Sales Management

Sales
Management
Slide
S. No. Reference No. Particulars
From-To
1 Chapter 1 Introduction to Sales Management 5 – 33
2 Chapter 2 Personal Selling 34 – 59
3 Chapter 3 Sales Forecasting 60 – 105
4 Chapter 4 Sales Budgeting 106 – 138
5 Chapter 5 Sales Quotas 139 – 157
6 Chapter 6 Sales Organisation 158 – 191

Slide
From-To
Manpower Planning - Process and

7 Chapter 7 192 - 219
Importance
8 Chapter 8 Performance Appraisal and Compensation 220 - 253
9 Chapter 9 Physical Distribution 254 - 279
10 Chapter 10 Introduction to Distribution Management 280 - 316
11 Chapter 11 Channels of Distribution 317 - 356
12 Chapter 12 CRM and Sales Management 357 - 379

Course Introduction
 The course Sales Management is designed to comprehensively cover various

relevant concepts such as the basics of sales management, personal selling, sales
forecasting, sales budgeting, sales quotas and the meaning and types of sales
organisation.
 This course also discusses about the process and importance of manpower
planning, performance appraisal, compensation, physical distribution,
distribution management, channels of distribution, Customer Relationship
Management (CRM) and sales management.
 Effective sales management helps organisations in achieving their sales
objectives, controlling their sales processes, ensuring speedy closure of deals and
increasing sales performance.
 Sales management is essential for organisations if they wish to sustain and
thrive in the highly competitive environment that exists today.
Sales Management – Session 1
Chapter 1: Introduction to Sales Management
Chapter Index
Slide
From-To
1 Learning Objectives 8
2 Topic 1 Objectives of Sales Management 9 – 10
Sales Management Definition, Process,

3 Topic 2 11 – 19
Strategies & Resources
Selling of Services as Opposed to Selling of
4 Topic 3 20
Tangible Products
Role and Function of Sales Management
5 Topic 4 21
within an Organisation
6 Topic 5 Duties & Responsibilities of Sales Manager 22

Chapter Index
Slide
From-To
Skills & Competencies Required by a Sales
7 Topic 6 23
Manager
Management Functions in Sales
8 Topic 7 24
Management
9 Topic 8 Selling vs. Marketing 25 - 28
10 Let’s Sum Up 29 - 32
• Discuss the objectives of sales management
• Understand the definition, process, strategies, and resources of sales
management
• Describe how the selling of services is different from the selling of tangible
products
• Discuss the role and function of sales management within an organisation
• Describe the duties and responsibilities of a sales manager
• Discuss the skills and competencies required by a sales manager
• Understand management functions in sales management
• Describe the difference between selling and marketing
Objectives of Sales Management
• Whilst some objectives are unique to each organisation, all organisations pursue
objectives of profitability, sales volume, market share, growth, and corporate
image.
• The management of the sales function influences all of these objectives. Thus, the
sales management objectives of an organisation are concerned with:
 Achieving desired sales volume
 Achieving desired profits
 Promoting growth
• The objectives of sales management integrate various sales functions.
• They must be realistic and achievable and expressed as much as possible, in
quantifiable terms.
Objectives of Sales Management
• The scope of sales management in an organisation includes both quantitative and

qualitative objectives as shown in following below:
Establishing
Sales Developing
Rewards, Sales Fixing Sales
Forecasting Sales
Recognition, and Budgeting Quotas
and Planning Objectives
Remuneration
Establishing Collecting
Sales Sales Directing the
Sales Customer
Promotion organisation Sales Team
Territories Feedback
Planning, Coordinating
Managing
Recruiting, and and
Distribution
Training of the Monitoring the
Channel
Sales Force Sales Team
Sales Management Definition, Process, Strategies &
Resources
• Sales management may be defined as the process of developing a sales force,

coordinating sales operations, and implementing sales strategies that enable an
organisation to achieve its sales targets consistently. Sales management involves
several activities as given below:
 Creation of sales plan and strategies to execute the plan such as strategies for
account management, sales force compensation, etc.
 Implementation of the above strategies
 Sales research, price fixation, and co-ordination of sales
 Hiring of the sales force
 Setting targets and regular monitoring of sales activities
Resources
• The process of sales management involves developing a sales force,

organising/managing sales operations and implementing sales techniques which
allows a business to constantly hit and even surpass its sales target.
• The sales management process includes the management of three key aspects of
sales:
 Sales operations
 Sales strategy
 Sales analysis
Resources
Key elements of sales

• As discussed in the previous section, sales management process involves three steps
and elements, lets understand each step in detail:
Sales Operations
• Sales operations include those activities and processes that support the business
strategies and objectives of a sales organisation and help in its effective functioning.
• The first step in the management of sales operations is to build a sales team,
starting with a competent sales manager and moving on to expanding the team.
• Once new talent has been taken on board, they should be properly trained to develop
their skills. They should be able to completely understand the product or service they
are selling and also the customers of the organisation. This will bring them all on the
same page regarding the objectives and expectations and make them work as a
cohesive unit.
Resources
• After proper training, provide the sales team with targets that are high yet
realistic. This helps to monitor and measure performance in the future.
• The next step is to delegate roles and responsibilities to the relevant team
member.
Sales Strategy
• A sales strategy is concrete, detailed plan for selling products or services to
generate and increase revenue consistently.
• A sales strategy is different from a marketing strategy as it focuses on actually
selling the product or service whereas a marketing strategy focuses on improving
the visibility of the product or service.
• A sales strategy defines the sales process to generate real, quantifiable profits. It
allows the sales team to understand how to actually conduct the sales.
• A sales cycle is a series of activities that helps the offering of a firm reach its
customers.
Resources
• A sales pipeline or sales funnel is a visual sequence of activities to achieve with

each prospect, from the initial lead to the completion of the sale. It helps members
of a sales team stay organised and achieve their goals.
Sales Analysis
• Sales analysis is an assessment that reveals the trends regarding an
organisation’s sales.
• A sales analysis report helps a business evaluate the effectiveness of current sales
efforts and identify what more efforts might be needed.
• Sales analysis is performed using various sales metrics that are measurable
indicators that specify the performance of different elements of the sales
operations and indicate whether or not sales targets are being met.
Resources
• Some KPIs that can be considered for a sales analysis include:

Sales targets
Sales leads/opportunities
Average purchase value
Sales per representative
Quote to close ratio
Net sales
Sales lead to close ratio
Sales-to-date
Sales growth
Resources
Resources
• There are several resources available online to help with the sales management
process and the most widely-used ones are given below:
Sales plan templates
Sales email templates
Sales compensation calculator
Online sales training
Sales enablement guides
Sales meeting checklist

Resources
Contemporary Sales Management Practices

• Some sales management practices used by today’s firms are:
 One-on-one coaching: One-on-one coaching of their team by sales managers
helps to increase productivity and helps firms see a growth in their annual
revenue.
 Continued training: Regular training helps to keep the sales manager updated
and also helps to continue building the sales team’s skillset.
 Use of technology: Technologies such as cloud-based CRM improves
collaboration and helps teams become more agile. Modern businesses can
integrate several technologies to increase productivity.
 Creating specific goals and tracking progress: Though it is your job to keep
track of your sales team’s progress, you need to keep track of your own goals
and progress as well.
Resources
 Identifying the sales team’s barriers to success: Identifying the barriers that
prevent the sales team from achieving the specified goals helps to determine
ways to overcome them. Common barriers include fear of rejection, poor
communication, lack of exposure to digital marketing, etc.
 Creating effective sales plans: Creating sales plans that work at both the
individual and team levels helps to ensure consistency and progress, better
time management, and improve prioritisation strategies.
 SWOT analysis: A SWOT analysis is a composition of company’s strengths,
weaknesses, opportunities and threats. The primary aim of a SWOT analysis is
to enables the organisation to have a thorough awareness of all the factors
involved in making a business decision.
Selling of Services as Opposed to Selling of Tangible
Products
• Selling services is different from selling products because, in the latter,

organisations sell physical, tangible entities, whereas, in the former, organisations
provide value through intangible skills and expertise.
• Various characteristics differentiate services from products such as intangibility,
inseparability, heterogeneity, perishability, and there is no transfer of ownership.
As a result, the marketing techniques and costs of selling the two are quite
different.
• In case of tangible products, it is easier for a customer to determine the value of
their purchase and if it was worth the money they spent.
• The complexity of the price/quality relationship also makes it difficult to measure
the actual costs of a unit of service. Services cannot be produced beforehand and
inventoried.
• Businesses need to forecast demand and understand how they can customise and
personalise the service to satisfy their customers.
Role and Function of Sales Management within an
Organisation
• Sales management has several roles and functions within an organisation as

shown below:
Helps in achieving sales targets
Improves profits
Promotes organisational growth
Fixes price
Motivates the sales force
Improves distribution
Duties & Responsibilities of Sales Manager
• Sales management plays a critical role in deciding whether a business will be a

success or a failure. Hence, a sales manager has a very important role in an
organisation.
• A sales manager is the person who guides an organisation’s sales team and
establishes their sales quotas and goals whilst steering them in the right
direction.
• A sales manager has the following duties and responsibilities:
Setting Developing
Achieving Sales team
individual and sales strategies
sales volume supervision
team targets and techniques
Building
Sales team Generating Brand Maintaining
client
coordination leads promotion records
relationships
Skills & Competencies Required by a Sales Manager
• Skills needed to become a successful sales manager are:
Analytical skills
Planning skills
Leadership qualities
Communication skills
Mentoring and motivational skills
Ability to allocate duties and responsibilities

Management Functions in Sales Management
• There are three key management functions in sales management:

 Interpersonal: The sales manager has to build a strong bond with clients as
well as his team. He or she should display leadership qualities and be able to
direct and motivate the sales force. The manager should be able to cultivate a
strong bond between the sales force and top management to facilitate both
internal as well as external communication.
 Decisional: A sales manager needs to handle any unexpected issue or
complication that arises within the sales organisation. He or she has to diffuse
conflicts through negotiations and should be able to work together with
different departments.
 Informational: In sales management, information has to be regularly conveyed
between the members of the sales team. Moreover, the performance of the
workforce and strategies has to be continuously monitored and the information
is used for improvement.
Selling Vs. Marketing
• Marketing is a broad concept and is defined as the process through which

products and services move from the producer to the end-user.
• Marketing starts much before and continues even after the product is sold.
• Philip Kotler defines marketing as a social activity directed at satisfying needs
and wants through the exchange process.
• Selling is a narrower concept and a part of marketing. It refers to the process of
providing the customer with the products or services they need in exchange for a
price.
• The differences between selling and marketing are summarised below:
Selling Marketing
Focuses on the product and profits Focuses on customer satisfaction
It is a seller-oriented approach Is a customer-oriented approach
Emphasis is on maximising sales Emphasis is on providing quality

products
Planning is short-term Planning is long-term
Cost determines price The consumer determines price and

price determines the cost of marketing
Is a direct activity Is an indirect activity
Has an inside-out perspective Has an outside-in perspective

Selling Marketing
Main focus is on finding customers for Main focus is on finding the right
products products for customers
Begins only after production and ends Begins much before the production of
with the delivery of product and goods and services and continues even
collection of payment after sales
Emphasis is on staying with existing Emphasis is on innovation in existing

technology and reducing costs technology and providing better value to
the customer
Views customer as the last link in Views the customer as the very purpose
business of the business
• Whilst there are differences between the two, both marketing and selling are
equally important.
• Marketing brings new prospects into your network and selling converts those
prospects into customers.
• Business-to-business sales, door-to-door sales, and personal selling are a few
examples of selling.
• Newsletters, affiliate marketing, Search Engine Marketing are a few examples of
marketing.
Let’s Sum Up
• According to AMA, sales management is the planning, direction, and control of

personal selling activities, including recruiting, selecting, equipping, assigning,
routing, supervising, paying, evaluating, and motivating.
• Sales management is concerned with maximising the benefits an organisation and
its customers obtain from the efforts of its sales force.
• Sales management objectives are sales forecasting and planning, sales budgeting,
sales organisation, planning, recruiting, and training of the sales force, developing
sales objectives, fixing sales quotas, directing the sales team, coordinating and
monitoring the sales team, establishing rewards, recognition, and incentives,
establishing sales territories, collecting customer feedback, managing distribution
channel, and sales promotion.
• The sales management process includes the management of three key aspects of
sales: sales operations, sales strategy, and sales analysis.
Let’s Sum Up
• Sales operations include those activities and processes that support the business
strategies and objectives of a sales organisation and help in its effective
functioning.
• A sales strategy is concrete, detailed plan for selling products or services to
generate and increase revenue consistently.
• Sales analysis is an assessment that reveals the trends regarding an
organisation’s sales.
• Some contemporary sales management practices are one-on-one coaching,
continued training, use of technology, creating specific goals and tracking
progress, identifying the sales team’s barriers to success, creating effective sales
plans, and swot analysis.
Let’s Sum Up
• In service-based selling, intangibility makes it harder for consumers to judge the

quality. The complexity of the price/quality relationship also makes it difficult to
measure the actual costs of a unit of service.
• Sales management helps in achieving sales targets, improves profits, promotes
organisational growth, fixes price, motivates the sales force, and improves
distribution.
• A sales manager’s duties and responsibilities include achieving sales volume,
setting individual and team targets, developing sales strategies and techniques,
sales team supervision, sales team coordination, generating leads, brand
promotion, building client relationships, and maintaining records.
• The skills and competencies needed for a sales manager are analytical skills,
planning skills, leadership qualities, communication skills, mentoring and
motivational skills, and the ability to allocate duties and responsibilities.
Let’s Sum Up
• Three management functions in sales management are interpersonal, decisional,

and informational.
• Marketing is a broad concept and defined as the process through which products
and services move from the producer to the end user whereas selling is a narrower
concept and a part of marketing.
Chapter 2: Personal Selling
Chapter Index
Slide
From-To
2 Topic 1 Meaning and Evolution of Personal selling 37 – 45
3 Topic 2 Theories in Personal Selling 46 – 54
4 Topic 3 Marketing of Financial Services 55 – 56
5 Let’s Sum Up 57 – 58
• Understand the meaning of personal selling
• Describe the evolution of personal selling
• Discuss the process of personal selling
• Describe the theories in personal selling
• Discuss the marketing of financial services
Meaning and Evolution of Personal Selling
• Personal selling is defined as the exchange of products or services between a

customer and a seller for a certain amount of money.
• Personal selling is a two-way form of communication, often face-to-face, where a
salesperson attempts to persuade the prospective buyer to buy the company’s
products or services.
• The salesperson uses their knowledge and skills to inform, assist, and persuade
the buyer to participate in a transaction from which both parties derive value.
• For the customer, this value is obtained from the benefits of the product or service,
while for the salesperson and the company, from the financial benefits.
• With advances in telecommunication, personal selling can now be performed using
telephones, via videoconferencing, or the Internet.
• Personal selling has four main objectives as depicted below:

Evolution of Personal Selling

• Personal selling today goes beyond facilitating a transaction between the buyer
and seller, it also involves identifying prospective buyers, becoming aware of their
problems and needs, providing them with information, and providing after-sales
service.
• It has evolved from simply peddling goods to buyers to building long-term
relationships, consultative selling, and value-added partnering (Manning 2014).
• The driving force behind these changes is the rise of the marketing concept in the
1950s that led organisations to move beyond emphasising only the sales volume to
pursuing other objectives such as identification of prospects, product positioning,
handling objections, and building long-term relationships.
• Wotruba (1991), describes five stages in the evolution of personal selling as shown
below:
Advantages of Personal Selling

• The advantages of personal selling are the following:
 Personal selling involves direct and personalised communication that allows
salespeople to interact with potential buyers. It is a two-way form of
communication where the transmission of information and getting feedback
occurs simultaneously.
 Personal selling helps the salesman reach out to prospective buyers that cannot
be reached through other promotional measures.
 Personal selling allows salespeople to be more perceptive of the buyers’
inclinations and responses and is flexible enough to adjust the message
depending on the reaction of the buyer.
 Personal selling allows demonstrations of the product’s features and handles
objections right away.
• There are a few limitations of personal selling, such as those given below:
 Personal selling involves substantial costs of travel, training, samples, etc. It is,
therefore, not preferred by small companies.
 Personal selling can only be effective when salespeople are motivated enough and
properly trained.
Situations Conducive to Personal Selling

• Certain situations are more conducive to personal selling in a company:
 Product situation: Personal selling is more relevant and effective in situations
where:
 The product is of a high unit value
 The product is in an introductory stage and demand needs to be generated
 The product needs to be customised according to specific consumer needs

 The product’s features need to be demonstrated
 The product requires after-sales service
 Market situation: Personal selling can prove to be more effective in the following
market situations:
 The firm needs to cater to a small number of large-size buyers
 The firm sells in a small local market, a government market, or an

institutional market
 There is a lack of intermediaries for indirect selling
 Company situation: Personal selling can be more effective in situations where:

 The company is unable to identify and apply an appropriate non-personal
communication channel
 The company does not have huge funds required for regular advertising
 Consumer behaviour situation: Personal selling is a more economical option

when:
 The consumer’s purchases are not that frequent but valuable
 The consumer needs their queries to be resolved immediately
 The consumer needs to be persuaded due to stiff competition
 The consumer needs active engagement in the exchange process

Steps in Personal Selling

• Regardless of the product being sold, there are seven steps in the personal selling
process as shown below:
Prospecting
Presentation and
and Pre-approach Approach
demonstration
qualifying
Closing the Overcoming

Follow-up
sale objections
Theories in Personal Selling
AIDAS Theory
• A very popular theory in personal selling, AIDAS stands for Attention, Interest,
Desire, Action, and Satisfaction. It is a customer-oriented theory that focuses on
the customers’ needs and problems.
• The theory states that the prospect goes through five different stages before giving
a satisfactory response to a product. Let us see what each of these stages means:
 Attention: In this stage, the customer becomes aware of the product as well as
the brand image. This stage is very important to the salesperson because this is
where they attempt to catch the attention of the customer. Different ways in
which to capture the attention of the prospect include catchy phrases in written
communication, emails, etc.
 Interest: In this stage, prospects maintain an interest in the product. This

stage is of utmost importance to the salesperson where they communicate the
benefits of the product to the prospect to maintain their interest.
 Desire: In this stage, prospects develop a liking towards the product or brand. A
desire can be created by using influencing and persuasion techniques such as
adding an emotional element to the sales communication, making prospects
aware of what they stand to lose if they do not act on their desires.
 Action: In this stage, prospects become convinced of making a purchase or
engages in a trial. Sales persons can use different promotional measures to
ensure action.
 Satisfaction: In this stage, the salesperson has to reassure the customer that
they made the right decision in buying the product.
Buying Formula Theory of Selling

• The buying formula theory is again buyer-oriented. It revolves around the needs
and problems of the buyer and the role of the salesperson is to help the buyer find
solutions. It is a schematic depiction of a set of responses.
• This theory attempts to explain the cognitive process that goes on in the mind of
the prospect when he decides whether or not to buy.
• The buying formula theory emphasises the internal factors that influence the
prospect’s responses and downplay the external factors believing that the
salesperson will not neglect the external factors.
• The buying formula provides a useful way to help the salesperson to remember
the internal factors.
• Simplistically, the buying process can be said to be comprised of three elements:
Need (or problem) → Solution → Purchase
• A fourth element is added because the outcome of purchase influences the chance
of a continuing relationship between the buyer and the seller so that the formula
becomes:
Need (or problem) → Solution → Purchase → Satisfaction
• The solution element in the above sequence consists of two parts: the product or
service and the brand name. The buying formula thus becomes:
Need (or problem) Product or Service or Brand name Purchase Satisfaction/
dissatisfaction
• For the buyer to make a purchase, they must consider the product or service and
the brand name to be adequate and also derive a pleasant feeling expecting
satisfaction from the purchase. When these are included, the buying formula
becomes:
• In this buying formula, the central solid lines of the formula represent the
primary elements in a well-established buying habit while the dotted lines
represent the reasons and pleasant feelings i.e., the elements of defence in the
buying habit.
• The goal of the salesperson is to encourage direct associations to ensure repeat

purchases.
• According to this theory:
 The salesperson should create and emphasise the need
 The salesperson should emphasise the relation between the need and offering
 The salesperson should create the brand image
 The salesperson should create an association between the need, the offering,
and the brand name.
 The salesperson should emphasise brand loyalty and the satisfaction derived
from the purchase.
Behavioral Equation Theory

• The behavioural equation theory proposed by J. A. Howard uses a stimulus-
response model and combines with it the findings from behavioural research.
• The learning process is a part of the stimulus-response model and has four
essential elements: drive, cues, response, and reinforcement as shown below:
Right Set of Circumstances Theory

