develop literature for his products, to be used by all his distributors, much more cheaply than his distributors could do it individually. It is important that the manufacturer differentiates between selling to the channels and selling through the channels. A manufacturer can fill the distribution pipeline for a limited amount of time. Then the products must flow through the channel, not just into it.
It is wrong and fatal to assume that the sale is consummated when the product moves from the manufacturer to the wholesaler. The manufacturer must exert leadership throughout the chain of the product moving from its stores to wholesalers to retailers to customers. Not many products have been successful without strong support from channel members.
Question 23: What is channel conflict? What are the four stages in which it evolves?
OR
What are the three main areas that give rise to channel conflicts? Explain them in brief.
OR
Explain the terms the horizontal level conflict, the vertical level conflict and the multi level conflict.
Answer:All channels are based on the premise that anyone joining the channel and performing channel functions stands to benefit. Channel conflicts arise in channel systems when one or more channel members start perceiving the behavior and actions of another channel member as an impediment to goal attainment.
There are many sources of channel conflicts. They can originate from competing roles, clash of domains and differing perceptions of reality. Marketing channel strategies and channel structures are also important sources of conflict. Channel conflicts can be of different types. They can be primarily divided into pre-contractual and post-contractual conflicts and conflicts based on channel levels. Based on the timing of conflicts, they are divided into conflicts that arise before channel members enter into agreements and those that arise after channel members enter into agreements. Channel level conflicts may be vertical, horizontal or multi-level. To ensure effective coordination and channel functioning, different conflict management techniques can be used.

Channel Conflict in Brief

Multichannel systems are a way of life for manufacturers today. Whether you are managing a mix of direct and indirect channels or a spectrum of high-support to low-support resellers, the reality is that channel conflict will be an ongoing issue in your marketplace. As the number of internet sites (potentially including your own) that offer your product for sale proliferates, this multi-channel structure becomes more complex and the channel conflict potential more pervasive.
A limited amount of channel conflict is healthy. It indicates that you have adequate market coverage. However, once the balance between coverage and conflict is lost, destructive channel conflict can quickly undermine your channel strategy, market position and product line profitability.
Conflict can show up in the market in a variety of ways. A point of confusion for many manufacturers is whether problems are truly symptoms of destructive channel conflict or other marketing or channel strategy issues. When faced with potential indicators of destructive conflict, you should audit your market position to identify the true cause and then quickly act to address it.
Channel conflict is managed by a combination of economics and controls. Economic solutions compensate channels fairly for functions performed and help direct channels away from actions that create destructive conflict. Controls put structure around a channel strategy to limit the potential for undue destructive conflict.

What is Channel Conflict?

Channel conflict can be defined as any scenario where two different channels compete for the same sale with the same brand. Conflict can take the form of a direct sales force competing with an independent distributor, two different types of competing distributors, two like distributors competing for the same sale, or all of the above. A few facts about achieving an appropriate balance between coverage and conflict:
1. Lack of any channel conflict in a marketing strategy usually indicates gaps in market coverage
2. Conflict cannot be eliminated. The goal of marketing management must be to optimize market coverage and manage a healthy level of channel conflict so that it does not become destructive
3. Market share erosion and declining street prices are evidence that channel conflict is becoming destructive. Channels are responding to excessive competition by de-emphasizing the brand or by giving away too much in order to keep an account
4. Every manufacturer will likely face destructive channel conflict at some point. As markets evolve and mature, many manufacturers will be required to add new, lower-cost channels in order to cover all major market segments. Often, destructive conflict arises because changes in the manufacturers go to market strategy lags the market changes associated with market evolution.
Recognizing Destructive Channel Conflict

Channel "noise" regarding conflict always exists. (In fact, a lack of channel noise is often an early indicator of coverage gaps in the manufacturer's channel strategy.) However, it does not mean that your company is experiencing destructive channel conflict just because different internal factions or channel members are complaining about lack of manufacturer commitment or are uncomfortable with competition for some sales. Increasing levels of noise or evidence of declining channel support for your product line would be indicators to pay attention to. It is a tough call, however, since destructive conflict tends to creep into a channel system over time.
External Indicators of Destructive Channel Conflict
Border Wars:These occur when multiple members of the channel network compete for the same sale in the same account. A limited number of border wars should be expected and are, in fact, one indication that you have good market coverage. A soft market creates the environment for increased border wars as channels get more aggressive to deliver revenue. Generally, channels will begin to react to channel conflict when incidence of border wars exceeds 10% to 20% of that channel's total business with a manufacturer's products.
Emotion:A necessary component of good channel management strategy is controlling the degree of emotion from the channel. However, as emotion builds, the channels will begin to react by reducing support of the product line or by switching out that line wherever possible. Emotion will often cause the channel to de-emphasize a brand even when it is not in the best interest of the channel. We have found that channels often have this discretion to control brand choice in as much as 40% of sales—they typically don't choose to exercise this discretion.
