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Sales and Distribution Management

  2. Evolution of Sales Management  Situation before industrial revolution in U.K. (1760AD)  Situation after industrial revolutions in U.K., and U.S.A.  Marketing function splits into sales and other functions like market research, advertising, physical distribution
  3. What is Sales Management?  One definition: “The management of the personal selling part of a company’s marketing function.”  Another definition: “The process of planning, directing, and controlling of personal selling, including recruiting, selecting, equipping, assigning, supervising, paying, and motivating the personal sales force.
  4. Nature of Sales Management •Its integration with marketing management
  5. Importance of Personal Selling and Sales Management  The only function / department in a company that generates revenue / income  The financial results of a firm depend on the performance of the sales department / management  Many salespeople are among the best paid people in business  It is one of the fastest and surest routes to the top management 
  6. Roles and Skills of a Modern Sales Manager  A member of the strategic management team  A member of the corporate team to achieve objectives  A team leader, working with salespeople  Managing multiple sales / marketing channels  Using latest technologies (like CRM) to build superior buyer-seller relationships  Continually updating information on changes in marketing environment
  7. Skills of a Successful Sales Manager  People skills include abilities to motivate, lead, communicate, coordinate, team-oriented relationship, and mentoring  Managing skills consist of planning, organizing, controlling and decision making  Technical skills include training, selling, negotiating, problem-solving, and use of computers
  8. Recruitment And Selection
  9. Recruitment And Selection Recruitment 1. Recruitment is the process of searching the candidates for employment and stimulating them to apply for jobs in the organization Selection Selection involves the series of steps by which the candidates are screened for choosing the most suitable persons for vacant posts.
  10. Recruitment And Selection Recruitment 2. The basic purpose of recruitments is to create a talent pool of candidates to enable the selection of best candidates for the organization, by attracting more and more employees to apply in the organization Selection WHEREAS the basic purpose of selection process is to choose the right candidate to fill the various positions in the organization.
  11. Recruitment And Selection Recruitment 3. Recruitment is a positive process i.e. encouraging more and more employees to apply. 4. Recruitment is concerned with tapping the sources of human resources Selection Selection is a negative process as it involves rejection of the unsuitable candidates. Selection is concerned with selecting the most suitable candidate through various interviews and tests.
  12. Recruitment And Selection Recruitment 5. There is no contract of recruitment established in recruitment Selection Selection results in a contract of service between the employer and the selected employee.
  13. Recruitment And Selection Recruitment 5. There is no contract of recruitment established in recruitment Selection WHEREAS selection results in a contract of service between the employer and the selected employee.
  14. Motivation and compensation Definition Motivation - Internal and external factors that stimulate desire and energy in people to be continually interested in and committed to a job, role, or subject, and to exert persistent effort in attaining a goal. Motivation is the energizer of behavior and mother of all action. It results from the interactions among conscious and unconscious factors such as the (1) intensity of desire or need, (2) incentive or reward value of the goal, and (3) expectations of the individual and of his or her significant others.
  15. Motivation and Compensation Definition Compensation is the total amount of the monetary and non-monetary pay provided to an employee by an employer in return for work performed as required.
  16. Compensation is based on  market research about the worth of similar jobs in the marketplace,  employee contributions and accomplishments,  the availability of employees with like skills in the marketplace,  the desire of the employer to attract and retain a particular employee for the value they are perceived to add to the employment relationship, and etc.
  17. Training the Salesforce  Is the effort an employer makes to provide salespeople with job related knowledge, skills, attitudes and culture that should result in improves performance on. sales, productivity and profits
  18. Managing the sales training process Assess sales training needs Design and execute sales training programme Evaluation and reinforcement of sales training programme
  19. Assess sales training needs Capability gaps  arise when the Salesforce doesn't have the required knowledge, skills or capabilities to become successful on the job.  Needs of both existing and newly hired sales trainees should be assessed.
  20. Methods used for assessing training needs  Sales manager’s observation  Salesforce survey  Customer survey  Performance testing  Job description  Salesforce audit
  21. Design and execute the sales training program  Aims/objectives of sales training(why?): like  Increase sales productivity,  Increase sales, profits or both  Improve customer relations,  Improve teamwork and cooperative efforts etc  Content of training program(what?):  company knowledge,  product knowledge,  customer knowledge,  competitor knowledge,  selling skills or sales techniques
  22. Methods(how?):  Class room/conference training: -lectures -demonstrations -group discussions  Absorption training/self study -audio cassettes -Manual books -CD-ROM  online training: -EPSS -Interactive multimedia training -Distance learning  Behavioral learning: -role playing -case studies Simulation games Sales training methods  On the job training -mentoring Job rotation
  23. Class room/conference training:  Lectures: to present more information in a short time to a large number of participants  Demonstrations: demonstrate the operation and use of the product like whirlpool asks newly hired salespeople to live for two months in a house that is equipped with its appliances  Group discussions: trainer leads the discussion and encourages participation from the salesperson
  24. Behavioral learning:  Role playing: one trainee plays the role of a salesperson and another trainee acts as a buyer  Case studies: a case is a narration of a business situation. Cases should be linked to learning objectives like understanding the consumer behavior or commercial terms and conditions to make it an effective learning  Simulation games: programmed computer games based on reality. Help in learning impact of decision making
  25. On the job training  Mentoring: Informal. Mentors usually provide the new employee advice and support as well as the information about the corporate culture  Job rotation: the sales trainee work in different jobs for short stints. For eg the sales person in FMCG is asked to work for two months each in retail shop, logistics department and field selling with a senior salesperson.
  26. online training:  EPSS: electronic performance support system makes the information available to the sales person immediately and in a personalized manner  Interactive multimedia training: used for retraining salespeople who can repeat or skip material as desired  Distance learning: personal training method. Companies operate their own television network to deliver training messages to their employees. Salespeople can ask questions to the experts and also share information with their peers by calling toll free numbers
  27. Absorption training/self study  Books  Audio cassettes  Articles  CD-ROM’s  Product manuals are supplied to the salespeople
  28. Execution(who,where,when,what?):  usually the sales training manager or the sales trainer is responsible for the entire process of sales training  Who will be the trainees?  new and existing salespeople  Intermediaries  Sales managers
  29.  Who will conduct the training Line sales personnel Staff trainers 'outside Training specialists  When should the training take place? Before placing them in field selling After new recruits show the desire the sell
  30.  Where should the training be done Centralized training: at the central location like head office Decentralized training: branch or regional office at the customer’s place or hotel room  What will be the budgeted expenditure for the training A written document of all the estimated expenditure for conducting the training program
  31. Evaluation:  Reactions: can be measured by interviewing them or asking them to complete a few questionnaires  Learning: before and after tests  Behaviour: self assessment by the trainee or observation from customers  Results: sales, profits, customer satisfaction, number of new customers and market penetration
  32. What is Motivation??  Drive to initiate an action.  The intensity of effort in an action  The persistence of effort over time.
