Sales Setting

Unit 4a
Objectives
1. Understand the forces that impact on selling and sales management
2. Appreciate why channels are structured in different ways
3. Evaluate push and pull promotional strategies and tactics
4. Understand the unique problems and forces that surround
organizational and service sales settings
5. Evaluate the usefulness and application of exhibitions as a
promotional medium
6. Appreciate the nature and role of public relations as a selling tool
7. Be aware of implications of selling and the internet
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1. ENVIRONMENTAL AND MANAGERIAL FORCES THAT IMPACT ON
SALES

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Behavioral: Rising consumer/organizational buyer
expectations and fulfilment of higher order needs
• Technological advances have created new higher
What makes customer customer expectations
satisfaction so difficult to achieve • Improvements in communication through email and
the internet have increased customer expectations
is that you constantly raise the regarding response time to their requests and inquiries
bar and extend the finish line. • Systems are often complex and customized, and require
You never stop. As your extensive accompanying service. This means that
customers get better treatment, salespeople need to be able to manage cross-functional
they demand better treatment.’ relationships to provide solutions and manage long-
term customer relation
- J.D. Power Consulting • In the corporate world customers are expecting greater
transparency in company operations and more ethical
practices

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Behavioral: Customer avoidance of buyer–
seller negotiations
• Most customers (especially in the
auto/car buying) have taken to viewing
the purchase as an ordeal to be
tolerated, rather than a pleasurable
occasion to be savored

• There are attempts by buyers to avoid

interaction with sales personnel. Hence
businesses advertise their product
ranges and prices online and other
media paltforms
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Behavioral: Expanding power of major
buyers
• The growing dominance of
major players in many sectors
(notably retailing) is having a
profound influence on selling
and sales management
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• Their enormous purchasing power
means that they are able to
demand and get special services.
• They include special customer
status (key account management),
just-in-time inventory control,
category management and joint
funding of promotions.
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 Behavioral: Globalization of markets
• As domestic markets saturate, • This complexity means that strategic
companies are expanding abroad to account managers require both
achieve sales and profit growth. enhanced teamwork and
coordination skills to ensure that
customers receive top-quality
• The global challenge includes a service. Ethical differences are also
correct balance between expatriate important considerations
and host country sales personnel,
adapting to different cultures,
lifestyles and languages, competing
against world-class brands and
building global relationships with
customers based in many countries.
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Behavioral: Fragmentation of markets
• Driven by differences in income levels,
lifestyles, personalities, experiences
and race, markets are fragmenting to
form market segments.

• Marketing and sales managers need to

be adept at identifying changes in
consumer tastes and developing
strategies that satisfy an increasingly
varied and multicultural society.

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 Technological: Salesforce automation; virtual
sales offices; electronic sales channels
• Automation of the sales process (EDI, faxes,
palmtop computers, etc) allowing direct
exchange of information.

• Improved technology has encouraged the

creation of virtual offices, allowing sales
personnel to keep in contact with head office,
customers and co-workers.

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Technological: Salesforce automation; virtual
sales offices; electronic sales channels
• The fastest growing electronic • E-commerce can work as a
sales channel is the internet and mediator between front end and
has changed the focus of the back end within the internet
sales team

• The internet has also raised

customer expectations regarding
salesperson knowledge about
their company and
responsiveness.

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Managerial: Employing direct marketing
techniques
• An emerging change is the use of
computer stations to replace
traditional salespeople.

• For example, customers can

compare features of competitive
models, calculate running costs,
compute monthly payments

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Managerial: Improving cooperation
between sales and marketing
• The development of effective
relationships between sales and
marketing is recognized

• The establishment of intranets

that link employees, suppliers
and customers through their PCs
can improve links and
information exchange.

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Managerial: Encouraging salespeople to attend training programs and
acquire professional
qualifications.

• Sales management is responding

by recognizing the importance of
training and professional
qualifications.