Customer Satisfaction:Conflict can erode customer satisfaction for two reasons:
1. Customers will start to experience redundant buying costs when forced to deal with multiple channels offering essentially the same solutions in sales situations
2. Competing channels focus on easy ways to win the sale in a conflict situation (such as dropping price) and begin to ignore less evident customer buying requirements
Channel Conflict Solutions
Channel conflict is an integral part of your channel strategy, so you must examine your market position and channel strategy before attempting to manage it. Taking a closer look at the problem often reveals that the perceived channel conflict issue masks a larger channel strategy issue. So prior to executing solutions to address channel conflict, the manufacturer is encouraged to examine all elements of its overall channel strategy, including pricing, end user segmentation, channel support programs, company policies, etc. Have you created a conflict situation through the design or implementation of these other components of channel strategy?
Destructive channel conflict is managed through economics and structural controls. Economics motivate the channels to avoid conflict. Structural controls lay the ground rules within which conflict is managed. With each tactic, communication before conflict arises is critical.The right economic solution is dictated by the type of conflict being faced, the manufacturer's market and channel position, and the company's strategic goals. Economic approaches include;
• Dual compensation—applied when conflict exists between direct and indirect channels. The goal is to move the indirect channel from a position of potential adversary for the direct sales force to one of "partner" for the direct sales force.
• Activity based compensation or discount—used to manage cross-channel conflict or conflict between channels of differing cost structures and capabilities. Activity based discounts are applied by paying a channel a specific discount if it performs a measurable task or function. These discounts allow the "high-cost" channel to compete against "low-cost" channels for those customers who value the high support.
• Shared costs—the key difference between this concept and functional discounts is that functional discounts compensate the channel for incremental tasks via a discount on product sold, while shared costs pay directly for the task.
• Compensation for market share—usually applied to direct versus indirect conflict, the direct sales rep is compensated based on total market share in a territory. The goals of the sales rep are based on direct and indirect volume, thus motivating the direct rep to "partner" with indirect channels to maximize territory volume.
Structural controls are only as effective as their enforcement. There is no value unless you are willing to clearly spell out the controls at the outset of the channel agreement and enforce the stated penalties to all channel members. The structural controls are typically applied to:
• Accounts—you specify "named" or "house" accounts where indirect channels can expect to compete with your direct channels. Named accounts are usually specified based on end-user sourcing capabilities, channel ability to meet end-user buying requirements, and volume and strategic value.
• Products—channels can qualify for franchising by product line/category across your company's offering. Product qualification is usually based on end-user product support needs, channel support capabilities, "fit" or positioning of the product category in the channel's overall business, and strategic considerations.
• Geography—as a manufacturer, you can specify those geographies/account types in which you will provide sales support to the channel. These geographies are usually defined by granting the channel a primary area of responsibility.
The successful marketer combines the elements of economic and control-related solutions that best address conflict challenges —framing them in an understanding of market position, channel position, and strategic goals.
Horizontal & Vertical Marketing Conflicts
Horizontal and vertical marketing conflicts involve disagreements among businesses in a marketing channel. A marketing channel is how a product moves from its manufacturer to the consumer. Channels have different stages, or levels. Typically, the first level of a channel is a factory. The second level is the wholesaler who buys a large number of products to sell to retail stores, which occupy the third and final level. When members of a channel disagree about methods or goals, conflicts ensue.
Horizontal Conflicts
A horizontal conflict refers to a disagreement among two or more channel members at the same level. For example, suppose a toy manufacturer has deals with two wholesalers, each contracted to sell products to retailers in different regions. If one wholesaler decides to branch its operations into the other wholesaler’s region, a conflict will result. If the toy manufacturer doesn't help solve the problem, its business dealings with both the wholesalers -- and the downstream retailers, as well -- might be in jeopardy.
Vertical Conflicts
Vertical conflicts involve a disagreement between two channel members on consecutive levels. For example, if the toy manufacturer discovers its products are arriving at retail stores later than scheduled, a conflict might develop between the manufacturer and the wholesaler responsible for shipping to retailers. At the same time, the retail stores might be in conflict with the wholesaler due to its inability to ship products on time.
Multichannel Conflicts
Multichannel conflicts refer to disagreements among members in separate marketing channels. While neither strictly horizontal nor vertical, these conflicts can affect all members of every channel. For instance, suppose the toy manufacturer participates in two marketing channels. In the first channel, the manufacturer sells its products directly to consumers via its official website. In the second channel, the manufacturer sells its products to wholesalers for resale to retailers. If the toy manufacturer’s website sells the products for much lower prices than retail stores, sales in the second channel will plummet. The resulting conflict will require some solution that works for both channels.
Question 24: Describe E-enabled selling and distribution with reference to sales and distribution management?
