Chapter 1Sales management

Personal selling Process

As a part of selling activities, if salespeople follow the steps or phases shown below, their chances of success are far better.

Prospecting & Qualifying

Preapproach / Precall planning Approach Presentation &

Demonstration

Follow-up & Service

Trail close / Closing the sale

Overcoming Objections

• The sequence of above steps may change to meet the sales situation in hand.• Some of the above steps may not be applicable for selling to the trade• We now discuss application of above steps to industrial selling

Prospecting• It is identifying or finding prospects i.e. prospective or potential customers.• Methods of prospecting or sales lead generation are: (1) referrals from existing customers, (2) company sources (website, ads., tradeshow, teleprospecting), (3) external sources (suppliers, intermediaries, trade associations), (4) salespersons’ networking, (5) industrial directories, (6) cold canvassing, (7) standard industrial classification (SIC) system.

Qualifying• Companies qualify sales leads by contacting them by mail or phone to find their interests (or needs) and financial capacity. • Leads are categorized as: Hot, Warm, and Cool

Preapproach

• Information gathering about the prospect.Sources of information: the Internet, industrial directories, government publications, intermediaries, etc.

• Precall planning• Setting call objectives• Tentative planning of sales strategy: which products,

features and benefits may meet the customer needs

Approach

• Make an appointment to meet the prospect• Make favourable first impression• Select an approach technique:

• Introductory• Customer benefit• Product• Question• Praise• The approach takes a few minutes of a call, but it can make

or break a sale

Presentation and Demonstration

There are four components:• Understanding the buyer’s needs• Knowing sales presentation methods / strategies• Developing an effective presentation• Using demonstration as a tool for sellingWe will examine each of the above points

Understanding the buyer’s needs

• Firms and consumers buy products / services to satisfy needs• To understand buyer’s needs, ask questions and listen• In business situations, problem identification and impact questions are importantE.G. • Have you experienced any problems on quality and delivery from the existing supplies?• What impact the quality and delivery problems will have on your costs and customer satisfaction?

Knowing Sales Presentation Methods/Strategies

Firms have developed different methods / styles / strategies of sales presentation• Stimulus response method / canned approach.

• It is a memorised sales talk or a prepared sales presentation. • The sales person talks without knowing the prospect’s needs. E.G.

Used by tele-marketing people• Formula method / formulated approach.

• It is also based on stimulus response thinking that all prospects are similar.

• The salesperson uses a standard formula – AIDA (attention, interest, desire, and action).

• It is used if time is short and prospects are similar. • Shortcomings are: prospects’ needs are not uncovered and uses

same standard formula for different prospects.

Sales Presentation Methods (Continued)

• Need – satisfaction method• Interactive sales presentation• First find prospect’s needs, by asking questions and

listening• Use FAB approach: Features, Advantages, Benefits• Effective method, as it focuses on customers

• Consultative selling method / Problem-solving approach• Salespeople use cross-functional expertise• Firms adopt team selling approach• It is used by software / consulting firms

Developing an Effective Presentation

Some of the guidelines are:• Plan the sales call• Adopt presentation to the situation and person• Communicate the benefits of the purchase• Present relevant and limited information at a time• Use the prospect’s language• Make the presentation convincing – give evidence• Use technology like multi-media presentation

Using Demonstration

• Sales presentation can be improved by demonstration

• Demonstration is one of the important selling tools EGs: Test drive of cars; demonstration of industrial products in use

• Benefits of using demonstration for selling are: • Buyers’ objections are cleared• Improves the buyer’s purchasing interest• Helps to find specific benefits of the prospect• The prospect can experience the benefit

Overcoming Sales Objections / Resistances• Objections take place during presentations / when the

order is asked• Two types of sales objections:

• Psychological / hidden• Logical (real or practical)

• Methods for handling and overcoming objections: (i) For Psychological objections: ask questions.(ii) For logical objections: (a) ask questions, (b) turn an

objection into a benefit, (c) deny objections tactfully, (d) third-party certificate, (e) compensation.

Trial close and Closing the sale

• Trial close checks the attitude or opinion of the prospect, before closing the sale (or asking for the order)

• If the response to trial close question is favourable, then the salesperson should close the sale

• Some of the techniques used for closing the sale are: (a) alternative-choice, (b) minor points, (c) assumptive, (d) summary-of-benefits, (e) T-account, (f) special-offer, (g) probability, and (h) negotiation

Follow-up and Service

• Necessary for customer satisfaction• Successful salespeople follow-up in different ways:

For example,• Check order details• Follow through delivery schedule• Visit when the product is delivered• Build long-term relationship• Arrange warranty service

Personal Selling Strategy

• Classifying market segments and individual customers within a target segment• Each firm should first decide on target market segments

and if possible, to classify customers into high, medium, low sales & profit potentials

• Sales strategy is developed accordingly• Relationship strategy

• Whether a selling firm should use transactional, value-added, or collaborative relationship depends on both the seller and the customer

