MM303- SALES AND DISTRIBUTION MANAGEMENT

1. MM303-SALES AND DISTRIBUTION MANAGEMENT Mr.LALIT TANK Asst. Professors, MBA Department, Bhagawan Mahavir College of Management, Surat Email id: lalittank@gmail.com MARKETING SPECILIZATION

2. COURSE CONTENTS Module-1 Introduction to Sales & Distribution Management Module-2 Personal Selling Process, Sales Territories & Quotas Module-3 Sales Force Management Module-4 Distribution Management Module-5 Market logistics and supply chain Management

3. Module-1 Introduction to Sales & Distribution Management

4. What is sales management American Marketing Association defined as Sales management is “The planning, direction, and control of personal selling, including recruiting, selecting, equipping, assigning, routing, supervising, paying and motivating as these tasks, apply to personal sales force.

5. Nature of sales management • Its integration with marketing management • Relationship selling • Varying sales responsibilities

6. Importance of sales management • Sales is most exiting, rewarding and challenging careers. • More position available then other professional occupations. • Sales career is one of the fastest and surest route to the top management. • Sales management only function that generates revenue, all other department spend the money. • Financial result of an organization depends on sales management.

7. Objectives of sales management Corporate objectives Sales volume Profitability Growth Marketing management Sales management

8. Personal selling objectives • Building product awareness • Creating Interest • Providing information • Stimulating demand • Reinforcing the brand

9. Types of sales management positions STRATEGIC/TOP LEVEL MANAGERS CEO/ PRESIDENT V.P SALES/V.P MARKETING NATIONAL SALES MANAGER TACTICAL /MIDDLE-LEVEL SALES MANAGERS REGIONAL/ZONAL /DIVISION SALES MANAGER BRANCH/AREA/DITRICT SALES MANAGER OPERATION/FRIST-LEVEL SALES MANAGERS SALES TRANNE/SALES PERSON/SALES REPRESENTATIVE

10. Theories of Personal Selling • AIDAS Theory • Right set of circumstances theory • Buying formula theory • Behavioral Equation theory

11. AIDAS THEORY • A Potential customer undergo five sequential mental states before he becomes an actual customer, by buying the product. • A-Attention • I-Interest • D-Desire • A-Action • S-satisfaction

12. Right set of circumstances theory • In this theory the salesman induces the right type of “stimuli” in the customer which leads to the right types of “response”. • This theory is based on the psychological frame called “ stimuli-Response”

13. Buying formula Theory • This is theory given by late E.K. Strong. • This theory focus on buyers- the prospects. buyers needs and problems are being solved. • The salesman acts as a catalyst in satisfying the customer. • Need(Problem) -> Solution -> Purchase ->Satisfaction

14. Behaviour Equation Theory • B=P x D x K x V • B= Response, the act of purchasing a brand of product. • P= Predisposition or force of habit • D= Drive or amount of motivation. • K=Incentive potential or its potential satisfaction to the buyer. • V=Intensity of cues or these are weak stimuli which determine when to buy.

15. Personal selling strategies • To address all the unique needs customers, you have to design your personal selling strategy to have three key elements: a knowledgeable salesperson or sales team, an understanding of your client, and a sales structure designed to give the salesperson enough power to make an irregular sale but still get rewarded for it.

16. The Salesperson The salesperson is the key to your personal sales strategy. So when you're recruiting salespeople, you should be willing to recruit the best and expect to pay them a premium. • The Client Throughout the marketing section, we've used the phrase "Know your client." It is just as important here as anywhere else. By understanding what your client needs in a product, you can better give the salesperson the tools they can use to fulfill that need. By understanding what a customer wants in a salesperson, you can tune your sales team to be just that.

17. The Sales Structure In personal selling strategy your sales person is your best friend. But, depending on the system you've set up for them, that person can also be your worst enemy. Determining an appropriate incentive system for a sales force can be the most difficult job you'll have as a business person.

18. Emerging trends in sales management • Global perspective • Revolution in technology • Customer relationship management (CRM) • Sales force diversity • Team selling approach • Managing multi-channels • Ethical and social issues • Sales professionalism.

19. Sales Forecasting and Budgeting Decisions

20. What is sales forecasting • Sales forecasting according to cundiff and still, is “ An estimate of sales during a specified future period which is tied to a proposed marketing plan and which assumes a particular set of uncontrollable and competitive forces.”

21. Types of sales forecast Total sales, Industry sales, company sales, product line sales, product form sales, product item sales. Product level Types of sales forecast Time period Long Rang, Medium Range, short range. Geographic Area World – Nation – Region – Territory –Customer

22. Basic Terms Used In forecasting • Market potential : • It is the best possible estimated sales of a given product or service for the entire industry in a given market for a specific period of time. • Market potential is also called as industry sales forecast.