Answer:A powerful force is driving the world towards converging commonalty and that force is technology. The Internet is an extremely important and new technology. Some companies have used Internet technology to shift the competition away from quality, features, service and price, making it harder for anyone in their industry to turn a profit. One of the biggest  advantages of the Internet is the ability  to  link  one  activity  with  another  and  make  real-time  data  widely available.
The access to global markets through Internet has changed the way; the business is   conducted   in   recent   years.   No   doubt,   it   has   quadrupled   marketing opportunities and enhanced business revenues of companies operating in e- business.  Today‘s  state  of  e-business  technology  and  environment  is  even providing  opportunities  to  identify  prospects  and  customers,  irrespective  of geographical limits, for their products and services.
Marketers  have  been  using  electronic  tools  for  many  years  but  the  use  of Internet and  other information technologies has created a flood of interesting and innovative ways to provide customer value. According to Strauss, Ansari and Frost, The internet and other technologies affect traditional marketing in three ways.  First, they increase efficiency in established marketing functions, second the technology   of   e-marketing transforms many marketing strategies and finally, it has fundamentally changedconsumer behaviour through a power shift from firms to mouse holders.
E-Enabled Selling and Distribution
The two most important concerns of the marketers are: how to make the sales of their products and how to have an effective distribution process. These two functions are required to be efficient enough so as to make the consumers to have positive perception about their products and they should receive them conveniently.
As all products and services are not consumed at their point of production, hence, the manufacturers need some intermediaries to sell their products to the consumers. For making their selling and distribution functions e-enabled, the manufacturers   develop   some   web-sites   and   promote   them.   Selling   and distribution function of these firms are called to be e-enabled. Some manufacturers link their websites to well known electronic directories or they use the directory service of intermediaries.
Many  functions  must  be  performed  in  moving  products  from  producer  to consumer regardless of which intermediary performs them. These intermediary sites are called electronic shopping malls or e-malls. Online retailers normally hold inventory and perform the pick, pack and ship functions in response to a customer order contact with buyers.
The internet provides a new channel for making contact with buyers. Electronic intermediaries can be classified into two categories:
1. E-distributors
2. E-brokers
E-distributor: An e-distributor takes full responsibility for fulfilling orders and collecting payment.
E-Brokers: E-brokers are intermediaries that  assist  in the purchase negotiations without actually representing either buyers or sellers.
Initially,   the main   concern   for   electronic marketing involved   securing technologies  necessary  to  implement  Internet  –  based  marketing,  such  as powerful search capability and secure electronic payment. However, today the main concern of management is shifting to how to utilize the opportunity of internet – based marketing to enhance competitiveness in harmony with existing marketing channels. So we need to examine the use of the conceptually new electronic business models.Another aspect of electronic marketing is whether it is more effective to use the internet for global or regional marketing.
To appropriately understand the concepts of e-enabled selling and distribution functions, it is pertinent to firstly understand the concept of e-marketing as e- enabled selling and distribution functions are an integral part of  e-marketing. All the functions of e-commerce, e-logistic and e-distribution etc. are parts of the e-marketing.
E-MARKETING
E-Marketing is still quite a controversial subject to talk about, since no one has so far  succeeded to unify the various theories around it; however there is one thing upon which there  is no doubt; that e-Marketing first appeared under the form of various techniques deployed by pioneer companies selling their products via the internet in the early 90‘s. The frenzy around these new marketing techniques created by e-tailors and supported by the internet rapidly gave birth to a new dimension of what we knew as Marketing: the e-Marketing (electronic Marketing).
Finally, the customers have access to full and free data, and it is they who decide the time, the form and the amount of information they need. According to Kotler and Keller, E-marketing describes company efforts to inform buyers, communicate, promote, and sell its products and services over the Internet. The e-term is also used in terms such as e-finance, e-learning and e- service. But the e-will eventually be dropped when most business practices is online.
E-MARKETING STRATEGY
E-marketing strategy is the design of marketing   that capitalizes on the organisation‘s electronic or information technology capabilities to reach specified objectives. In essence, e-marketing strategy  is  where  technology  strategy  and  marketing  strategy  wed  to  form organisation‘s e-marketing strategy. Technology and its unique properties have given some new life to traditional enterprise and marketing strategies.
The e-marketing strategy is normally based and built upon the principles that govern the traditional, offline marketing, the well-known 4 P‘s (Product, Price, Promotion, Positioning) that form the classic marketing mix. Addition of the extra 3 P‘s (people, processes, proof) makes the whole extended marketing mix. Until here, there are no much aspects to differentiate e-marketing from the traditional marketing performed offline: the extended marketing mix (4+3 P‘s) is build   around   the   concept   of   transactional and its elements   perform transactional functions defined by the exchange paradigm.  What gives e- marketing its uniqueness is a series of specific functions, relational functions, i.e.  personalization, privacy, customer service, community, site, security, sales promotion.