• Each selling firm to decide which segments and individual customers respond profitably to collaborative relationship

Components of Sales Strategy (Continued)

• Selling Methods• These are: (1) Stimulus response, (2) formula, (3) need-

satisfaction, (4) team selling, (5) consultative• Selection of appropriate selling method depends on

relationship strategy• Channel Strategy

• There are many sales / marketing channels. For example: company salesforce, distributors, franchisees, agents, the internet, brokers, discount stores

• Selection of a suitable channel depends on both the buyer and the seller, products / services, and markets

Concepts of Sales Organisation

• A sales organisation assists the sales manager to carry out needed tasks efficiently and effectively to achieve results

• The basic concepts of the sales organisation are:• Degree of centralisation• Degree of specialisation• Line or staff positions• Market orientation• Effective co-ordination

Basic Types of Sales Organisations

Sales organisations are generally classified into four basic types:

• Line Organisation• Line and staff organisation• Functional organisation• Horizontal organisation

We shall discuss main characteristics, advantages, and disadvantages of each type of sales organisation

Line Organisation

Characteristics: All managers have line authority to direct and control subordinates. Used in small firms / departmentsAdvantages: Simple organisation, clear authority, quick decisions, low costDisadvantages: No support to line managers from subordinates who have specialised knowledge / skills. Less time for planning / analysis

HeadMarketing

Sales Manager

Area Sales Manager1

Area Sales Manager3Area Sales

Manager2

Area Sales Manager4

salespeople salespeople salespeople salespeople

Line and Staff Organisation

Characteristics: Specialist staff managers are available for senior marketing / sales managers. Staff managers’ role is to assist / advise line managers. Used in medium and large size organisations

Advantages: Better marketing decisions, superior sales performance

Disadvantages: High cost and coordination, slower decision making, conflict may arise if staff managers’ role is not clear

Head-Marketing

Marketing ResearchManager Sales Manager Promotional

ManagerCustomer Service

Manager

Area Sales Manager-1

Area Sales Manager-1

Area Sales Manager-1

Salespeople Salespeople Salespeople

Functional Organisation

Characteristics: Each functional specialist has line responsibility over salespeople. Used by a large firm with many products / market segments, minimising line authority to functional managers

Advantages: Qualified specialists guide salesforce, simple to administer

Disadvantage: confusion due to more managers giving orders to salesforce

Head-Marketing

Marketing Research Manager

Promotional Manager

Customer ServiceManagerSales Manager

Area Sales Manager #4

Salespeople

Horizontal Organisation

Characteristics: Removes management levels & departmental boundaries. Except planning team, all others are members of cross-functional teams. Used by firms having partnering relationships with customers.Advantages: Reduction in supervision, unnecessary tasks, & cost; Improved efficiency and customer responses.

Research & Design Team:•Customer Research•Product / Service Design

Planning Team:•Strategic Planning•Accounts, Finance•HR, Administration•Chief Operation Officer

Operations Team:•Production / Operations•Quality Assurance•Systems Engineering

Customer Support Team:•Information•Service•Training

Customer Satisfaction Team:•Sales & Marketing•Pricing, Promotion•Channels, Logistics

Size of the Salesforce

• How many salespeople needed (or salesforce size) to achieve a firm’s sales and profit objectives is a key decision

• Methods available to decide optimum salesforce size are as follows:

• Workload• Sales potential (or breakdown)• Incremental

• We shall discuss these methods briefly:

Workload Method

• Assumption: All salespeople have equal workload• Steps involved to calculate salesforce size are:

1) Classify customers as per their sales potential2) Decide time per sales call and call frequencies for each class

of customers3) Calculate total market workload = (1) x (2) in hours4) Decide total work time available per salesperson5) Divide total work time available by different activities per

salesperson in hours6) Calculate total number of salespeople needed

)5()3(

nsalespersoperavailabletimesellingtotalworkloadmarkettotal

Workload Method (Continued)• Advantages: simple method, conceptually sound, used for all types of

selling situations• Disadvantages: Neglects sales productivity & salesforce turnover

Sales Potential / Breakdown Method• The formula used is: , where

N=Number of salespeople needed, or salesforce sizeS=Annual sales forecast for the company in value (Rs. Million)P=Estimated productivity of the average salesperson in sales (Rs. Million)T=Estimated percentage of annual salesforce turnover

• Advantages: Simple and straight forward• Disadvantages: Conceptually weak; lead time needed for a new

salesperson to reach average productivity

)1( TPSN

Incremental Method

• It is based on marginal analysis theory of economics• Basic concept: Net profits will increase when additional

salespeople are added, if the incremental sales revenues exceed the incremental costs

• Merit: Conceptually accurate, as it quantifies relationships between salesforce size, sales, costs, profits

• Demerit: Can not be used if historical data on sales and costs are not available