Sales and Distribution Management

Sales and Distribution
Management
 Sales and Distribution Strategy
 Sales involves delivery and transfer of ownership of the
product or service to the customer
 It forms the beginning of the latter part of the supply
chain post manufacture
 Sales constitutes the direct and most intimate contact of
the firm makes with its customers
 Sales is responsible for the fulfillment of the promise
made to the customer by its predecessor function-marketing
 While marketing is responsible for creation of a
customer, sales and after sales service are responsible
for servicing and retention of the customers

Areas of Sales Management
Responsibilities
 Forecasting of aggregate and product wise
sales, using past data and incorporating current
and future trends
 Designing and managing the sales workforce to
meet the forecast and build long term relations
with associates
 Decide on critical aspects of sales policy
including pricing, credit terms to customers and
settlement of claims
 To closely liaise with After Sales service to
present a united customer care front to
associates and consumers

Role of Sales Management
 The larger concept of marketing is the creation,
servicing and retention of customers and markets
 This comprises identifying customer wants, designing
and developing products/services to meet these wants
 Designing products, deciding initial pricing,building
awareness, persuasion-role of marketing function
 Sales role-Actual delivery of products/services to the
customer maximizing convenience and ensuring
satisfaction
 Finally fulfilling the promise made to the customer
through sincere and effective after sales service

 Marketing covers want identification and
development of appropriate products/services
 Sales involves transfer of ownership and
possession to the customer in exchange for
the price she pays
 Retention of the customer takes place in the
after sales and customer service part of the
larger marketing chain

 Effective transfer of possession and ownership
to the customer
 This has to be done in the right place, right time
and the right manner
 Choice of channel members, deciding the terms
of engagement with channel partners, Sales
promotion and merchandising are key
responsibilities
 Effective liaising with Marketing and
manufacturing are essential ingredients for
successful selling

 Timely and accurate information on gross sales and by
product, studying current sales trends and projecting
future trends are important responsibility elements
 Sales has to be the secondary/tertiary sales which
represents consumer off take and not as is usually the
case reflect primary i.e. “push sales”
 Sales constitutes the first point contact with primary and
secondary customers
 Image of a company and its business prospects are
critically impacted by the attitude and the performance of
the sales force

Managing the sales force
 Three fundamental issues: the right organization, the
right sales force and the right evaluation and
compensation system
 Key to sales force organization is the level of
aggregation over product lines and choice of
geographical coverage
 Most Indian companies have common sales force for all
product categories. A few like Philips have segmented
sales force viz. audio and video products have separate
sales force
 Deciding the mix between specialized segmental skills
and the cost benefit analysis to justify the decision is key
to sales force organization

Sales force strength and
organization
 No of persons required at various levels and positions is
decided based on geographical coverage and intensity
of coverage of channel outlets (Break bulk, distributor
and retail)
 Benchmarking with key competitors is useful for new
sales force as well as updating existing sales force
 Back office and infrastructural support are key inputs in
determining the sales force composition
 Establishing performance standards, being “best in the
class” should be the objective
 Qualification should include aptitude as well as
attitudinal requirements. Learning curve inputs also vital

Compensation and Incentive
Systems
 Compensation should be competitive both externally
and internally. In India “in hand” is relevant
 An effective incentive system sets aggressive but
achievable and transparent targets (most Indian
companies fail here)
 Should reflect business priorities, be simple and easy to
administer
 Supporting requirements are reliable forecasts and
rational budgeting
 Most important- focus to be on secondary i.e. consumer
sales and not primary i.e. Invoice numbers

Managing the Sales Force
 Deploy according to desired territorial configuration: ensure
adequate coverage breadth wise and depth wise
 Continuous interaction with all channel members to be ensured.
Partnership is the focus
 Role of senior and top management crucial. Every senior/top
person to make sales visits. Helps to be in touch with market
realities
 Sales persons whereabouts to be continuously monitored. Regular
sales visit and performance reports a must
 Training both class room and on the job to be a continuous and
evolving initiative. Mentorship to be institutionalized
 Regular periodic transfers between marketing, sales and after sales
service personnel helps to improve integration and versatility
between the three arms of the larger marketing function

Sales Strategy-choice among
several options
 Relationship strategy aims at developing a holistic
partnership with all those involved in the buying
decision e.g. computers and industrial marketing
 Double win strategy ensures outcomes for both
buyer and seller, requires empathizing from both, is
essential part of any selling strategy
 Heroic sales strategy involves money back, free
replacement and persistent after sales contact.
Most successful in maximizing loyalty and retention
 Customer centric instead of product centric strategy
shifts emphasis towards customer and away from
short term sales person strategy which is increase
numbers.