  33. Motivation: Motivating the Sales Force 1. Maslow:  Physiological: Fin Comp., AC, Cafeteria  Safety & Security: Job security, Fringe Benefits  Love & Belongingness: Liking & Respect from Boss / Peers / Customers  Self Esteem: Job title, responsibility, recognition and promotion  Self Actualization: Challenging job, Creativity and achievement in work
  34. 2. Herzberg:  Hygiene Factors: Presence does not motivate, absence de- motivates or negative impact (work conditions, job security, salary, interpersonal relations, company policies)  Motivational Factors: Absence causes dissatisfaction : Presence motivates (Responsibility, promotion, Recognition, Achievement)  HF corresponds to Maslow’s 1,2,3 while MF corresponds to Maslow’s 4 and 5.
  35. 3. Goal Setting Theory – MBO (Edwin Locke):  People have needs / aspirations, they set goals, go about getting these goals  Higher goals – higher outputs  Set goals for salespeople: Plan activities better, Learns to prioritize manage time  Goal should be clear & not too difficult to achieve
  36. 4. Expectancy Theory (Victor Vroom) Motivation depends on 3 factors = f (e × v × i) e = expectations (expected outcomes) v = valence (extent to which outcome is valued by the individual) i = instrumentality (probability that the effort spend by the individual will help in obtaining the outcome) Used to study sales force management problems particularly when motivation decreases because of realignment of Sales Territory.
  37. 5. Job Design Theories  Correlate motivation with Job Satisfaction  JS = Pleasure felt in one’s experiences in a job  JS created by  Job Enrichment: Vertical expansion of a jobs involves addition of more tasks in the job, more responsibilities  Job Rotation: Assigning employee to alternative jobs, relieves monotony  Job Enlargement: horizontal expansion by adding more tasks with no increase in responsibility, prevents employee from getting board .
  38. Motivation Model Motivation to Work “What Is the Probability of Success?” Performance Level “Will I Be Rewarded for Success?” Rewards Intrinsic Extrinsic “Are the Rewards Worth It?” Equity Determination Inputs vs. Outputs “Are the Rewards Fair?” Satisfaction Intrinsic Extrinsic Feedback
  39. Sales Force Needs and Ways to Fill Them  Status  Control  Respect .  Change title from “salesperson” to “area manager.” Buy salespeople more luxurious cars to drive.  Allow salespeople to help plan sales quotas and sequences of calls.  Invite salespeople to gatherings of top executives. Put pictures of top salespeople in company ads and newsletters.
  40. Sales Force Needs and Ways to Fill Them  Routine  Accomplishment  Stimulation  Honesty  Assign each salesperson a core of Routine loyal customers that are called on regularly.  Set reasonable goals for the number of calls and sales.  Run short-term sales contests. Schedule sales meetings in exotic locations.  Deliver promptly all rewards and benefits promised.
  41. AN EXERCISE TO DETERMINE YOUR MOTIVATIONAL NEEDS To perform the exercise, read through the following statements…check those which are most important in motivating you to do your best work. Select the ten most important statements. 629 Job security 847 Being trusted to do my job the way I think it should be done. 333 Participating in work group conversations. 311 Having adequate shelter to protect from the elements. 836 Having a job which allows me time with my family. 151 Having an opportunity for personal growth. 937 Socializing with my friends. 743 Being considered for an advancement opportunity. 431 Working with other people.
  42. AN EXERCISE TO DETERMINE YOUR MOTIVATIONAL NEEDS 819 Having children. 458 Doing something meaningful with my life. 757 Being in a position to contribute new ideas. 828 Having an associate that looks out for my interests. 735 Including other people in what I do. 949 Being selected for an exclusive award. 234 Being involved with work associates in social and recreational activities. 616 Being sexually satisfied. 146 Having a responsible person tell me when I’ve done a good job. 539 Having an active part in work related social activities. 341 Knowing that other people respect me and my work. 132 Acceptance as a work group member
  43. Second Number to left of statement indicates the category; how many in each: Number Category 1 Physiological 2 Safety - Security 3 Love - Belonging 4 Self Esteem 5 Self Actualization Determining Your Motivational Needs
  44. YOUR SCORE To determine results: the statements are divided into five categories intended to represent the five levels in Maslow’s Hierarchy of Needs. The second digit in each statement number indicates the category. These categories are: 1-Physiological, 2-Safety-Security, 3-Love-Belonging, 4-Self-Esteem, 5-Self-Actualization.
  45. Number Percent 847 86% 341 74% 757 54% 431 51% 828 37% 458 37% 743 34% Maslow’s Hierarchy – U.S. Salespeople’s Responses
  46. Sales Quotas  Sales quotas are sales goals or targets set by a company for its marketing / sales units for a time period  Marketing / sales units are regions, branches, territories, salespeople, and intermediaries  Generally, company sales budget is broken down to sales quotas for various marketing units
  47. Objectives of Sales Quotas  To use quotas as performance standards or performance goals  To control performance  To motivate people by linking quotas to compensation plans  To identify strengths and weaknesses of the company
  48. Types of Quotas  Sales volume quotas  For effective control, sales volume quota should be set for the smallest marketing units, such as salesperson, districts / branches, product items / brands  Sales volume quotas can be stated in (a) rupees / dollars, (b) units, or (c) points  Rupees / dollars sales volume quotas are appropriate when salespeople are required to sell many products
  49.  Unit sales volume quotas are suitable when  Salespeople are selling a few products  Prices of the product fluctuate rapidly  Price of each product / service is high
  50.  Point sales volume quotas are appropriate when the company wants salespeople to sell products that contribute more to profits 
  51.  Financial Quotas  Financial quotas control (a) gross margin or net profits, and (b) expenses of marketing units  Gross-margin / Net-profit quotas  Calculate gross margin by subtracting ‘cost of goods sold’ (i.e. cost of manufacturing) from sales volume. Sales managers are not responsible for cost of manufacturing  Net profit quotas are generally accepted by sales mangers as it is calculated by subtracting direct selling expenses from the gross margin  Expense quotas  In many companies, expense quotas are stated as a percentage of sales  Expense quotas to be administered with flexibility, to make salespeople cost conscious, allowing reasonable expenses
  52.  Activity Quotas  These are set when salespeople perform both selling and non-selling activities  Objective is to direct salespeople to carry out important activities  For effective implementation, activity quotas are combined with sales volume and financial quotas  E.G. Calling on high potential customers, payment collection from defaulting customers
  53. Combination Quotas Type of Quota Quota Actual Percent Quota Weight (Importance) Percent Quota x Weight Sales Volume (Rs) 5,00,000 4,50,000 90 3 270 Receivables (days) 45 50 89 2 178 New Customers (Nos) 04 05 125 1 125 Total 6 573
  54. •Used when companies want to control salesforce performance on key selling and non-selling activities •Focus on a few types of quotas, to avoid confusing salespeople. An example: •Total point score=573/6=95.5 for a salesperson •Typically use ‘points’ as a common measure to resolve the problem of different measures used by various types of quotas
  55. Sales Territories  A sales territory consists of existing and potential customers, assigned to a salesperson  Most companies allot salespeople to geographic territories, consisting of current & prospective customers
  56. Major Reasons / Benefits of Sales Territories  Increase market / customer coverage  Control selling expenses and time  Enable better evaluation of salesforce performance  Improve customer relationships  Increase salesforce effectiveness  Improve sales and profit performance
  57. Procedure for Designing Sales Territories  Select a control unit:  select a geographical territorial base called control units  Are states, metros, cities, districts, towns, industrial estates and major customers  Sales manager should choose the smallest control units so that the adjustments and calculations are possible
  58.  Find location and potential of customers  Of present and prospective customers in each control unit.  Information of present customers can be obtained from company's sales analysis  Information on prospective customers can be obtained from both company's sales people and telephone directories and market research studies.