• Sometimes called the situation-response theory, the right set of circumstances
theory states that the particular circumstances occurring in a given selling
situation result in the prospect responding predictably.
• The right set of circumstances theory is a seller-oriented theory and argues that if
the salesperson can successfully grab the prospect’s attention and maintain their
interest, and also present the right stimuli, it will result in the desired response
i.e., the sale.
• The circumstances can be both internal and external to the prospect.
• Supporters of this theory suggest that external circumstances should be given
more emphasis than internal ones.
• This theory tends to overlook internal factors that are not readily manipulated
and can therefore encounter problems as internal factors are important in most
selling situations.
• While this theory emphasises the importance of the salesperson controlling the
situation, it fails to handle the internal factors that influence the interaction and
is unable to assign a suitable weight to the buyer’s response.
Marketing of Financial Service
• In a broad sense, financial services refer to the mobilisation of savings and include
all activities that transform savings into investment.
• Meidan, (1996), defined financial services as activities, benefits, and satisfaction,
related to the sale of money, that offer to users and customers financial-related
value.
• Customers of financial services can be both retail customers and corporate
customers.
• The marketing of financial services refers to all the marketing strategies and
techniques used by marketers in the financial services sector to create and drive
awareness of financial products.
• Financial services also involve capturing leads and convert them into loyal
customers.
Marketing of Financial Service
• Several factors such as lack of trust in the eyes of customers, regulatory barriers,
and digitisation in today’s markets make it important that organisations actively
pursue customers.
• Financial service providers today need to provide customers a digital-first
financial services marketing strategy which includes using the following tactics as
depicted below:
Apply Embrace
Engage with Adopt Digital
Relationship Omnichannel
Customers Marketing
Marketing Marketing
Offer
Standardise
Personalised
Branding and
Marketing
Messaging
Experiences
Let’s Sum Up
• Personal selling is defined as the exchange of products or services between a

customer and a seller for a certain amount of money.
• There are five types of flow between the buyer and the seller in this exchange
process: information, product, cash, ownership, and feedback.
• Personal selling is a form of two-way communication.
• Personal selling has four main objectives: informative, persuasive, relational, and
image-building.
• There are five stages in the evolution of personal selling: provider, persuader,
prospector, problem-solver, and procreator.
• Certain product, market, company, and consumer situations make personal selling
is more relevant, effective, and economical.
Let’s Sum Up
• There are seven steps in the personal selling process: prospecting and qualifying,
pre-approach, approach, presentation and demonstration, overcoming objections,
closing the sale, and follow-up and maintenance.
• Popular theories in personal selling are the AIDAS theory, the buying formula
theory, the behavioural equation theory, and the right set of circumstances theory.
• Financial services refer to the mobilisation of savings and include all activities
that transform savings into investment.
• The marketing of financial services refers to all the marketing strategies and
techniques used by marketers in the financial services sector to create and drive
awareness of financial products.
Chapter 3: Sales Forecasting
Chapter Index
Slide
From-To
2 Topic 1 Meaning & Nature of Sales Forecasting 63 – 69
3 Topic 2 Methods of Sales Forecasting 70 – 98
The Basis for Selecting Suitable Forecasting

4 Topic 3 99 – 102
Method
5 Let’s Sum Up 103 – 104

• Understand the meaning and nature of sales forecasting
• Discuss the qualitative methods of sales forecasting
• Describe the quantitative methods of sales forecasting
• Analyse the basis for selecting a suitable forecasting method
Meaning & Nature of Sales Forecasting
• A forecast may be defined as an indicator of what is likely to happen in a given

time frame in the future, generally based on available data.
• From this definition of a forecast, we can say that a sales forecast is an indicator
of the amount of a product or service a business is likely to sell in a given time
frame in the future in a given market at a given price. That is, a sales forecast is
an estimate of the future sales potential of an organisation.
• Accurate sales forecasting allows an enterprise to produce the required quantity
at the right time. The sales forecast forms a basis for production targets. It also
allows it to plan ahead for budgets, raw materials, equipment, labour, pricing, etc.
• Sales forecasting plays the following role in an organisation:

 Help visualise the revenue goals: Sales forecasting provides all the
stakeholders with a good understanding of the revenue goals for the specified
time frame. Visualisation of the revenue goals helps to anticipate cash flow and
growth of the organisation and measure the performance against it. It also
helps to prepare for any issues that may occur down the line.
 Manage and monitor sales performance: Sales forecasts help to manage the
sales team and monitor its performance against the sales goals. It helps
organisations develop and execute a plan for the given period and adapt if
things do not go according to plan.
 Help with high-level decisions: Accurate sales forecasts provide information
that helps the top management take decisions regarding expansion, growth,
investments, etc.
 Plan for the cash flow: Sales forecast aid the finance department in planning
for the cash flow to cover the expenses.
 Prepare for after-sales support: Sales forecasts prepare the customer service
team for after-sales support.
• Apart from the above, sales forecasting plays a very important role in
manufacturing businesses as it helps with the following:
 It helps to determine production volumes
 It helps to determine plant capacity, equipment, capital and manpower
requirements, etc.
 It helps to establish the sales and production budgets
 It helps in pricing decisions
 It aids in advertising decisions
 It aids in decisions regarding expansion, production mix, etc.
 It helps in making production and purchasing schedules

 It aids in developing strategies that will help in achieving the targets that have
been predicted by the sales forecasts
• Forecasting can be of the following two types:
 Short-term Forecasting: This type of forecasting is limited to a short period,
usually up to one year and aids in the following areas:
 Determining production schedules: Production schedules have to be
developed according to predicted sales volume to avoid the problem of both
overproduction and under-production.
 Pricing decisions: Sales forecasts help to devise a suitable price policy
 Purchasing of raw materials: An understanding of sales in the immediate

future allows firms to estimate production scales and purchase raw
materials as needed.
 Setting sales targets: An understanding of future sales levels in the near

future will allow managers to adjust sales targets accordingly. If sales
targets are set too high, salespersons find them impossible to meet, whereas
if sales targets are set too low, the targets are met too easily, and incentives
amount to nothing.
 Advertising and promotion decisions: An estimate of sales levels in the near
future allows firms to plan their advertising and sales promotion
accordingly.
 Short-term financial requirements: Estimating sales and production scales
allows firms to estimate short-term financial requirements.
 Long-term Forecasting: This type of forecasting refers to a period of forecasting

more than one year. The element of uncertainty is higher in long-term
forecasting. It is more relevant to the planning of:
Expansion of an existing unit or opening a new

unit
Long-term financial requirements
Personnel requirements
Rate of maintenance of equipment and plant
Raw material requirements over a long-term

• For any sales forecast, the following things must be factored in:
 Competition: Existing and new competitors’ offerings play an important role in
deciding the demand and thus, the future sales of a product or service.
 Technological advances: Technological advances introduce new products and
new trends in the market and change the demand for a product or service.
 Government policies: Sales of products and services are influenced by
government policies and regulations.
 Internal factors: Internal factors related to plant capacity, changes in product
mix, etc., should be factored in.
Methods of Sales Forecasting
• Several methods of sales forecasting are available, and the management can
choose the one that will work best for them depending on the following criteria:
Simplicity
Credibility
Economy
Availability
• One must remember that predicting anything in the future, including sales, is
often inaccurate, so one must choose a method of forecasting and improve it such
that the forecast is as realistic as possible.
• A good sales forecasting technique minimises the departure of the actual sales
from the forecast.
• Forecasting methods can be of two types:
 Qualitative forecasting methods
 Quantitative forecasting methods
• Qualitative forecasting methods are based on opinions and intuition, whereas
quantitative forecasting methods use mathematical models and relevant historical
data to generate a forecast.
• There are following major differences between Qualitative forecasting methods

and Quantitative forecasting methods:
Qualitative methods Quantitative methods
Relevant in situations where little to no Relevant in situations where historical

information exists data exists
Useful for new products and new Useful for existing products and
technology technology
Involves human judgement, intuition and
Involves mathematical techniques
experience
Their strength is objectivity, consistency
Their strength is to include the latest
and ability to handle huge quantities of
changes and access to inside information
data
Limited by being prone to personal bias Limited by their dependence on data
Qualitative Methods - User Expectations, Salesforce Composite, Jury of

Executive Opinion, Delphi Technique, Market Test
• Qualitative forecasting methods are based on human factors, such as opinions and
intuition.
User Expectations
• In this method, the business approaches its customers directly to determine their
requirements in the near future. The business asks its customers about the
quantity and quality of the goods they will purchase, when and where they will
buy, etc.
• This approach is more suitable in the case of industrial goods instead of consumer
goods because the potential market has only a limited number of buyers and
prospects.
• The user expectations method has the following limitations:

 There is a chance that the expectations of the buyer may change in future.
 It works only for short-term forecasting.
 It does not work for making forecasts regarding consumer goods.
Sales Force Composite

• In the sales force composite method, salespersons are approached for their opinion
regarding the sales trends in their respective territories, and these opinions are
consolidated to build the overall sales forecast.
• The sales personnel provides the estimates of the sales of a product or service in a
particular sales territory, during a given period.
• This method is the bottom-up approach wherein the sales force offers their opinion
on sales trends to the top management.
• The strength of this method comes from the fact that salespersons have a good
understanding of their sales territories and customers.
• The weakness of this method is that it is prone to the personal bias of the
salespersons. Moreover, salespersons may not know how to use economic and
statistical indicators correctly.
• They might only consider the microeconomic factors and neglect the
macroeconomic environment.
• This problem can be somewhat remedied by training the sales force in forecasting
techniques.
Jury of Executive Opinion

• The jury of executive opinion is a widely used qualitative method of sales
forecasting.
• The opinions of a small group of top-level managers and executives from different
departments, such as sales, finance, marketing and production are collected and
used to predict sales for a given period.
• This method is usually employed when the issue is complex as the top-level
executives have years of experience in their field and a deep understanding of the
organisation’s strengths and weaknesses and the risk factors and opportunities in
the relevant industry.
• They also better understand the macroeconomic factors that can influence the
sales trend.
• In the jury of executive opinion, the group of top-level managers and executives
uses its managerial experience, and sometimes also includes the results of
statistical models.
• This method includes judgement and other soft human factors, such as personal
opinions and intuition to make predictions.
• The jury of executive opinion method can be of two types: the top jury method and
percolated jury method.
• In the top jury method, only the top executives can participate and in the
percolated jury method, a large number of marketing sales executives participate.
Delphi Technique
• The Delphi method is a method of choice when a long-term forecast is needed on
complex issues where expert opinion is the only available source of information.
• The Delphi method works on the assumption that the combined knowledge of a
panel of experts will generate a forecast at least as good (and most likely better)
as the one generated by a single member.
• In this method, a panel of members with expertise in the given area are
approached with a questionnaire and their feedbacks are organised into a
summary.
• If any expert’s answer deviates too much from the median, they offer an
explanation that is added to the summary. The updated summary is sent to all the
panel members again.
• They review the summary and if they think necessary, they can reconsider or
revise their forecast given the feedback of other members.
• The limitation of the Delphi method is that it can be a time-consuming process,
especially if there is not much consensus between panel members initially
• The steps in the Delphi method are given below:
 A questionnaire is sent to a panel of experts, either internal or external to the
organisation, to obtain their independent estimates of future sales.
 The independent estimates are organised in the summary and the summary
report is submitted to panel members for review.
 Experts can review the estimates made by other experts and if they think
necessary, they may reconsider or revise their estimates.
 The process is repeated for multiple round still the panel reaches a consensus
on the forecast.
Market Test
• In the market test method, a sales forecast is made based on the outcome of a
direct market test. It is used more commonly by consumer goods marketers.
• When used by industrial goods marketers, this method is called a market probe.
• The market test helps to make sales forecasts for new product launches. It helps
the firm decide if the market will accept the product or not.
• In the market test method, the new product is first introduced in selected
geographical areas that are representative of the final market to estimate the
product’s acceptance and demand in the selected areas.
• Based on the customer response, the firm can forecast the sales of the product and
decide whether commercialisation is a viable option or not.
• The market test is a quite reliable method, but care must be taken to select areas
that truly represent the overall market.
• Despite being valuable as a sales forecasting tool, it is limited by the fact that it is
a time-consuming process since the results can only be reliable if the test is
carried out for a sufficient amount of time.
• It takes significant time to deliver results, during which market conditions may
change and the results may not be a true representation of the whole market.
Quantitative Methods - Time Series Analysis, Moving Average, Exponential

Smoothing, Regression & Correlation
• Quantitative methods for sales forecasting are different from qualitative methods
as they make use of mathematical tools and historical data.
• These methods are more objective than qualitative methods and usually more
time and cost-effective.
Widely used quantitative methods are as follows:
Time Series Analysis

• Time-series analysis is one of the most widely used methods for the prediction of
long-term forecasting.
• The term time series refers to a sequential order of values of a given variable at
equal time intervals.
• A time-series depicts the relationship between two variables, one being time and
the other any measurable variable. The quantified variable may show an increase
or decrease with reference to time.
• Time series analysis explains the reason behind the values observed at different
points in time.
• A time-series model aims to identify patterns in historical data and extrapolate

them into forecasts.
• A time series is generated by collecting a series of information over given points in
time.
• Time series data, such as the one above can be applied to a time series forecasting
model to make predictions, such as estimating the sales for February.
• A time-series problem has the following time-based key components:
 Level: Level is the average or baseline value in the time series.
 Trend: Trend is the long-term increase or decrease in the values of the target
variable with time. A trend can be upward, downward, or horizontal (no trend).
It can be linear or exponential.
 Cycles: This component accounts for the recurring pattern of data above and
below the trend line. This component exists when the data shows inclines or
declines that are not of a fixed period. Cycles differ from seasonal patterns
because the average length of cycles is longer (usually, more than one year).
 Seasonality: Seasonality exists when there is a tendency of patterns to repeat
at regular intervals.
 Irregularity/Noise: This component exists when there are random variations
that can occur in the data that cannot be explained through trends, cycles, or
seasonality. It accounts for short-term, unexpected and non-recurring factors
that influence the time series data.
• In simple terms, the nature of the key components of a time series can be
represented as follows:
• Three factors are important in time series analysis and forecasting:

 Autocorrelation: Autocorrelation is the degree of correlation of a time series
with its past values, i.e., the tendency of data patterns to repeat themselves.
 Seasonality: Seasonality is a measure of how often observations and patterns
repeat themselves at regular intervals.
 Stationarity: Stationarity is the property of the mean, variance and an
autocorrelation structure to remain the same over time.
• The time series analysis is quite useful when there is sufficient past data of a
reliable nature is available. It helps to understand the rate of growth, the extent
and the direction of periodic fluctuations when conditions are relatively stable.
Moving Average
• Long-term forecasting of sales trends can also be done using the moving average
or rolling mean method.
• The moving averages method examines the underlying pattern of a set of data to
provide an estimate of future values.
• The moving averages method uses time-series data to smooth out random, short-
term fluctuations in the data set by creating a constantly updated average.
• The technique generates an average of a set of numbers in a given range whilst
moving the range.
• The moving averages method can have the following variations:

 Simple moving average (SMA): SMA is an equally weighted mean of n records.
The formula for SMA is: Simple Moving Average = (A1 + A2 +……+An) / n
Where Ai is the data point in the ith period
 Weighted moving average (WMA): WMA assigns more weight to recent data
points and less weight to older data points. It is calculated by multiplying each
observation in the data set by a predetermined weighting factor. The formula
for WMA is:
Weightage Moving Average = (A1*W1+A2*W2+ ……+AnWn)
Where Ai is the data point in the ith period and Wi its predetermined weighting
factor.
 Exponential moving average (EMA): EMA is also a weighted average where

more weight is given to the data observed in more recent times than older data.
But here the weighting factors decrease exponentially. The formula for the
EMA is:
Exponential Moving Average= (C - P)* (2/(n+1)) + P
Where C is the current data point and P is an exponential moving average of
the previous period (simple average used for the first period).
Regression & Correlation

• Correlation is the degree to which two or more variables are related. Correlation
analysis is done using various statistical tools and techniques to determine the
degree of correlation between two or more variables.
• Correlation analysis helps to quantify the relationship between two or more
variables.
• Correlation analysis estimates a sample correlation coefficient, denoted r, that
ranges between -1 and +1.
• The correlation between two variables can either be positive (i.e., higher levels of
one variable correlate to higher levels of the other) or negative (i.e., higher levels
of one variable correlate to lower levels of the other).
• The sign of r indicates the direction of the association, while the magnitude of the
r indicates the strength of the association.
• Let X and Y be the two random variables, then the population correlation
coefficient σXY between X and Y is given by the formula:
Where:
ρXY = Population correlation coefficient between X and Y
Cov = Covariance
E = Expected value operator
μX = Mean of the variable X
μY = Mean of the variable Y
σX = Standard deviation of X
σY = Standard deviation of Y
• Correlation can be represented using graphs, such as the one shown in below that
shows four hypothetical scenarios where one continuous variable is plotted along
the X-axis and the other along the Y-axis:
• In the graph:
 Scenario 1 shows a strong positive association (r=0.9)
 Scenario 2 shows a weaker association (r=0.2)
 Scenario 3 shows an absence of association (r ~ 0)
 Scenario 4 shows strong negative association (r = – 0.9)
• Regression analysis is a statistical tool to assess the relationship between a
dependent variable and one or more independent variables.
• The dependent variable Y is also known as outcome or response variable, and the
independent variables X1, X2 … are known as predictors, explanatory variables,
or covariates.
• Linear regression is the most common form of regression analysis that uses a
linear approach to assess the relationship between a scalar response (dependent
variable) and one or more explanatory variables (independent variables).
• Linear regression is used to estimate the values of a random variable based on the
values of a fixed variable.
• Simple linear regression is a regression with one independent variable, whilst a
multivariate linear regression has more than one independent variable.
• Most real-world scenarios involve multiple independent variables; therefore,
linear regression often describes the multivariate linear regression.
• A simple linear regression equation can be written as:
Y= a + bX
Where,
Y = Dependent variable
X = Independent variable
b = The slope of the line
a = the intercept (the value of y when x = 0)
Differences between correlation and regression analysis

• Correlation determines the degree to which two variables are associated but it
does not fit a line through the data points. On the other hand, linear regression
finds the best line that predicts the dependent variable from the independent
variables.
• Correlation analysis is applied when both variables are measured, while linear
regression is applied when X is a variable that is used to estimate Y.
Exponential Smoothing
• Exponential smoothing is a smoothing technique that weights past observations
with exponentially decreasing weights to make forecasts for future values.
• The greatest weight is given to most recent observations, lesser weight to
immediately preceding observations, even lesser weight to the observation
preceding that and so on.
• It supports time-series data with seasonality or systematic trends.
• There are the following types of exponential smoothing:

 Simple Exponential Smoothing: Simple exponential smoothing can be used to
generate short-term forecasts when a time series can be described using an
additive model with constant trend and no seasonality. Single exponential
smoothing only estimates the level component. The formula for the single
exponential smoothing is:
Where:
St= smoothed statistic, (the simple weighted average of recent observation xt)
S(t-1) = previous smoothed statistic
t = given time period
α = smoothing parameter; 0 < α < 1
 Holt’s/Double Exponential Smoothing: Holt’s or double exponential smoothing

can be used to generate a short-term forecast when a time series can be
described using an additive model with increasing or decreasing trends but no
seasonality. The formula for double exponential smoothing is:
S1 = x1
B = x1 – x0
Fort > 1,
St = axt + (1 –α)(S(t–1) + b(t–1))
βt = β(St – S(t–1)) + (1 – β)b(t–1)
Where:
bt = best estimate of the trend at time t
β= trend smoothing factor; 0 < β <1
 Holt-Winters’/ Triple Exponential Smoothing: Holt-Winters’ or triple

exponential smoothing can be used to generate a short-term forecast when a
time series can be described using an additive model with increasing or
decreasing trend and seasonality.
ct = sequence of seasonal correction factor at the time t

γ = seasonal change smoothing factor: 0 < γ < 1
The Basis for Selecting a Suitable Forecasting Method
• Seeing the valuable role that forecasting plays in long-term business planning and
the growth and success of an organisation, it is critical to select the right
forecasting method for your organisation.
• Forecasting enables managers to manage seasonality, changes in trends, sudden
changes in pricing or promotion strategies by the competition, sudden changes in
the economy, etc.
• A forecast can only provide the right answers when the right questions are asked,
and the right techniques are applied.
• Over the years, many forecasting techniques have become available to managers.
• Each technique has its merits and limitations and the forecaster has to apply the
right technique to get the right answer. Therefore, in this section, we will discuss
the selection of a suitable forecasting method.
• The selection of a method depends on many factors as given below:

 The purpose of the forecast
 The cost/benefit of the forecast
 The availability of historical data
 The range of the forecast
 The time available for making the analysis
 In the case of a particular product, the stage of the product’s life cycle
• Let us now understand the factors that influence the selection of the forecasting
method:
 The purpose of the forecast: The first and foremost criterion in the selection of a
suitable method is the objective behind doing the forecast. The reason behind
the forecast determines how accurate the forecast needs to be.
 The cost/benefit of the forecast: Forecasting techniques vary in their costs;

therefore, the forecaster must decide the level of inaccuracy they can accept as
a trade-off between cost and the value of accuracy in choosing a technique.
 The availability of historical data: The availability of historical data is
important when considering. It is also important to determine whether past
data is relevant and how much. Qualitative techniques use qualitative data,
such as expert judgement while quantitative techniques rely completely on
historical data.
 The range of the forecast: The objectives can range from short term decisions,
such as the immediate requirements of raw material or transport to long-term
decisions regarding production capacity, expansion, financial requirements and
policy.
 The time available for making the analysis: The selection of the forecasting
method depends on how much time is available to make the forecast.
• The stage of the product’s life cycle: If the forecast is to be made for a particular
product, the stage of the product’s life cycle is considered when selecting the
method. This is because the maturity of a product directly determines the
availability of data and being able to quantify the associations between the
factors.
Let’s Sum Up
• Sales forecasting is the process where the sales team of an organisation estimates
the future sales and revenue generated by the business.
• Good sales forecasts enable the decision-makers to make smarter decisions
regarding the organisation’s objectives, investments, budgeting, plant capacity,
inventory size, recruitment of staff, advertising decisions, pricing decisions, etc.
• Forecasting can be of the following two types, short-term and long-term.
• For any sales forecast, competition, technological advances, government policies,
and internal factors must be factored in.
• A good forecasting method should be simple, reliable, economical and produce
meaningful results quickly.
• Qualitative forecasting methods are based on opinions and intuition.
• Quantitative forecasting methods use mathematical models and relevant
historical data.
Let’s Sum Up
• Common qualitative forecasting methods include user expectations, sales force

composite, jury of executive opinion, Delphi and market test methods.
• Widely used quantitative methods include time-series analysis, moving averages,
correlation and regression analysis and exponential smoothing methods.
• The selection of a method depends on the purpose of the forecast, the cost/benefit
of the forecast, the availability of historical data, the range of the forecast, the
time available for making the analysis, and in the case of a particular product, the
stage of the product’s life cycle.
Chapter 4 : Sales Budgeting
Chapter Index
Slide
From-To
2 Topic 1 Meaning & Purpose 109 – 112
3 Topic 2 Methods of Sales Budgeting 113 – 119
4 Topic 3 Types of Sales Budgeting 120 – 125
5 Topic 4 Steps in Preparation of Sales Budget 126 – 134
6 Let’s Sum Up 135 – 137

