Sales and Distribution Management

Sales and Distribution Management

Dr. Prashant Mishra

prashant@iimcal.ac.in

Nature of Personal Selling

• Most salespeople are well-educated, well-trained professionals who work to build and maintain long-term relationships with customers.

• The term salesperson covers a wide spectrum of positions from:– Order taker (department store salesperson)– Order getter (someone engaged in creative selling)– Missionary salesperson (building goodwill or

educating buyers)

What is Personal Selling?

Involves Two-Way, Personal Communication Between

Salespeople and Individual Customers Whether:

face to face,by telephone,through video conferencing,or by other means.

The Role of the Sales Force

• Personal selling is effective because salespeople can:– probe customers to learn more about their

problems,– adjust the marketing offer to fit the special

needs of each customer,– negotiate terms of sale, and– build long-term personal relationships with key

decision makers.

The Role of the Sales Force

Sales Force Serves as a Critical Link

Between a Company and its Customers Since They:

Represent Customers to

the Company to Produce Customer

Satisfaction

Represent the Company to

Customers to Produce Company Profit

Characteristics of Personal Selling

Flexibility• Identify best

prospects• Adapt to situations• Engage in dialogue

Builds Relationships• Long term• Assure buyers

receive appropriate services

• Solves customer’s problems

Personal Selling Limitations

• Can not reach mass audience

• Expensive per contact• Numerous calls

needed to generate sale

• Labor intensive

Personal Selling Tasks

Order taking

• Routine– writing up orders– checking invoices– assuring prompt order

processing

• Suggestive selling

Personal Selling Tasks

Order getting• Seeking out

customers• Creative selling• Pioneering• Account management

Personal Selling Tasks

• Missionary– Detailer– Goodwill– “Closers”

• Cross-functional• Account service rep

Some Traits of Good Salespeople

Step 1. Prospecting and Qualifying

Step 1. Prospecting and Qualifying

Identifying and Screening For Qualified Potential Customers.

Steps in the Selling ProcessSteps in the Selling Process

Learning As Much As Possible About a Prospective Customer

Before Making a Sales Call.

Learning As Much As Possible About a Prospective Customer

Before Making a Sales Call.Step 2. Pre-approachStep 2. Pre-approach

Step 3. ApproachStep 3. ApproachKnowing How to Meet the Buyer

to Get the Relationship Off to a Good Start.

Knowing How to Meet the Buyerto Get the Relationship Off

to a Good Start.

Step 4. Presentation/ Demonstration

Step 4. Presentation/ Demonstration

Telling the Product “Story” to the Buyer, and Showing the

Product Benefits.

Telling the Product “Story” to the Buyer, and Showing the

Product Benefits.

Steps in the Selling ProcessSteps in the Selling Process

Step 5. Handling Objections Step 5. Handling Objections

Step 6. Closing Step 6. Closing

Step 7. Follow-Up Step 7. Follow-Up

Seeking Out, Clarifying, and Overcoming

Customer Objections to Buying.

Asking the Customerfor the Order.

Following Up After the Sale toEnsure Customer Satisfaction

and Repeat Business.

Alternative Steps:

Find ’emFind ’em

Grab ‘emGrab ‘em

Show ‘emShow ‘em

Answer ‘emAnswer ‘em

Sell ‘emSell ‘em

Keep ‘emKeep ‘em

Identify and Qualifying Prospects

• Prospecting: Identifying likely new customers– Leads

• Qualifying: Evaluating a prospect’s potential

Identify and Qualifying Prospects

• Prospecting: Identifying likely new customers– Leads

• Qualifying: Evaluating a prospect’s potential

Creative Selling Process

Approaching the Prospect

• Contact

• Rapport

• “Only one chance to make a first impression”

Approaching the Prospect

• Contact

• Rapport

• “Only one chance to make a first impression”

Creative Selling Process

Sales Presentation

• Persuasive communication

• Attention

• Interest

• Desire

• “Tell the product’s story”

Sales Presentation

• Persuasive communication

• Attention

• Interest

• Desire

• “Tell the product’s story”

Creative Selling Process

Handling Objections– Questions– Reservations

• Understand Concern

• Counterarguments

• Acknowledge concern

• Clues to process

Handling Objections– Questions– Reservations

• Understand Concern

• Counterarguments

• Acknowledge concern

• Clues to process

Creative Selling Process

Closing the Sale

• Closing signals

• Trial close

• Ask for the sale

Closing the Sale

• Closing signals

• Trial close

• Ask for the sale

Creative Selling Process

Following Up

• Commitments met– Shipment– Performance

• Reinforce relationship

• Satisfied customers rebuy & recommend

Following Up

• Commitments met– Shipment– Performance

• Reinforce relationship

• Satisfied customers rebuy & recommend

Creative Selling Process

PlanningPlanning OrganizingOrganizing

DirectingDirectingControllingControlling

Settingobjectives

Organizingactivities

Recruit, select, train, develop, manage, &motivate

Motivate,evaluate, & control

Sales Management

Organizing Sales ActivitiesOrganizing Sales Activities

Sales Territory:

• Geographic divisions

• Customer types

• Product lines

• Selling task

Sales Territory:

• Geographic divisions

• Customer types

• Product lines

• Selling task

Geographic DivisionGeographic Division

Sales RepCalifornia

Sales RepPacific NW

Sales RepSoutheast

Sales RepNortheast

District SalesManager

District SalesManager

District SalesManager

District SalesManager

Regional SalesManager

Regional SalesManager

Vice-PresidentMarketing

Customer TypeCustomer Type

New Account#1

New Account#2

ExistingAccount #1

ExistingAccount #2

New AccountsManager

Existing AccountsManager

Vice-PresidentSales

Product LineProduct Line

Sales RepEastern Region

Sales RepWest’n Region

Sales repEastern Region

Sales RepWest’n Region

Snack FoodsSales Manager

BeveragesSales Manager

Vice-PresidentSales

Directing the Sales Force

• Recruiting and selecting

• Training & develop

• Compensating

• Motivating

Compensation MethodsCompensation Methods

Straight Straight salary orsalary or

wagewage

Straight Straight salary orsalary or

wagewage

Salary plusSalary pluscommissioncommission

Salary plusSalary pluscommissioncommission

StraightStraightcommissioncommission

StraightStraightcommissioncommission

CommissionCommissionwith drawwith draw

CommissionCommissionwith drawwith draw

Quota-bonusQuota-bonusplanplan

Quota-bonusQuota-bonusplanplan

Evaluation and Control

• Required reports• Measurement against

plan or sales standards

• Expense control• Productivity• New account

development

Ethical Issues

• Kickbacks, bribes and “gifts”

• Price discrimination• Cheating on expense

accounts• Misrepresentation

Distribution Channel Design and Management

Distribution’s Function

• The major purpose of marketing is to satisfy human needs by delivering products of various types to buyers when and where they want them and at a reasonable cost.

• The “when and where” is the function of Distribution

What is a Distribution Channel?

• A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user.

• Marketing Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision.

Why are Marketing Intermediaries Used?

• The use of intermediaries results from their greater efficiency in making goods available to target markets.

• Offer the firm more than it can achieve on it’s own through the intermediaries:– Contacts,– Experience,– Specialization,– Scale of operation.

• Purpose: match supply from producers to demand from consumers.

Distribution

PRODUCER

CONSUMER

DISTRIBUTION

Distribution Channel Distribution Channel FunctionsFunctions

Distribution Channel Distribution Channel FunctionsFunctions

OrderingOrdering

PaymentsPayments

CommunicationCommunicationTransferTransfer

NegotiationNegotiation

FinancingFinancingRisk TakingRisk Taking

PhysicalDistribution

PhysicalDistribution

InformationInformation

Typical Channels of Distribution

ANUFACTURER

ONSUMER

HOLESALER

ETAILER

GENT

Business-to-Business Channels

Direct

Wholesaler

Agent

Business-to-Business Channel Trends

Infomediaries & Vertical Exchange

Conventional Distribution Channel vs. Vertical Marketing Systems

VerticalVerticalmarketingmarketingchannelchannel

Manufacturer

Retailer

ConventionalConventionalmarketingmarketingchannelchannel

Consumer

Manufacturer

Consumer

Retailer

Wholesaler

Wh

ole

sale

r

Types of Vertical Marketing SystemsTypes of Vertical Marketing SystemsCorporate

Common Ownership at Different Levels of the Channel

CorporateCommon Ownership at Different

Levels of the Channel

ContractualContractual Agreement Among

Channel Members

ContractualContractual Agreement Among

Channel Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

Vertical Marketing Systems

• Corporate systems - total ownership

• Administered - strong leadership

• Contractual - legal relationships

Planning the Channel of Distribution

• Determining the structure– Marketing mix strategy– Organizational resources– External environmental factors– Market characteristics– Consumer preferences and behavior– The nature and availability of Intermediaries– Other environmental factors