Methods of Selling
 Selling through channel partners(distributors
and dealers)
 Direct selling which bypasses channel
associates works for some products(personal
care,household-Avon,Amway, Eureka Forbes)
 Sales through large retail chains in house
brands (Wal-Mart, Home Depot)
 Mail order sales(Sears), telemarketing of
services increasingly popular-to be questioned
in terms of appropriateness(standardized, low
involvement products eligible)

Channel Management and
Channel strategy
 Distribution channels have different members
each forming a link in the chain between
company and customer
 We start with Ca rry ing a nd Fo rwa rd ing agents
who “break bulk”
 Distributors, wholesalers and retailers form the
rest of the chain in that order(they are all
primary customers) not final customers
 Most channel members operate on
remuneration of fixed costs plus variable
margins on goods sold or moved

Channel strategy decisions
 Channel selection first step: no of factors include
market factors, competitors, intermediary availability
and product factors
 Market factors include customer preference for
place of purchase viz. supermarket, departmental
store, neighborhood outlet
 Geography is important(rural customers in India
prefer centralized selling locations,whereas urban
prefer to shop closer to home
 Sometimes new entrants can choose locations
overlooked by incumbents (Wal-Mart rural Arkansas
while incumbents preferred big cities)

Some Channel Definitions
 Distributors are bulk buyers and sellers of company
products/services. Perform all functions of primary customers viz.
bulk storage, retailer servicing and participation in sales promotion
 Wholesalers sometime synonymous with distributors but at others
one step down the logistic chain handling sub territory of larger
distributor area
 Agents/brokers are channel partners who do not take title to
company’s goods but act as intermediaries between seller and
customers (primary or secondary) –resorted to in initial stages of
establishing post manufacturing supply chain
 Retailers are the last link in the supply chain, interface with the
consumer/customer and are responsible for creating and
maintaining the firm’s image with them.

Channel selection criteria
 Most firms initially go for established channel members already
partnering big players like H.L.L or Nestle
 Timex Watches decided to go in for enlightened, aggressive
newcomers and this paid off handsomely
 Stage in product life cycle important. In initial stages risk with
newcomers preferred. Later choice with company either veterans or
more new comers
 High tech products like info. Hardware requires substantial
company support through trained personnel. Low tech products in
personal care, personal ware can do with fewer company support
personnel
 Low value products can be sold through wholesalers and general
retailers. However high value products including appliances, white
goods require focused retailing and excellent after sales service
infrastructure
 In all cases close contact with ultimate customers is a must.
Companies ignore this basic wisdom at their peril.

Roles/responsibilities of channel
members
 Carrying &forwarding agents maintain company stock
and move it to distributors/wholesalers. Invoicing to
primary customers from C.F.As
 Wholesalers/distributors carry their own stocks and
service retailers. Adequate territory coverage is their
responsibility
 Retailers stock, display and sell to their customers. Key
requirement is accurate and timely reporting of stocks
based on which alone reliable records of demand can be
built
 Retailers should also do the best in selling, and building
rapport and goodwill with customers and in advising
them and guiding with their best interests and the
company’s as well in mind

Company responsibility to channel
members
 Channel members should not be loaded with excess inventory
which will cause resentment and lower their commitment
 Every channel member should be given appropriate mix of product-fast
moving, medium and slow moving.
 Non moving product should be removed by company at periodic
intervals. Discount schemes do not solve the problem
 Company should provide adequate primary and secondary display
to channel members and point of purchase material
 Good appraisal and reward system should be put in place to reward
the right partner performance. Non performers should be gradually
weeded out. Long term orientation should be the key to assessing
all channel partners
 Frequent and caring interaction with channel partners and prompt
addressal of grievances will help to build and sustain enduring
partnerships as opposed to opportunistic alliances

Indian Distribution Scenario
 Traditional role of intermediaries viz. set up
minimal infrastructure and expect guaranteed
returns
 Extremely high cost of logistics
 Lowest margins in the world
 Expectation of extremely low prices from
Indian mass market customers further
pressurizes already low returns

Indian Distribution Scenario
 Challenge of working with low product portfolios
and low inventories not acceptable to firms as
well as channel partners
 Poorly organized and managed distribution and
retail operations. Company owned and
managed facilities not much better
 Continuous pressure on sales force to achieve
unrealistic targets results in equally unrealistic
pressure on channel partners
 Prevailing mindsets have to change for both
firms and channel partners