• Explain about sales budgeting
• State methods of sales budgeting
• List types of sales budgeting
• Discuss steps in sales budgeting
• Describe bottom-up budgeting
Meaning & Purpose
• A budget refers to the estimation of revenue and expenses over a given period of
time in the future.
• A budget is a formal plan for the execution of future activities stated in monetary
terms.
• Budgets can be designed for specific units, departments, products, or the
organisation on the whole. While budgets are commonly expressed in monetary
terms, they can also be quantified in terms of non-monetary resources, such as
time.
• A sales budget is a plan that specifies the allocation of resources in a way that will
achieve the sales targets predicted by the sales forecast.
• The objective of preparing a sales budget is to plan for optimisation of resources
and achievement of sales forecasts.
Meaning & Purpose
• A sales budget forms the basis of the other budgets of the organisation, such as
the production budget. Hence, the sales budget must be carefully prepared.
• CIMA defines budgeting as “the process of expressing the predicted costs and
resources for a planned course of action over a given time in the future.
• “Budgeting is a management tool expressed in quantitative terms to easily
organise and prioritise complex or competing activities in an organisation.
• Sales budgeting is a planning tool that helps to plan and prepare for how and
when resources will be spent to achieve the desired sales targets and maximise
revenue.
• Sales budgeting is a means of control that helps to establish standards and
benchmarks and measure actual results against those. It is also a means of inter-
departmental coordination.
Meaning & Purpose
• Budgeting can also be used as a means to appraise the performance of teams or

individuals.
• Various managerial policies regarding long-term planning, cash flow, capital
expenditure, etc. are decided based on budgeting.
• Budgeting may thus be defined as the process of planning, preparing, organising,
managing, and controlling budgets.
Purpose of Sales Budgeting
• The purpose of sales budgeting is to plan and coordinate various sales-related
activities and to ensure they are effectively controlled and monitored.
Meaning & Purpose
• Following figure shows the role of sales budgeting in an organisation:
Planning
Control
Budgeting of other departments
Coordination
Measurement of performance
Fixing roles and responsibilities
Communication
Growth goals
Master budget
Financial goals
Motivation
Methods of Sales Budgeting
• Organisations have different ways in which they can approach sales budgeting.
• Most commonly used methods of sales budgeting are:
Affordability method
Percentage of sales method
Competitive parity method
Objective & task method
Zero base budgeting

Affordability Method
• It is the most straightforward method of sales budgeting.
• In the affordability method, the management develops the sales budget based on
its ability to spend on sales functions.
• The management decided how much it could afford to spend for selling its goods
and used this figure as a basis for budgeting. However, things often end up costing
more than what was estimated, and there may not be enough funds in the end.
Percentage of Sales Method
• In the percentage of sales method, firms set their sales budget as a specified
percentage of current or expected sales. This method is commonly used by firms
involved in the mass selling of goods and or those governed by finance.
• The percent of sales method is a quick method to develop a sales budget by closely
correlating items to sales. However, it is only possible to apply this method to line
items that correlate with sales; any fixed expenses cannot be projected using this
method.
Competitive Parity Method
• The competitive parity method is commonly used by firms faced with tough
competition.
• The competitive parity method is appropriate for sales budgeting for an industry
that is characterised by a large number of established competitors. It is a safe
strategy in a competitive market: keeping the firm in competition but avoiding a
sales budget that is more than needed.
• The competitive parity method has the following merits:

 It ensures that the budget allocation is always optimum, avoiding both
overspending that will lead to unnecessary losses and underspending that will
lead the firm to lose to the competition.
 It is a safer approach to budgeting when the firm does not have enough
information to determine how it can succeed in the market.
• Competitive parity has the following demerits:
 When a firm only follows a competitor, it may never have a competitive
advantage in the market.
 In the case of products that have as pacific requirement for additional or lower
spending, this approach may lead to incorrect budget allocation.
Objective & Task Method

• In the objective and task method, managers develop their budgets by identifying
the objectives of the sales function and then determining the sales-related tasks to
achieve those objectives. Once this is done, the cost of each task activity is
estimated to figure out the total budget.
• A typical objective and task method have three steps:
 Identifying objectives: In this step, the firm identifies the sales objectives and
results it wants to achieve.
 Identifying tasks: In the second step, the firm determines the specific tasks
that will help achieve the desired objectives.
 Estimating costs: In the last step, the firm determines how much money is
needed to complete each task and then allocates that amount to the sales
budget.
Zero Base Budgeting

• In the zero base budgeting method, the sales budget for each year is initiated from
scratch or zero base.
• The managers reassess all the line items in the cash flow statement and then
justify the expenses that would be incurred along with the revenue that will be
generated by the sales department of the firm.
• The zero base budgeting method does not automatically transfer any line item
from the previous budget to the new budget. It does not depend on previous
budget data and requires justification for every line item.
• Traditional budgeting lays more focus on controls based on the expenditure, zero-
based budgeting lays more focus on the reason behind each expenditure. It focuses
on identifying a task and its associated cost and then allocating these expenses
regardless of the current expenditure structure.
• Zero-based budgeting has the following merits:

 It helps to minimise costs by keeping expenditures in check and preventing the
budget from expanding.
 It encourages the strategic allocation of resources.
• Zero-based budgeting has the following demerits:
 It can promote short-term thinking.
 It is more resource-intensive, time-consuming, and complex than traditional
budgeting.
Types of Sales Budgeting
• In sales budgeting, there can be different types of budgets that enable an

organisation to maximise its resources, eliminate waste, and increase its revenue.
• Different types of sales budgets are as follows:
Sales Budget
• A sales budget estimates the sales in units and the revenue generated from sales.
• A sales budget specifies the amount of money a business is willing to spend on
sales-related expenses for the given time period. It covers various business
expenses, ranging from sales taxes to the sales team’s salaries, rent payments,
and utilities.
• The format of the sales budget is generally monthly or quarterly; the sales budget
can be presented in the annual format but that way, too much information is
grouped together.
• For a business with a large number of products selling spread over a bigger
geographic area, it is better to group expected sales into a smaller number of
product categories or geographic regions.
• The purpose of a sales budget is to help a firm decide its expenditure on sales
activities.
• A sales budget is a critical element of professional selling. A budget helps in the
growth of a business by determining what is needed and how much should be
spent on it.
Selling Expense Budget
• The selling expense budget is the estimated amount that will be incurred on
selling expenses in one accounting period.
• Every firm has to spend a certain amount on selling and administrative expenses
that are not dependent on the manufacturing units.
• Selling expenses budget includes those expenses that are needed to achieve the
objective of making sales such as sales commissions, advertising and promotion,
store displays, and distribution costs.
• Selling expenses are fixed costs that will be paid on monthly basis.
• Distribution costs include costs incurred in getting the product to the customer.
• The selling expense budget is prepared by the senior-level managers in the sales
and marketing department. It is aligned with the sales objectives of the
organisation, i.e., the selling expense budget estimates the selling expenses
needed to achieve the desired sales goals.
• The important components of the total selling expenses budget are given below:
 Selling personnel costs: The salesperson is directly involved in selling the product,
therefore, the salaries and commission paid to the salesperson fall under selling
expenses.
 Advertising and promotion expenses: Product placement done by advertising the
product through various platforms is important for selling the product. Hence,
advertising and promotional expenses fall under selling expenses. These are
generally fixed.
 Variable selling expenses: Variable selling expenses include ordering costs, handling
costs, and other selling expenses that are incurred only when sales are made and the
product needs to be distributed to the customer.
 Additional selling expenses: Various expenses such as supplies, travel, etc. also fall
under selling expenses.
Sales Department’s Administrative Budget

• The sales department’s administrative budget comprises an estimate of all selling,
general, and administrative expenses for an accounting period.
• The administrative budget only considers costs not directly associated with sales
or production but needed to run the sales function. It includes executive salaries,
depreciation, amortisation, consulting, legal fees, rent, insurance, and office
supplies.
• An administrative budget helps the management to exercise control of the day-to-
day activities of the firm.
• The administrative budget includes all the expenses that a business would incur
even if there was no sales activity.
• The information included in the administrative budget is not directly drawn from
other budgets.
• The estimate of administrative expenses is derived from the overall corporate

activity instead.
• To estimate costs for this budget, it is useful to determine the activity levels at
which incremental costs may be incurred and include them in the budget.
• Incremental budgeting is a simple way to derive the administrative expense
budget, where the estimates are based on the last budget and adjusting the
figures by 5 or 10 percent and using the result as the current budget.
Steps in Preparation of Sales Budget
• The budgeting process typically comprises the following steps:
Research and analysis to assess the market conditions
Preparing a sales forecast based on past data and market conditions
Prioritising the objectives determined in the planning process
Evaluating and quantifying the total available resources
Determining and quantifying the inputs and activities needed to achieve

the desired objectives.
Allocate a part of the total resources towards each input or activity

• There are two approaches for preparing the sales budget for a company:
Top-down budgeting
Bottom-up budgeting
Top-down Budgeting
• In the top-down budgeting method, the top management prepares a high-level
budget based on the firm’s objectives and allocates the amounts for the individual
departments including sales.
• The sales department managers prepare their budget based on these numbers.
• The top management uses the previous year’s budget and financial reports, past
data, current market conditions, and macroeconomic factors to prepare the high-
level budget.
• Top-down budgeting suits smaller business structures where the chain of
command between the top management and lower-level managers is shorter.
Top-down Budgeting Process

• The top-level budgeting process begins with top-level executives meeting to set
targets for sales, expenses, and profits.
• The finance department then allocates budgets to the other departments.
• The sales department now prepares its detailed budget, expressing the sales
function in terms of resources.
• The detailed budget from the sales department is sent back to the finance
department that then reviews it to ensure that it is aligned with the company’s
overall goals.
• The budget may need revisions, after which it is finalised and entered into the
system.
Advantages of Top-down Budgeting
It helps to focus on the overall growth of the organisation.
It ensures that department managers are aware of the top-level

management’s expectations.
It aligns departmental targets to the overall goals of the organisation.
It is less time-consuming and less resource-intensive.

Disadvantages of Top-down Budgeting
Departmental managers are less

involved in the budget-making process,
potentially decreasing their motivation
to ensure its success.
Top-level managers may set unrealistic

targets which may be challenging for
lower-level managers to achieve.
Without inputs from the key people

involved, budgets can often be
insufficient or excessive.
Bottom-up Budgeting
• Bottom-up budgeting begins at the department level, moving up to the top level.
Here the various departments compile their targets and cost estimates for the
given accounting period.
• All the individual estimates are then added to get the overall budget of the
organisation.
• In this method, the managers of each department provide their inputs since they
are more familiar with the day-to-day operations of the company.
Bottom-up Budgeting Process

• In bottom-up budgeting, targets and resources are estimated at the most detailed
level, reporting line item for each unit or department.
• Once departments prepare their projections of activities and expenditures, the

costs are added to arrive at the total budget for the department.
• The budgets of all departments are then summed up to obtain the overall budget
for the organisation.
• The top management reviews the budget to see whether the budget is aligned
with the goals and objectives of the firm for the accounting period. If the top
management is not satisfied with the budget estimates, they may ask the
respective departments to revise the budgets and resubmit for approval.
• Once approved, the budget is sent to the finance department to allocate resources
to individual departments.
Advantages of Bottom-up Budgeting
Estimates are more realistic and accurate because

department managers can understand the costs,
resources, and requirements of their respective
departments better.
There is more attention to detail regarding the

targets and resources needed to achieve those
targets.
When managers are involved in the budget-

making process, their motivation to achieve the
targets is higher.
Disadvantages of Bottom-up Budgeting
If errors occur at department levels in

the estimation, they can compound when
individual budgets are added up.
Sometimes managers can estimate more

resources than needed while keeping
targets low to improve their chances of
exceeding targets.
It generally takes more time than top-

down budgeting.
Let’s Sum Up
• A budget is a formal plan for the execution of future activities stated in monetary
terms. Budgets can be expressed in both terms of monetary and non-monetary
resources.
• A sales budget is a plan that specifies the allocation of resources in a way that will
achieve the sales targets predicted by the sales forecast.
• Sales budgeting is a planning tool that helps to plan and prepare for the spending
of resources to achieve the desired sales targets and maximise revenue.
• The role of sales budgeting in an organisation involves planning, control,
establishing and maintaining coordination, measuring performance, fixing roles
and responsibilities, communication, growth goals, building the master budget,
budgeting of other departments, financial goals, and motivation.
Let’s Sum Up
• Some important methods of sales budgeting are the affordability method, the
percentage of sales method, the competitive parity method, the objective and task
method, and the zero base budgeting method.
• The different types of budgets relevant to sales include the sales budget, the
selling expense budget, and the sales department administrative budget.
• The budgeting process typically comprises research and analysis to assess the
market conditions, a sales forecast based on past data and market conditions,
prioritisation of the objectives, evaluation, and quantification of the total available
resources, determination, and quantification of the inputs and activities needed to
achieve the desired objectives and allocation of a part of the total resources
towards each input or activity.
Let’s Sum Up
• The two methods for preparing the sales budget for a company are top-down
budgeting and bottom-up budgeting.
• Top-down and bottom-up budgeting are often used together by managers, one
acting as a check upon the other.
Chapter 5 : Sales Quotas
Chapter Index
Slide
From-To
2 Topic 1 Meaning & Purpose of Sales Quota 142 – 144
3 Topic 2 Types of Sales Quota 145 – 149
4 Topic 3 Selling-by-Objectives Management 150 – 152
5 Topic 4 Principles of Sales Quota 153
6 Let’s Sum Up 154 – 156

• Describe the meaning and purpose of sales quota
• Discuss the various types of sales quota
• Understand selling-by-objectives planning
• Learn the principles of sales quota
Meaning & Purpose of Sales Quota
• A sales quota is defined as a quantitative sales target assigned to a particular

sales unit for a specific period. This unit may be a particular region, sales team, or
individual salesperson.
• Sales quotas help to stimulate a sales unit to perform its best and support the
sales objectives of the firm.
• Apart from motivating the salesperson or team, sales quotas also act as a basis for
establishing incentives, compensation plans, and standards for performance
evaluation.
• Sales quotas enable managers to understand how productive their sales teams are
and whether the sales processes are functioning optimally.
• Sales quotas can be measured in various ways, such as net profits, sales volumes,
or activity.
• Sales quotas have the following role in an organisation as shown below:
Provide targets,
Create standards
compensation
for evaluating
plans, and
performance
incentives
Control selling Highlight successful

activities salespersons
Monitor and
regulate selling
expenses
• Two methods are commonly used for creating sales quotas:

 Top-down Approach: In the top-down approach, the top management
establishes the sales goals for the specified time that align with the overall
objectives of the firm and then assigns sales quotas to support these goals.
 Bottom-up Approach: In contrast to the top-down approach, the bottom-up
approach analyses the past sales data of each salesperson or team and uses this
information to generate sales quotas. The bottom-up approach establishes a
quota at the upper limit of sales that salespersons have achieved in the past
and can therefore set more realistic goals.
Types of Sales Quota
• Sales managers can use various types of quotas for their teams. The common
types of sales quotas that managers use are:
Sales
Activity
Volume
Quota
Quota
Expenses
Profit Quota
Quota
Sales Volume Quota

• The most widely used sales quotas are based on sales volume.
• Sales volume quota includes sales in terms of units sold over a specified period. It
is typically established for one year and the sales force needs to achieve their
assigned quotas over the year.
• Sales volume quotas motivate salespersons to achieve certain targets over the
year, for instance, register a certain number of new users.
• Sales volume quotas help to even out the sales of slow-moving and fast-moving
products and also the different categories of customers per sales unit.
• The sales volume quota may be set in monetary or sales unit terms.
• Sales volume quotas in terms of sales units are more suitable for products whose
unit price is high or in markets where prices fluctuate significantly.
• Sales volume quotas in monetary terms are more suitable when multiple products
are sold to one or different categories of customers.
• Sometimes, sales volume quotas are set on a point basis, i.e., points are awarded
when a specific level of sales in units and monetary terms is achieved per product
or customer.
Activity Quota
• While sales volume quotas are the most common types, another widely used
alternative involves creating quotas based on activity.
• Activity quotas help to ensure that important sales activities are performed within
a given period.
• The common activities on which this quota is based include the number of sales
presentations made, number of prospect calls made, number of meetings, number
of recovery calls made, number of sales closed, and number of new clients
acquired.
• Sometimes, activities that constitute the part of the sales process, but they do not
translate directly into sales, are also included.
• In a competitive market, the sales force may also need to perform activities
related to market development to build the reputation of the company.
• Activity quotas are useful because they motivate the sales force to perform not
only the urgent selling activities but also the non-selling market development-
related activities that are important to the company, on time.
Profit Quota
• Profit quota is another common type of sales quota. Here, the sales force is
expected to sell enough units or subscriptions to generate a specified amount of
profit for the given period.
• This type of quota is useful for companies that have products with a range of
different profit margins.
• Profit quotas are, therefore, suitable for multiproduct companies, for example,
FMCG companies, where different products contribute to different levels of
profits.
• They motivate the sales force to spend more time selling high-margin items and
less time on less profitable items.
Expenses Quota
• There are some companies that set quotas for expenses involving different sales
levels achieved by the sales team.
• The sales force is given a budget that is a percentage of a sales territory’s sales
volume and is expected to spend only that sum as expenses. This type of quota
ensures that the sales force tries to keep selling costs within acceptable limits.
• These quotas are difficult to set and may also demotivate the sales force.
Selling-by-Objectives Management
• Selling by Objectives (SBO) is a common concept in a selling organisation.

