Contents 1. Introduction to Sales and Distribution Management

Transcription

1 Contents About the Authors ii Preface to the Second Edition vii Preface to the First Edition ix Acknowledgements xiii Brief Contents xv 1. Introduction to Sales and Distribution Management 1 Introduction 1 Evolution of Sales Management 1 What is Sales Management? 2 Nature and Importance of Sales Management 2 Relationship Selling 3 Varying Sales Responsibilities/Sales Positions 4 Importance of Personal Selling and Sales Management 4 Role and Skills of Modern Sales Managers 4 Skills of a Sales Manager 6 Types of Sales Managers/Sales Management Positions 6 Top-level (Strategic) Sales Managers 6 Middle-level (Tactical) Sales Managers 7 First-line (Operational) Sales Managers 7 Staff Sales Management Positions 8 Sales as a Career 8 Rewards in Sales Career 8 Salesperson to Sales Manager 9 Changing Role of a Salesforce 9 Women in Sales 11 Sales Objectives, Strategies and Tactics 12 Sales Objectives 12 Sales Strategies and Tactics 12

2 xviii Contents Emerging Trends in Sales Management 13 Global Perspective 13 Revolution in Technology 14 Customer Relationship Management (CRM) 14 Salesforce Diversity 14 Team Selling Approach 14 Managing Multi-channels 15 Ethical and Social Issues 15 Sales Professionalism 15 E-Selling 16 Linking Sales and Distribution Management 16 Distribution Channels 18 Maximising Customer Service 18 Sales Operations Planning 19 Summary 20 Glossary of Key Terms 21 Conceptual Questions 22 Objective Type Questions 23 Application Questions 24 Reference Notes 24 Case 1.1: PI Foods Ltd. Managing Sales and Distribution Personal Selling: Preparation and Process 27 Introduction: The Psychology in Selling 27 Buyer-Seller Dyadic Interaction 28 Buying Decision Process 28 Problem (or Need) Recognition 28 Information Search (or Collection) 28 Evaluation of Alternatives 28 Purchase Decision 29 Post-purchase Behaviour 30 Buying Decision Process of Business Buyers 30 Buying Situations or Types of Purchases 30 For Household and Individual Consumers 30 Buying Situations for Business Buyers 31 Effective Communication 31 Sales Knowledge and Sales Related Marketing Policies 32 Company Knowledge 32 Product Knowledge 33 Customers and Competitors Knowledge 33 Sales-Related Marketing Policies 33

3 Contents xix The Sales Process or the Personal Selling Process 34 Prospecting 35 Qualifying 36 Preapproach 36 Approach 37 Presentation and Demonstration 38 Developing an Effective Presentation 42 Demonstration 43 Overcoming Objections 44 Trial Close/Closing the Sale 46 Follow-up and Service 49 Negotiation 50 Transactional and Relationship Selling 52 Transactional Selling (or Exchanges) 52 Relationship Selling 53 Value-added Selling 53 Summary 53 Glossary of Key Terms 54 Conceptual Questions 55 Objective Type Questions 56 Application Questions 57 Reference Notes 59 Case 2.1: Elex Motors Ltd. Partnering Relationship 60 Case 2.2: RK Consultants Selling Consultancy Service Planning, Sales Forecasting and Budgeting 62 Introduction 62 Strategic Planning 62 Corporate Strategic Planning 62 Business Unit (or SBU) Strategic Planning 63 Product/Operational Planning 63 Role of Marketing and Sales 63 The Role of Marketing at Corporate Level 63 The Role of Marketing at Business Unit 64 Marketing and Personal Selling Strategies 65 Integrated Marketing Communications (IMC) 65 Sales Strategy A Strategic Decision Area 66 Classification of Accounts 66 Relationship Strategy 66 Selling Methods 67 Channel Strategy 68