The Sales Organization
 Functions include planning, administrative and
executive functions
 Planning features forecasting, budgetting and
formulation of sales policy
 Administrative function comprises recruitment of
sales force, training, appraisal/reward systems
and control
 Executive functions include sales promotion and
selling routine i.e. execution of customer orders
 Objective of the sales organization is to ensure
achievement of the company’s sales and profit
targets

Forecasting
 Forecasting may be of total product/service
sales or of sub product or individual products or
combinations of all
 While forecasting is essentially a prediction of
future sales, it usually is a projection of past
sales incorporating credible trends
 Desirable to give more weightage to recent
period sales. At least ten previous periods data
should be taken for reliability.Most Indian firms
ignore these to their cost

Forecasting
 For cyclical industries, need to know the length
of the cycle(might change as for Indian auto
industry from 4 yrs up to 1980s to 5 years post
1980s) Amplitude as % change to be measured
 Cycles include macro economic cycles, industry
cycles and inventory cycles(most Indian
companies do not include these in their
forecasts
 Finally consumer sales to be measured and
forecasted and not sales to channel members
as is unfortunately done

Sales Budgets
 Sales budgets are overall sales plans
enumerated in financial terms
 The forecast by gross units, product groups and
individual variants to be converted into Re terms
 Expenses for promotions and schemes as well
as infrastructure like hoardings and shop
signage to feature
 Allowances for spoiled and obsolete product
withdrawals to be included
 Targetted levels of overall receivables and
acceptable age of receivables also part of
budget

Sales Budgets
 Budgets should be approved by senior sales
executives with their marketing and financial
counterparts and finally approved by top
management
 Budgets should be reviewed definitely on a
quarterly basis and preferably on monthly basis
 Changes should be minimal but incorporated
into revised budgets after approval by top
management

Sales Policy
 Firstly the direct/indirect issue. Do we go for
direct selling? Do we use distributors? If so
how many in various territories and regions?
How many in metros/large cities?
 Next to decide the terms of sale including
credit terms and to whom various credit terms
applicable(franchisees, direct and indirect
dealers)

Sales Policy
 Deciding minimum infrastructure for channel
partners
 Intensity and frequency of coverage by sales
personnel I.e. weekly/monthly visits to specific
retail outlets and distributors and CFAs
 Warranty policy and ASS infrastructure to be
decided.Training and supervision of Channel
staff for various functions including logistics,
motivation of retailers and handling quality
issues are part of sales policy
 Need to involve Marketing and QC personnel in
formulation of relevant aspects of sales policy
where their contribution is critical

Administrative Functions
 First step is the selection of sales personnel.
Various sources including media, placement
agencies and educational/vocational training
campuses have to be tapped
 Employee contacts are useful for experienced
personnel. Poaching seems attractive but is a
short term approach

Short term performance initiatives
 These are short term inducements to customers to buy
more of the firm’s products
 These include discount, coupon sales, lucky draws and
contests
 These require involvement of Marketing and finance
groups to ensure best synergy of market enhancing and
profit achievement objectives
 Problem is that most of these only result in altering the
timing of purchase and do not contribute to increased
sales during the year
 Further these contribute to brand dilution and ambiguity
about real pricing points for the brand offering

Some Suggestions
 It is better to build brand credibility, offer real value
propositions to customers through relevant
communication and strategic pricing
 Associates should be supported through adequate
infrastructure including signage and merchandising
support
 Finally associate remuneration should be competitive
and permissive of realistic long term earning prospects
 Information systems and good evaluation/incentive
schemes with a view to build enduring partnerships
should form the keystone of associate formation and
development

Sales Organization Types
 Several types based on competitive
specialization of selling orgn.
 Geographical orgn. most common where all
firm’s products sold in each region -assumes
demand patterns and associate capability
uniformly spread
 Product type sales organization e.g. pharma
cos have medicines, equipment and supplies
organized in separate groups

Sales Organization Types
 Orgns. based on customer types viz.
Industrial, Institutional and Consumer
categorization. IBM, Xerox, Publishing cos
 Activity function based including
telemarketing, direct selling, and field sales-telecom
firms follow this approach
 Hybrid sales orgns. Large cos evolve into this
form of orgn. over time

Recruitment,training and
compensation of sales force
 Recruitment is process of locating, selecting
and employing suitable persons for the sales
force
 Matching to positions on the orgn chart and to
job specs is essential
 Objective criteria and sound methods of
testing/evaluating ensure good recruitment
 Over reliance on criteria such as quantum of
prior experience a pitfall