Establishing sales quotas in a sales organisation is an involved process and SBO
management is a strategic management technique that aims to improve the
performance of the sales organisation by defining the selling objectives.
• SBO management is a managerial process where the management and sales
persons come together to determine the common objectives and agree on the
anticipated results.
• The idea behind SBO is that when the management and employees together
establish specific objectives, the desired results, and the actions needed to achieve
these results for the organisation in advance, it improves the employees’
motivation to participate and commit to their work.
• SBO management sets future targets by treating the territory as a business and
managing each account.
• SBO has the following key features:
 The salesforce is involved in setting the selling objectives of the organisation.
 Selling objectives are developed at both the qualitative and the qualitative
levels.
 Selling objectives need to be both challenging and attainable.
 It aligns the overall objectives in the same direction.
• Following figure shows the advantages of SBO management:
Improves salesforce participation and motivation
Helps to set realistic and measurable goals
Improves communication and coordination
Improves productivity
Principles of Sales Quota
• The setting of sales quotas is a difficult process without a definite formula to

follow.
• The key to establishing sales quotas is finding the right balance between being
challenging and attainable.
• The principles of sales quota allow managers to create well-balanced sales quotas.
These principles are shown below:
Alignment
Objectivity Simplicity Accuracy Fairness
with strategy
Alignment
with
Attainability Flexibility Certainty Timeliness
compensation
plans
Let’s Sum Up
• Sales quotas act as performance targets assigned to a marketing unit (i.e., a

salesperson, branch office, district or region, or dealer or distributor) for a
specified time.
• Sales quotas function as a managerial tool for defining and boosting the sales
effort of an organisation, helping to plan, control, and evaluate its sales activities.
• Sales quotas set clear goals that both motivate the sales team and appraise its
performance.
• Sales quotas provide a basis for compensation and incentive plans.
• They also help to reveal the strengths and weaknesses in the organisation’s selling
structure.
• Sales quotas create standards for evaluating performance, provide targets,
compensation plans, and incentives for the sales force, control selling activities,
highlight successful salespersons, and monitor and regulate selling expenses.
Let’s Sum Up
• Two methods are commonly used for creating sales quotas: the top-down and the
bottom-up approach.
• The most widely used sales quotas are based on sales volume that includes sales
in terms of units sold over a specified period.
• Another widely used sales quota is based on activity that helps to ensure that
important sales activities are performed within a given period.
• Profit quota is where the salesforce is expected to sell enough units or
subscriptions to generate a specified amount of profit for the given period.
• Expenses quotas are based on expenses related to the different sales levels
achieved by the salesforce.
• Sales teams often operate with some sort of combination of different types of sales
quotas.
Let’s Sum Up
• In SBO management, the management and salespersons come together to

determine the common objectives and agree on the anticipated results.
• In SBO management, the selling objectives are developed at both the qualitative
and the qualitative levels.
• SBO management improves salesforce participation and motivation, helps to set
realistic and measurable goals, improves communication and coordination, and
improves productivity.
• The principles of sales quota allow managers to create well-balanced sales quotas.
These principles are objectivity, simplicity, accuracy, fairness, attainability,
alignment with strategy, alignment with compensation plans, flexibility, certainty,
and timeliness.
Chapter 6 : Sales Organisation
Chapter Index
Slide
From-To
2 Topic 1 Different Types of Sales Organisations 161 – 173
3 Topic 2 Types of Sales Force Structure 174 – 183
4 Topic 3 Linking Sales and Distribution Management 184 – 186
5 Let’s Sum Up 187 – 190

• State the role of sales organisations
• Discuss the different types of sales organisations
• Explain the different types of sales force structure
• Describe the link between sales and distribution management
Different Types of Sales Organisation
• The sales organisation is the unit of an organisation that is responsible for the
sales and distribution of goods and services.
• A sales organisation comprises a group of individuals who handle different aspects
of the sales function such as selling, distribution, advertising, etc.
• The sales organisation works towards increasing sales volume and maximising
revenue for the firm. It helps to define and allocate the responsibilities and duties
of the sales force. It promotes coordination of activities of the sales department
and its interaction with the other departments such as advertising, promotion,
and distribution.
• As stated earlier, the structure of a sales organisation refers to the segmentation
of the sales team into specialised groups. This structure is decided by various
factors such as the region, the number of products and services, the size of the
sales force, and the customer categories.
• A sales organisation performs the following functions in an organisation:

 Detailed market analysis, including products and competitor research
 Developing appropriate sales policies
 Sales forecasting based on relevant data
 Advertising and marketing decisions
 Pricing decisions
 Branding and positioning decisions
 Decisions regarding distribution channels
 Selection, training, motivating and controlling the sales force
 Decisions regarding sales quotas and compensation plans
 Allocation of sales quotas, sales duties, and territories
 Maintenance of sales and salespersons data

 Purchase related decisions
 Creation of demand for products
 Processing and handling of the orders received
 Collection of dues for credit sales
• The structure of the sales organisation is critical for the success of a selling
enterprise.
• A proper structure allows the firm to make the most of individual skills and
knowledge whilst ensuring that the right sales reps are targeting the right
customers.
• The salesperson is a critical component of the sales organisation and is responsible
for several activities in a sales company.
• A sales organisation is structured in a manner that helps to easily identify the

activities performed by an individual or group.
• The structure helps to clearly define the roles and responsibilities and promotes
coordination that allows those involved to work efficiently and achieve the sales
goals of the company.
• Sales organisations are generally modelled in the three ways as shown below:
The The
Pod Island
The
Assembly
Line
The Assembly Line Sales Organisation Structure

• In the assembly line model, sales teams are divided based on the job description of
each salesperson. It is so named because of the similarities between sales
operations under this model with manufacturing assembly lines.
• Like a manufacturing assembly line, specialised salespersons help buyers
navigate a particular phase of the customer journey.
• In this model, account business development reps generate qualified leads that
are then handed to an account executive, who closes the sale.
• Once the sale is closed, a customer account manager takes over the customers and
manages the relationship throughout the customer’s life cycle.
• Following figure represents the assembly line sales organisation structure:
Sales
Account
Inbound Developme Customer
Executives
Leads nt (Qualify Success
(Closers)
Leads)
• The benefits of Assembly Line Sales Organisation model are as follows:
Specialisation leads to increased operational efficiency
Increases the reps’ expertise in specific sales activities
Quicker sales process

• The limitations of this model are the following:
Increased risk of running into silos
The numerous handoffs may decrease the quality of

customer experience
Costs may increase due to task specialisation

The Island Sales Organisation Structure

• In the island model, every seller is unspecialised and possesses knowledge of
several different areas. Here, the same rep manages a single customer from
prospecting to on boarding, i.e., the rep generates, qualifies, and even closes leads.
• This type of sales organisation offers reps greater autonomy to build and grow
customer relationships.
• Following figure shows the island sales organisation structure:
Founder
Salesperson 1 Salesperson 2 Salesperson 3 Salesperson 4 Salesperson 5

• The benefits of this model are the following:

 It makes customer-seller relationships more streamlined
 It maximises the individual output of the reps
 It promotes an individualistic and competitive culture
 Managing numerous accounts at different stages of the customer lifecycle can
be quite challenging
 Individual success may become more important than collaboration
 It is harder to scale up this structure
The Pod Sales Organisation Structure

• The pod model combines elements from both the island and assembly line models.
• Like the island model, a single pod manages a customer from prospecting to on
boarding. But like the assembly line model, reps of each pod specialise in a specific
phase of the customer journey.
• The pod model is preferred by larger organisations that have a large sales force
they want to organise because it is easier to assign pods to certain product lines,
geographies, accounts, etc. as needed.
• Following figure shows the pod sales organisation structure:
Sales Development
Inbound Leads
(Qualify Leads)
Account Executives
Customer Success
(Closers)
• The benefits of this model are the following:

 Less risk of silo formation between roles and functions
 Better customer experience due to smoother handoffs as a result of enhanced
collaboration
 Sales team adjustments are more responsive
 Individual motivation may be tough
 Poor performers may ride on the achievements of performers
Types of Sales Force Structure
• The sales force comprises all the human and material resources that an
organisation uses for its selling activities.
• The sales force’s structure determines how effective it is.
• For instance, if a company sells products that need specific technical knowledge, it
would not be logical to sell all products by area.
• Various factors such as budget, customers, and organisational culture decide the
structure of the sales team that is right for a firm.
• Supporting functions such as sales enablement and sales operations also influence
the sales organisation structure.
• Managers need to consider the following factors when deciding the structure of the
sales force:
 Nature of the product: The nature of the product is important in deciding the
sales force structure. For instance, products with shorter lifecycles will need
different selling efforts than those with longer lifecycles.
 Demand for product: The demand for a particular product plays a critical role
in allocating salespersons to a territory. For instance, a product with constant
demand and high turnover requires lesser selling effort than one with low or
fluctuating demand and low turnover.
 Transport: The transport facilities available for a particular product also need
to be considered when dividing the sales force into a specific structure. For
marketing and sales to be effective, a region with poor transport facilities
should be divided into smaller territories.
 Competition: Highly competitive sales territories mean that the size of the
sales territory is reduced. In these territories, salespersons need to meet
dealers and customers more often to maintain product demand. Hence, in such
territories, the sales force should be allocated to smaller territories.
• Following figure shows the commonly used sales force structures. These
structures are based on the different divisions in the organisation.
Product based
Geographic
based
Customer based
Combination
based
Product Based
• In this type of division, the responsibilities of the sales force are defined based
only on the product or product lines.
• If the reps gain expertise for a particular product or service, they can better
convey its value and use to the prospects.
• Product type is suitable in case the organisation has many products (/services) and
it can divide the departments according to the products.
• It also makes sense to align salespeople to products when a company sells highly-
priced products or technically-complex products.
• Product-based sales force structures have the following advantages:

 Division according to product ensures that each product gets required
attention.
 It enables sales reps to specialise in specific products.
 It allows managers to guide selling efforts.
 It allows managers to assign responsibilities to salespersons more effectively.
• Product-based sales force structures have the following disadvantages:
 Efforts may be duplicated within geographies and customer accounts, resulting
in higher costs
 Coordination may become difficult between two product departments.
 Selling costs may be higher when dividing the sales force according to the
products.
 Operational costs may be higher because each product is handled differently.
Geographic Based
• This structure makes it easier for managers to appraise their reps’ sales
performances relative to the potential of a particular territory or region.
• Geographic-based sales force structures have the following advantages:
 Transport costs are reduced since responsibilities have been defined based on
areas.
 Customer services may be improved in geographic-based sales force structures.
 It is easier to evaluate sales performances according to zones.
• Geographic-based sales force structures have the following disadvantages:

 Managers may find it difficult to coordinate the sales force for different
markets.
 The chance of conflicts related to resource allocation between zones is higher.
 The possibility of sales reps working in silos is higher, preventing them from
developing cross-functional expertise.
Customer Based
• In this type, the sales force structure is organised based on the customers to whom
the products are offered.
• Most firms have customer accounts of varying sizes and needs; by defining
responsibilities accordingly, sales reps can become familiar with each type and
meet their needs better.
• A customer-based structure is suitable when the number of customers seeking

specific services is huge.
• It is also suitable when the target market comprises premium customers who do
not mind paying for the services offered.
• Customer-based sales force structures have the following advantages:
 Since the departments are divided according to customers, each customer gets
proper attention.
 Customer satisfaction is increased as customer services are maximised.
 Sales planning and policies can be improved by focusing on different customer
categories.
• Customer-based sales force structures have the following disadvantages:

 Planning and developing the market according to the customer can be quite
expensive for the firm.
 Managing resources may prove difficult.
 Coordination of sales activities is more difficult.
 Constant communication with team members is needed to ensure all customers
are provided with the same quality of service.
Combination Based
• The combination-based approach of organising the sales force combines the other
three approaches to structure the sales force.
• This structure is suitable in organisations that offer a variety of products to
different customer categories spread over a big geographical area.
• This structure is also suitable when a company seeks to concentrate on different
customers or products within a specific location.
Linking Sales and Distribution Management
• Sales refers to the exchange of products or services against some amount of money
and is a firm’s only revenue-generating function.
• Distribution is the process of making a product or service available for
consumption by the end-user.
• Distribution management is used to supervise this process to ensure it is efficient
and effective.
• Sales and distribution management are both elements of the marketing mix.
Marketing mix is a set of marketing tools that help to promote a product or service
in the market. It is mainly centred around the 4Ps, i.e., the product, price, place,
and promotion.
• Sales management and distribution management are both a part of it and
intricately linked, and one cannot exist or operate without the other.
• Sales management devises the strategy and action plans to achieve the sales goals
of revenue and growth, and the distribution management works towards the
execution of these plans.
• Integration between the two functions is critical for customer satisfaction.
• The sales organisation is responsible for both the sales and distribution of goods
and services.
• Role of distribution management in some important sales management activities

are:
Sales Management Activities Distribution Management Role

Policy for successful coverage of Follow call plan Make customer calls
markets and distribution channels productive Use multi-channel
approach
Policy for handling customer Quick action at the customer
complaints interface level Report to senior
management if the problem persists
or escalates
Planning of advertising and sales Coordination with distribution
promotion channels Responsibility of execution
with distribution channels
Let’s Sum Up
• Sales organisation is the unit of an organisation that is responsible for the sales
and distribution of goods and services.
• It is a structured group of individuals who interact with each other to achieve the
desired sales goals.
• A sales organisation generates revenue for the organisation by persuading
prospective buyers to purchase a product or service.
• A sales organisation helps to assign roles and responsibilities amongst the
salespersons to ensure targets are met.
• It ensures that the sales team is focusing on both critical selling and non-selling
activities.
• It establishes the sales routine in an organisation, ensuring proper supervision of
the salesforce and stimulating the sales effort.
Let’s Sum Up
• It helps managers to avoid duplication of duties and functions and reduce the
chances of confusion.
• The nature, size, and financial conditions of the organisation, its sales policies,
distribution methods, the region, the number of products and services, the size of
the sales force, and the customer categories influence the structure of the sales
organisation.
• A sales organisation is involved in several functions of the organisation such as
performing detailed market analysis, developing appropriate sales policies,
forecasting sales, advertising, marketing, pricing, branding, positioning, and
distribution decisions, selection, training, motivating and controlling the sales
force, set and allocate sales quotas, compensation plans, sales duties, and
territories, maintain sales and salespersons data, processing and handling of the
orders received.
Let’s Sum Up
• Sales organisations are generally modelled in three ways: the assembly line
model, the island model, and the pod model.
• Sales force can be structured based on product, geographic location, customer, or a
combination of the three.
• In the product-based division of sales force, the responsibilities of the sales force
are defined based on the product or product lines.
• In geographic location-based division, departments are divided according to
territories or geography.
• In a customer-based division, departments are divided according to the customers
to whom the products are offered.
• The combination-based approach combines the other three approaches to
structure the sales force.
Let’s Sum Up
• Distribution is the process of making a product or service available for

consumption by the end-user. Distribution management is used to supervise this
process to ensure it is efficient and effective.
• Sales and distribution management are both elements of the marketing mix.
• Sales management and distribution management are intricately linked, and one
cannot exist or operate without the other.
• Sales management devises the strategy and action plans to achieve the sales goals
of revenue and growth, and the distribution management works towards the
execution of these plans.
Chapter 7: Manpower Planning - Process and
Importance
Chapter Index
Slide
From-To
Recruitment & Selection of Salesperson -

2 Topic 1 195 – 200
Methods & Process
3 Topic 2 Training & Development 201 – 209
Motivational Theories and Their Application

4 Topic 3 210 – 216
in Motivating Salespeople
5 Let’s Sum Up 217 – 218

• Describe the manpower planning - process and importance
• Explain the recruitment & selection of salesperson - methods & process
• Discuss the training & development
• Interpret the motivational theories and their application in motivating
salespeople
Recruitment & Selection of Salesperson - Methods &
Process
• Right salesmen can help enterprises acquire marketing objectives.

• Recruitment and selection are critical decisions in salesforce management that
situation with ensuring the proper type (right qualities, right qualifications and
right experience) of sales employee.
• The recruitment of salesperson shall begin with the project of determining the
number of humans to be inducted into the enterprise.
• The number of salespersons required will depend on such elements as the number
of clients (existing and potential), the number of times the clients want to be
contacted and the time required, etc.
• It is crucial that the enterprise has the proper number of salespersons. The
number shall neither be more nor less.
Process
• Methods of recruitment of salespersons are defined as follow:

 Recruitment of salespersons from among the existing employees: Preference
can be given to the present personnel of the concern. Employees working in
different departments can be taken into consideration if they own the preferred
qualification, aptitude and mind-set for a sales career. Some of the benefits of
choosing from within the enterprise are:
 They may be easily assessed, as their carrier statistics are already available.
 Such personnel is speculated to be greater loyal and sincere.
 The initial training to be given (known as induction training) isn’t important

as they are already familiar with the organisation.
 Better management may be exercised over their activities as they are not
strangers. To quote the proverb here ‘known devil is better than an unknown
angel might be extra appropriate.
Process
 As the person is already a worker of the concern, he wants not to be paid a

completely excessive remuneration.
 Recruitment of salespersons through newspaper advertisement: The vacancy
can be notified through manner of newspaper advertisements. The nature of
work, the qualification expected, preceding selling experience, income offered,
etc., could be commonly specified inside the advertisement itself.
 Recruitment of salespersons through employment exchanges: The Government
run employment exchanges can be contacted in this regard. The company can
also additionally request such employment exchanges to furnish a listing of
eligible candidates. There also are private employment experts and bureaus
that offer valuable facts on such matters.
Process
 Recruitment of salespersons through Campus interviews: Another famous

technique of recruitment nowadays is what is known as ‘campus interview’. By
this it is supposed that the employers will go to colleges and universities at a
particular time frame each year and interview the students studying certain
diploma courses.
 Recruitment of salespersons from competitors: Salespersons working for the
competition can be lured with higher perquisites. The ethics in this type of
practice has been a depend on controversy. The benefit of such a method is that
the salespersons selected are already properly versed inside the particular line
of enterprise and consequently can carry out their work greater effectively.
 Recruitment of salespersons from unsolicited application: Renowned companies
obtain a number of applications often from the unemployed graduates despite
the fact that the concern has not referred to as for applications. The employees
department of the concern might also additionally keep a document of all such
applications for future consideration.
Process
 Process of recruitment & selection of salesperson: Another crucial source of

recruitment is that the organisation can be knowledgeable of a suitable
candidate for a job inside the concern. Such a recommendation might also
additionally come either from a worker of the company or from any friend or
relative of the organisation. The following steps are performed:
i. Application blank: Necessary facts about the applicant is required to keep
in mind for appointment. Generally, the applicants are requested to use on
company’s application form, dispatched directly to candidates towards a
requisition or an application form, called application blank given inside the
advertisement itself.
ii. Screening: All applications will not be taken into consideration. Screening
is a method via way of means of which applications are to be screened out
(rejected) from in addition consideration, on the premise of unsuitability.
The final applications are officially taken into consideration via way of
means of appointment, subject to additional formalities.
Process
iii. Reference: Generally, it is a common practice to ask the applicant to say

the names of references or referees whose income supervisor can inquire
about the applicant’s integrity, modern personality, and skills. The features
are checked with care and warning of the sales manager via way of means
of contacting the referees.
iv. Personal interview: This is a crucial step in the method of selection. Only
the screened applications are taken into consideration for selection and the
organisation sends out interview letters. Personal interview is a must.
v. Test: A test is an extra instrument that is used to further evaluate
applicants in order to establish their fit for the job.
Training & Development
• Research shows that only 20% of the workforce has the skills that will be required
ten years from now. That means training and development are guaranteed to be
needed at some point of the strategic growth process.
• Employee Training and Development facilitates in updating personnel’ abilities
and information for performing a Job which on the quit results in growing their
work performance and growth the productiveness of an organisation.
• For salesforce, training is pivotal in order to assure that product benefits are
conveyed effectively to the target audience.
• Training is not only restricted to train the employees but to also to have a
competitive edge in the market.
• One can sell only when he/she is competent enough to convey the multi-uses and
benefits of the products which should drive the feeling of satisfaction among the
customers.
Content of Training
• The official training content material definition consists of all facts provided to
beginners with the goal of teaching understanding or skills.
• This way training content material can take several forms, such as text, static
visible and video, audio, and interactive elements.
• The following are a few forms of company training content material you must
consider the usage of for your courses, relying at the subject, complexity, and
different considerations:
 Slide presentations: Although this is the most primary kind of training content
material, it still deserves a mention. This category covers each PowerPoint
presentations and different types of slide decks.
 Guide: Guides are an excellent manner of providing step-by-step instructions to

finish a task. Not only do they clearly lay out the data learners want to discover
ways to carry out a procedure, however they have another use. Employees can
go back to courses to refresh their memories inside the future.
 Charts and graphs: Charts and graphs are beneficial for various purposes: they
are able to specific a big amount of information, compare or comparison details,
display how information has changed over time, and spotlight trends, to call
just a few uses.
 Mobile learning content: Mobile learning content material is not precisely a
category of its own, as much as a mindset. It is good for busy personnel on the
go, because it permits learners to consume the small bits of expertise they want
without useless information.
 Quiz: When training involves learning a big amount of information, ordinary

quizzes are beneficial for checking that learners recall everything they have got
covered so far. Quizzes even work properly for repetition purposes, reviewing
what personnel already discovered earlier than they move directly to the next
point.
 Games: Whereas quizzes and simulations are excellent for checking progress,
games upload a detail of fun for your eLearning path. This is usually crucial for
company training however specially whilst the subject is quite dry. If you are
providing your course to a large organisation of learners, badges and
leaderboards will introduce a few healthy competitions.
Methods of Training
• Management development is a systematic manner of growth and improvement by
which the managers develop their skills to manage. It is involved with not best
improving the overall performance of managers however additionally giving them
possibilities for increase and development.
• There are strategies through which managers can enhance their understanding
and skills.
• One is through formal training and different is through the process experiences.
• On the job training is very important considering real learning takes place
handiest when one practices what they have studied. But it is also similarly vital
in gaining understanding through classroom learning.
• Learning turns into fruitful only whilst concept is blended with practice.
On-the-Job Training (OJT)

• This is the most common method of training in which a trainee is placed on a
specific job and taught the skills and knowledge necessary to perform it.
 Job rotation: This training approach includes movement of trainee from one
activity to any other benefit knowledge and experience from specific activity
assignments. This approach facilitates the trainee understand the troubles of
other employees.
 Coaching: Under this approach, the trainee is placed under a specific manager
who capabilities as a teach-in training and gives remarks to the trainee.
Sometimes the trainee might not get a possibility to express his ideas.
 Job commands: Also called step-by-step training wherein the trainer explains
the manner of doing the roles to the trainee and in case of mistakes, corrects
the trainee.
 Committee assignments: An organisation of trainees are requested to resolve a

given organisational trouble through discussing the trouble. This facilitates
enhanced team work.
Off-the-Job Methods
• On the job training methods have their personal limitations, and for you to have
the overall improvement of employee’s off-the-job training also can be imparted.
• The techniques of education which can be followed for the improvement of
personnel away from the field of the job are known as off-the-job methods.
• The following are some of the off-the-job techniques:
 Case study method: Usually case study deals with any problem faced by a
enterprise which may be solved by an employee. The trainee is given the
possibility to analyses the case and come out with all possible solutions. This
approach can enhance analytic and crucial for considering an employee.
 Role-playing: In this case also a trouble situation is simulated asking the

employee to anticipate the function of a specific character inside the situation.
The participant interacts with different participants assuming special roles.
The complete play may be recorded and trainee gets a possibility to observe
their own performance.
 In-basket method: The employees are given facts about an imaginary company,
its activities and products, HR hired and all information associated with the
firm. The trainee (worker under training) has to make notes, delegate
responsibilities and prepare schedules inside a specified time.
 Business games: According to this approach, the trainees are divided into
companies and every organisation has to talk about approximately diverse
sports and features of an imaginary organisation. They will speak and
determine approximately diverse topics like production, promotion, pricing etc.
 Grid training: It is a continuous and phased programmer lasting for 6 years. It

consists of levels of planning development, implementation and evaluation. The
grid takes into consideration parameters like concern for humans and problem
for humans.
 Management education: At present universities and management institutes
offers excellent emphasis on management education. Many management
institutes offer not handiest degrees however additionally hands-on experience
having collaboration with enterprise concerns.
 Conferences: A meeting of several human beings to talk about any difficulty is
referred to as conference. Each participant contributes by studying and
discussing numerous problems associated with the topic. Everyone can express
their own viewpoint.
Motivational Theories and their Application in
Motivating Salespeople
• Motivation has been researched by psychologists and others for lots of years.
• A variety of theories were developed which might be pertinent to the motivation of
salespeople.
• Since knowledge of the relationship among motivation and the overall
performance of a person or a group in an organisational setting is important,
motivation has become an examination of academic and expert interests. At the
same time, researchers and theorists are working closer to investigating to
discover reasons and rationales behind motivation and the way it pushes
personnel to work.
• Moreover, the relationship among motivation and different psychological variables
consisting of activity overall performance and activity satisfaction have turned out
to be essential problems of scholastic investigations. So far, the theoretical
developments on motivation were categorised into classes.
• Motivation is a state-of-mind, full of strength and enthusiasm, which drives

someone to work in a positive manner to attain preferred goals.
• Motivation is a force which pushes someone to work with excessive degree of
commitment and awareness even if things are towards him.
• Motivation interprets into a certain form of human behaviour.
Need Hierarchy Theory