  59.  Next the estimate the total sales potential for all customers in each geographical control unit.  Estimate market potential or market forecast based on one or more forecasting methods  Classify customers on the basis of their sales and or profit potential.  Can be done by using ABC analysis.
  60. ABC analysis.  All the customers are entered in the reverse order of their sales/profit potential  Entering the name of the customer whose sales/profit potential is the highest.  Then the name of the customer with second highest potential is entered  A= whose sales/profit potential add up to 70%  B= whose sales/profit potential add up to 20%  C= whose sales/profit potential add up to 10%
  61. Decide basic territories Through:  Build-up method, Or  Break-down method
  62. Procedure in Build-up Method  Decide customer call frequencies  Calculate total customer calls in each control unit  Estimate workload capacity of a salesperson  Make tentative territories  Develop final territories Objective is to equalize the workload of salespeople
  63. Procedure in Breakdown Method  Estimate company sales potential for total market  Forecast sales potential for each control unit  Estimate sales volume expected from each salesperson  Make tentative territories  Develop final territories Objective is to equalise sales potential of territories
  64. Assigning Salespeople to Territories  Sales Manager should consider two criteria: (A) Relative ability of salespeople  Based on key evaluation factors:  (1) Product knowledge, (2) market knowledge, (3) past sales performance, (4) communication, (5) selling skills
  65. (B) Salesperson’s Effectiveness in a Territory  Decided by comparing social, cultural, and physical characteristics of the salesperson with those of the territory  Objective is to match salesperson to the territory
  66. Management of Territorial Coverage  It means: How salesperson should cover the assigned sales territory  It includes three tasks for a sales manager:  Planning efficient routes for salespeople  Scheduling salespeople’s time  Using time-management tools
  67. Routing  Routing is a travel plan used by a salesperson for making customer calls in a territory  Benefits of or Reasons for routing:  Reduction in travel time and cost  Improvement in territory coverage  Importance of routing depends on the application:  Nature of the product – Important for FMCG  Type of jobs of salespeople – Important for driver-cum-salesperson job, but creative selling job needs a flexible route plan
  68. Procedure for Setting up a Routing Plan •Identify current and prospective customers on a territory map •Classify each customer into high, medium, or low sales potential •Decide call frequency for each class of customers •Build route plan around locations of high potential customers •Computerized mathematical models are developed •Commonly used routing patterns are:
  69. Scheduling  Scheduling is planning a salesperson’s visit time to customers. It deals with time allocation issue  How to allocate salesperson’s time?  Sales manager communicates to salesperson major activities and time allocation for each activity  Salesperson records actual time spent on various activities for 2 weeks  Sales manager and salesperson discuss and decide how to increase time spent on major activities  Companies specify call norms for current customers, based on sales and profit potentials, and also for prospective customers
  70. Time Management Tools  To help outside salespeople* to manage their time efficiently and productively, the tools available are:  High-tech equipment like laptop computers and cellular phones  Inside salespeople to provide clerical support, technical support, and for prospecting, and qualifying, as they remain within the company  Outside salespeople can then spend more time getting more orders & building relationships with major customers  *Outside salespeople travel outside the organization
  71. Sales Budget?  It includes estimates of sales volume and selling expenses  Sales volume budget is derived from the company sales forecast – generally slightly lower than the company sales forecast, to avoid excessive risks  Selling expenses budget consists of personal selling expenses budget and sales administration expenses budget  Sales budget gives a detailed break-down of estimates of sales revenue and selling expenditure
  72. Purposes of the Sales Budget  Planning  Coordination  Control
  73. Sales Budget Process  Many firms follow a process for preparation of annual sales and company budgets. It generally includes:  Review past, current, and future situations  Communicate information to all managers on budget preparation – guidelines, formats, timetable  Use build-up approach, starting with first-line sales managers  Get approval of sales budget from top management  Prepare budgets of other departments
  74. The Sales Process  The sequence of below steps may change to meet the sales situation in hand.  Some of the steps may not be applicable for selling to the trade
  75. Marketing channels
  76. Channel Functions  Information gathering  Consumer motivation  Negotiating with suppliers  Placing orders  Financing  Inventory management  Risk bearing  After sales support SDM- Ch 9 76
  77. Channel Functions…….  Physical reach  Customer contact  Building relationships  Market feedback  Understand market trends and keep principals informed  Handle price risks  Finances market credit and inventory holdings  Provide after sales service SDM- Ch 9 A
  78. SDM- Ch 9 78 Channel Flows  Forward flow – company to its customers – goods and services  Backward flow – customers to the company – payment for the goods. Returned goods.  Flows both ways - information
  79. SDM- Ch 9 79 Three Flows Recognized FORWARD BOTH WAYS BACKWARD Goods and Services Information Payment for goods / returns Company Customers
  80. SDM- Ch 9 80 Channel Flows  Some channel member/s have to perform them  There is a cost associated with each flow  If a channel member is discontinued, the flow has to be performed by another  All flows and transactions can be effective only with timely, accurate and correct information  The channel flow is ideally to be handled by the most competent channel member who can deliver best service at the lowest cost.
  81. Why are marketing intermediaries used?
  82. SDM- Ch 9 82 The Five Channel Flows  Physical flow::-transportation and storage of the product in order to physically deliver the product to end-user  Title flow of goods: (negotiation, ownership and risk sharing also) (i) Ownership :- nominally taking title to the product so that in case the product is damaged or lost due to any reason ,the loss is accounted for (ii) Promotion :- promoting the product to the customers in several ways like advertising ,displaying demonstrating ,giving information about ,etc (iii)Negotiating :- coming to an agreement about the terms of trade with the upstream and down stream entities in the channel including the customer
  83.  Payment flows: (financing and payment):taking care of the financial requirement of the members of the channel  Information flow (about goods, orders placed and orders executed)::- receiving and recording the orders, consolidating it and passing it on to the upstream receiving payments ,recording it, consolidating it , and passing it on to the upstream.