4 xx Contents Developing Sales Forecast 68 Types of Sales Forecast 68 Basic Terms Used in Forecasting 68 Forecasting Approaches 70 Top-down/Break-down Approach 70 Bottom-up/Build-up Approach 71 Sales Forecasting Methods 72 Executive Opinion Method 72 Delphi Method 73 Salesforce Composite Method 73 Survey of Buyers Intentions Method 74 Test Marketing Method 75 Moving Average Method 76 Exponential Smoothing Method 76 Decomposition Method 77 Naive/Ratio Method 77 Regression Analysis 78 Econometric Analysis 79 How to Improve Forecasting Accuracy? 79 Use Multiple Forecasting Methods 79 Identify Suitable Methods 79 Develop a Few Factors 79 Obtain a Range of Forecasts 79 Use Computer Hardware and Software Tools 81 Sales Budgets 81 Purposes of the Sales Budget 81 Methods Used for Deciding Sales Expenditure Budget 82 Sales Budget Process 82 Summary 84 Glossary of Key Terms 84 Conceptual Questions 86 Objective Type Questions 87 Application Questions 87 Reference Notes 88 Case 3.1: AG Refrigerators Ltd. Developing Sales Forecast Management of Sales Territories and Quotas 90 Defining Sales Territory 90 Reasons for Setting up or Reviewing Sales Territories 90 Procedure for Designing Sales Territories 92 Select a Control Unit 92

5 Contents xxi Find Location and Potential of Customers 93 Decide Basic Territories 94 Assigning Salespeople to Territories 96 Relative Ability of Salespeople 97 Salesperson s Effectiveness in a Territory 97 Use of IT in Territory Management 97 Managing Territorial Coverage 98 Routing 98 Scheduling 99 Time Management Tools for Salespeople 100 Time Management Tools for Sales Managers 101 Sales Quotas or Sales Targets 102 What are Sales Quotas? 102 Objectives of Quotas 102 Types of Quotas 103 Methods for Setting Sales Quotas 107 Insights into Setting and Administration of Sales Quotas 108 Companies not Using Quotas 110 Summary 110 Glossary of Key Terms 111 Conceptual Questions 112 Objective Type Questions 112 Application Questions 113 Reference Notes 114 Case 4.1: CG Engineering Company Achieving Quotas 116 Case 4.2: MM Marketing Company Territory and Quotas for a New Product Organising and Staffing the Salesforce 117 Concepts of Sales Organisation 117 Degree of Centralisation 117 Degree of Specialisation 118 Line or Staff Position 118 Market Orientation 118 Effective Co-ordination 118 Span of Control 119 Basic Types of Sales Organisational Structures 119 Line Sales Organisation 119 Line and Staff Sales Organisation 120 Functional Sales Organisation 120 Horizontal Sales Organisation 121

6 xxii Contents Specialisation within Sales Organisation 122 Geographic Specialisation 122 Product Specialisation 123 Market Specialisation 124 Combination Sales Organisation 125 Management of Major or Key Accounts 126 Alternative Sales Organisations for Major Customers 127 Size of the Salesforce 128 Workload Method 128 Sales Potential/Breakdown Method 129 Incremental Method 130 Staffing the Salesforce 130 The Planning Stage 131 Recruiting the Salesforce 134 Selecting the Salesforce 137 Hiring Stage 142 Socialisation 143 Summary 144 Glossary of Key Terms 145 Conceptual Questions 146 Objective Type Questions 147 Application Questions 148 Reference Notes 149 Case 5.1: Electrical Product Company Revision in Sales Organisation 151 Case 5.2: Swishflow Ltd. Hiring Salespeople Training, Motivating, Compensating, and Leading the Salesforce 153 Introduction 153 Managing the Sales Training Process 153 Assess Sales Training Needs 154 Design and Execute Sales Training Programme 155 Evaluation of Sales Training Programme 165 Reinforcing Sales Training 166 Motivating the Salesforce 166 What is Motivation? 167 Importance of Motivation 167 Relevance of Motivational Theories to Salespeople 168 Selecting an Effective Mix of Motivational Tools 171 Guidelines for Motivating Salespeople 174