• Maslow’s classic hierarchy of needs model proposed that there are five
fundamental needs which are arranged in a hierarchy as shown below.
Category Type Characteristics
Physical Physiological The basics of survival such as hunger and thirst.
Safety Protection from life’s unforeseeable events such as
accidents and illness.
Social Belongingness Striving to be accepted by those we care about and love
(particularly one’s family) and to be a significant figure
in their lives.
Esteem A desire for prestige and a high reputation, a desire to
acquire a high position relative to other people’s status.
Self Self- Actualised in what he is potentially’ is the desire for self-
actualisation fulfilment in accomplishing what one is capable of for
one’s own sake.
• Maslow argued that needs form a hierarchy in the experience that, while no needs
are fulfilled, someone concentrates upon his or her physiological needs.
• When those needs are fulfilled, protection needs turn out to be preponderant and
turn out to be crucial determinants of behaviour. When these are satisfied,
belongingness will become crucial - and so on up the hierarchy.
• Effective motivation effects from an accurate assessment of the needs of the
person salespeople under the manager’s supervision.
• The overriding want of a sales individual can be reassurance and the constructing
of confidence; this will act to inspire him or her.
• For every other who has excellent want for esteem however a trouble concerning
work rate, the sales supervisor might also additionally try and inspire by showing
to colleagues at a sales assembly his or her relatively terrible sales performance.
Two Factor Theory

• Herzberg’s dual theory concept distinguished elements that may cause positive
dissatisfaction however cannot motivate (hygiene factors) and elements which
cannot cause positive motivation.
• Hygiene factors included physical working conditions, security, salary and
interpersonal relationships.
• Directing managerial attention to those elements, postulated Herzberg, could
deliver motivation as much as a ‘theoretical zero’ but could not bring about
positive motivation. If this had been to be achieved, attention might have to accept
true motivators.
• The inclusion of salary as a hygiene factor instead of as a motivator was a concern
to criticisms from sales managers whose revel in led them to believe that
commission paid to their salespeople was an effective motivator in practice.
• Herzberg accommodated their view to a point by arguing that improved salary via
better commission was a motivator via the automated reputation it gave to sales
success.
• The sales individual is lucky that success is directly observable in terms of better
sales (besides in missionary promoting, wherein orders aren’t taken, e.g.,
pharmaceuticals, beer and promoting to specifiers).
• However, the degree of responsibility afforded to salespeople varies a great deal.
Opportunities for giving a greater degree of responsibility to (and consequently
motivating) salespeople consist of giving authority to grant credit (as much as a
certain price) discretion to the salespeople.
• Hertzberg’s Hygiene and Motivating Factors:
Hygiene: Job dissatisfaction Motivators: Job satisfaction
Company policy and Achievement

Administration Recognition
Supervision Work Itself
Interpersonal relations Responsibility
Working conditions Advancement
Salary Growth
Status
Security
Let’s Sum Up
• Manpower planning which is also known as Human Resource Planning includes

placing proper number of humans, proper kind of people on the right place, right
time, doing the proper things for which they are applicable for the success of
objectives of the organisation.
• Training and Development is one of the most vital features of Human resource
management in any of the organisation. The goal of this Training is to enhance
personnel’ abilities conduct and information through setting them into learning
new strategies for doing work.
• Management development is a systematic manner of growth and improvement by
which the managers develop their skills to manage.
• Motivation has been researched by psychologists and others for lots years. A
variety of theories were developed which might be pertinent to the motivation of
salespeople.
Let’s Sum Up
• Herzberg’s dual factor concept distinguished elements that may cause positive
dissatisfaction however cannot motivate (hygiene factors) and elements which
cannot cause positive motivation.
Chapter 8: Performance Appraisal and Compensation
Chapter Index
Slide
From-To
2 Topic 1 Compensating the Sales Force 223 – 234
3 Topic 2 Time & Territory Management 235 – 244
4 Topic 3 Evaluating the Performance of Sales Force 245 – 251
5 Let’s Sum Up 252

• Explain the performance appraisal and compensation
• Describe the compensating the sales force
• Discuss the time & territory management
• Define the evaluating the performance of sales force
Compensating the Sales Force
• A good sales compensation plan stimulates the salesperson to exert greater

promoting efforts and gain higher results.
• Managers, too, can lead and supervise salesperson easily.
• The compensation for the sales force includes a secured income as living wages in
exchange of their performance and efforts.
• A good sales compensation plan aids in attaining the objectives of the sales
organization. It may involve incentives and other employee benefits and perks.
Factors Influencing Design of Sales Compensation Plan

• Compensation level is influenced via different means. Some elements are internal
in nature and others are external.
• Internal elements are company-precise that relate to the company’s resources,
abilities, policies, etc.
• External elements are people who perform outdoor the organisation, i.e., the
outside surroundings which have an impact on the sale compensation plans.
Internal Factors
• The internal factors are discussed in brief as follows:
 Financial Ability: A firm’s ability position returns on investment, monetary
outlay, etc., suggest the long-time period monetary potential of a firm.
 Compensation Policies: A company’s compensation policies are determined by
the number of employees working, number of permanent employees, number of
casual staff, etc.
 Recruitment and Selection Policy: This impacts the number of humans which
might be at the salary roll. The salary payment guidelines need to do not forget
the quantity of latest personnel inducted and the quantity of personnel, which
might be retired or have left.
 Promotional Policy: Compensation plans ought to be regular with diverse

managerial or non-managerial ranks and merchandising from one rank to the
following ought to be coupled with affordable upward in salaries and different
benefits.
 Job Descriptions: The volume of job (sales volume), its importance, and
characteristics affect the compensation plan assigned to a job position.
 Employer’s Designation and Position: An executive position deserves higher
salary level. Secondly, a senior in position demands a higher remuneration
package than that of the junior employee.
 Employee’s Relative Contribution: Here, the benefit of the worker is a decisive
aspect in finalising his compensation package. An employee who sells products
at a very high margin and in large number deserves unique interest in phrases
of incentives or rewards.
External Factors
• The external factors, including a compensation plan which is discussed as follows:
 Prevailing Compensation Policies in the Industry: Every enterprise must
provide salary to its salesperson and it’s far secure for a corporation to observe
the industries norms and policies. This is in particular real for medium and
small agencies with restricted monetary strength.
 Legal Conditions: As organisations need to strictly examine the legal
regulations and policies of the governments. The authorities have felony
prerequisites at the minimum wages act or provisions for fringe. However,
many organisations regularly violate those norms and have interaction
salesperson on a meagre salary more and take advantage of them.
 Economic Conditions: These are vital salary level determinants. It is a

customary exercise within side the enterprise circuit that with the upward
push in inflationary conditions, the businesses enhance the extent of the
allowance in order that the personnel can cope up with the growing rate
degree.
 Market Competition: It is a great cause to control personnel tactically at the
salary packages. Under fantastic aggressive situations, the group’s installation
techniques to maintain or live on withinside the competition scenario and here,
professional personnel come to be valued assets of the organisation.
 Trade Unions: It regularly performs a mediating position withinside the
company’s decision to repair up different salary stages for employees along
numerous positions. This is real in public sectors and large private region
firms. In small firms, change unions are normally non-existent and employees
are pressured to crab the earnings or salary stages as decided with the aid of
using the company.
 Global Considerations: These are vital when the organisation establishes any
subsidiary devices in overseas countries or ship their personnel overseas to
work on worldwide initiatives or businesses. It is essential, therefore, for the
organisation to recognise the price of living, tax structure, social or cultural
norms, etc., of a country that has robust relationships with compensation
levels.
 Criteria for Sound Compensation Scheme: A salary scheme wishes to comply
with a few basic standards or requirements. These are essential for each
employer and salesperson for nonviolent coexistence in one place. It needs to
serve the work of each event equitably. Compensation of sales pressure is a
critical component of sales pressure management.
Types of Sales Compensation – Financial And Non-financial

• Salary is the economic and non-economic compensation offered to employees in
exchange of their work performance.
• The term ‘salary’ refers to all types of monetary returns and tangible offers those
personnel gets hold of as a part of the employment relationship.
• Compensation is the system of supplying adequate, equitable and honest
remuneration to the personnel.
• Compensation is that employees get hold of in exchange for the offerings rendered
in an organisation.
• Compensation refers to a huge variety of monetary and non-monetary rewards
given to personnel for his or her offerings rendered to the organisation. It involves
wages, salaries and worker advantages that include paid vacation, insurance,
maternity leave, long touring facility, retirement advantages, etc.
Financial Compensation
• Financial compensation is the most crucial motivational factor that satisfies
employees’ primary desires like food, clothing, etc. It includes the compensation in
the form of salary, wages and monetary benefits. It is further categorised into two
parts:
1. Direct compensation means compensating employees by providing them salary
in the following forms:
a. Wages: Wages means remuneration paid in cash for the work performed by
an employee.
b. Bonus: Bonus means extra cash paid to an employee for exceeding his
performance or on completion of specified project or target.
2. Indirect Compensation: It consists of fringe benefits, worker services,

supplementary reimbursement. Management makes use of it ostensibly to
facilitate its recruitment attempt or have an impact on the ability of personnel
coming to work for a company, have an impact on their live or create more
commitment, improve morale, lessen absenteeism in trendy and enhance the
productivity of the business enterprise.
It can be in the following forms:
i. Job security
ii. Recognition
iii. Participation
iv. Pride in job

v. Delegation of responsibility
vi. Other incentives
Non-financial Compensation
• Non-monetary reimbursement differs from direct salary as it has no financial
value.
• Non-economic incentives are in the forms of rewards that are not a part of an
employee’s salary.
• It may involve achievement awards, group management opportunities, non-public
days, prices, paid training, present cards, new workplace or workspace improve or
maybe paid parking or transit passes, etc.
Objectives of Compensation Plans

• A good sales compensation plan satisfies the employees in every term. Here are
some of the additional objectives of compensation management:
 To Attract Top Talent: One of the primary goals of compensation should be to
recruit qualified talent. When you have a competitive compensation plan in
place, you will be better able to attract the best industry talent.
 To Retain & Reward Personnel: Don’t lose your top expertise on your
competition due to the fact employees agree that the grass will be greener
elsewhere. Find out market values for your employees and provide salary plan
accordingly. You can also set up salary-for-performance models to drive
performance by encouraging associates to reach new goals and push farther.
 To Boost Motivation: When established effectively, your re-salary plan can

pressure motivation throughout your teams. Employees who understand that
they’re being pretty compensated for his or her work sense preferred and are
consequently much more likely to live engaged, committed, and productive.
 To Be Compliant: Compensation isn’t pretty much being truthful inside the
industry; it should additionally follow federal regulations, together with the
Fair Labor Standards Act. While adhering to requirements can complicate your
reimbursement control, it’s going to assist defend your corporation in opposition
to litigation and make certain equity throughout the board on your employees.
 To Maximise ROI: It requires a few excellent turning; however, salary control is
only while you get the most important bang on your buck. In different words, if
you could create a salary plan that remains inside finances at the same time as
additionally riding productiveness through salary-for-overall performance and
different motivational tactics, you are developing a plan that is good for the
organisation and effective for employer to work hard.
Time & Territory Management
• When sales personnel are grouped as per the geographical boundaries.

• A sales territory is defined as the group of customers in a particular territory for
which a sales team hold responsibility.
• Time and territory control is first-class described as “getting the most out of your
sales day by planning the most efficient use of scarce resources.”
• The advantages of powerful time and territory control are many, including much
low pressure and worry, decreased expenses, a healthier pipeline, account growth,
extra sales, better earnings, and extra time to spend together along with your
family.
• A sales territory accommodates a set of clients or a geographical location assigned
to sales unit. The territory might also additionally or won’t have geographic
boundaries.
Importance of Territory Management to the Salesperson

• Sales territory control increases your profit of crew morale, boom sales, offer a
bigger purchaser base and encourage crew cohesion.
• Territory control is a purchaser organisation or geographic location over which
both a person salesclerk or a sales group has responsibility.
• These territories are generally described primarily based totally on geography,
profit potential, its records or an aggregate of those factors.
• The closing purpose of this department of regions is to maximise sales and profits,
and to allocate assets efficiently.
Activities of Territory Management

• The following outlines the activities of territory management:
Number of sales presentations made
Number of service calls made
Number of calls made for recovery
Number of dealers visited
Number of new accounts opened

Reasons for Setting Sales Territories

• A company can develop and use sales territories for various reasons. Some of the
reasons are as follows:
To obtain entire coverage of the market
To establish a salesperson’s responsibility
To evaluate performance
To improve customer relations
To reduce sales expenses
To allow better matching of salesperson to customer
To benefit salesperson and the company

Procedure for Setting up Sales Territories

• In setting up or designing sales territories, these four steps must be followed:
Selecting a basic geographical control

unit
Determining sales potentials in control

unit
Combining control units into tentative

territories
Adjusting for coverage difficulty and

reallocating tentative territories
• The main motive of establishing sales territories is to simplify the planning and
controlling of the selling function. Following are some reasons for establishing
sales territories:
 To obtain thorough coverage of the market: According to the department of
sales territory, the play is assigned to salesclerk. This allows marketplace
coverage, in preference to the sales clerk promoting the product in line with his
ambition. It allows the sales supervisor to display and take updates hence from
special sales managers.
 To establish the salesperson’s job and responsibilities: It is very vital to set up
jobs and duties for salespersons. Sales territories assist in doing so due to the
fact the challenge is assigned to the salesclerk and he’s accountable and
chargeable for the same.
 To evaluate sales performance: In an organisation, the sales territory is as

compared from the preceding years to contemporary to discover the distinction,
i.e., the boom or lower in sales volumes. It allows working at the distinction.
This is finished with the assist of sales territory because the play is assigned in
a right way and collecting of records and assessment turns into easy.
 To improve customer relations: As we know, salespersons should spend
maximum in their time on avenue to promote the good show even if the sales
territory is designed in a right way, the sales personnel on shops can spend
extra time with the clients (gift and potential).
 To reduce sales expenses: Once the geographical areas are decided, the agency
receives a right image as to the areas that may be assigned to the salespersons.
He/she desires to cowl that region in order that there may be no duplication of
labor through sending salespersons withinside the equal region.
Criteria for Territory Design

• The main criteria for territory design are:
 Procedure for Designing: At the time of designing the territory, the supervisor
has to preserve in thoughts the scale of the territory this is going to be assigned
to the salesclerk. It must be neither too small nor too huge. If the territory is
geographically too small, the salesclerk might preserve calling the equal clients
repeatedly.
 Select Control Point: As the call suggests, the control has to pick out a
geographical manipulate point. The manipulated factors may be categorised on
the idea of district, pin codes, areas, states and cities. At the time of choosing
the manipulate tool, the control has to intention to pick out as small a
manipulate unit as possible.
• The two basic approaches commonly used for designing sales territories are
discussed below:
 Market Build-up Approach: In this approach, an estimation of the existing and
capability products/offerings call for is made with the aid of using searching at
how the marketplace is constructed up, who’re its present/capability customers,
how most do they devour and at what frequency.
 The Workload Approach: This approach is designed by WJ Talley on the basis of
the workload performed by salespersons. The following steps should be
considered important when using the above approach:
 Customers are grouped into class size according to the sales volume.
 Optimum call frequencies for each class of customers are estimated.
 Present and potential customers are then located geographically and

arranged volume wise and value-wise.
 The number of present and potential customers in each volume/ value group
is then multiplied by the desired call frequency to get the total number of
planned calls required for each geographical control unit.
Evaluating the Performance of Sales Force
• One of the most vital duties of sales managers is to assess the overall performance
of the salesperson.
• The overall performance appraisal duration can turn out to be one of these
instances that a shop clerk dreads, except the appraisal is correctly conducted.
• Ineffective overall performance appraisal has a tendency to turn out to be a time-
ingesting and ugly work for the sales supervisor in addition to the sales
employees.
• Aspects like motivation, skill-set, activity satisfaction, function perception, private
elements like age, sex, height, etc.; the ego drive, and empathy closer to the clients
are inherent withinside the man or woman shop clerk.
• Environmental and organisational elements, together with the one-of-a-kind
features of sales control come outside elements.
• It is tough for the sales supervisor to be expecting the effect of the outside
elements at the overall performance of the sales force.
• To degree overall performance, it is far important for the sales supervisor to
install area an overall performance assessment procedure.
• A right assessment manner guarantees that the enterprise is nicely managed.
• It additionally offers the sales employees with facts on their overall performance
and offers pointers for similar improvement.
• Performance assessment also can assist in enhancing the relationships among the
sales pressure and superiors with the aid of using minimising suspicion and
enhancing interaction.
• The overall performance assessment manner normally entails five steps:

 The first step is to decide the elements that have an effect on the overall
performance of the sales pressure.
 The subsequent step entails the choice of standards to be able to be used to
assess the overall performance.
 Step three entails setting up overall performance requirements that may be
used as a foundation to examine the overall performance of the sales pressure.
 Step four entails tracking real overall performance.
 The closing step is to check and offer comments to the sales employees.
• The motive of carrying out overall performance assessment is to crosscheck
whether or not the sales pressure play is in alignment with organisational targets.
It additionally allows screen the sales pressure
• Performance assessment additionally allows to put together a destiny movement

plan for the sales employees and satisfy the organisational targets.
• It exerts a power at the mode of compensation, solving of sales quotas, and choices
at the switch or elimination of the shop clerk from the organisation.
• In maximum organisations, it is far the instantaneously advanced or the sales
supervisor who conducts the overall performance appraisal.
• Sometimes a group of humans along with the employees’ supervisor and the
branch head, together with the sales supervisor, appraise the sales employees.
• The timing of appraisal moreover varies for unique organisations. It is predicated
upon the complexity of the profits plan, the expenses concerned, and the cutting-
edge goals of the organisation.
• Periodic general overall performance appraisal is vital to end up aware about any
discrepancies inside facet the fundamental profits plan and correct them.
• The sales supervisor or the involved man or woman concerned in appraising the
sales pressure can take the assist of quantitative or qualitative standards.
• Qualitative standards consist of sales skills, territory control skills, character
traits, etc.
• The quantitative elements consist of the sales volume, common calls according to
day, sales orders, etc.
• Quantitative standards are the ones factors that degree the sales overall
performance in phrases of the give up effects while qualitative standards contain
all the ones play that the salesperson does to attain the give up effects.
• The sales supervisor ought to make certain that the overall performance
requirements are set to evaluate and compare the real overall performance of the
sales pressure.
• The requirements range from enterprise to enterprise and are exclusive for
exclusive task profiles. Performance requirements come into quantitative
requirements, qualitative requirements, time-primarily based totally
requirements, or cost-primarily based totally requirements.
• All the sales pressure play may be segregated into this kind of four classes and as
compared with the bottom standard.
• There is no single approach that may be taken into consideration perfect for all
organisations. Some of the generally used strategies are essays, score scales,
rankings, control with the aid of using goals and behaviorally-anchored score
scales.
• Several contemporary-day strategies like essential incident appraisal, work-

requirements approach, own circle of relatives of measures, etc., had been evolved
to healthy versions and different requirements.
• Finally, everyday tracking and evaluation of the sales pressure play is likewise
important to make certain that the organisational play is aligned to the sales
planning.
Let’s Sum Up
• All organisations use performance appraisal for various purposes. The main issue
hovers around the question of what criteria should be used to appraise
performance.
• Performance Appraisal is the systematic assessment of the man or woman with
recognise to his or her overall performance at the activity and his or her capacity
for development.
• Sales-force compensation is the primary trouble confronting each sales
management. Compensation, here, stands for the economic and non-economic
praise given with the aid of using the corporation to, its sales-pressure in go back
for the offerings rendered.
• Compensation is what personnel get hold of in trade for the offerings rendered in
an organisation.
• Sales territory control increases your sales crew’s morale, boom sales, offer a
bigger purchaser base and encourage crew cohesion.
Chapter 9: Physical Distribution
Chapter Index
Slide
From-To
2 Topic 1 Meaning of Logistics 257 – 262
3 Topic 2 Total Cost Approach of Physical Distribution 263 – 264
4 Topic 3 Physical Distribution Tasks 265 – 270

Latest Technologies in Logistics (EDI,
5 Topic 4 Artificial Intelligence, DIADs, RFID, Bar 271 – 275
Coding & Scanning)
6 Let’s Sum Up 276 – 278
• Explain the physical distribution
• Describe the meaning of logistics
• Discuss the total cost approach of physical distribution
• Define the physical distribution tasks
• State the latest technologies in logistics
Meaning of Logistics
• Logistics refers to the overall method of dealing with how resources are acquired,
stored, and transported to their very last destination.
• Logistics management includes figuring out prospective distributors and providers
and figuring out their effectiveness and accessibility. Logistics managers are called
logisticians.
• Logistics manages the efficient forward and reverse flow of products and services
from the point of origin to the ultimate recipient.
• This further infers that logistics bears an impact on the movement of goods and
how swiftly products reach the target consumer.
• In this manner, logistics enables organisations to gain a competitive edge over
their competitors.
• Logistics adds value to the organisation by fulfil the needs of the customers in
terms of time and place of availability of the product.
• The logistics function in an economy aims to contribute to a business in the

following ways:
It ensures high customer service levels.
It maintains high-quality product delivery.
It helps minimise costs for transportation of

products.
It facilitates to have flexibility and swiftness in

changing market environment.
It assists to maintain a balance between the quality

of service and low costs.
Functions of Logistics
• Transportation and warehousing are the two main features of logistics.
• Transportation management specialises in making plans, optimising and
executing using automobiles to transport items among warehouses, retail places
and customers.
• The transportation is multimodal and might consist of ocean, air, rail and roads.
• Not surprisingly, transportation management is a complicated procedure that
includes making plans and optimising routes and shipment loads, order
management, freight auditing and payment.
• Carrier control is a critical component since the price, availability and capability
of transportation companies can range widely.
• Logistics corporations normally use Transportation Management System (TMS)

software programme to meet the needs of transport-related logistics.
• There are also an area of interest applications, including backyard control
systems.
• Warehousing, or warehouse control, consists of such capabilities as stock
management and order fulfilment.
• Most corporations use Warehouse Management System (WMS) software
programme to control the float and storage of products and identify stock.
• Most carriers of organisation useful resource making plans (ERP) software
programme provide TMS and WMS modules, in addition to greater specialised
additives for stock control and different logistics features.
• Meanwhile, self-sufficient vehicles, consisting of driverless forklifts, shipping

vehicles and drones, are probably to come to be greater common in warehouses, in
warehouse yards and on highways.
• While on-time shipping of intact packages has usually been essential all through
the supply chain, it has come to be even greater mission-important in current
years as Omni channel commerce, with its same day domestic or retail shipping of
custom designed merchandise ordered from smartphones, turns into greater
common.
• Suppliers, manufacturers, vendors and shops have needed to enhance their
logistics strategies to satisfy the demand for quicker, greater convenient shipping
of a greater variety of goods.
• They additionally have needed to higher integrate their strategies and structures
to enhance supply chain visibility.
• Logistics management is an essential aspect of Supply Chain Management (SCM).