  84. SDM- Ch 9 84 Channel partners and their Involvement in flows Manufacturer C&FA or Distribution Center Distributor, dealers Wholesaler or retailer Physical Title / ownership Information Risk sharing Promotions Physical Title Information Payment Order processing Physical Title / ownership Information Payment Order placement Negotiation Risk sharing Promotions Physical Title / ownership Information Payment Order placement Negotiation Risk sharing Promotions Channel formats…
  85. SDM- Ch 9 85 Channel Formats  Is decided by who ‘drives’ the channel system:  Producer driven  Seller driven  Service driven  Others
  86. SDM- Ch 9 86 Producer Driven  This is the effort of the manufacturer to reach the product to his consumers. Examples:  Company owned retail outlets: petrol, Bata shoes, Titan, Tanishq, Reliance mobiles  Licensed outlets: exclusive rights to some retail outlets like KMMF, Bata  Consignment selling agents: the company passes on the physical stocks to the intermediary who pays the company only after the products have been sold  Franchisees: franchisee has to buy from the company and sell it  Brokers: sells on the behalf of the company without taking ant physical possession of the goods  Vending machines: mostly soft drinks companies, ATMs
  87. SDM- Ch 9 87 Seller Driven  Use of existing channels to reach the largest number of end users  Existing wholesalers and retailers: like convenience stores, paanwalas  Modern retail formats: like department stores, supermarkets  Specialty stores: sell one type of merchandise only like Tanishq, shopper’s stop, any furniture store.  Discount stores – sell at discounted rates due to volume buying and lower overheads like best price  Pheriwalas: the door to door sales people
  88. SDM- Ch 9 88 Service Driven  These are the people who facilitate the distribution  Transporters and freight forwarders  Providers of warehouse space  Carrying and forwarding Agents (C&F agents)  3P Logistics service providers  Couriers: handle smaller packages than C&F agents
  89. SDM- Ch 9 89 Other formats  Multi-level marketing systems: Amway, Tupperware  Co-operative societies: to help farmers  TV home shopping  Catalogue marketing  The internet  Exhibitions, fairs and trade shows  Data base marketing Channel levels…
  90. SDM- Ch 9 90 Channel Levels  Zero level – if the product or service is provided to the end user directly by the company. Used mostly by companies delivering service like health, education, banking (also known as service channels)  One level – consists of one intermediary like Biz bazar  Two level – consists of two intermediaries and is the most common for FMCG products
  91. SDM- Ch 9 91 Service Channel  Companies establish their own unique channels to deliver services like health, education, banking, insurance etc  Hundreds of bank branches to be close to prospects.  Banks may also recruit independent agents to get customers to walk in.  Musician or magician may use mass media, events or web sites to reach customers.
  92. Marketing Channel Systems  Vertical:  Corporate  Administered  Contractual  Horizontal  Multi-channel SDM- Ch 9 92 Vertical….
  93. Types of Vertical Marketing Systems Corporate Common Ownership at Different Levels of the Channel Contractual Contractual Agreement Among Channel Members Administered Leadership is Assumed by One or a Few Dominant Members
  94. Number of marketing intermediaries  Intensive distribution  Exclusive distribution  Selective distribution
  95. Channel Management Decisions Selecting FEEDBACK Motivating Training Evaluating
  96. Physical distribution and logistics management  Physical distribution(marketing logistics)  major logistics function  Integrated logistics management  Third-party logistics
  97. Major logistics function  Order processing  Warehousing  Inventory  transportation
  98. Integrated logistics management  Cross-functional teamwork inside the company  Building channel partnerships
  99. Third-party logistics  An independent logistics provider that performs any or all of the functions required to get their clients’ product to market.
  100. Vertical Marketing System  Various parties like producers, wholesalers and retailers act as a unified system to avoid conflicts  Improves operating efficiency and marketing effectiveness  3 types:  Corporate  Administered  Contractual SDM- Ch 9 100 Corporate…
  101. Corporate VMS  Combines successive stages of production and distribution under single ownership.  The company would like to do this in order to ensure that it has direct control on the distribution of its products  Examples:  Bata, Bombay Dyeing, Raymond, medical diagnostic equipment SDM- Ch 9 101 Administered…
  102. Administered VMS  Co-ordinates distribution activities  Gains market power by dominating a channel  Usually true of dominant brands like GE, Kodak, Pepsi, Gillette, Coke and HLL in certain locations  Command high level of co-operation in shelf space, co-operation from resellers, displays, pricing policies and promotion strategies SDM- Ch 9 102 Contractual…
  103. Contractual VMS  Independent producers, wholesalers and retailers operate on a contract  Could take the forms of:  Wholesaler sponsored voluntary chains: Kemp toys  Retailer co-operatives: Apna bazar  Manufacturer sponsored retail franchise: Maruti and Hyundai  Manufacturer sponsored wholesale franchise: Franchise organizations: Pepsi, coca cola  Service firm sponsored retail franchise: like starbucks SDM- Ch 9 103
  104. Horizontal Marketing System  Two or more unrelated companies join together to pool resources and exploit an emerging market opportunity  In-store banking in hotels, big stores  Retail outlets in petrol bunks  Coffee Day outlets in airports SDM- Ch 9 104 Multi-channel…
  105. Multi-channel Distribution  Company uses different channels to reach / same or different market segments  Most FMCG companies have separate networks for retail market and institutions  Most B2B firms use multi-channels for customer segments like Government, institutions etc SDM- Ch 9 105
  106. Multi-channel Distribution  Used in situations where:  Same product but different market segments  Unrelated products in same market – detergents and ice creams (HLL)  Size of buyers varies  Geographic concentration of potential consumers varies  Reach is difficult Benefits include lower cost, better market coverage and customized selling SDM- Ch 9 106
  107. Channel Functions  Information gathering: about customers, competitors  Consumer motivation: to make them buy the products  Negotiating with suppliers: on price and other terms  Placing orders: buy the product and pass it on to customers  Financing: pay the price  Inventory management: safe keeping of inventory  Risk bearing: risk of storing  After sales support: extend credit
  108.  Physical reach  Customer contact  Building relationships  Market feedback  Understand market trends and keep principals informed  Handle price risks  Finances market credit and inventory holdings  Provide after sales service
  109. Role of Intermediaries SDM- Ch 9 109 Company 1 Company 2 Company 3 Intermediary Large number of CONSUMERS Direct and Indirect….
