SALES AND DISTRIBUTION
MANAGEMENT

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

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.

Nature of Sales Management
•Its integration with marketing management

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


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

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

Recruitment And Selection

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.

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.

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.

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.

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.

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.

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.

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.

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

Managing the sales training process
Assess sales
training needs
Design and
execute
sales training
programme
Evaluation and
reinforcement of
sales training
programme

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.

Methods used for assessing training
needs
 Sales manager’s observation
 Salesforce survey
 Customer survey
 Performance testing
 Job description
 Salesforce audit

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

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

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

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

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.

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

Absorption training/self study
 Books
 Audio cassettes
 Articles
 CD-ROM’s
 Product manuals are supplied to the salespeople

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

 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

 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

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

What is Motivation??
 Drive to initiate an action.
 The intensity of effort in an action
 The persistence of effort over time.

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

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.

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

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.

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 .

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

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.

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.

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.

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

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

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.

Number Percent
847 86%
341 74%
757 54%
431 51%
828 37%
458 37%
743 34%
Maslow’s Hierarchy –
U.S. Salespeople’s Responses

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

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

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

 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

 Point sales volume quotas are appropriate when the company wants
salespeople to sell products that contribute more to profits


 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

 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

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

•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

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

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

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

 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.

 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.

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%

Decide basic territories
Through:
 Build-up method,
Or
 Break-down method

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

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

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

(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

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

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

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:

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

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

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

Purposes of the Sales Budget
 Planning
 Coordination
 Control

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

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

Marketing channels

Channel Functions
 Information gathering
 Consumer motivation
 Negotiating with suppliers
 Placing orders
 Financing
 Inventory management
 Risk bearing
 After sales support
SDM- Ch 9
76

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

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

SDM- Ch 9 79
Three Flows Recognized
FORWARD
BOTH WAYS
BACKWARD
Goods and Services
Information
Payment for goods / returns
Company Customers

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.

Why are marketing intermediaries used?

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

 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.

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…

SDM- Ch 9 85
Channel Formats
 Is decided by who ‘drives’ the channel system:
 Producer driven
 Seller driven
 Service driven
 Others

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

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

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

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…

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

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.

Marketing Channel Systems
 Vertical:
 Corporate
 Administered
 Contractual
 Horizontal
 Multi-channel
SDM- Ch 9
92
Vertical….

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

Number of marketing intermediaries
 Intensive distribution
 Exclusive distribution
 Selective distribution

Channel Management Decisions
Selecting
FEEDBACK
Motivating
Training
Evaluating

Physical distribution and logistics
management
 Physical distribution(marketing logistics)
 major logistics function
 Integrated logistics management
 Third-party logistics

Major logistics function
 Order processing
 Warehousing
 Inventory
 transportation

Integrated logistics management
 Cross-functional teamwork inside the company
 Building channel partnerships

Third-party logistics
 An independent logistics provider that performs any or all of the functions
required to get their clients’ product to market.

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…

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…

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…

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

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…

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

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

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

 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

Role of Intermediaries
SDM- Ch 9
109
Company 1 Company 2 Company 3
Intermediary
Large number of CONSUMERS
Direct and Indirect….

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

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…

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

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

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

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.

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

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

Goals of Logistics system
• Provide a Targeted Level of Customer Service at the
Least Cost.
• Maximize Profits, Not Sales.

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

• Order Processing
• Warehousing
• Inventory Management
• Transportation
• Logistics information management
Design system to minimize costs of attaining
objectives
Logistics Functions

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

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

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

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

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

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

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

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

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

Integrated Logistics Management
Building partner relationships refers to the
understanding that one company’s distribution
is another company’s supply system
12-72

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

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

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

Channel design and
planning process

 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

 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

 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

 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

 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

 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

 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

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.

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

 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

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

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

 Reputation
 Leadership in the market
 Integrity, fairness in dealings
 Market coverage
 Territory/ intensity
 Regularity, reliability
 Relationship, productivity

 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

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

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’

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

Sales Meetings &
Sales Contests

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

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

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

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

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

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

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

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

 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.

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

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

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

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.

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.

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).

 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.

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)

Sales Contests
 Managerial Evaluation of contest:
 Contest vs. alternatives
 Short & Long term effects
 Design
 Fairness
 Impact upon sales force morale

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
Sales & Cost Analysis

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

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

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

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.

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

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

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
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

COMPENSATION PLANS

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

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.

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 .

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.

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.

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

 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

 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

 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

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

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

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

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

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.

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

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

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

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

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 .

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 .

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

 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.

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

Figure: Average salary (in lakhs) offered to entry level employees

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

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

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

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

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

Thank you… 