• While the phrases are occasionally used interchangeably, logistics specialises in
shifting merchandise and substances as efficiently as possible.
• In contrast, SCM encompasses a miles wider variety of Supply Chain Planning
(SCP) activities, consisting of demand making plans and income and operations
making plans (S&OP), and Supply Chain Execution (SCE), which include
strategic sourcing and transportation management.
Total Cost Approach of Physical Distribution
• Physical distribution includes various features to be carried out like warehousing,

inventory management, acquisition, transporting, packaging material, and
customer services.
• Traditionally, entrepreneurs considered those activities impartial and traded them
in isolation however now the selections are taken in coordination with different
activities.
• Total fare method ambitions at lowering the full cost involved in physical
distribution system.
• Various fares incurred in physical distribution of products like stock cost,
warehousing cost, packaging, etc.
• Total fare method means that marketer needs to attempt to reduce basic
distribution cost, now no longer any precise cost.
Total Cost Approach of Physical Distribution
• The overall cost of distribution includes the expenses of numerous factors

including expenses of storage, stock maintenance, transportation, etc.
• The general fare method is a corollary of the structures method.
• Total price method envisages using overall cost (and now no longer the price of
every man or woman aspect) at the same time as deciding on the opportunity
route of movement in recognise of bodily distribution of the products.
• In case the general price is not always analysed, there may be each chance of
taking a wrong decision. It is obvious that a discount withinside the price of one
aspect can be viable on the cost of the other element.
• Management needs to suppose in phrases of exchange off in decreasing
opportunity expenses to maximise profits. By doing this, the company can
maximise potential profit.
Physical Distribution Tasks
• The critical logistics decisions are:

i. How do I want to process an order?
ii. Where have the stock been placed?
iii. How have items been shipped?
• In fact, those elements shape a key element of the logistics system as follows:
• The components of logistics management are discussed as follows:

 Storage, warehousing and material handling: These elements are important for
a retail enterprise. The merchandises are required to be stored, warehoused
and handled in a proper manner. Some of the important aspects of these
elements are warehouse location, storage type and material handling
equipment.
 Packaging: It involves transportation of merchandise, and reduces the
possibility of damage caused during transit. For example, if items/such as
processed foods are not properly packed, these can perish in transit.
 Inventory: It refers to the stock of materials in retail organisations. Retail
organisations maintain inventory levels on the basis of sales and demand
forecasts.
 Transportation: An effective transportation system ensures timely delivery of

merchandises from suppliers to the warehouses, from warehouses to the
distribution centres and from distribution centres to the retail stores.
 Information and control: These are the most important elements in logistics.
Retail enterprises need to have access to the real-time information and control
over their logistics operations. Large retail enterprises, like Walmart, use
specialised software to keep track of their operations.
 Order processing: In large organisations, order processing refers to handling
voluminous products to make them reach the desired destination. Order
processing operations or facilities are generally known as distribution centres.
Order processing comprises verifying the order received and checking whether
the facility has the required amount of goods.
Order processing is a perpetual process which consists of the following:

 Picking: It entails taking and collecting products in specified quantity prior
to shipping the orders for customers.
 Sorting: It refers to the process of separating goods as per their destination.
It is crucial for sorting products as it eases the shipment of products. If
sorting is not done in correct manner, then it will create a mess for shipment
team and the order will not reach the target customers.
 Package formation: It is an important part of order processing as it includes
weight, label and pack products. The outer packaging should include weight,
usage and specification of the product to inform the customer how to use the
product.
 Consolidation: It consists of accumulating packed products to loading bays to
be transported. At the loading bays, the goods will be gathered where bill of
landing and various documents will be prepared.
 Inventory control: Inventory refers to the stock of materials in retail

organisations. Inventory management refers to having sufficient inventories to
fulfil the customers’ requirements and simultaneously reducing the storage
cost. Inventory control basically aims at balancing the customer satisfaction
level and reducing the cost at the same time.
 Warehousing: Warehousing refers to storing of finished goods until they are
sold or shipped to the ultimate destination. Warehousing plays a crucial role in
the logistics of an organisation. In the context of supply chain management, a
warehouse is a requisite as the products once manufactured need to be stored.
 Transportation: Transport is the single most important aspect of logistics
activities in manufacturing organisations. The physical movement of finished
products is pivotal as unless products do not reach the target customers, the
demand or customer satisfaction cannot be fulfilled.
 Packaging: Packaging is a logistic activity that is crucial in SCM. It is a must

for every manufacturing organisation. Packing ensures that during the
physical distribution of a product, they do not get affected or lose their quality.
Correct packaging assists in minimising damage to finished products and
saving the products from spoilage, pilferage and thefts.
 Information: Logistics is fundamentally an information-driven activity that
deals with the movement of inventory throughout the supply chain.
Information system works like oil of the machinery that aims at delivering
quality service to the customers.
 Material handling: The pace of the movement of inventory throughout the
supply chain is hinged on the methods employed for material handling. A
disorganised material-handling method may cause damage to the product,
untimely product delivery and increase the overhead cost.
Latest Technologies in Logistics (EDI, Artificial
Intelligence, DIADS, RFID, Bar Coding & Scanning)
• Increasing technology involvement throughout industries has created a huge
impact on logistics.
• Logistics system automation leads to significant boom in workflow flexibility and
performance.
• Logistics businesses need to stay up to date approximately the new and evolving
trends, from new technologies to discover the changing rules that necessitate the
latest techniques and methods to make sure compliance.
Electronic Data Interchange (EDI)
• In order to accomplish that, however, companies need to first have the proper EDI
software in place.
• EDI remains the standard for electronic transactions between businesses, and
that is no exception in the logistics industry.
• Logistics organisations rely on EDI data to simply get things done.
• Connecting and integrating EDI transport data across a multi-enterprise supply

chain is of the utmost importance. Modernised technology can extend data flows to
integrate into core applications to expand a company’s online presence through
seamless e-commerce and marketplace integration.
Artificial Intelligence
• Artificial intelligence based cognitive automation technology complements
administrative intelligence and quickens data-extensive operations inside the
logistics industry.
• AI algorithms may be mixed with the device getting to know to manage up with
marketplace fluctuations.
• Self-depended and shrewd avenue technology has prompted a nice alternate
toward logistics offerings automation.
• Managers may also use an AI-based predictive way to control deliver chain
procedures and, for example, locate approaches to store money.
• This additionally enables in greater correct prediction approximately the
transport date and extended pleasure many of the consumer base.
DIADs
• The name stands for Delivery Information Acquisition Device and it is the
handheld data collector UPS drivers use to record and transmit delivery
information across a mobile cellular network.
• It also helps UPS save 59 million sheets of paper each year.
• The original DIAD was designed to resemble a clipboard, be reliable through any
weather and have enough power to last all day.
RFID
• Radio-frequency Identification (RFID) is the usage of a Wi-Fi nontouch machine
that makes use of radio-frequency electromagnetic fields to switch information
from a tag connected to an item for the functions of computerised identity and
tracking.
• For a deliver chain, the RFID era may be utilised in numerous aspects, along with
warehouse management, stock management, freight transportation,
manufacturing, and retailing. With RFID era, the delivery chain can attain
excessive overall performance and tracking.
• RFID refers to Radio Frequency Identification.
Bar Coding & Scanning

• Scanners that perform primarily based totally on photo reputation and evaluation
are lots higher than IRs, LEDs, and LASER readers.
• They are extra green, and in contrast to their predecessors, photo-seise-primarily
based totally scanners can carry out complicated operations at the same time as
taking pictures a barcode.
• The software programme approaches the barcode photo captured via way of
means of the virtual digital lens.
• There are huge advantages- the optical barcode scanners are extra bendy to apply
than the LASER scanners.
Let’s Sum Up
• Logistics management entails each stage of products’ physical distribution—

starting from procurement of raw materials, materials handling and storage,
managing stock, sales forecasting, transport and storage requirements.
• The key to successful logistics management requires efficient collaboration of
activities, cooperation, coordination and information sharing throughout the
organisations supply chain.
• Logistics management plays a crucial role in solving perplex logistics problems
and to manage the entire supply chain as a single entity.
• Efficient logistics would serve to reduce the costs for the organisation and increase
the customer service, thus increasing profitability.
• The logistics swiftness and reliability of products contribute immensely to the
growth of the nation’s internal and external trade.
Let’s Sum Up
• An effective transportation system ensures timely delivery of merchandises from

suppliers to the warehouses, from warehouses to the distribution centres and from
distribution centres to the retail stores.
• The packaging of goods will also be inspected whether the outer packaging is
sturdy enough to bear the loading and unloading of goods.
• The primary objective of logistics management is to maintain a smooth flow of
materials in a supply chain effectively so as to fulfil the customers’ desired level of
satisfaction.
• It is the responsibility of the logistics department to monitor and control unethical
practices while transporting valuable goods.
• It is crucial for every organisation to have a strong knowledge of logistics systems
for yielding high profits and be able to deliver customers the most positive
experience of the product.
Let’s Sum Up
• AI-based cognitive automation technology complements administrative

intelligence and quickens data-extensive operations within side the logistics
industry. AI algorithms may be mixed with device getting to know to manage up
with marketplace fluctuations.
• The name stands for Delivery Information Acquisition Device and its miles the
hand-held records collector UPS drivers use to document and transmit shipping
records throughout a cellular mobile network.
• Scanners that perform primarily based totally on photo reputation and evaluation
are lots higher than IRs, LEDs, and LASER readers. They are extra green, and in
contrast to their predecessors, photo-seize-primarily based totally scanners can
carry out complicated operations at the same time as taking pictures a barcode.
Chapter 10: Introduction to Distribution Management
Chapter Index
Slide
From-To
2 Topic 1 Concept of Distribution Management 283 – 288
Growing Importance of Distribution for

3 Topic 2 289 – 293
Strategic Advantage
4 Topic 3 Value Chain and Marketing Intermediaries 294 – 306
5 Topic 4 Conventional Distribution System 307 – 313
6 Let’s Sum Up 314 – 315

• Explain distribution management
• Describe the functions of distribution channels
• Discuss the channel design
• Define the factors considered in selecting channels
• State the types of wholesalers and types of retailers
• Describe the Vertical Marketing Systems (VMS)
Concept of Distribution Management
• Distribution can be simply understood as a process of the flow of the goods from
the point where it is produced to the point where it is to be delivered, i.e. the end
user.
• Designing a distribution network is a complex process which involves crucial
analysis on different parameters.
• There is no one type of distribution network that suits all the industries.
• The distribution network is designed keeping in view the type of product,
technology available, macroeconomic factors, political factors etc.
• Every organisation needs to design a network to suit its own needs.
Meaning of Distribution
• The term ‘logistics’ refers to the planning and processes that go into the efficient
supply and delivery of products.
• Supply management, bulk and shipping packing, temperature controls, security,

fleet management, delivery routing, shipment tracking, and warehousing are all
examples of logistics activities and processes.
• Distribution is a logistics management system that focuses on order fulfilment
across distribution networks.
• A distribution channel is a series of agents and organisations through which a
product or service passes on to origin to a customer.
• A distribution network is a network of storage facilities and transportation
systems that are linked together.
• The role played by networks in the distribution management is elaborated as

follows:
 Balances supply and demand for products: A robust distribution network helps
assemble and supply the necessary goods to the point of requirement.
 Protects against risk arising out of uncertainty: Widespread distribution
facilities can protect the inventory against forecasting errors, disruptions in
supply and fluctuations in demand.
 Economy of scale: Distribution network supports the manufacturing operations
in reducing its costs by ensuring long-production runs.
 Key driver of overall profitability: The network affects not only the supply
chain costs, but also the end consumer directly.
Elements of Distribution
• The various elements of a physical distribution system are:
 Customer service: Customer service is a predetermined level of customer
satisfaction that a shopping intends to offer. Retailers cannot get a competitive
edge over their competitors without developing and enforcing “customer service
standards.” 95% of purchases are delivered within 5 hours of receipt, and 100%
are delivered within 24 hours, according to a customer service guideline.
Customer service levels may be improved by following certain steps:
a. By maintaining constant product availability.
b. By lowering the time between placement of an order and receiving it.
c. By offering adequate training to transportation salespeople and personnel.
 Order processing: Order processing, also known as order fulfilment, is the act of
handling client and order information into a computer system in order to
generate invoices for pickup inside a distribution centre (which might be a
warehouse or a retail shop). The primary concept is to deliver orders according
to the preferences of consumers in terms of location and schedule.
 Inventory control: Inventory management is an important part of a retailer’s
physical distribution system. It comprises money spent on inventory, and the
possibility of the items becoming obsolete as time passes. Marketing executives
promote big inventories to avoid stock outs in a retail firm, but finance
executives urge inventory reduction.
 Warehousing: It includes all operations related to the storage of products from
the moment they are acquired and the time they are delivered to the client once
the order is received. This role includes receiving product, breaking it down
into bulk, storing it and loading it for distribution to clients according to their
preferences.
 Transportation mode: The physical distribution of products and services

necessitates the use of transportation. The transportation mode allows channel
participants such as manufacturers, distributors, and retailers to deliver
products and services to clients at their point of purchase or at their doorstep.
Growing Importance of Distribution for Strategic
Advantage
• Distribution is typically an under appreciated aspect of strategy, despite the fact

that it is usually a key component of a winning approach.
• The phrase “distribution” in the business sector refers to the routes, procedures,
and processes used to convey goods and services from their point of
manufacturing, production, or development to their final end-users.
• When the words “distribution” and “strategy” are combined, the issue becomes:
how can distribution be used as a component or variable in a company’s overall
business and marketing strategy?
• Here is how these forms distribution can play a key role in strategy:
 Open new markets: Opening a new channel of distribution or expanding
distribution into new geographic areas can provide access to a company’s
products or services to new groups or categories of customers.
Advantage
 Speed up delivery: Sometimes the benefit of distributing a product or service

more rapidly is enough to warrant a new distribution method. A new
distribution approach might emerge if speed of delivery is paired with a direct-
to-consumer business model.
 Reduce costs: If a new distribution system or enhanced logistics can
considerably lower costs and increase profit margins, that distribution strategy
may be worthwhile to pursue. For example, if a shop has a high-cost than the
retail-store distribution system, it might be able to save money by transferring
portion of its sales to an online distribution system.
 Reduce out-of-stocks: If retail out-of-stocks are a significant issue in a certain
sector or product category, a new distribution strategy may be required. An
issue with out-of-stocks must often be addressed with one eye on marketing
and promotional activities and the other on supply chain and logistics.
Advantage
 Achieve distribution: If a small business with limited resources develops an

enticing new product but is unable to get it on the market in retail stores, it
might approach a big retailer and offer to distribute the product only in that
retailer’s stores.
 Burnish a brand image: The sorts of stores in which a product is sold can
influence and reinforce a consumer’s perception of that brand. A premium
company, for example, may option to be distributed only through upmarket,
high-end retail outlets.
 Block a competitor: If a manufacturer learns that a large rival is preparing to
significantly grow its online presence and direct-to-consumer commercial
activity, the manufacturer may aggressively develop its own direct-to-consumer
channel of distribution as a deterrent to the competitor’s operations.
Advantage
Advantages of Distribution Management

• Distribution management reduces waste in a variety of ways, from reduced
spoilage to lower storage expenses, because items and supplies may be distributed
when required (‘just in time’ inventory), rather than retained in larger quantities
(‘just in case’ inventory).
• Reduced shipping costs and faster delivery to consumers are two benefits of
distribution management. It also makes things simpler for purchasers by allowing
‘one-stop shopping’ and other conveniences and rewards, such as customer loyalty
rewards programmes.
Distribution Management Strategies
• There are three distribution management strategies at the strategic level:
1. Mass: The mass strategy aims to distribute to the mass market, e.g. to those
who sell to general consumers anywhere.
Advantage
2. Selective: The selective method tries to distribute to a limited number of

retailers, such as pharmacies, hair salons, and highend department shops.
3. Exclusive: The exclusive distribution approach tries to reach a small number
of people. Manufacturers of Ford automobiles, for example, sell exclusively to
authorised Ford dealerships, while Gucci-brand items are only sold to a select
group of luxury goods stores.
Value Chain and Marketing Intermediaries
• A value chain is a business model that outlines the whole process of creating a
product or service.
• The stages involved in moving a product from conception to distribution, as well
as everything in between — such as obtaining raw materials, manufacturing
operations and marketing activities — make up a value chain for organisations
that manufacture things.
• A value-chain analysis is carried out by examining the particular procedures
involved in each phase of a company’s operations.
• A value-chain analysis is used to improve manufacturing efficiency so that a firm
may give the most value for the least amount of money.
• A value chain may assist a corporation in identifying inefficient sections of its
business and then implementing ways to optimise its operations for optimum
efficiency and profitability.
• A value chain is a concept that describes the whole chain of a company’s actions in
the development of a product or service, from receiving raw materials to delivering
it to customers, and everything in between.
• Five major activities viz. incoming operations, operations, outward logistics,
marketing and sales, and service; — and four subsidiary activities viz.
procurement and buying, human resource management, technical development,
and firm infrastructure; make up the value chain framework.
• The value chain framework aids firms in identifying and categorising their core
and secondary business operations.
• Analysing those value chain activities, sub activities and the relationships among
them facilitates companies recognise them as a device of interrelated functions.
• When an organisation applies the value chain concept to its own activities, it is
known as value chain analysis.
Primary Activities
• Its main activity is to contribute to the physical activities, sale, maintenance and
support of a product or service. These activities include:
 Inbound: Internal processing and management of resources from external
sources such as external suppliers and other supply chain sources. These
incoming external resources are called “inputs” and can contain raw materials.
 Operation: Activities and processes that convert input to “output”. This is a
product or service that your company sells and flows to your customers. These
“outputs” are core products that can be sold at a higher price than the cost of
materials and production to make a profit.
 Outbound logistics: Delivery of output to customers. The process includes
systems for storage, collection, and distribution to customers. This includes
managing the company’s internal systems and the customer’s external systems.
 Marketing and sales: Activities such as advertising and branding aimed at

raising awareness, reaching the audience for marketing, and communicating
why consumers buy products and services.
 Services: Activities such as customer service and product support that
strengthen long-term relationships with customers who have purchased a
product or service.
Secondary Activities
• The following secondary activities support a variety of primary activities.
 Procurement and purchase: Negotiating prices and other activities related to
finding new external suppliers, maintaining relationships with suppliers, and
procuring materials and resources needed to manufacture products or services.
 Human resource management: This includes features such as recruiting,

training, building and maintaining an organisational culture. Maintain good
relationships with employees.
 Technology development: Activities such as R&D, IT management, and
cybersecurity that build and maintain the use of technology within an
organisation.
 Company infrastructure: Necessary company activities such as law,
administration, management, accounting, finance, public relations or quality
assurance.
Benefits of Value Chains