7 Contents xxiii Compensating the Salesforce 175 Objectives of a Compensation Plan 176 Designing an Effective Sales Compensation Plan 176 Basic Types of Compensation Plans 178 Leading the Salesforce 182 Modern Views of Sales Leadership 182 Leadership Styles 183 Leadership Skills 184 Supervising Salespeople 185 Summary 186 Glossary of Key Terms 187 Conceptual Questions 189 Objective Type Questions 189 Application Questions 190 Reference Notes 191 Case 6.1: CG Ltd. Refresher Training 194 Case 6.2: STI Ltd. Incentive Scheme for Salespeople Controlling the Salesforce 196 Sales and Marketing Intelligence System 196 Salespeople 196 Secondary Data Sources 197 Discussions with Customers and Intermediaries 197 Other Sources 197 Salesforce Expenses 197 Types of Expense Plans 198 Marketing Audit 199 Salesforce Audit 199 Evaluation of Effectiveness of Sales Organisation 200 Sales Analysis 201 Marketing Cost and Profitability Analysis 203 Productivity Analysis 207 Evaluating and Controlling the Performance of Salespeople 208 Purposes of Salesforce Performance Evaluation and Control 208 Procedure for Evaluating and Controlling Salesforce Performance 208 Ethical, Social, and Legal Responsibilities of Sales Personnel 216 Business Ethics and Sales Management 216 Social Responsibilities 218 Legal Responsibilities and Sales Management 218 Problems Related to the Internet and Telemarketing 219

8 xxiv Contents Summary 219 Glossary of Key Terms 220 Conceptual Questions 221 Objective Type Questions 222 Application Questions 223 Questions 223 Reference Notes 224 Case 7.1: GTI Company Ltd. 225 Case 7.2: KKN India Ltd. 225 Case 7.3: SHB Bank Fraud Control Unit 226 Case 7.4: Intel Pentium Chip Flaw Distribution Management and the Marketing Mix 230 Introduction 230 Distribution Management 230 Definition of Distribution Management 231 Need for Distribution Channels 231 Are Intermediaries Necessary? 234 A Combination Works Better 235 Discrepancies and Distribution Channels 235 How Does Distribution Add Value? 238 Distribution Channel Strategy 239 An Overview of Distribution Channels 243 Channels of Distribution Used 245 Different Kinds of Distribution Networks 245 Patterns of Distribution 251 Distribution Channels for Rural Markets 252 Summary 253 Glossary of Key Terms 254 Objective Type Questions 255 Conceptual Questions 256 Application Questions 257 Reference Notes Marketing Channels 258 Introduction 258 What about Information? 260 The Marketing Channel 262 Channel Definition 262 Evolution of Marketing Channels 262

9 Contents xxv Channel Formats Possible 264 Producer Driven 264 Seller Driven 265 Service Driven 266 Other Formats 266 Relationship of Flows to Service Levels 267 Channel Levels 268 Service Channels 269 What is the Channel Expected to Deliver? 269 Summary of Channel Functions 271 Prominent Channel Systems 271 Vertical Marketing Systems 272 Contractual VMS 273 Horizontal Marketing Systems 273 Multi-channel Marketing Systems 274 Costs and Margins in the Distribution System 274 Summary 276 Glossary of Key Terms 277 Objective Type Questions 278 Conceptual Questions 278 Application Questions 279 Reference Notes 279 Case 9.1: Research One Ltd. Sales and Channel Relationships Channel Institutions: Retailing 282 Introduction 282 Definition of Retailing 283 The Retailer as a Salesman 285 Theories in Retail 286 The Global Retailing Scene 286 Retailers Dictate Terms 287 Retailers Own Brands/Private Labels 288 Manufacturers Response to Growing Retail Strength 288 Retail Relationships 289 The Retail Scene in India 289 Some Salient Features of Retail in India 289 Salient Retail Numbers 291 The Retail Evolution 291 Commitment among Shoppers 291 Shopper Segments 292