23. Market forecast: It is the expected industry sales of a given product or service at one specific level of industry marketing expenditure, in a given market, for a specific period of time. market forecast is also called as market size. • Sales potential : it is the best possible estimated sales of a given product or service for a company in a given geographic area for a specific period of time. sales potential is also defined as the maximum share of market potential that is expected to be achieved by a company.

24. Sales forecast: it is the estimated company sales of a given product or service, under a proposed marketing plan, in a given market, for a specific period of time. a company may make sales forecast for an entire product line. • Sales budget: it is the estimate of expected sales volume in unites or revenues from the company’s product and services and the selling expenses. • The sales budget goes into complete details of expected sales of each product item.

25. Sales quota: it is a sales goal set for marketing unit for a specific period of time. The marketing unit may be a salesperson, a branch, a region, a dealer, or a distributor.

26. Forecasting approaches • Top down/ Break-down approach: in this approach, typically the company sales forecast is developed at the business unit level, by using suitable forecasting methods. • The head of sales then breaks down the co. sales forecast into region, district. Territory, sales person.

27. Two major methods for top-down approach • Market – buildup method: The first steps in this method is to identify existing and potential business buyers in the geographical territory. The second steps is to find out their potential purchases of the product under study. The final step is to add-up the business potential of all the buying firms to obtain a fairly accurate estimate of market potential for the product or service for a specific geographical territory.

28. Multiple-factor index method: • This method first identifies the factors that influence the sales of a product or service. • Generally, there are more than one sales factors such as population and income that influence sales. • These factors are given certain weights, corresponding to the degree of sales opportunity.

29. Bottom-up/ Build up approach • Bottom up or build up approach starts with the company’s area or branch managers asking its salespersons to estimate or forecast the sales in their respective territories. Combined into company sales forecast Combined into Regional /zonal sales forecast Combined into area/ branch sales forecast Salespersons sales forecast of individual customer

30. Sales Forecasting Methods • Qualitative methods • Executive opinion • Delphi method • Sales force composite • Survey of buyer’s intentions • Test marketing • Quantitative Methods • Moving averages • Exponential smoothing • Decomposition • Ration method • Regression analysis • Econometric analysis

31. Qualitative Methods 1. Executive opinion method • The oldest, simplest and most widely used method. • The research study said that 86% of cos. Used this method for sales forecast. • The methods includes getting views of top executives of the co. regarding future sales. • The sales forecasts are made either by taking the average of all the executives’ individual opinion or through discussions among the executives. • The executives’ give their opinion based on experience, judgment, and intuition. • Advantages : 1. forecasting can be done quickly and easily. 2.less expensive then other.3. very popular for small and medium size cos. • Disadvantages: 1. unscientific 2.subjective 3.difficult to break down forecast in subunit (Like region , branches)

32. 2.Delphi Method • This method is similar to the executive opinion method. • This method developed by RAND CORPORATION During the last 1940s. • The difference is that the members of expert panel do not meet or discuss in a committee. • The selection of panel of experts from within and outside the organization. • The coordinator asks each expert separately to make a forecast on some matter. • Each member of the expert panel submits in writing his/her forecast anonymously. • The coordinator summarizes these forecasts into a report that is sent to each panel member. • The experts are asked to make another prediction separately on the same matter, with knowledge of the forecast of the other expert on the panel. • This process is repeated until the panel of experts arrive at some consensus. • The basic belief in this methods is that experts, without any pressure or influence will develop a more accurate prediction of the future.

33. Delphi Method ………….Cont. • Advantages : • Objective forecast that is accurate • Useful for technology, new product, industry sales forecast. • Both long and short-term forecasting possible. • Disadvantages • Difficulty getting a panel of experts. • Longer time for getting consensus. • Break-down of forecast into products or territories is not possible.

34. Sales force composite method • This method involves sales people to estimate their future sales. • It is an example of bottom-up approach and is also called a “grass roots” approach. • Each salesperson estimates in his/her territory how much quality or value existing and potential customers will buy of each of the cos. product • This methods is often used by industrial or business marketing cos. • S.R. make the sales estimate in consultation with customers and sales supervisors based on their experience. • The cos. Sales forecast is made up composite of all the sales persons ‘ sales forecast.

35. Sales force composite………….Cont… • Advantages • Forecasting is done by sales people who are closest to the market have batter insight in sales trends. • Detailed sales estimate broken down by customer, product, S.R. and territory. • Involvement of sales people. • Disadvantages • Sales forecast are often pessimistic or optimistic as sales people are not trained in forecasting. • Sales people may deliberately underestimate the demand. • Many sales persons are not interested in sales forecasting.

36. Survey of buyers’ intentions method • This method is sometimes called as market research or market survey. • It includes asking existing and potential customers about their likely purchases of the cos. Product and service for forecast period. • Several research organization conduct periodic survey of consumer buying intention. They combine various bits of information into consumer confidence measure.