• Value chain frameworks help organisations understand and assess the causes of
positive and negative cost efficiency. Performing value chain analysis can help
your organisation in the following ways:
 Support decisions for various business activities.
 Diagnose points of ineffectiveness for corrective action.
 Understand linkages and dependencies between different activities and areas
in the business. For example, issues in human resources management and
technology can permeate nearly all business activities.
 Optimise activities to maximise output and minimise organisational expenses.
 Potentially create a cost advantage over competitors.
 Understand core competencies and areas of improvement
Marketing Intermediaries
• The market broker is an agency involved in the handling of products from the
manufacturer to the point of purchase by the end consumer.
• Market brokers can be individuals or businesses.
• Products are constantly changing at all levels, adding to the cost of subsequent
transportation and storage. After all, this product is available in retail stores at a
specific price.
• Brokers are essential because it is difficult for a company to compete for price, but
it is not possible for a company to manage a huge distribution network on its own.
• Marketing intermediaries are links in the supply chain that connect
manufacturers or other intermediaries to end users.
• An intermediary is an agency, distributor, wholesaler, or retailer. These parties

are used to sell, promote or make available goods/services through a contractual
agreement with the manufacturer.
• They receive the goods at a specific price, add a margin and go to the next link in
the supply chain at a higher price. They are known as brokers or sales brokers.
• Many manufacturers do not sell their products or services directly to consumers,
but they use marketing agents to perform many of the functions needed to deliver
their products to end users.
• These intermediaries or brokers (wholesalers, retailers, agents, and brokers),
distributors, or financial intermediaries usually have long-term obligations with
manufacturers to form so-called marketing or sales channels.
• Manufacturers can use raw materials to produce finished products, which can be
sent directly to retailers or, in rare cases, to consumers.
• Each party in the distribution channel usually takes legal ownership of the goods
during a physical transfer, but this is not always the case.
• Distribution channels in less industrialised countries tend to be more direct, that
is, shorter and simpler.
• Due to the large number of small producers, these agents work through
intermediaries, who recruit sub-buyer to find runners to transport products from
remote locations.
• Until the second half of the 20th century, long and complex sales channels and
numerous wholesalers characterised Japanese marketing organisations. The
product may go through at least five separate wholesalers before it reaches the
retailer.
• There is a wide variety of sales channels available to businesses, and building the
right channels can be one of the most important marketing decisions for a
company.
• As with most industrial capital goods, companies can sell their products directly to
their end customers. Alternatively, you can use one or more intermediaries to
deliver the goods to the end consumer.
• The design and structure of consumer and industrial marketing channels can be
very similar or very different.
Types of marketing intermediaries
• The four types of marketing intermediaries are:
1. Agent: The agent is an independent entity that acts as an agent for the buyer’s
manufacturer. The agent owns the product without actually owning it. They
work on a commission basis.
2. Distributor: Distributors differ from wholesalers in that wholesalers have

many product lines such as Tide and Surf Excel in stock but distributors are
complementary lines of either Tide or Surf Excel products. Only one of them is
in stock. Distributors bring these products to POS and work very closely with
suppliers and buyers.
3. Wholesalers: Wholesalers buy and resell products in bulk. They own the
products they sell. They usually sell these products to retailers for profit.
4. Retailers: Retailers can be independent such as small convenience stores, or
supermarket chains such as Tesco, Walmart, Big Bazaar, and Reliance Fresh.
They own products in stock. Retailers are usually the last link in the supply
chain to make a profit and deliver products to end users.
• In addition, based on the characteristics and roles of the distributor, there are
usually the following formats:
 Commercial brokers: wholesalers, retailers and other brokers buy goods and
then resell them for profit.
 Brokers: brokers, manufacturer representatives, commercial agents serve
customers. We are looking for and will negotiate the terms of sale on behalf of
the manufacturer.
 Brokerage Support: Manufacturer’s support advertising in shipping companies,
warehousing, banks and manufacturing processes.
• Marketing intermediaries (also known as Distribution intermediaries) are product
distribution, numerous organisations and people operate as a link between
manufacturers and customers.
• Marketing intermediates are companies that assist businesses in advertising,

selling, and delivering goods and services to customers.
• Product distribution intermediates, distribution support establishments,
marketing service institutions, and financial intermediaries are all examples of
these businesses.
• A distributor can be a retailer, wholesaler, agency, or broker, among other things.
Conventional Distribution System
• Traditional distribution channels are the most common distribution channels.

• Traditional distribution consists of producers, wholesalers and retailers who act
independently.
• This channel guarantees the flow of goods from producers to end customers via
wholesalers and retailers.
• Traditional sales channels are important to businesses because they define the
phase of the final product and how it reaches the consumer.
• In traditional sales channels, each level works individually and is mutually
exclusive.
• Traditional distribution channels consist of one or more independent producers,
wholesalers, and retailers. Each is a separate company trying to maximise its own
profits, perhaps even at the expense of the entire system.
• No channel member has sufficient control over other members, and there is no
formal way to assign roles to resolve channel conflicts.
• According to Kotler and Armstrong (2001), a conventional distribution channel is
a channel consisting of one or more independent producers, wholesalers, and
retailers, each a separate business seeking to maximise its own profits even at the
expense of profits for the system as a whole.
• Distribution channels in marketing are useful tools in marketing because they act
as a series of processes that require the transfer of ownership of goods from the
point of production to the place where consumers use them.
• According to Philip Kotler, traditional distribution channels consist of one or more
independent manufacturers, wholesalers, and retailers, each aiming to maximise
profits at the expense of the profits of the entire system.
• Traditional distribution channels are primarily used for all consumer goods, from
clothing to groceries. This channel originates from manufacturers working in the
supply chain and distributes products nationwide.
• The manufacturer’s job is to pay huge amount of money to the media to promote
their products. In addition, products are passed through the supply chain to
wholesalers or distributors.
• The job of wholesalers/distributors is to receive large quantities of all products for
efficiency.
• A wholesaler is an intermediary between a retailer and a manufacturer.
• Wholesalers can divide large quantities into small quantities and hand them over
to individual retailers.
• Comparable other communication channels, traditional channels require a place of
purchase for customers such as retailers and wholesalers.
• It is based on consumer buying behaviour towards the target buyer of the product.
• Retailers can also buy directly from manufacturers and wholesalers and sell to
consumers.
• The advantage of a retailer is that he can buy in bulk, with strong customer
loyalty, an attractive offer for the brands he runs.
• If the target market cannot be reached, or if the sales channel shifts due to the
closing of the store, the conventional sales channel will change.
• The fundamental disadvantage in traditional distribution channels during a
recession, destabilising relationships between producer intermediaries.
• Manufacturing needs to be flexible at this point in order to reduce the risk of
selling new products on the market.
• Traditional sales channels assume that each company operating on this channel is
a separate group and operates.
• Traditional distribution channels are fragmented networks in which

manufacturers and consumers are loosely connected to each other through
intermediaries in the exchange process.
• Conventional channels are of two types:
A. Direct distribution channels: A consumer goods manufacturer has the option of
selling directly to his customers. There are no intermediaries in this channel;
it is the shortest and easiest. When it comes to selling directly to end users,
there are three options:
i. Through own sales stores, i.e. several locations.
ii. Orders can be placed by mail or over the phone.
iii. By sales agents on the road.
B. Indirect distribution channels: The indirect channel is one in which a

manufacturer distributes his items through middlemen. To finish the
distribution process, a chain is followed.
• Some of the indirect channels are as follows:
 One level channel of distribution: A producer may enlist the assistance of
intermediaries to distribute his goods; intermediaries might be a store or a
wholesaler. The manufacturer provides retailers and wholesalers direct access
to him through this distribution route. This is also the simplest, most
straightforward, oldest, and most widely used distribution route.
 Two level channel of distribution: A producer may choose to distribute his
products through two intermediaries. Wholesalers and retailers are two
possible intermediaries. For many consumer items, this is the most
conventional route.
 Multi level channel of distribution: Manufacturers can sell goods to consumers

with the help of three or more intermediaries. These intermediaries are
distributors, wholesalers and retailers. This is an extension of the above
channels and is required if complex distribution deployments are required.
Let’s Sum Up
• Distribution management is a step in the supply chain that ensures items reach
end-users or customers. Managing distribution, whether from a wholesaler to a
retailer or from a retailer to a customer, is simply managing the transportation of
commodities.
• Distribution management is a crucial procedure for managing the activities and
flow of your company’s products and commodities from a supplier to a business
maker, then to a retailer or wholesaler, and finally to the end consumer, customer,
or prospect.
• Inventory management is an important part of a retailer’s physical distribution
system. It comprises money spent on inventory, wear and tear, and the possibility
of the items becoming obsolete as time passes.
• A value chain is a business model that outlines the whole process of creating a
product or service.
Let’s Sum Up
• The market broker is an agency involved in the handling of products from the
manufacturer to the point of purchase by the end consumer. Market brokers can
be individuals or businesses.
Sales Management – Session
Chapter 11: Channels of Distribution
Chapter Index
Slide
From-To
Functions of Distribution Channels

(Discrepancies Removal – Spatial
2 Topic 1 321 – 328
Discrepancy, Temporal Discrepancy, Bulk
Breaking, Provide Assortment)
Channel Design (Based on Structure,
3 Topic 2 329 – 336
Intensity and the Type of Intermediaries)
4 Topic 3 Factors Considered in Selecting Channels 337 – 340
5 Topic 4 Types of Wholesalers and Types of Retailers 341 – 349

Chapter Index
Slide
From-To
6 Topic 5 Vertical Marketing Systems (VMS) 350 – 353
7 Let’s Sum Up 354 – 355

• Explain the channels of distribution
• Describe the functions of distribution channels
• Discuss the channel design
• Define the factors considered in selecting channels
• State the types of wholesalers and types of retailers
• Describe the VMS (Vertical Marketing Systems)
Functions of Distribution Channels (Discrepancies Removal –
Spatial Discrepancy, Temporal Discrepancy, Bulk Breaking,
Provide Assortment)
• Some important functions performed by distribution channels are as follows:

 Sorting: Middlemen acquire the goods from various suppliers and arrange them
into familiar groups based on their size, quality, shape, etc.
 Accumulation: Intermediaries/middlemen maintain a huge volume of stock to
ensure a continuous supply of goods.
 Allocation: Sorted goods are then packed in small marketable quantities (such
as 250 gm, 500 gm and 1 kg) for sale.
 Assorting: Middlemen procure a variety of goods from different manufacturers
and provide them to the customers in the combinations desired by them.
 Product promotion: Producers have the onus of undertaking marketing and
promotional activities. However, at times, the middlemen also contribute their
bit in acts such as discounts, special displays and stock clearance sale.
Provide Assortment)
 Risk-taking: Intermediaries have to bear the risk of the distribution of goods

and services; for instance, the risk arising from damage or spoilage of goods
when they are transported from one place to another or when they are stored in
the warehouse. Primarily, channels of distribution result in the following
benefits:
 Convenience to customers: It enables customers to have multiple items in a
single store.
 Wider customer reach: It enables an organisation to reach a large and wide
geographical area with efficiency in distribution.
 Reduces cost: It assists an organisation to reduce cost as retailers stock the
shelves with the products, in turn, cutting additional stocking and delivery
expenses.
Provide Assortment)
 Quick feedback: It facilitates quick customer response and provides an

insight into how a product can be made better. Broadly, there are two types
of distribution channels: Direct channel and Indirect channel
o Direct channel: In this type of channel, the manufacturer directly sells
the goods or services to the end-consumer. There is no involvement of
middlemen and is also called direct to consumer. This is the simplest and
shortest mode of distribution.
o Indirect channel: The manufacturer engages one or more middlemen to
distribute goods or services. The main forms of indirect channels are:
» One-level channel: Manufacturer → Retailer → Consumer. This
channel has only one intermediary, i.e., retailer who sells the product/
service to the final buyer. It is usually adopted for speciality products/
services.
Provide Assortment)
» Two-level channel: Manufacturer → Wholesaler → Retailer →

Consumer. In this channel, wholesaler and retailer act as a link
between the manufacturer and consumer. This is a commonly used
channel for distributing soap, clothes, grains, cereals, etc.
» Three-level channel: Manufacturer → Agent → Wholesaler → Retailer
→ Consumer. This channel consists of three middlemen, i.e., agent,
wholesaler and retailer. The manufacturers supply the goods or
services to their agents who, in turn, supply them to wholesalers and
further to retailers.
Provide Assortment)
• Let us understand the functions of physical distribution in discrepancy removal in

the process of sales management:
 Match Discrepancy: Consumers do not purchase directly from producers.
Consumers typically purchase very small portions of product; however,
producers produce them in massive portions. Therefore, there’s a discrepancy
between deliver and call for.
 Storing and Transportation: After things are manufactured, they must be
stored until they are sold to clients. This necessitates the establishment of
storage and warehousing facilities. One of the most significant roles of
intermediaries is to keep items in their facilities to meet changing client
demand.
Provide Assortment)
 Information Provision: There are salesperson and shops close to you. The
proximity of this area offers purchaser comments and direct facts
approximately options and new modifications in product. Brokers also can offer
treasured facts approximately the sports in their competition.
 Assortment of Products: Sales channels help customers purchase product in
handy character batches, packs, and exclusive product variations, main to
client usability. Goods and product are industrially produced to take gain of
economies of scale and minimise ordinary manufacturing costs. It is critical to
stores due to the fact clients engage directly with the product and make buy
selections primarily based totally on what they see.
1. Product Width: Product Width refers back to the variety of product traces
supplied via way of means of stores. For example, supermarkets might also
additionally provide a product line that tiers from meals to cosmetics to
over the counter medicines.
Provide Assortment)
2. Product Depth: Product Depth is quite a few product supplied in every

product line. For example, if the store in query is a grain forte shop, it can
promote loads of grains. The range determines the intensity of the product.
 Spatial Discrepancy
The channel goods facilitate to lessen the
“distance” among product producers and
customers.
Consumers are scattered
Need to attain cheaper
Enterprises additionally produce product in a

single area to satisfy worldwide needs
Provide Assortment)
 Temporal Discrepancy: Channel system is quicker than client call for helps to
respond. The time of manufacture and the time of intake of the product are
exclusive. The wide variety of manufacturing bases is limited; however, there
are loads of customers.
Channel Design (Based on Structure, Intensity and the Type
of Intermediaries)
• Channel design is a strategic technique utilised by organisations to distribute

assets to the marketplace through direct and indirect channels or routes.
• Direct channels usually includes e-trade platforms, at the same time, as indirect
channels may be a mixture of partners, distributors, and marketplaces.
• Companies optimise their channel blend primarily based totally on segmentation,
cost, margin considerations, and broader strategic commercial enterprise goals.
• The channel design is provided as a marketer’s desire and calls for you to
configure the channel from scratch or regulate a current channel.
• The term design implies that the marketer is consciously and actively allocating
the distribution tasks to develop an efficient channel.
• Channel design has a strategic implication, as it will be used as a strategic tool for
gaining a differential advantage.
of Intermediaries)
• Manufacturers and producers, wholesalers and stores are all confronted with
channel layout choices.
• Producers and producers “examine” channels. Retailers are “searching” at
channels; however, wholesalers-intermediaries are searching at channel design
from each perspective.
• This bankruptcy offers handiest with the producer and the producer’s factor of
view.
• Channel design choices are vital due to the fact they decide the marketplace
presence of a product and the accessibility of the product to buyers.
• Channel choices are strategically even extra vital as they contain long-time period
efforts. It has typically less complicated to alternate fees and promotions than to
alternate advertising channels.
of Intermediaries)
Based on structure
• Whenever designing a distribution channel, there are many factors in
consideration. One of them is how close the company is to its target market. The
other is the expansion plans of the company and how expansion will require a
deeper distribution network.
 Consumer channel structure: The customer channel structure is typically used
inside the FMCG marketplace or the long lasting customer items marketplace.
This channel shape is thought for the diverse varieties of factors at the
distribution community. From top to bottom, those are the gamers that decide
the channel structure.
 Manufacturer: This is the determined business enterprise that desires to
promote its product to its give-up clients and construct distribution
channels.
of Intermediaries)
 Dealer: This is the very last touch between the producer and the customer. A
business enterprise needs to have a factor of sale with a view to promote a
product and display its abilities to its clients. Companies such as Bose have
many corporations that promote their product immediately to their give-up
clients.
 Wholesalers: Wholesalers are individuals who purchase stock from
producers in bulk and resell it to stores. For FMCG product, the wholesaler
is answerable for breaking the majority and the customer sturdiness is the
duty of the complete region.
 Agent or Broker: An agent or broking is someone who makes a transaction
between a store and a business enterprise, or between a wholesaler and a
business enterprise. He gets a small rate to technique the transaction.
Brokers also can be C & Fs (providers and freight providers). This may be
the 1/3 stage of channel shape.
of Intermediaries)
 Consumers: People who purchase product from stores. Therefore, primarily

based totally on those actors, the customer channel shape may be configured
with unique cloth flows.
Intensity of channel design
• As noted earlier, the variety of stages in a channel can variety from the huge
direct (producer user) 1 to 3 stages, relying on numerous factors.
• After the variety of stages has been determined, every business enterprise ought
to decide the variety of intermediaries at every stages of the channel. This
increases the problem of the energy of the distribution.
• Sales energy refers back to the variety of intermediaries at every stages of the
advertising channel.
• In different words, whether or not a small variety of outlets is outsourced to
distribute or a big variety of outlets are developed to distribute the business
enterprise’s product.
of Intermediaries)
• In short, in relation to income intensity, groups have three wide options. These
are:
 Intensive distribution policy: Intensive distribution coverage refers to sale of
product via a totally big variety of outlets. These coverage ambitions at giving
most publicity to the product on the market inside the marketplace.
 Selective distribution coverage: As the call implies, this coverage limits the
variety of outlets that bring product. Therefore, in assessment to using all
feasible intermediaries, cautious choice on the factor of sale while a product is
offered is made at a specific degree.
 Exclusive distribution coverage: This coverage offers a confined variety of
dealers the extraordinary proper to promote the agency’s product of their
respective areas. Within the framework of this directive, among the producer
and the distributor, the producer guarantees to promote the product solely
through the distributor of the whole marketplace, and the distributor
monopolises the producer.
of Intermediaries)
Type of Intermediaries
• Intermediaries, also known as distribution intermediaries, marketing
intermediaries, or middlemen, are an extremely crucial element of a company’s
product distribution channel. This is due to the fact the salesperson is an outside
group, person, or agency that lets in the Intermediaries to supply the product to
the more user.
• There are four generally recognised broad groups of intermediaries as:
 Agent/Broker: Agent or broker is a person or agency that acts as an extension
of a production agency. Your important task is to symbolise the producer while
promoting product to customer. They do not longer very own the product
without delay, however they do very own it inside the income process. They
make an income through commissions.
of Intermediaries)
 Wholesaler: They take possession of products and goods that are

intermediaries. They are impartial and very own the product they promote.
Wholesalers do no longer manage small portions of products. They purchase in
bulk and save their product of their warehouses and wait till they are resold.
Wholesalers do not often promote to quit users.
 Distributor: Distributor acts like a wholesaler in that it owns, stores, and
profitably sells its product to stores or different intermediaries. However, the
principle distinction is that vendors are partnering with complementary
product.
 Retailers: Stores are available lots of shapes and sizes, from horn supermarkets
to big chains such as Walmart and Target. Regardless of size, stores purchase
product from marketplace agents and promote them without delay to quit
clients for income.
Factors Considered in Selecting Channels
• With the changing consumption patterns of consumers in recent years, more small
and medium retailers are being used to make spot purchases.
• The role of the distributor in supporting the point of sale industry is substantial.
It needs to ensure the delivery of products with wide geographical coverage along
with offering a product mix customised for each retailer at competitive prices at
the same time.
• The need of the hour is to develop flawless logistics to ensure that the products
reach the point of sale.
• The challenge of product delivery using the least cost and possible time requires
even higher efficiency levels. This has given birth to software tools that are
specialised in this segment combined with advanced systems and processes that
are customised for different product profiles.
• The large growth in the use of the warehouse management system, automated
inventory controls, data collectors, routing systems and trackers increase the
speed and safety of the distribution process.
• It is important for organisations to develop a framework that enables them to
achieve operational excellence by adopting a distribution network that aligns with
their strategic goals.
• Nowadays, customers are seeking more value and logistics can meet the value by
integrating the 3 R’s which are:
1. Reliability: In the current economic environment, customers across markets
are reducing their inventory holdings. Just-in time (JIT) practices are catching
up across industries ranging from car. Therefore, it becomes imperative for
suppliers to fulfil the completed orders at agreed times. The focus of any
successful logistics strategy should be on reliability.
2. Responsiveness: The importance of quick response cannot be undermined in

today’s marketplace. Organisations need to respond in shorter lead times with
agility and maximum flexibility. A logistics strategy should focus on shipping
and transporting smaller quantities with speed directly to the point of
consumption.
3. Relationships: The idea of single sourcing has been catching up lately as
consumers desire to reduce their supplier base, thereby taking advantage of
reduced costs, improved quality and integrated scheduling of production and
deliveries.
• Factors that typically have an impact on the selection of distribution channels

may be divided into 4 groups:
Market considerations
Product considerations
Intermediate considerations
Business considerations
Types of Wholesalers and Types of Retailers
• A warehouse is a place to store the stock or the inventory. Most of the tasks that
occur in a warehouse are related to inventory management.
• These tasks include accumulating the receipt of products, issuing of products,
recording changes and tracking the movement of inventory.
• The role of a warehouse is, at times, considered to be processing the inventory
from entry to exit, and, sometimes, it is considered to be a simple storage facility
for products in transit from the point of origin to the point of destination.
• Warehousing can play a pivotal role in minimising supply chain inefficiencies to
improve value addition during the logistical flow of products and inventory
management, including consolidation and customisation of inventory.
• In a world-class warehousing environment, the customer service improves and the
costs of warehousing are reduced.
• A warehouse is a building or an area or a facility where goods are stored.