These functions of the e-marketing stay at the base of any e-marketing strategy and they have a moderating character, unlike the classic marketing mix that comprises situational functions only.
Personalization
The fundamental concept of personalization as a part of the e-marketing mix lies in  the  need  of  recognizing  and  identifying  a  certain  customer  in  order  to establish   relations   (establishing   relations   is   a   fundamental   objective   of marketing). It is crucial to be able to identify customers on individual level and gather  all  possible  information  about  them,  with  the  purpose  of  knowing marketing  and  be  able  to  develop  customized,   personalized  products  and services.
For example, a cookie strategically placed on the website visitor‘s computer can let the marketer know vital information concerning the access speed available: in consequence, if he knows the visitor is using a slow connection (eg. Dial-up)he  will  offer  a  low-volume  variation  of  his  website,  with  reduced  graphic content and no  multimedia or flash applications. This will ease his customer‘s experience on his website and he will be prevented from leaving the website on the reason that it takes too long to load its pages. Personalization  can  be  applied  to  any  component  of  the  marketing  mix; therefore, it is a moderating function.
Privacy
Privacy is an element of the mix very much connected to the previous one i.e. personalization.  When one gathers and stores information about marketers existing and potential customers (therefore, when one performs, the personalization part of the e-marketing mix) a crucial issue arises: that of the way this information will be used, and by whom. A major task to do when implementing an e-marketing strategy is that of creating and developing a policy upon access procedures to the collected information.
This is a duty and a must for any conscious marketer to consider all aspects of privacy,  as   long  as  data  are  collected  and  stored,  data  about  individual persons.Privacy is even more important when establishing the e-marketing mix since there are many regulations and legal aspects to be considered regarding collection and usage of such information.
Custom Service
Customer service is one of the necessary and required activities among the support functions needed in transactional situation. We will connect the apparition of the customer service processes to the inclusion of the time parameter in transactions. When switching from a situational perspective to a relational one, and e-marketing is mostly based on a relational perspective, the marketer saw himself somehow forced into considering support and assistance on a non-temporal level, permanently, over time.For these reasons, we should consider the Customer Service function (in its fullest and largest definition) as an essential one within the e-marketing mix. As we can easily figure out, the service (or assistance if you wish) can be performed upon any element from the classic 4 P‘s, hence its moderating character.
Community
We  can  all  agree  that  e-marketing  is  conditioned  by  the  existence  of  this impressive network that the internet is. The merely existence of such a network implies that individuals as well as groups will eventually interact. A group of entities that interact for a common purpose is what we call acommunity and we will soon see why it is of absolute importance to participate, to be part of a community.
The number of its components gives the value of a network; more exactly the value of a network equals the square of the number of components. We can apply this simple law to communities, since they are network: we will then conclude that the value of a community rises with the number of its members. This is the power of communities; this is why we have to be a part of it.
The customers/clients of a business can be seen as part of a community where they interact (either independent or influenced by the marketer).  Therefore developing a community is a task to be performed by any business, even though it is not always seen as essential. Interactions among members of such a community can address any of the other functions  of  e-marketing,  so  it  can  be  placed  next  to  other  moderating functions.
Site
The e-marketing interactions take place on a digital media the Internet. But such interactions and relations also need a proper location, to be available at any moment and from any place. The site can take other forms too, such as a Palm Pilot or any other handheld device, for example. This  special  location,  accessible  through  all  sort  of  digital  technologies  is moderating  all  other  functions  of  the  e-marketing? It is then a moderating function.
Security
The security function emerged as an essential function of e-marketing once transactions began to be performed through internet channels. What we need to keep in mind, as marketers are the following two issues on security: Security during transactions performed on our website, where we have to take all possible precautions that third parties will not be able to access any part of a developing transaction; Security of data collected a stored, about our customers and visitors.A honest marketer will have to consider these possible causes of further trouble and has to co-operate with the company‘s IT department in order to be able to formulate convincing (and true, honest!) messages towards the customers that their personal details are protected from unauthorized eyes.
Sales Promotion
At least but not last, we have to consider sales promotions when we build an e- marketing strategy. Sales promotions widely used in traditional marketing as well,  we  all  know  this,  and  it  is  an  excellent  efficient  strategy to  achieve immediate sales goals in terms of volume.This function counts on the marketer‘s ability to think creatively: a lot of work and inspiration is required in order to find new possibility and new approaches for developing an efficient promotion plan.On the other hand, the marketer needs to continuously keep up with the latest internet technologies and applications so that he can fully exploit them. E-marketing implies new dimensions to be considered aside of those inherited from the traditional marketing. These dimensions revolve around the concept of relational functions and they are a must to be included in any e- marketing strategy in order for it to be efficient and deliver results.