  110. SDM- Ch 9 110 Channel Flows  Forward flows – company to its customers – goods and services  Backward flow – customers to the company – payment for the goods. Returned goods (like soft drinks bottle)  Flows both ways - information
  111. SDM- Ch 9 111 Other formats  Multi-level marketing systems – Amway, Tupperware  Co-operative societies  TV home shopping  Catalogue marketing  The internet  Exhibitions, fairs and trade shows  Data base marketing Channel levels…
  112. SDM- Ch 9 112 Channel Levels  Zero level – if the product or service is provided to the end user directly by the company.  Used mostly by companies delivering service like health, education, banking (also known as service channels)  One level – consists of one intermediary  Two level – consists of two intermediaries and is the most common for FMCG products
  113. SDM- Ch 9 113 Service Channel  Companies establish their own unique channels to deliver services like health, education, banking, insurance etc  Hundreds of bank branches to be close to prospects  Banks may also recruit independent agents to get customers to walk in  Musician or magician may use mass media, events or web sites to reach customers
  114. Logistics Marketing logistics (physical distribution) involves planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet consumer requirements at a profit 12-57
  115. Increasing importance of logistics  Effective logistics is becoming a key to winning and keeping customers.  logistics is a major cost element for most companies.  the explosion in product variety has created a need for improved logistics management.  information technology has created opportunities for major gains in distribution efficiency.
  116. Nature: Marketing logistics involves: • Outbound distribution: Moving products from the factory to resellers and consumers • Inbound distribution: Moving products and materials from suppliers to the factory • Reverse distribution: Moving broken, unwanted, or excess products returned by consumers or resellers 12-58
  117. Supply Chain Management Supply chain management is the process of managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers 12-59
  118. Goals of Logistics system • Provide a Targeted Level of Customer Service at the Least Cost. • Maximize Profits, Not Sales.
  119. Importance of Marketing Logistics • Competitive advantage by giving customers better service at lower prices • Cost savings to the company and its customers • Product variety requires improved logistics • Information technology has created opportunities for distribution efficiency 12-60
  120. • Order Processing • Warehousing • Inventory Management • Transportation • Logistics information management Design system to minimize costs of attaining objectives Logistics Functions
  121. Warehousing Warehousing is the storage function that overcomes differences in need quantities and timing, ensuring that the products are available when customers are ready to buy them. Storage warehouses are designed to store goods, not move them. Distribution centers are designed to move goods, not store them. 12-63
  122. Inventory management Inventory management balances carrying too little and too much inventory Just-in-time (JIT) logistics systems allow producers and retailers to carry small amounts of inventories of parts or merchandise RFID (radio frequency identification devices) are small transmitter chips embedded in or placed on products or packages to provide greater inventory control 12-65
  123. Transportation Transportation affects the pricing of products, delivery performance, and condition of the goods when they arrive • Truck • Rail • Water • Pipeline • Air • Internet 12-67
  124. Transportation Modes Rail Nation’s largest carrier, cost-effective for shipping bulk products, piggyback Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Water Low cost for shipping bulky, low-value goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Air High cost, ideal when speed is needed or to ship high-value, low-bulk items
  125. Marketing Logistics and Supply Chain Management Intermodal transportation combines two or more modes of transportation • Piggyback uses rail and truck • Fishyback uses water and truck • Airtruck uses air and truck 12-68
  126. Logistics Information Management Logistics information management is the management of the flow of information, including customer orders, billing, inventory levels, and customer data • EDI (electronic data interchange) • VMI (vendor-managed inventory) 12-69
  127. Integrated Logistics Management Integrated logistics management is the recognition that providing customer service and trimming distribution costs require teamwork internally and externally • Cross-functional teamwork inside the company • Building partner relationships 12-70
  128. Integrated Logistics Management Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires Teamwork, Both Inside the Company and Among All the Marketing Channel Organizations. Cross-Functional Teamwork inside the Company Building Channel Partnerships Third-Party Logistics
  129. Integrated Logistics Management Cross-functional teamwork inside the company refers to the inter-relationship of different departments within the company to achieve the goals of integrated supply chain management 12-71
  130. Integrated Logistics Management Building partner relationships refers to the understanding that one company’s distribution is another company’s supply system 12-72
  131. Integrated Logistics Management Third-party logistics is the outsourcing of logistics functions to third-party logistics providers (3PLs) • Provide logistics functions more efficiently • Provide logistics functions at lower cost • Allow the company to focus on its core business • Are more knowledgeable of complex logistics 12-73
  132. What is Channel Conflict?  Channel conflict occurs when one member’s actions prevent another channel from achieving its goal.  Types of channel conflict  Vertical  Horizontal  Multichannel
  133. Causes of Channel Conflict  Goal incompatibility: objectives of the company and its distributors may not always match  Unclear roles and rights  Differences in perception  Intermediaries’ dependence on manufacturer  Loss of opportunity  Clash of interest  New channel partner  Extension of credit
  134. Channel design and planning process
  135.  Segmentation stage  Pharmacy company segments: Doctors/ Chemists/ Hospitals and nursing homes  Positioning stage  Service objectives at each channel element. Each segment has different expectation  Focus stage  Doctors in all A category towns  Chemists located in the main markets of A towns  Only big govt and private hospitals  Developing the right channel alternative  Modifications required to make it an ideal channel 1. Channel Stages M1 M2 M3 P1 P2 P3
  136.  Lot size  Toothpaste pack sizes, Wheat flour packs, Motor with horse power  Waiting time  Difference of “Desire to purchase”  Choice to the consumer  Variety and assortments  Place utility  Service support  Sales support for maintenance and repair  Installation and training  Credit  Home delivery  Regular service follow ups 2. Defining the customer needs
  137.  Industrial products require direct-marketing by the company  Consumer products should be available in large no of outlets  Frozen desert and ice-cream products need cold storage facilities  Seeds selling will need rural distribution  Multi level marketing will require their distributors to appoint further distributors 3. Designing channel objectives
  138.  Business intermediaries currently available  The number and type of intermediaries required  Any new member to be specially developed  Roles of each channel member 4. Channel Alternatives study
  139.  Margins of the channel partners  Cost of transportation of goods between the company and the end user  Cost of order booking and execution  Cost of stock returns/ date expired stocks taken back  Cost of reverse logistics required (getting empties back) 5. Cost of channel system
  140.  Ready channel partners may be already available. These can be further utilized  Distributors or redistribution: stockiest of some other companies  C&F agents: can be further utilized for collections and other work  Logistics service providers: will undertake distribution activities.  Manufacturer’s agents, stockiest, guarantors provide financial support  Financial agencies can be used to finance your customers. 6. Current intermediaries
  141.  Should be adequate for expected coverage of the target markets at the same time should not be too much to dilute the effort and add to the costs. 7. Number of intermediaries
  142. Evaluation of Major alternatives  Cost:  Every channel will have different costs associated with  Ability to manage and control:  Considering coverage, frequency, productivity, inventory, credit, merchandising, distribution, promotions, after-sales-service, pre-sales-sales, channel salespeople, stock points  Adaptability:  Sensitivity of channel to addition, elimination of products, additional service, new territory coverage, generating leads, handling price change, stock rationing  Range and volume to be handled:  Ability to handle large range of products and volumes.