• The warehousing activities involve the administrative and physical tasks
concerned with the receipt, inspection, storage, retrieval and dispatch of goods.
• Storage involves proper stocking of the related products together in a storage
facility. Basically, warehousing is storage on a large scale.
• The place where the products are kept is referred to as the warehouse. A
warehouse can be seen as a node/intersection where information and products
flow between suppliers and customers.
• Warehousing caters to different types of products.
• The structure of the warehouse and the facilities therein depend on the type of
product to be stored therein.
• To meet the different requirements, different types of warehouses may be

categorised as follows:
 Private warehouse: Warehouses owned/managed by businessmen to stock their
own products are referred to as private warehouses. Some examples of such
warehouses are those warehouses that are made by farmers near their fields or
by wholesalers and manufacturers near their factories.
 Public warehouse: As the name suggests, warehouses where goods of the
general public are stored, are referred to as public warehouses. Rent for storing
goods is levied for storage. The government awards licence for such warehouses
and also regulates their functioning.
 Government warehouse: Warehouses owned/managed by government bodies
are known as government warehouses. Private organisations may also store
their goods here. Food Corporation of India is an example of such a warehouse.
 Bonded warehouse: Goods for which import duty is yet to be paid are stored in
a bonded warehouse. Such warehouses are usually located near ports.
 Co-operative warehouse: Warehouses that are owned/operated by cooperative
societies are known as co-operative warehouses.
 Raw material, work-in-progress and finished goods warehouse: These
warehouses are located near the production facility for the ease of access.
 Distribution warehouse: These warehouses consolidate products from different
points of manufacturing or from different manufacturers for consolidated
shipment to the customers.
 Fulfilment warehouse: These warehouses receive, pick and ship small orders
for individual customers.
 Local warehouses: These are distributed across geographies in order to shorten

transportation distances and provide a speedy response to customers. These
can also supply individual products to the customers as frequently as desired.
 Value-added service warehouses: In these warehouses, activities such as
packaging, labelling, pricing and marking are performed as a value-added
service to the customer.
Types of Retailers
• The basic functions of a retailer are buying and assembling goods for selling to
buyers.
• The responsibility of a retailer lies in the identification of the most economical
source for obtaining the goods and selling them at a profit to the consumer. Thus,
the general functions of a retailer are associated with warehousing and storing of
goods.
• The different types of retail formats are explained as follows:

 Departmental store: A departmental retail store is basically a large-scale
organisation having different departments and handling a variety of
merchandise under one roof. Departmental stores are a popular type of format
and confine their activities to particular lines of business.
 Chain stores or multiple stores: Multiple shops system is a system of opening
branches at various locations under centralised management and having
similar lines of products. The chain stores receive supply from the central office
and remit its sale proceeds to the central office regularly or periodically.
 Consumer cooperative stores: Consumer Cooperative stores are established
under the Cooperative Societies Act and are owned and operated by the
members of the customers themselves. The capital of the store is provided by
the shareholders, and the membership is voluntary.
 Mail order house (Catalogue retailing): Mail order type of retail format is also
known as ‘sale through post’ or ‘postal sales’. Under this format, the retailers
contact the prospective customers through advertising using various traditional
modes of communication such as TV and catalogues or leaflets by giving
information about products in it.
 Supermarkets or self-service stores: A supermarket is a large retailing store
selling products such as groceries and general merchandise. In supermarkets
concept, there are a large variety of merchandise products having low margin
appeal with self-service criteria. Goods are kept at open racks and shelves, and
the prices after discounts are displayed so that customers can make decisions
and pick the selected goods in the basket.
 Kirana stores or unorganised retail stores: These are operated by local retailers
in the Indian market. These stores are related to the unorganised sector of the
Indian market, which makes up a larger portion of the retail sector in the
country. The products are procured from the wholesalers or manufacturers
directly, and it is upon the decision of the retailer to provide credit facilities to
the customers or not.
 Super bazaars: Super bazaars have interrelated functioning as supermarkets,
but the products in these bazaars mainly consist of eatables such as fresh
fruits, vegetables, dry fruits, meat or dairy goods. Several super bazaars can be
seen in different cities of India such as Connaught Place in Delhi. India has
around 100 super bazaars functioning in metro cities.
 Mom and Pop Store Kirana stores or Unorganised retail stores: These are
operated by local retailers which can be individual or family-owned small
business entities in the Indian market. These stores are related to the
unorganised sector of the Indian market, which makes up a larger portion of
the retail sector in the country.
Vertical Marketing Systems (VMS)
• Vertical Marketing System (VMS) consists of manufacturers, wholesalers and

outlets of fundamental channel companions operating collectively as an
organisation to satisfy client desires.
• In conventional advertising structures, producers, wholesalers, and outlets work
separately to maximise income on the rate of every other.
• This created infinite conflicts among vendors and decreased the general income of
the commercial enterprise.
• To conquer those conflicts, a few businesses have begun to apply vertical
advertising structures wherein manufacturers, wholesalers and outlets work
collectively to attain their typical commercial enterprise goals.
• A vertical advertising device is described as an advertising device wherein the
three fundamental participants of manufacturing and distribution channels
(producers, wholesalers and outlets) work collectively to satisfy customer desires
and attain commercial enterprise goals.
• The vertical advertising device works for collaboration among participants of the
distribution channel.
• In a conventional advertising device, every member of the distribution channel
acts independently as an impartial company, channeling the manufacturing and
income chain of the employer device.
• The vertical advertising device is one such advertising device that gives the joint
efforts of the three fundamental distribution channels.
Types of VMS – Corporate, Administered, Contractual

• There are numerous sorts of this goods, relying on how the concept is used. There
are commonly simple sorts. The kind is an extension, however you could think
about it as the subsequent category: The sorts are:
1. Corporate vertical marketing system: In company VMS, all factors of
manufacturing due to the fact the contributors of the distribution channel,
whether or not producers, wholesalers, or outlets, personal all different
contributors of the channel.
2. Contract vertical marketing system: In Contract VMS, every member of the
distribution channel works independently, consolidating sports on a settlement
foundation and growing the income of running alone. The maximum not
unusualplace shape of settlement VMS is a franchise.
3. Managed vertical marketing system: In Managed VMS, there aren’t anything

contracts between contributors of the manufacturing and distribution
channels, however their goods are inspired through the scale and strength of
one of the contributors.
Let’s Sum Up
• A channel of distribution—additionally known as a distribution channel—is the

approach an enterprise makes use of to get a products or services into the fingers
of a intermediaries as speedy and effectively as possible.
• The most important feature of the distribution channel is to convey collectively
product from exclusive producers and lead them to have to customers. Apart from
this, channel contributors additionally carry out many different capabilities along
with shopping, warehousing, selling, shipping and financing.
• Channel design is the strategic process that commercial organisations use to
balance resources across direct and indirect channels or routes to market.
• Broker, additionally referred to as a distributor, advertising agency, or broking, is
a completely crucial detail of an agency’s product distribution channel. Without a
salesperson, it is miles nearly not possible for an agency to function.
Let’s Sum Up
• Broker, additionally referred to as a distributor, advertising agency, or broking, is

a completely crucial detail of an agency’s product distribution channel. Without a
salesperson, it is miles nearly not possible for an agency to function.
• Vertical Marketing System (VMS) consists of manufacturers, wholesalers and
outlets of fundamental channel companions operating collectively as a unified
organisation to satisfy client desires.
Chapter 12 : CRM and Sales Management
Chapter Index
Slide
From-To
Understanding Customer Relationship

2 Topic 1 360 – 369
Management (CRM)
3 Topic 2 Customer Retention 370 – 371
4 Topic 3 E-CRM 372 – 376
Relationship between Sales Management

5 Topic 4 377
and CRM
6 Let’s Sum Up 378

• Explain the CRM and sales management
• Discuss customer retention
• Define the strategies for customer retention
• State the E-CRM
Understanding Customer Relationship Management
(CRM)
• CRM refers to a business strategy that enables organisations to better serve the
needs of their customers, improve customer service, achieve a high level of
customer satisfaction, thereby maximise customer loyalty and retention. It
encompasses a number of technologies used to streamline customer interaction,
which helps in finding, acquiring, and retaining customers.
• Some of the most popular definitions of CRM are given as follows:
 According to Gartner, A business strategy designed to optimize profitability,
revenue and customer satisfaction.
 According to Price Waterhouse Cooper (PWC), A business strategy that aims to
understand/appreciate, manage and personalize the needs of the organization’s
current and potential customers.
 According to Jill Dyche, The infrastructure that enables the delineation and
increase in customer value and the correct means by which to motivate
valuable customers to remain loyal and buy again.
(CRM)
Aim of CRM
• The main aim of CRM is retaining customers by engaging them and listening
them as and when required. It’s main focus is to facilitate long-time period
earning, retention of customers, customer welfare at profit by developing the
customer-centric strategies.
• The main purpose of CRM is to provide quality services to customers and achieve
a high level of customer satisfaction.
• The following are some reasons explaining the importance of CRM:
 Establishing effective communication channels
 Gathering information related to customers
 Creating detailed profiles of individual customers
 Achieving a high level of customer satisfaction
(CRM)
 Tracking new sales opportunities

 Increasing market share and profit margins
 Enhancing customer loyalty
 Fulfilling customer requirements
• Few techniques which businesses use in relationship marketing are:
 Consistently providing excellent customer service.
 Trying to know the individual in person and anticipating his/her future needs.
 Providing loyalty programs, offering discounts and special perks for repeat
customers
(CRM)
• Small businesses also try to have daily interactions on the Internet with their
customers and sees an opportunities to build relationship marketing ties.
• This leads to higher rates of engagement with customers, though inviting them to
visit their websites and comment on blogs.
• Relationship marketing is more of a sales and marketing method, while the CRM
concept refers to a software and processes used to manage the marketing methods
and client relationship.
• The use of customer relationship management includes the operational tasks that
support the relationship marketing strategy.
• Activities may include gathering data about the customers, then organizing and
analysing it to create target customer profiles.
• CRM data is also effective in finding opportunities to create special offers to
reward long-time customers for their loyalty, further building the relationship.
(CRM)
CRM Process
• Customer Relationship Management (CRM) consists of all of the approaches to
draw and hold relationships with clients.
• Other approaches include coping with purchaser information, studying facts, and
producing reviews for insight.
• CRM covers all components of commercial enterprise operations that have an
effect on clients, consisting of sales, commercial enterprise development, sales,
advertising, and purchaser service. Therefore, CRM expands sales strategies,
perceive opportunities, decrease risk to gain better results.
(CRM)
The Five Steps in the CRM Process

• CRP Process involves following steps:
1. Generate Brand Awareness: The first step in the CRM procedure is to make
potential clients aware of your product or service. The first step in attracting
new clients is to introduce them to your enterprise by following means:
 Understand the goal group: Marketers behaviour studies to perceive
cantered demographics, benefits, favoured channels of verbal exchange, the
messages they reply to maximum, and what’s critical to them.
 Target market segmentation: Audience personas are created to divide a
brand’s audience into comparable businesses primarily based totally on
comparable benefits and demographics. This allows entrepreneurs recognise
which kind of human are more in all likelihood to be clients and who
campaigns for the marketing campaign.
(CRM)
 Create advertising campaigns that goal those audiences: With A/B checking
out and advertising automation, you could perceive what works and what
does not, create your very own campaigns in your very own purchaser
segments, together with social media and electronic mail, and expand lead
acquisition strategies.
2. Acquire leads: After introducing your brand to potential clients, the second
step is to gather leads. Your sales and advertising groups interact together
along with your audience through e-mail campaigns and Google Ads.
3. Convert leads into customers: Once you have got the eye and interest of your
potential leads, the following step is to convert them into actual clients. If
leads are positive, sales representative want to keep expanding leads and
construct positive outlook of the brand and product.
(CRM)
4. Provide quality customer support: The CRM should not end at lead conversion.
Companies want to retain their customers and deliver superior customer
service, preferably via various communication channels (live chat, email, and
phone) and whenever your customers need it.
5. Drive upsell: Upselling is a sales method used to persuade current clients to
buy extra products or improvements in reference to their preliminary buy.
CRM can arrange your client listing via way of means of buy records and ship
custom e-mail templates for associated products to potential leads.
Importance of CRM
• Customer Relationship Management is the most effective and strong technique for
preserving and growing client relationships.
• Most of the organisations have dedicated excellent tools for maintaining CRM
systems into their workplace.
(CRM)
• Some of the efficient tools used in most of the renowned organisation are Batch
Book, Salesforce, Buzz stream, Sugar CRM, etc.
• The following points explain the importance of CRM:
 Learning: CRM facilitates organisations recognise extra approximately their
clients, who they are, why they purchase products, and developments of their
buy records. This permits companies to higher count on and reply to their
clients’ goals.
 Organisation: CRM allows companies to emerge as extra green via way of
means of organising and automating sure components in their enterprise. From
sales approaches to advertising campaigns, commercial enterprise analytics
and client statistics, CRM automates and streamlines those approaches for
companies.
(CRM)
 Optimisation: Finally, CRM software programme permits companies to

optimise their interactions with their clients. CRM improves client pride via
way of means of simplifying and optimising the extra complicated client
interplay approaches.
Customer Retention
• Customer retention refers to the activities and measures taken with the aid of
using an organisation or employer to number purchaser attrition.
• The purpose of loyalty retention is regularly to assist organisations keep as many
clients as viable through loyalty and branding initiatives.
• It is essential to consider that purchaser loyalty starts with the purchaser first
contacting the organisation and lasts for the existence of the connection.
• This refers back to the organisation’s capacity to in the end maintain clients
buying products and services. It is your obligation and responsibility to construct
top relationships with current clients.
• When your clients are glad together along with your products and services, they
will now no longer best come returned to you, however, will market your brand a
lot higher than you.
Customer Retention
Strategies for Customer Retention

• STP is one of the most widely adopted customer retention strategy. As you have
already studied, STP stands for Segmentation, Targeting, and Positioning.
• It is a marketing technique for the modern times and is a three-way model that is
driven by the segregation of not only the market but your customers and then
using their buying preferences to target them with content.
• The STP model is all about developing and delivering personalized and relevant
messages to engage with different audiences, at different levels.
• An essential part of STP marketing is the drawing up of personas and
communicating to each of these personas at a tactical communication label.
E-CRM
• The term e-CRM has been derived from e-commerce. It is all about managing
relationships with customers by using Information Technology (IT).
• e-CRM enables organisations to integrate their internal resources with their
external marketing strategies.
• This helps in identifying and fulfilling customer needs. According to William
McKnight, “E-CRM is not just your call center, self-service Web site, sales force
automation tool or the analysis of customers purchasing behaviors.
• E-CRM is all of these initiatives working together to enable you to more effectively
respond to your customers needs and to market to them on a one-to- one basis. It’s
about the customer, not any individual piece of technology.
• Most people have a perception that e-CRM is just a marketing trick applied by
organisations.
E-CRM
• However, in reality, it is an electronic way of interacting with customers, providing

quality services to them, and getting their feedback.
• Online customer feedback enables organisations to understand the requirements
of customers and make improvements in their products accordingly.
• e-CRM helps organisations to transfer documents from one system to another
using e-mails and networking.
• Apart from this, it enables organisations to be aware of the changing
requirements of customers and reach out to the target customers through both
traditional and electronic channels.
• E-Commerce actually began in the 1970s when larger corporations started
creating private networks to share information with business partners and
suppliers. This process, called Electronic Data Interchange (EDI), this method
sends standardised records that streamlines the procurement method among
businesses, in large part doing away with office work and human intervention.
E-CRM
Benefits from e-CRM

• e-CRM enables organisations to respond to the needs of customers more effectively
and serve them on a one-to- one basis.
• Moreover, it helps organisations to personalize their customer interactions
through e-mail, telephone, and live web chat.
• Apart from this, application of e-CRM also helps different departments of an
organisation to perform their activities effectively.
• The following are the benefits of e-CRM:
 Direct benefits: Imply that e-CRM helps an organisation to reduce costs
incurred on manual processes, achieve maximum output, and improve business
performance. Moreover, e-CRM enables organisations to reach out to maximum
number of customers, which, in turn, increases overall organisational revenue.
E-CRM
 Indirect benefits: Include benefits, such as reduced lead times for ordering
products, minimum risk of obsolete stock, customer satisfaction, and effective
communication.
 Strategic Benefits: Refer to long-term benefits of e-CRM that can be achieved
through close interaction with customers, suppliers, and employees of an
organisation. These benefits are often non-quantified, unseen, and valuable.
Scope of e-CRM
• The scope of e-CRM encompasses:
 Sales: Supports key capabilities including contact management, opportunity
management, forecasting, and a 360-diploma view of all consumer money owed
and interactions. Automate and prepare area carrier sports for in depth sales
and closing.
E-CRM
 Marketing: Detailed schedules and tasks, maintaining contact lists and part
time logs, automated hyperlinks to leads, money owed or contacts, control of
product and useful resource records, advertising alerts, etc.
 Channel control: Support for key capabilities including marketing campaign
control and analysis, consumer demographic analysis.
 Customer service: Provides green workflow and smooth get admission to
records whilst consumer records are synchronised throughout all verbal
exchange channels.
 Partner management: Track and examine sales from companions and song
touch with dealers, distributors, and different sales companions.
 E-Business: Creating and adapting consumer-orientated websites that permit
clients to generate and guide requests from the company’s website.
Relationship between Sales Management and CRM
• One way to keep consumer experiences satisfactory and encourage them to behave
positively, without recruiting more staff, is to segment customers and service
levels which can be done with the help of CRM.
• Businesses should also avoid over-promising and strive to provide consistent
quality and service.
• Businesses also need to be mindful that a consumer may have been experiencing
an issue long before they may bring it up to the notice of support staff. They must,
therefore, be more attentive when a consumer brings up issues.
• Sales intelligence CRM is a tool used by an organisation to optimise and evaluate
key sales processes. It helps salespeople analyse information related to customers
and take various sales decisions.
• Sales intelligence CRM is primarily designed for organisations involved in the
wholesale, distribution and manufacturing segments.
Let’s Sum Up
• Customer Relationship Management (CRM) may be described as a framework for

identifying, acquiring, satisfying, and keeping worthwhile clients with the aid of
using handling powerful relationships to enhance and make certain profitability.
• CRM is the maximum effective and maximum green technique to preserving and
growing client relationships.
• Customer loyalty refers back to the sports and measures are taken with the aid of
using an organisation or employer to lessen purchaser attrition.
• E-CRM honestly commenced inside the 1970s, whilst massive businesses
commenced to construct personal networks for replacing records with commercial
enterprise companions and suppliers.
• CRM is at once associated with sales control. However, in case your consumer
dating control device is not always carried out flexibly, intuitively, and properly,
sales control will not gain from it.

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Sales

1 Chapter 1 Introduction to Sales Management 5 – 33

2 Chapter 2 Personal Selling 34 – 59

3 Chapter 3 Sales Forecasting 60 – 105

4 Chapter 4 Sales Budgeting 106 – 138

5 Chapter 5 Sales Quotas 139 – 157

6 Chapter 6 Sales Organisation 158 – 191

Manpower Planning - Process and

8 Chapter 8 Performance Appraisal and Compensation 220 - 253

9 Chapter 9 Physical Distribution 254 - 279

10 Chapter 10 Introduction to Distribution Management 280 - 316

11 Chapter 11 Channels of Distribution 317 - 356

12 Chapter 12 CRM and Sales Management 357 - 379

 The course Sales Management is designed to comprehensively cover various

2 Topic 1 Objectives of Sales Management 9 – 10

Sales Management Definition, Process,

6 Topic 5 Duties & Responsibilities of Sales Manager 22

9 Topic 8 Selling vs. Marketing 25 - 28

• The scope of sales management in an organisation includes both quantitative and

• Sales management may be defined as the process of developing a sales force,

• The process of sales management involves developing a sales force,

Key elements of sales

• A sales pipeline or sales funnel is a visual sequence of activities to achieve with

• Some KPIs that can be considered for a sales analysis include:

Average purchase value

Sales per representative

Quote to close ratio

Sales lead to close ratio

Sales plan templates

Sales email templates

Sales compensation calculator

Online sales training

Sales enablement guides

Sales meeting checklist

Contemporary Sales Management Practices

• Selling services is different from selling products because, in the latter,

• Sales management has several roles and functions within an organisation as

Helps in achieving sales targets

Promotes organisational growth

Motivates the sales force

• Sales management plays a critical role in deciding whether a business will be a

• Skills needed to become a successful sales manager are:

Mentoring and motivational skills

Ability to allocate duties and responsibilities

• There are three key management functions in sales management:

• Marketing is a broad concept and is defined as the process through which

• The differences between selling and marketing are summarised below:

Focuses on the product and profits Focuses on customer satisfaction

It is a seller-oriented approach Is a customer-oriented approach

Emphasis is on maximising sales Emphasis is on providing quality

Cost determines price The consumer determines price and

Has an inside-out perspective Has an outside-in perspective

Emphasis is on staying with existing Emphasis is on innovation in existing

• According to AMA, sales management is the planning, direction, and control of

• In service-based selling, intangibility makes it harder for consumers to judge the

• Three management functions in sales management are interpersonal, decisional,

2 Topic 1 Meaning and Evolution of Personal selling 37 – 45

3 Topic 2 Theories in Personal Selling 46 – 54

4 Topic 3 Marketing of Financial Services 55 – 56

• Personal selling is defined as the exchange of products or services between a

• Personal selling has four main objectives as depicted below:

Evolution of Personal Selling