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 Technological

Behavioral Managerial

Strategic
Customer
Management of
a traditional
sales
Organization

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 Strategic customer management requires
Intelligence
• Salespeople show a deep
understanding of the
customer’s business, so that
they can identify needs and
opportunities ahead of the
customer.
• Sellers can gain competitive
advantage by identifying new
opportunities in the end-user
markets of their customers.
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Interfaces
• Traditional salesperson and
sales management processes
integrate with the new
challenges of doing business
that have emerged through
developments in technology.
• The aim is to produce an
effective customer
relationship management
system that allows customer
choice of channel while
creating an efficient system of
delivering customer value.
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Integration
• The process of welding all the
company’s activities and
processes that affect
customer value into a single,
integrated and sustained
point of value delivery to
customers.
• There is the need for cross-
functional and cross-border
integration to deliver superior
customer value.
15
 2. SALES CHANNELS
• Modern-day manufacturing,
more cosmopolitan consumers,
Logistics or
Physical better transportation and
Distribution
Management communications, and business
(PDM) specialization have meant that
channel decisions are now quite
Distribution complex.
channels

Channels of
distribution.

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 1. Logistics or physical distribution
management (PDM)
• Logistics means the effective and • The logistics mix describes the six (6)
economic planning, implementation functional elements involved:
and control of the physical flow of 1. Order processing
materials in their unprocessed state 2. Materials handling
through to finished goods from the 3. Warehousing
point of origin to delivery to the end- 4. Inventory control
consumer. 5. Transportation
6. Packaging
• Logistics conventionally starts with
customers and works back towards
the original source of supply.
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 1. Order processing
• This first stage calls for close
liaison with the customer. A
well-designed system should
have simple administrative
procedures and be speedy
and effective.
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2. Materials handling
• Is usually a function of the
product in terms of physical
characteristics such as weight,
bulk related to value and
perishability, all of which will
determine how the product is
stored and transported.
• Here, a balance between
levels of service that the
company provides (e.g. ex-
stock delivery as opposed to,
say, one month) and costs is a
decisive factor.
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3. Warehousing
• The location of depots and
warehouses relative to end-
customers is very important
in some industries (e.g.
agricultural machinery where
spare parts must be
immediately available during
the harvesting period).
• Warehouses can carry buffer
stock and help to even out
peaks and troughs in
production. Again, this
process requires a balance
between service levels and
costs.
18
 4. Inventory control
• With the widespread
adoption of just-in-time, or
lean, manufacturing, this
has become a critical issue
• It is now customary to
think of stockholding in
terms of hours rather than
days or weeks.
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5. Transportation:
• Is usually a function of the
product in terms of
physical characteristics
such as weight, bulk
related to value and
perishability, all of which
will determine how the
product is stored and
transported.
• Here, a balance between
levels of service that the
company provides (e.g. ex-
stock delivery as opposed
to, say, one month) and
costs is a decisive factor.
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6. Packaging
• Packaging design for the
container that is displayed
on the shelf of a
supermarket is normally a
marketing communications
issue, but in terms of outer
containers and appropriate
packaging for shipping via
various modes of
transport, this falls under
the logistics mix
classification.
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 2. Channels of distribution
• A sales channel is the route that
goods take through the selling
process from supplier to
customer.