37. Survey of buyers’ intentions cont…… • Advantages • Useful in forecasting sales for industrial products, consumer durables, new product. • It also gives customers’ reasons for buying or not buying • Relatively inexpensive and fast when only the few customers involved. • Disadvantages • Sometimes buyers are unwilling to reveal their plans. • Buyers some times over optimistic. • Expensive and time consuming in consumer non durable market where consumers are very large in number.

38. Test marketing method • This method is useful for forecasting sales for new product, which has no historical sales figures. • It can also be used for estimating sales for an established product in a new territory . • Full blown test markets • Controlled test marketing • Simulated test marketing

39. Full blown test markets • It consists of the co. choosing a few (two to six ) representative cities. in which full promotion campaign is introduce. • The duration of test market varies from a few months to one year, depending on new the repurchase period of the new product. • Buyers surveys are carried out to get information about consumer attitude, usage and satisfaction towards the new product.

40. Controlled test marketing • The co. with the new product hires a research firm and get a panel of stores at specified geographic location. • The research firm delivers the new product to the panel of stores, arranges promotion at the stores, and measures the sales of the new product. • The research firm also interview sample consumers to get their perception on the new product. • Both full-blown test markets and controlled test marketing expose the new product to the competitors.

41. Simulated test marketing • In this method, about 30-40 consumers are selected, based on their brand familiarity and preferences in a particular product category such as baby care and soft drink products. • These consumers are shown commercials or print advertisements of well known products and also the new product, without any specific mention. • These consumers are given a small amount of money and asked to buy any items in a store. • The researcher of the company notes how many consumer buy the new product and competing product • These consumers are interviewed to find reasons for buying or not buying, and later, after usage of the new product.

42. Quantitative Methods 1.Moving average method : • This is a relatively simple method that develops a co. forecast by calculating the average co. sales for previous years. • Sales forecast for next year : actual sales for past 3 or 6 years /number of years (3 or 6) • Advantages: 1.Simple method 2. easy to calculate 3.widely used for short term and medium term sales forecast. • Disadvantages: 1.unable to predict a downturn 2.can’t predict long term sales forecast accurately 3.historical data needed.

43. Exponential smoothing method • This method is closely related to the moving averages method for sales forecasting. • By using the exponential smoothing equation, the forecaster can allow sales in certain periods to influence the sales forecast more than sales in other period. • Sales forecast for next = (L) (actual sales this year + (1-L) (This year’s sales forecast) L= probability weighing factor

44. Exponential smoothing…..Contn…. • Advantages • Simple to operate • Forecaster’s knowledge or intuition can be used in forecasting. • Useful method when sales data have a trend or seasonal pattern. • Immediate response to a upturn or downturn in sales and used by many firms. • Disadvantages • Smoothing constant is somewhat arbitrary • Long term and new product forecasting are not possible.

45. Decomposition method • In this method the company previous periods sales data is broken down into four major components such as TREND, CYCLE, SEASONAL AND ERRATIC event. • These components are then recombined to produce the sales forecast. • Advantages • This method is that it is conceptually a sound method. • Disadvantages • Difficult and complex statistical methods are needed to break down sales data into various components. • Historical data is needed.

46. Ration method • Ration method is a time series method of forecasting. • Which is based on the assumption that what happened in the immediate past will continue to happen in the immediate future. • Sales forecast for next year= Actual sales of this year* Actual sales of this year/ Actual sales of last year

47. Ration method…….cont…… • Advantages • Simple to calculate • Requires less data • Accuracy is for short-term forecast • Disadvantages • It can not be used for forecasting sales for long term periods and new product. • Accuracy of sales forecast would be less, if past sales fluctuate considerably.

48. Regression analysis • This is a statistical method that is used to predict sales. Called as dependent variable “Y”. • The co. then identifies cause and effect relationship between the co. sales and the independent variable or factor. Which influence the sales. • Advantages • High forecasting accuracy. If relationship between variable are stable. • Objective method • Can predict turning points of the co’s sales. • Disadvantages • Technically complex • Can be expensive and time consuming. • Use of computer and software packages are essential.

49. Econometric Analysis • In this method, many regression equations are built to forecast industry sales, general economic conditions, or future events. • To find out which factors or variable influence sales and the relationships between sales and factors as well as the interrelationships between the factors, develop a number of regression equations representing these relationship. • A forecast is prepared by solving these equations on a computer. • Advantages –this method is that accurate forecast of economic condition and industry sales are possible. • Disadvantages- Large volume of data is required representing the various factors.

50. How to improve sales forecasting Accuracy • Use multiple forecasting methods • Identify suitable methods • Develop a few factors • Obtain a range of forecasts • Use computer hardware and software tools