  143. Selecting channel partners  Selecting Carrying and Forwarding agent  Location of the party  In or close to main market of the company  Location of the warehouse  Close to a major market  Outside octroi limits  Should have proper road/ transport access  Labor availability  Utilities support  Connected by phone
  144.  Past experience  As a C&FA for a similar company  As a transporter should have access to a good warehouse  History of past business  Should have handled similar but non-competing companies  Ability to maintain confidentiality of transactions  Financial strength  To handle all operating expenses till re-imbursement  Insurance  IT capability  Adequate own hardware  Trained staff to handle simple programmes and repairing formats
  145. Selecting channel partners  Flexibility  In operating hours daily  To handle peak loads  Transportation facilities  Reliability, consistency in source of vehicles  Additional volumes to be handled at short notice  Attitude, commitment  To be of the highest order/ positive  Willing to expand the business  Disciplined ..conti
  146. Selecting channel partners  Selecting Distributor  Size of the channel partner  Current business portfolio  Financial strength/ asset ownership including personal assets of partners  Own Salesforce  No of sales people  Qualifications, background, experience  Current business  Products handled, volume handled  Should be of similar products but non-competitive  Product quality, compatibility and complimentary
  147.  Reputation  Leadership in the market  Integrity, fairness in dealings  Market coverage  Territory/ intensity  Regularity, reliability  Relationship, productivity
  148.  Sales performance  On current business  Awards, prizes, certificates won on performance  Management of business  Educational background, qualification of partners  Market working  Efforts on merchandising, displays  Handling sales promotions  Past experience  Inventory management  Adherence to stock norms recommended by the company
  149. Selecting channel partners  Credit extended in the market  % of outlets  & of current business  Bad debts, if any  Stock distribution  Ready stocks or order booking  Infrastructure availability  Warehouse  Distribution vans  Hardware/ personal computers/ connectivity
  150. Channel power Referent power:Power out of eminent position of the company Expert power: Power out of special knowledge of the company Legitimate power: Power of legal agreement with company Support power: Support in the form of promotions, subsidies, additional help Competition power:Comparison with other channel members Reward power: Incentives, special incentives Coercive power: Power of ‘threat’
  151. Channel design comparison factors  While comparing two channels,  Efficiency: Input versus output  Effectiveness: How well channel meets its objectives  Capacity: How effectively channel can handle changes in volume  Agility: How well can channel handle changing demand pattern  Consistency: of performance  Reliability: Commitment on performance
  152. Sales Meetings & Sales Contests
  153. Sales Meetings & Sales Contests  Sales Meetings Objectives:  Communication & Motivational Purposes  Exchanging Information & Ideas  Directions & Guidelines to Sales persons  To Stimulate the group to raise its standards as to reasonable & acceptable performance  Appraisal & reviewing the job performance
  154. Sales Meetings Organization A-C-M-E-E  Defining the specific Training Aims  Deciding Meeting Content  Determine methods of conducting the meeting  Deciding upon execution of the meeting  Evaluation of the results
  155. Sales Meetings Organization 1. Defining the specific Training Aims  Communicate & Motivate  New Product Introductions  Improving Deficiency in Sales People  Orienting Sales Personnel on advertising Program  Introducing New Services for customers  Aims to be clear & attainable  Probable results justify the estimated costs
  156. Sales Meetings Organization 2. Deciding Meeting Content  Planning the agenda  Customizing according to the aims 3. Determine methods of conducting the meeting  Need, Time available & meeting place  Short & Participative  Group discussion
  157. Sales Meetings Organization 4. Execution:  Decisions on speakers, Seminar Leaders, Meeting Site & Time  Infrastructure including room arrangements 5. Evaluation:  Meeting accomplished its specific aims  Participant Feedback
  158. Types of Sales Meetings 1. National Sales Meetings:  Appropriate in situations where changes have to be brought about in the marketing policies or any important changes, which require the attendance of various major executives.  National sales meetings can bring out the changes speedily and consistently.  Presence of the executives at the national sales meetings provides more encouragement and motivation when compared to written and recorded messages.  Advantages:  Comprehensive change in policies;  Standardized explanations & answers;  common platform;  better coordination  Disadvantages  High Costs  Convenient time problem,  Disruption of routine
  159. Types of Sales Meetings 2. Regional Sales Meetings:  Executives instead of meeting at the central office, they attend the decentralized meetings, thus reducing the costs and saving time. Each regional meeting is planned to deal with distinctive problems of that particular region.  Advantages:  Decentralization  Reduced Traveling costs  Lowering lost selling time  Disadvantages:  High demand on executives  Smaller percentage of top management
  160. Types of Sales Meetings 3. Local Sales Meetings:  Local sales meetings are held on weekly basis.  They last for about 15mins to more than an hour.  Local sales meetings provide an occasion for the sales persons to express their personal opinions and problems.  It gives an opportunity for the sales persons to come together and build up their individuality.  Strength is Informality  Ample time for each sales person  Better Acquaintance & Group Identity
  161.  4. Remote control & Traveling sales meetings:  Closed circuit television: Companies having large sales force can make use of closed circuit television meetings. Companies that launch new products or introduce national sales campaign use televised meetings.  Sales meetings by Telephone: Telephone conference call is appropriate for small group meetings and discussions. In this meeting the sales manager starts the discussion and it is guided by two conditions that one person talks at a time and speakers identify themselves. The basic advantage is it saves time and money.  Sales Meetings at Home: In this kind of sales meeting the material and the required information is sent to sales personnel’s home.
  162. Sales Contests  Special selling campaign offering incentives in the form of prizes & awards beyond those in the compensation plans  Provide extra incentives to increase sales volume, to bring in more profitable sales volume  Needs for esteem and self actualization
  163. Sales Contests Objectives  To obtain new customers  To secure larger orders per sales call  To push slow moving items, high margin goods, or new products  To overcome a seasonal sales slump  To sell a more profitable mix of products  To improve the performance of distributors sales personnel  To promote seasonal merchandise  To obtain more product displays  To get reorders  To promote special deals to distributors, dealers
  164. Sales Contests 1. Contest Formats Novelty Format: are ones that "hunt for hidden gold," or "win the Super Bowl.“  are more fun, but many sales managers feel that they tend to insult the intelligence of more sophisticated salespeople.  tend to work better with younger, less experienced salespeople.  Novelty contests can be fun for selling special inventory, special events, or seasonal packages. Direct Format: Direct contests are straightforward, such as "achieve 15 percent higher rates," or "write 20 percent more direct business  Important Points:  Timely & Effective  Understandable to the audience
  165. Sales Contests 2. Contest Prizes: Cash:  Cash is not the most effective prize, especially if salespeople are reasonably well paid. Their money and security needs are satisfied by their regular compensation.  Also, cash does not act as a motivator unless it is between 10 percent and 25 percent of salespeople's base compensation for the period of the contest. Well-paid salespeople will generally not go to much extra effort for just a few hundred dollars.  Cash does not fulfill any need for recognition and provides no tangible, permanent evidence of the achievement like a trophy does.