• Can be direct or indirect

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Cont.
• Channel management is a key
role of the sales manager.
• This is a major responsibility,
since for most manufacturers
success or failure is partially
determined by how efficiently
and effectively their products are
sold through their marketing
channel members
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• Factors affecting Appraising of
sales channels
• the market;
• channel costs;
• the product;
• profit potential;
• channel structure;
• product life-cycle;
• non-marketing factors.
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 The Market
• This must be analyzed to
ensure that as many potential
consumers as possible will
have an opportunity to
purchase the product or
service.
• Not alienating existing
customers must also be
considered.
• Channel compatibility with
similar products in the
marketplace is important.
• Companies must ensure that
they maintain the status and
image associated with the
channels
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Channel costs
• Generally, short channels are
the costliest. A company
selling direct may achieve
large market coverage, but in
addition to increased
investment in the salesforce,
the firm incurs greater
transportation and
warehousing costs.
• The advantage in this
approach may be greater
profits
• Short channels have an
advantage of being nearer to
end-users, which means the
company is in a better
position to anticipate and
meet their needs.
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The product
• Normally, low-cost, low-
technology items are better
suited to longer channels.
• Complex products like
industrial products use
shorter channels
• The width of the product line
may also make business to
use salespersons
• A narrow product line is more
suited to a longer channel
because it allows for
combining with other
complementary products e.g.
selling bathroom fittings
through hardware store
merchants
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 Profit potential
• There comes a point when
the costs of obtaining more
sales through a channel
outweigh revenue and
profits to be gained from
increased sales.
• A balance must be struck
between channel expense,
profit and gross margins.
• A manufacturer using short
channels is more likely to
have high gross margins, but
equally higher channel
expenses. A manufacturer
using longer channels will
have relatively lower gross
margins, coupled with lower
channel expenses.
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Channel structure
• To some extent a
manufacturer’s choice of
distributive intermediaries
is governed by the members
in that channel. If members
of the channel are strong
(by virtue of, say, their size),
then it will be difficult for a
manufacturer to go outside
the established channel.
• In some cases it may be
difficult to gain entry to the
channel unless the product
is differentiated by way of
uniqueness or lower price
from those products already
established in the channel.
• Gaining access to giant
intermediaries may require
aggressive push strategies
along with mass
promotional pull strategies
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Product life-cycle
• Consideration must be given
to how far the product is
along the product life-cycle
• New products require
intensive distribution and
products are established
selected authorized dealers
will be needed for e.g. after
sales service.
Non-marketing factors
• Non-marketing factors
relate to the amount of
finance available.
• E.g. The firm may have to
distribute through a
middleman because it
cannot afford to employ a
field salesforce
• Conversely, the firm may
use a non-conventional
channel such as mail order,
which requires minimal
investment in salespeople.
• Non-marketing factors may
also apply when selling
internationally
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 Characteristics of sales channels
Direct Selective Intensive Exclusive

• the manufacturer • The manufacturer • maximum exposure • The manufacturer

does not use a sells through a at the point of sale sells to a restricted
middleman and sells limited number of is needed and the number of dealers.
and delivers direct middlemen who are manufacturer sells An example is the
to the end- chosen because of through as many car industry where
customer. special abilities or outlets as possible. distributors must
facilities to enable Servicing and after- provide levels of
the product to be sales aspects are stockholding, after-
better marketed. less important. sales service, etc.,
• Examples are deemed appropriate
cigarettes, breakfast by manufacturers as
cereals and their reputations
detergents. depend ultimately
upon service back-
up provided by
distributors.
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 Management of sales channels
• Channel decisions are strategic and
there are two major reasons for this:
1. Such decisions generally involve a
company in long-term commitments,
usually to other organizations.
2. Channel decisions can intimately
affect all of a company’s marketing
and operating activities of the
marketing program (7Ps)
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• A key factor in delineating options for
channel decision is the company itself and in
particular overall company and marketing
objectives and company resources.
• E.g. companies wishing to become market
leaders in for instance, the grocery market
have little option but to consider distributing
through the multiples.
• Generally, issues like numbers of customers,
their geographical dispersion and customer
needs, habits and preferences must also be
taken into consideration.
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 Four major strategic elements of channel choice and design are:
1. The delineation and selection of
basic channel structure
– involves considerations as to
channel length, types of intermediaries
and functions of intermediaries.
2. The delineation of required market
exposure
– this element relates to decisions
concerning the number of
intermediaries to be used and their
geographical dispersion.
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3. Systems and procedures for ensuring
maximum cooperation in the channel
and the minimum of channel conflict
– this includes the specification of
territorial rights, franchising conditions,
etc.
4. Marketing and channel support
strategies
– this element concerns the relative
emphasis and focus for marketing efforts
in the channel.
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3. INDUSTRIAL/COMMERCIAL/PUBLIC AUTHORITY SELLING
ARE LARGELY DIFFERENT FROM CONSUMER MARKETS