10 xxvi Contents Sources of Awareness 292 Modern Format Awareness Levels 293 Hierarchy of Factors for Evaluation of a Modern Format 293 Private Label Brands in India 294 Trends in Retailing in India 295 Projected Trends 297 Organised Retailing in India 298 Trading/Retail Formats 299 Types of Retailers 301 Retail Focus on Categories 303 Category Lifecycles 304 Category Types 304 Category Management 304 Merchandise Buying Rules 305 The Role of the Retailer 305 Merchandising 306 Customer Service 310 Customer Communication 315 Retail Strategy Guidelines 316 Steps in Retail Strategy 316 Retail Strategies 317 Positioning Strategy 319 Product Differentiation Strategy 320 Operational Superiority 320 Store Location 321 Factors in Development of Strategy 322 Retail Performance Measures 323 Other Retail Performance Measures 323 Aspects of Store Design 324 Efficient Consumer Response (ECR) 325 How does ECR Work? 325 Retailing Initiatives in Rural India 326 Franchising 326 How Does the System Work? 327 Electronic Retailing or E-Tailing 328 Retailing on the Internet/e-tailing 328 Retailing on the Internet Some Salient Points 328 Internet Usage in India 328 Online Retailers 330 Disadvantages of Online Retailing 331

11 Contents xxvii Logistics Support to E-retailing 331 Receipt of Payment Against Orders (Payment Gateway) 332 Foreign Direct Investment (FDI) in Retail in India 333 Summary 334 Glossary of Key Terms 335 Objective Type Questions 337 Conceptual Questions 338 Application Questions 339 Reference Notes Channel Institutions: Wholesaling 343 Introduction 343 Definition of a Wholesaler 344 Features of Freelance Wholesalers in India 344 Wholesalers Deliver Value 345 Functions of Wholesalers 345 Wholesaling Functions for Producer Suppliers 346 Wholesaling Functions for Retailers and Other Customers 346 Classification of Wholesalers 347 Wholesalers Key Tasks 349 Assembling or Aggregating the Goods 349 Warehousing of the Goods 349 Order Booking and Execution 350 Transportation of the Goods 350 Financing of the Business 350 Risk Bearing 350 Grading and Packing 350 Providing Market Information 350 Limitations of Wholesalers 351 Strategic Issues in Wholesaling 351 Selecting Target Markets 351 Marketing Mix 351 Major Wholesaling Decisions 352 Which Markets to Operate in? 352 Manpower 352 Which Product to Sell? 353 Promotional Support 353 Credit and Collections 353 Image and Customer Perception 353 Warehouse Location and Design 353 Inventory Control 353

12 xxviii Contents Cash and Carry Wholesale 354 METRO Cash & Carry 355 Bharti Wal Mart Best Price Modern Wholesale 356 Distributors/Dealers/Stockists 356 Distributor Management 357 Need for a Distributor 357 Expectations from the Distributor 358 Selection of Distributors 358 Security Deposit 359 Payment by the Distributor 359 Credit to be Extended by the Distributor 360 Investment in Inventory 360 Investment in Infrastructure 360 Manpower 360 Coverage of Markets 361 Developing Rural Markets 362 Categorisation of Distributors 365 Performance Evaluation of Distributors 366 Trends in Wholesaling 368 Future of Wholesalers in India 370 Summary 370 Glossary of Key Terms 371 Objective Type Questions 372 Conceptual Questions 373 Application Questions 374 Reference Notes Designing Channel Systems 376 Introduction 376 Channel Design and Planning Process 377 Variables which Affect the Channel Structure 378 Stages in Channel Planning 378 Defining the Customer Needs 379 Defining Channel Objectives 381 Channel Alternatives 382 Cost of the Channel System 382 Hybrid Channels 384 Evaluation of Major Alternatives 385 Selecting Channel Partners 387 Example: A Carrying and Forwarding Agent (C&FA) 388

13 Contents xxix Example: A Distributor 389 Factors Influencing Channel Selection 390 Change of Channel Members 391 Training Channel Members 392 Motivating Channel Partners 393 Evaluating Channel Members 396 Evaluation of Effectiveness of Channel Systems 397 Modifying an Existing Channel Network 397 Channel Design Comparison Factors 399 Channel Design Implementation 399 Vertical Integration Owning the Channel 402 Own the Channel or Outsource? 403 How much of Vertical Integration? 404 Why Vertical Integration? 405 Outsourcing Distribution 405 Non-store Retailing and Electronic Channels 406 Selling Door-to-door 406 Vending Machines 407 Tele-shopping 407 Marketing through Catalogs 407 Selling Direct 408 Use of Electronic Channels 408 Summary 410 Glossary of Key Terms 412 Objective Type Questions 413 Conceptual Questions 414 Application Questions 415 Reference Notes 416 Case 12.1: Snow White Paper Company (2) Finished Goods Distribution Channel Management 418 Channel Management 418 Use of Power Bases in the Context of Channel Management 418 Identifying and Resolving Channel Conflicts 418 Channel Co-ordination 419 Use of Channel Power 419 Five Sources of Power 422 Countervailing Power 423 What is Channel Conflict? 424 Stages of Conflict 424