  166. Merchandise:  Merchandise is better than cash as a prize  it is more permanent evidence of achievement. Also, companies can often get merchandise through trade deals or at wholesale prices, and thus give larger prizes than if cash were used.  Furthermore, if people are allowed to have a choice of merchandise, rewards can be more closely tied to individual needs and preferences, and salespeople and their families can express their individuality in the prizes they choose.
  167. Sales Contests  Travel:  Travel is becoming more and more popular as a prize, because of the status, prestige, glamour, and fun associated with an exotic or exciting trip.  they can be glamorized, and people love to fantasize about them.  Also, trips can include spouses and partners, which helps get partners involved in contests and in a frame of mind to support the extra work and effort necessary to win a contest (if no extra effort is necessary, contests are a waste of time).
  168.  Special Honor & Privileges:  Special privileges are a good reward, but they are often hard to get approval for in larger, more rigid companies (extra vacation, for example.).  Special recognition, like being flown in to the home office to meet the company president or receiving special recognition and publicity ("Million Dollar Roundtable," for example) are sometimes easier to get approved in larger, more bureaucratic companies than days off.
  169. Sales Contests 3. Contest Duration:  Mostly run for one to four months  No set guidelines  Consideration of length of time interest 4. Contest Promotion:  Promote contests well to keep the enthusiasm level high  Promote them at all levels of the organization, not just in the sales department in order to get everyone in the company involved and supporting the salespeople (even include vital support people in prizes)
  170. Sales Contests  Managerial Evaluation of contest:  Contest vs. alternatives  Short & Long term effects  Design  Fairness  Impact upon sales force morale
  171. Sales Contests  Objections:  No reason to reward sales persons for their regular duties  High Caliber & more experienced sales personnel consider sales contests juvenile  Unanticipated & undesirable results  Bunch sales  Disappointment to losers  Temporary motivating devices  Weakens Team Spirits
  172. 172 Sales & Cost Analysis
  173. Sales & Cost Analysis 173 Done for sales control: Statistical purpose of sales control: Accounting analysis to determine profitability Why Sales Control? 1. Measuring Performance: Objective evaluation of sales efforts critical for growth Some measures: Sales / Quota ratio / Budget ratio, Closes / Calls ratio 2. Identifying problems before they magnify: Inaccurate sales forecasts, low profit margins, low business, inability of Sales Management to maximize revenues to existing customers 3. Identifying sales opportunities
  174. How to manage Sales Control? 174 1. Setting goals: Part of Sales Planning & Sales Budgeting process SP: Staffing, Recruiting, Training, Evaluation SB: Targets for Sales and for Costs associated with Sales 2. Comparing actual with targets: 3. Taking corrective action: Problem in sales control 1. External factors over which sales people have no control 2. Inadequate information
  175. Sales Analysis 175 1. Gathering, classifying, comparing and studying sales data 1. Converts raw data from various sources into actionable information 1. Helps in non marketing functions like production planning, cash management, inventory management etc. 2. Managers have to decide on purpose of evaluation before doing sales analysis; simple sales analysis gives figures while comparative sales analysis sets standards 3. Sales information systems use mathematical and statistical procedures to generate reports; managers have to decide which
  176. How to do Sales Analysis? 176 1. Most critical element in sales analysis is sales information; most commonly used source for sales information is the sales invoice. 2. Other sources of information include cash register receipts, sales person call reports and expense reports, financial reports, warranties etc.
  177. Different types of sales analysis could be : Sales Analysis by Region 177 Region S. Quota Actuals Diff. Performan ce Index Sales/SQ × 100 West South North East 10.25 10.00 9.75 8.75 10.20 10.02 9.73 7.01 -0.05 +0.02 -0.02 -1.74 99.51 100.20 99.79 80.11
  178. 2. Sales Analysis by Sales Representative 178 Sales Rep. S. Quota Sales Diff. Perf. Index Ravi Rahul Rishi Raj 500.5 300.5 500.25 425.75 475.5 290.5 150.25 400.75 -25 -10 -350 -25 95.00 96.67 30.03 94.12
  179. 3. Sales Analysis by Product for Rishi 179 Product Quota (Rs.) Actual (Rs.) Diff. Tooth Paste Soap Cosmetics 400 300 500 240 180 220 160 120 280 Rishi has problems of motivation, selling skills.
  180. 180 4. Sales analysis by customer: Company can focus on promising segments 5. Sales analysis by distribution channel: Can help in making elimination decisions regarding channels 6. Sales analysis by units sold: Useful during times of inflation and price changes
  182. Compensation objective  compensation is one of the most important motivating and retaining field salesperson  sales force compensation is a cost that can be quickly spiral out of control if the compensation plan is design improperly  So the useful tool to translate company objectives and desires of salespeople into an appropriate compensation plan is to consider the customer product matrix
  183. Company’s General Compensation Structure 1. Ranking- It is widely being used in businesses. It sorts job description in the order of worth. It measures only overall appraisals of the relative worth of different jobs. 2. Grading- A system of grades & grade description, against which individuals jobs are compared. The grades are described in terms of job responsibility, skills required, supervision given & received, exposure to unfavorable & hazardous working conditions. 3. Point system- It involves establishing & defining the factors common to most jobs that represent the chief elements of value inherent in all jobs. The specific factors chosen are, minimum education required, mental & physical skills, responsibility, personality requirements. Each factor is assigned a minimum & maximum no of points, different ranges being associated in line with relative importance of the factors.
  184. 4. Factors comparison method- It employs selected factors & evaluation scales. It compares sales person on a set of selected factors & rank them according with the performance performed by them under such criteria factors. 5. Competitors offer- the compensation structure should me made while seeking the competitors offering to their sales staff .
  185. 4. Determine Compensation Level Management must determine the amount of compensation a salesperson should receive on the average. According to caliber: Management should ascertain whether the caliber of the present sales force measures up to what the company would like to have. According to worth of individual: Management weighs the worth of individual persons through estimating the sales & profit dollars that would be lost if particular salespeople resigned. According to the amount the company can afford to pay: The company should make a cost estimate on a break even chart to propose the compensation plan for every individual salespeople.