Fewer customers Concentrated markets

• Institutions and businesses • Industrial markets are often

purchase goods either for use in highly concentrated e.g.. Abbosey
their own organizations or for use Okai spare parts dealers, Accra
in the manufacture of other Industrial Area
goods.

• There are few potential

purchasers, each making high-
value purchases.
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 Industrial/commercial/public authority selling are largely different from
consumer markets
Complex purchasing decisions
• Buying decisions often involve
a large number of people.
• This can prolong negotiation
and decision-making
processes
• For example, specifiers need
to be convinced of the
technical merits of the
product, production people
want to be assured of
guaranteed delivery and
buyers will be looking for
value for money.
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Long-term relationships
• The nature of selling in
industrial, commercial and
public authority settings is
that long-term relationships
are established and both
parties become dependent
upon each other, one for
reliable supplies and the
other for regular custom.
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 Industrial/commercial/public authority selling are largely different from
consumer markets
Reciprocal trading
• This is an arrangement whereby
company A purchases certain
commodities manufactured by
company B and vice versa.
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Types of production
• Job (or unit or project) production:
an item is produced or constructed
to individual customer requirements.
E.g. Ships, airplanes
• Batch production: a number of
products or components are made at
the same time, but not on a
continuous basis. e.g. books, clothing
• Flow (or mass or line) production:
this is continuous production of
identical or similar products that are
made in anticipation of sales.
• Process (or continuous) production:
the production unit has raw
materials coming into the
manufacturing process and a finished
product emerging at the end.
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 4. SELLING FOR RESALE
• This includes selling to 1. Multiples e.g. ShopRite
retailers, most of whom are
multiples like ShopRite, 2. Variety chains
Melcom, Game etc. which 3. Co-operative societies
effectively perform their own 4. Department stores
wholesaling functions.
5. Independents
6. Mail order
• There are seven different
types of selling outlets: 7. Direct selling e.g. Avon cosmetics

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 Co-operative
Multiples Variety chains Department stores
societies:
• classed as • similar to • owned and • stores with five or
belonging to a multiples except controlled by the more departments
retail organization that the people who shop under one roof and
with ten or more qualifying there, each at least 25
branches, each number of society is employees, selling a
selling a similar branches is five governed by a wide range of
range of • and they sell a board of directors commodities,
merchandise. wider range of elected from its including significant
• Supermarkets e.g. merchandise. own members. amounts of
Shoprite tend to household goods
fall into this and clothing e.g.
category. Melcom

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 Independents Mail Orders Direct Selling

• Traders who own their own retail • The most popular type of • Basically involves reaching customers
outlets. There are types arrangement is the mail order directly in their offices, homes, etc. to
• 1. This is an informal grouping warehouse that carries a large range demonstrate the usage of the product
whereby retailers (usually within a of goods. to solicit sales e.g. Forever Living
specific geographical area) group products, Avon cosmetics
together to make bulk purchases. • Business is conducted through the
• 2. A wholesaler or group of medium of glossy catalogues held by
wholesalers invites retailers to appointed commission agents who
affiliate to them and agrees to take sell to families and friends.
the bulk of their purchases from
them. Such arrangements are
termed voluntary groups (individual
wholesaler-sponsored) or voluntary
chains (group wholesaler-
sponsored).
• Retailers voluntarily agree to abide by
the rules of the group or chain,
including matters of accounting
procedures, shop facilities and group
marketing/promotional schemes.
Many franchised restaurant chains fall
in this category (e.g. Pizza Express,
KFC)