14 xxx Contents Reasons for Channel Conflict 425 Channel Conflict in Hybrid Channels 427 Types of Channel Conflict 427 Examples of Channel Conflict 428 Competition and Conflict 428 Managing Conflict 428 Ways of Managing Channel Conflict 434 Principles of Channel Management 435 Channel Control 436 Vertical Management Systems (VMS) 437 Channel Policies 438 Markets to be Serviced 438 Customer Coverage 438 Pricing 439 Product Lines 439 Selection of Channel Members 440 Termination of Channel Partners 440 Ownership of the Channel 440 Distribution Management for Services 440 Some Unique Distribution Examples 442 Summary 447 Glossary of Key Terms 448 Conceptual Questions 450 Objective Type Questions 450 Application Questions 451 Reference Notes 454 Case 13.1: Popular Foods Ltd. Sales and Distribution Team Work 456 Case 13.2: Gem Soaps and Detergents Managing Channel Conflict 457 Case 13.3: Apple Food Products Managing a Distribution Network 459 Case 13.4: Kinetic Engineering Company Handling Channel Conflict 461 Case 13.5: Advanced Measuring Devices (1) Channel Management and Control 463 Case 13.6: Advanced Measuring Devices (2) Channel Management and Control Channel Information Systems 468 Introduction 468 Why an Information System? 469 Developing a Channel Information System Channel MIS 469 Purpose of Information Systems 470 Volume and Value Information 471 A Good CIS 471

15 Contents xxxi Elements of a Channel Information System 471 Market Information 472 Distributor Profile and Database 472 Competition Tracking 473 Primary Sales 473 Secondary Sales 473 Retailer Cards 473 Pricing Trends 474 Promotions History 474 Promotions Evaluation 475 Secondary Freight 475 Inventory Control 475 Orders/Indents from Channel Partners 476 Distribution Costs 476 Distributor Return on Investment (ROI) 477 Statutory Information and Reporting 477 Distributor Payments Record 477 Storage and Processing of Information 478 Channel Performance Evaluation 478 Channel Performance Evaluation Criteria 479 Criteria for Evaluation 479 Channel Implementation 482 Intensive Distribution 485 Selective Distribution 485 Example of Coverage and Break-even Sales 486 IT Systems for Channels 487 Summary 488 Glossary of Key Terms 489 Conceptual Questions 490 Objective Type Questions 490 Application Questions 491 Reference Notes 494 Case 14.1: Indian Engineering Ltd. Improving Effectiveness of Distribution 495 Case 14.2: Teekha Spices Ltd. Challenging the Capabilities of a Distribution Network 497 Case 14.3: Ashwin Healthcare Ltd. Modifying Distribution Channels Market Logistics and Supply Chain Management 501 Origin of Logistics 501 Customer Service 502 Definition of Logistics 503