Customers’ Desired Service Levels

• Lot size

• Waiting time

• Spatial convenience

• Product variety

• Service backup

Steps in Distribution Planning

IntensiveDistribution

IntensiveDistribution

Exclusive Distribution

Exclusive Distribution

SelectiveDistribution

SelectiveDistribution

DistributionIntensity

DistributionIntensity

Choosing a Distribution System

Intensive DistributionIntensive Distribution

Seeks to obtain maximum product exposure at the

retail level

Seeks to obtain maximum product exposure at the

retail level

ProducerProducer

RetailerRetailer RetailerRetailerRetailerRetailer

RetailerRetailer

RetailerRetailer RetailerRetailer

RetailerRetailer

RetailerRetailer

RetailerRetailer RetailerRetailer RetailerRetailer

RetailerRetailer

RetailerRetailer RetailerRetailer RetailerRetailer

Selective DistributionSelective Distribution

Product is sold Product is sold in a limited in a limited number of number of

outletsoutlets

Product is sold Product is sold in a limited in a limited number of number of

outletsoutlets

ProducerProducer

RetailerRetailer RetailerRetailerRetailerRetailer

RetailerRetailer RetailerRetailer RetailerRetailer

Product is sold in Product is sold in only one outlet in only one outlet in

a given areaa given area

Product is sold in Product is sold in only one outlet in only one outlet in

a given areaa given area

ProducerProducer

RetailerRetailer

Exclusive Distribution

Developing Distribution Tactics

Selecting Channel PartnersSelecting Channel Partners

Reward orCoercive

Power

Reward orCoercive

Power

LegitimatePower

LegitimatePower

EconomicPower

EconomicPower

Managing the Channel of DistributionChannel Leader Power

Managing the Channel of DistributionChannel Leader Power

Distribution Channels & the Marketing MixDistribution Channels & the Marketing Mix

Materials HandlingMoving Products Into,

Within, andOut of Warehouses

Materials HandlingMoving Products Into,

Within, andOut of Warehouses

Warehousing Number Needed

WhereWhat Type

Warehousing Number Needed

WhereWhat Type

Inventory Control

When to orderHow much to order

Inventory Control

When to orderHow much to order

Order ProcessingReceived

ProcessedShipped

Order ProcessingReceived

ProcessedShipped

Physical DistributionFunctionsTransportation

Rail, Water, Trucks, Air,

Pipeline, Internet

Physical Distribution

Rail Cost-effective for shipping bulk products,

piggy-back, fishyback, birdyback.

Rail Cost-effective for shipping bulk products,

piggy-back, fishyback, birdyback.

WaterLow cost for shipping bulky, low-value,

non perishable goods, slowest form.

WaterLow cost for shipping bulky, low-value,

non perishable goods, slowest form.

TruckMost important carrier for consumer

goods, flexible.

TruckMost important carrier for consumer

goods, flexible.

AirHigh cost, ideal when speed is needed or

distant markets have to be reached

AirHigh cost, ideal when speed is needed or

distant markets have to be reached

PipelineCarry petroleum based products,

very low cost, requires little energy.

PipelineCarry petroleum based products,

very low cost, requires little energy.

Transportation Modes

InternetWeb sites have products available, used

especially for services.

InternetWeb sites have products available, used

especially for services.

Channel Relationships

• Cooperation

• Conflict

• Power– Coercive– Expert– Legitimate

Decision Making Framework

Prospects of Destructive Conflict

Importance of threatened

channel in terms of current or potential volume or profitability

High Low

High (FIRE) Act to avert or address conflict

Allow threatened channel to decline

Low (Smoke)

Look for opportunities to reassure threatened channel and leverage your power

Do nothing

Channel Conflict: Identifying Threats

• First, are the channels really attempting to serve the same end users?

• Second, do channels mistakenly believe they are competing when in fact they are benefiting from each other's actions?

• Third, is the deteriorating profitability of a griping player genuinely the result of another channel's encroachment?

• Fourth, will a channel's decline necessarily harm a manufacturer's profits?

Managing Channel Conflict

WHEN TWO OR MORE CHANNELS TARGET THE SAME CUSTOMER SEGMENT

• Differentiate the Channel offer

• Define Exclusive Territories

• Enhance or Change the Channels Value

Managing Channel ConflictCHANNEL ECONOMICS DETERIORATE• Change the channels economic formula:

(Grant rebates if an intermediary fulfill certain requirements; Adjust margins between products to support different channel economics; and Treat channels fairly to create level playing field)

• Create Segment Specific Programs (certain services not available via direct channels)

• Complement value proposition of the existing channel by introducing a new channel

• Foster consolidation among intermediaries in a declining channel

Managing Channel Conflict

THREATENED CHANNEL STOP PERFORMING OR RETALIATE AGAINST THE SUPPLIER

• Leverage Power (eg. Strong Brand) against the channel to prevent retaliation

• Migrate volume to winning channel • Back off

Other Distribution Management Issues

• Reverse distribution

One Coca Cola Distributor

One thousand retailers

OK

Difficult

• Ethical, Political, & Legal