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 Cont.
• The implications of the above 7 selling
outlets these developments has been
that salespeople of FMCGs selling to
multiples is more a matter of
negotiation at higher levels whereby
the buyer and the sales manager
negotiate price and delivery
• Sometimes salespeople carry out
merchandising activities such as
building up shelf displays, providing
window stickers and in-store
advertising
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• The growing importance of retailers is
reflected in the formation of trade
marketing teams to service their needs
• Trade marketers focus on retailer
needs:
• the kinds of products they want;
• in which sizes;
• with which packaging;
• at what prices;
• with what kind of promotion.
• An important role for trade marketers
is to develop tailored promotions for
supermarkets.
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 Cont.
• Information on trade requirements is • Because of the large size of site
fed back to brand management, who required for such outlets and
develop new products, and to the also for customer convenience,
salesforce, who can then better the trend has been towards out-
communicate with retailers. of-town sites where easy
parking is facilitated
• Since the late 1960s we have witnessed
the growth of large-scale retailing,
including growth in the size of retail
establishments, first to supermarkets,
then to superstores, then to
hypermarkets and finally to megastores.

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 Cont.

• Because supply normally exceeds • At the same time retailers have

demand for consumer goods, there encouraged shoppers to become
has been a large increase in ‘store loyal’ through the
advertising and other forms of introduction of loyalty card
promotion in an attempt to induce schemes
brand loyalty, with FMCGs being
pre-sold to consumers by means of
‘pull’ promotional strategies

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 Franchising
• A more recent trend is the contractual • From manufacturers to retailers:
systems of franchising. e.g. a car manufacturer (the
• It is a corporate vertical marketing franchisor) licenses car
system (VMS) as its power is based at a distributors (franchisees) to sell
point in the channel that is one or more its products.
stages removed from the end-customer
• The franchisor initiates the franchise
and provides the link to the ultimate
franchisee in specific stages of the
manufacturing/distribution process.

• Franchising comes in a number of

forms:
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 Cont.
• From manufacturers to wholesalers:
popular in the soft drinks industry, here
manufacturers sometimes supply
concentrate (i.e. the ‘secret recipe’)
which wholesalers then mix with water
and bottle for distribution to local retail
outlets (e.g. Pepsi Cola, Coca-Cola).
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• From wholesalers to retailers. The
most successful example is the
voluntary group ‘SPAR’, which does
not manufacture, but its large
wholesale buying power means it can
pass on cost savings to independent
retailers who join the group and
display the SPAR logo.
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 Cont.
• Service firm sponsored franchises to
retailers: this area has achieved the
largest growth over recent years.
Examples are found in the fast food
business (e.g. Burger King,
McDonald’s, Little Chef, KFC, Spud-U-
Like, Pizza Hut); car rentals (e.g. Avis,
Budget, Hertz) office services (e.g.
Prontaprint); hotels and resorts (e.g.
some Sheraton and Holiday Inn hotels
are owned by individuals or groups
who operate on a franchise basis).

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Franchising arrangements have a common
set of procedures:
• The franchisor offers expert • Many Franchise arrangements
advice on such matters as have a central purchasing system
location, finance, operational where franchisees buy at
matters and marketing. favorable rates or where a
successful ‘formula’ is central to
the operation of the franchise
• The franchisor promotes the (e.g. KFC)
image nationally or
internationally and this provides
a well recognized name for the
franchisee.

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 Cont.
• The franchise agreement provides
a binding contract to both sides.
This contract governs such matters
as hours of opening, hygiene and
how the business is operated in
terms of its dealings with
customers.
• A franchise arrangement normally
requires the franchisee to pay a
royalty or franchise fee to the
franchisor. However, the franchisee
owns the business and is not
employed by the franchisor.

• The franchisor often provides initial

start-up and then continuous
training to the franchisee.

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