16 xxxii Contents Scope of Logistics 505 Key Logistics Activities 505 Materials Handling 506 Order Processing 507 Extension into Supply Chain Management 508 Supply Chain Management Focus 509 Need for a Supply Chain Review 509 Influencing Factors on Supply Chain 510 Supply Chain Integration 511 Difference Between Logistics and Supply Chain Management 511 One Viewpoint: Pete Crosby SCM Consultant 512 A Second Viewpoint (from Another Logistics Consultant) 512 Council of Logistics Management 512 A Fourth View Point: Jeff Ashcroft 513 Our View 513 Logistics and Other Functions Interface 513 Major Areas of Interaction Logistics and Marketing 514 Channels of Distribution 516 Logistics Impact on Financial Health 516 Strategy for Logistics 517 Customer Service Elements 518 Service Driven Logistics Systems 519 Focus Areas of Logistics and SCM 520 Inventory Management 520 Warehousing 527 Transportation 530 Advances in Supply Chain Management 538 Efficient Consumer Response 538 Category Management 539 Continuous Replenishment 539 Quick Response Logistics 539 Handling Functional and Innovative Products 539 Benchmarking 539 IT Enabling the Logistics Function 540 IT in Managing the Supply Chain 540 Technology in Logistics EDI, Bar Coding, RFID etc. 541 Supplier Relationship Management (SRM) 542 Customer Relationship Management (CRM) 542 Supply Chain Management (SCM) 543

17 Contents xxxiii Electronic Data Interchange (EDI) 543 Bar Codes 543 Radio Frequency Identification (RFID) 544 Data Warehousing 544 Electronic Payment Transfers 545 Logistics/Supply Chain: Cost of Service 546 Logistics/Supply Chain: Performance Measurement 547 Internal Measurements 547 External Measurements 547 Logistics/Supply Chain Performance: Popular Measurement Ratios 547 Logistics for Rural Markets 548 Summary 549 Glossary of Key Terms 550 Objective Type Questions 552 Conceptual Questions 553 Application Questions 554 Reference Notes 556 Case 15.1: Snow White Paper Company (1) Managing Inbound Logistics 558 Case 15.2: Snow White Paper Company (3) Handling Outbound Transport 559 Case 15.3: Norton India Ltd. Managing Distribution Channels and Logistics 560 Case 15.4: Atlas India Ltd. Setting up a Logistics System 562 Case 15.5: Healthcare Equipment Company Clearing Import Consignments International Sales and Distribution Management 567 Introduction 567 The Nature of International Markets 567 Choosing the Market 568 Culture and International Business 568 Legal Aspects of Doing International Business 569 Risks Involved in Doing Business Internationally 570 Selling in International Markets 571 Entry Strategies for International Markets 571 Organising for International Selling 572 Distribution 572 Types of Distribution Channels 573 Legal and Social Aspects 574 Role of Logistics Companies 574 Profile of an International Salesperson 574 Pricing and Payment Terms in International Trade 574 Currency of Pricing 576

18 xxxiv Contents Packing and Shipping 576 Market Intelligence and Research 577 Summary 577 Glossary of Key Terms 578 Conceptual Questions 579 Objective Type Questions 579 Application Questions 580 Caselet Sales Promotions 582 Introduction 582 Definition of Sales Promotion 582 Benefits and Drawbacks of Sales Promotion 583 Benefits to Manufacturers 583 Benefits to Consumers 584 Benefits to Traders 584 Drawbacks to Manufacturers 584 Drawbacks to Consumers 584 Drawbacks to Traders 584 Types of Sales Promotions 585 Consumer Promotions 585 Trade Promotions 591 Business Promotions 595 Sales Force Promotions 596 Effect of Sales Promotion on Sales 597 Coordination of Sales Promotion with Advertising and Personal Selling 597 Evaluation of Sales Promotion 598 Summary 599 Glossary of Key Terms 600 Conceptual Questions 601 Objective Type Questions 602 Application Questions 603 Reference Notes 603 Case 17.1: Healthy World 605 Case Chapter Matrix for Integrated Cases 607 Case 1: Computers (India) Ltd. 609 Case 2: Footwear (India) Ltd. 611 Case 3: SM Technologies Ltd. 615 Case 4: Hindustan Products Ltd. 618

19 Contents xxxv Case 5: AP Technologies Ltd. 622 Case 6: Hindustan Engineering and Automotive Products Ltd. 625 Case 7: Alfa Networks 627 Case 8: Metal Products India Ltd. 631 Case 9: Syndiant Ltd. 634 Case 10: Electrical Equipment Ltd. 637 Case 11: Sunshine Luminaires Pvt. Ltd. 640 Case 12: Taurus Analytical Solutions Ltd. 642 Case 13: SKJ Company Ltd. 645 Index 649