  186. 1. A fixed element, either a salary or a drawing account, to provide some stability of income. 2. A variable element (for example, a commission ,bonus, or profit sharing arrangement) to serve as an incentive. 3. An element covering the fringe or “plus factor”, such as paid vacations, sickness & accident benefits, life insurance, pensions. 4. An element providing for reimbursement of expenses or payment of expenses allowances. Management selects the combination of elements that best fits the selling situation. The proportions that different elements bear to each other vary of 60:40 to an 80:20 basis. Compensation elements.
  187. Designing an effective sales compensation plan  Examine job description  Set up specific objectives for sales people  Decide levels of pay/compensation  Develop the compensation mix  Decide indirect payment plan or fringe benefits  Pretest, administer and evaluate the plan
  188.  Examine job descriptions:  Separate job descriptions are required for different sales positions or jobs e.g. missionary salesperson senior salesperson, key account executive  Each job description should include responsibilities and key performance standards to decide how much to pay  Set up specific objectives for salespeople  These are derived from company’s sales and marketing objectives  Salespeople should have some control on the objectives e.g. number of sales calls made  Objectives should be measurable e.g. sales volume, selling expenses
  189.  Decide levels of pay/compensation.  It means the average pay or money earned per year(or month)  It is important to decide levels of pay for all sales positions  It is decided based on the following factors:  Levels of pay for similar positions in the industry  Levels of pay for comparable jobs in the company  Education, experience and skills required to do sales job  Cost of living in different metros and cities
  190.  Annual average pay level vary between industries, within the same industry and sometimes within the company  Firms decide a range of average pay, instead of a specific pay  Salespeople earn pay depending on their and company performance
  191. Develop the compensation mix  Widely used elements of compensation mix are:  1) salaries  2) commissions  3) bonuses  4)fringe benefits(or perquisites) Expense allowances or reimbursements like travel, lodging, etc are not included
  192. Basic types of compensation plans are:  Straight salary  Straight commission  Combination of salary, commission and bonus 68% companies use combination and balance 32% firms use straight salary or straight commission
  193. 1. Straight salary plan- is simplest compensation plan.  Salesperson receive fixed sums as regular intervals(usually each week or month sometimes every 2 weeks), representing total payments for their services.  Such plans are more common among industrial- goods companies than among consumer- goods companies. Types of compensation plans
  194. Advantages : 1. More control over wages level 2. Allow maximum control over sales people activities Limitations : 1. Salary don’t provide strong incentives for extra effort. 2. Salaried employees require supervision 3. This method overpay the least productive members of sales team Application : 1. In competitive environment 2. when team selling is important 3. sales of complex products 4. When product are resold through advertisements
  195. 2. Straight commission Plan-  Salespeople on commission are paid a percentages of the sales or gross profit they generate  The theory supports the individual sales personnel should be paid according to productivity.  As sales volume rises to different levels, the commission rates differ for different products, categories of customers, or during selling seasons. This method is common in the clothing, textiles & shoe industries & in drug * hardware wholesaling. Firms selling intangibles, such as insurance & investment securities, manufacturers of furniture, office equipment & business machines also are frequent users of straight- commission plans.
  196. Advantages : 1. Foster independence of actions 2. Maximum incentives Limitations : 1. Little control over commission people 2. Turn over when business conditions are too bad Application : 1. When maximum incentives is needed and minimum post sale service
  197. Salary plus commission- Most sales compensation plans are combinations of salary & commission plans.  By a judicious blending of the two basic plans, management seeks both control & motivation. Actual results depend upon management’s skills in designing & administering the plan.  to give a salespeople a push needed to sell complex products and services
  198. Advantages :- 1. Commission rate can be adjusted to promote the sale of individual products 2. Paid monthly 3. Discourage salespeople to leave the company Limitations : Expensive and costly to administer Application : In industries where business fluctuate with seasonal or economical cycles
  199. Salary +Bonus: Used to provide representatives with income security while the bonus gives added incentives to meet company objectives . Bonus : are discretionary payment for reaching specific goals and are paid annually Advantage: 1. Balance the need to control selling expense and provide extra rewards 2. lower turnover Limitations : 1. In some firm the size of bonus is so arbitrary 2. Deals with the relation between performance and rewards
  200. Salary + commission +Bonus The most comprehensive plan combine the stability of the salary , the incentives of a commission and special rewards of bonus Advantages :_ 1. Allow manager to reward everyone 2. Allow to design different plan to appeal salespeople needs 3. Earn more money Limitations: This method is too complex Application: Industries such as electronics and business services .
  201. Commission +Bonus Combines the incentives of a commission and a special rewards for meeting firm’s objectives Advantages : 1. Easy to understand 2. Simple to administer 3. Similar cash flow benefit Limitations : Perceived equity of the year end bonus that’s mean a typical high performing sales person become frustrate when he or she sees that top salesperson receive larger year end bonus _Application : Suited to companies which use independent sales Rep .
  202. A bonus is an amount paid for accomplishing a specific sales task It is paid for:  reaching sales quota  performing promotional activities  obtaining new accounts  following up leads  setting up displays, or  carrying out other assigned works. It is like an additional financial reward to the sales person for achieving results beyond a predetermined minimum. Use of bonus & Fringe benefits
  203.  Fringe benefits do not bear direct relationships to job performance they are provided by federal & state law.  For example, payment for social security premiums, unemployment compensation, worker’s compensation, pension plan, holiday’s , vacations, hospitalization insurance, company providing housing etc.
  204. Apart from pay packages marketing people also get high incentives and perks. The industry provides for special allowances such as annual bonus, house rent allowances, mobile allowances, transportations, travel leaves, paid vacations, etc. Figure: Average Salary offered in Indian Telecommunication Sector for Entry Level Jobs
  205. Figure: Average salary (in lakhs) offered to entry level employees
  206. Note: The software and hardware industry is in need of talented programmers, testers, developers and analysts to improve their productivity. Figure: Average salary offered in BPO and KPO
  207. Compensating Salespeople Components Salary Commissions Needs  * Motivate effort on non-selling activities  * Adjust for differences in territory potential  * Reward experience and competence * Motivate a high level of selling effort * Encourage sales success
  208. Compensating Salespeople Components Incentive Payments (Bonus) Sales Contests Personal Benefits Needs Direct effort toward strategic objectives Provide additional rewards for top performers Encourage sales success  * Stimulate additional effort targeted at specific short-term  * Satisfy salespeople’s security needs  * Match competitive offers
  209. Figure 14-2: Comparing Salary and Commission Plans for Field Sales Representatives 0 100 200 300 400 500 10,000 20,000 30,000 40,000 Straight salary Totalcostperperson (thousands$) Sales Per Person in Thousands
  210. Use of Compensation Plans Straight Salary 7 Straight Commission 10 Salary Plus Bonus 34 Salary Plus Commission 21 Salary Plus Bonus Plus Commission 24 Commission Plus bonus 4 Total 100% Percentage of Companies Using
  211. Thank you… 