Recruitment contd.
 Reference check on previous employment
experience and performance necessary
 Clear statement of expectations from new
employees on conduct and performance a
must
 Offer of emoluments and future prospects to
be unambiguous(avoid vague “sky is the limit”
promises-nobody believes them anyway)

Training of Sales force
 Training needs flowing from job specs is the
starting point. Understanding customer markets
is critical
 Detailed product knowledge mandatory for all
types of offerings. For low tangibility
differentiated offerings(e.g.personal care),
knowledge of emotional satisfiers helps
 Knowledge of the market place, competitors,
channel associates and selling practices are
focus areas
 Inventory management, good logistics practices
and receivables management should be vital
inputs

Training of Sales Force
 Frequency, timing and manner of sales visits to
various channel associates is fundamental
training input
 Communication skills a priority with emphasis
on receiving and rapport building(listening and
empathising)
 Training methods include formal class room
formats, field training, seminars and interaction
with senior/top mgmt
 On the job training by superiors combining
concept with practice should co-exist with
general functional and behavioural training

Compensation and Motivation of
Sales Force
 Sales compensation through salary,bonuses
and perquisites
 Significant part of compensation to be
performance based. Care to be taken to set
realistic, real world targets.

Motivation of Sales Force
 Motivation is the driving force based on
positive feelings that produces goal directed
action
 It is necessary to reward goal directed action
to ensure repetitive behaviour towards the
goal/goals
 The first step obviously is to establish the right
goals

Right Sales Goals-the right
approach
 Customer to be the focus always. Creation of
new customers and retention of existing
customers
 Primary and Secondary/final customers should
merit equal focus. In fact primary customers are
stakeholders too with their unique set of rightful
expectations
 If we short change the primary customer, we are
unlikely to fully meet the expectations of the end
customer

The Sales Goals
 The final goal has to be maximizing long term
profits through optimizing the volume/margin
relationship
 Channel inventory planning and control is critical
 Optimizing accounts receivables is another
critical responsibility and therefore major
performance variable
 Critical variable is retail sales which reflect
consumer sales and therefore demand for
company’s product/services

Sales goals
 Unit of sales needs to be defined properly. For
services like telecom, a unit of standard value (Rs. x
representing a standard offering like monthly
revenue)
 For merchandising, and signage joint goals for
sales and marketing should be set
 Min. no of inventory turns for each channel partner
should also be a sales goal. Recommended min 12
for every industry
 Min revenue/profit per sq.ft of space should be a
retail target
 Regular and reliable reports should be a
fundamental performance requirement

Rewarding Performance as well as
Potential
 Rewarding current performance in financial and non
financial measures is intrinsic to motivation
 Need to spot & assess and develop potential
through training and award of challenging
assignments is the greater part of motivation
 Involve sales personnel in critical customer service
areas like new product selection, pre manufacturing
logistics. Establish contributions from sales
personnel(feedback they carry from customers
primary and secondary is input)
 Role of mentors is very important. Attaining the
position of a mentor could be the ultimate goal of
outstanding performers. Nurturing mentorship
throughout the sales organization is key to superior
competitiveness

Channel Partner Management
 Need to select the right channel partners-new
to the industry,new to business is the best
 Clear set of expectations to be communicated at
selection(storage, inventory management,
retailer servicing and support, timely and reliable
information are key
 Competitive remuneration with accompanying
rigorous performance standards
 Information about the sales responsibility
domain, competitors and relevant socio,political,
cultural impacters

Channel Partner Management
 Providing initial and ongoing training on product,
technologies, logistics practices and Info
systems critical
 Periodic visits to company facilities and
interaction with company personnel over all
relevant functions viz. marketing, manufacturing,
Q.C. and Finance/accounts
 Rewards and recognition through channel
partner conferences an important motivating
and enabling device
 Most importantly fostering the partner identity in

Company responsibility to channel
members
 Channel members should not be loaded with excess inventory
which will cause resentment and lower their commitment
 Every channel member should be given appropriate mix of product-fast
moving, medium and slow moving.
 Non moving product should be removed by company at periodic
intervals. Discount schemed do not solve the problem
 Company should provide adequate primary and secondary display
to channel members and point of purchase material
 Good appraisal and reward system should be put in place to reward
the right partner performance. Non performers should be gradually
weeded out. Long term orientation should be the key to assessing
 Frequent and caring interaction with channel partners and prompt
addressal of grievances will help to build and sustain enduring
partnerships as opposed to opportunistic alliances

Merchandising
 Merchandising is the process of increasing
visibility and appeal of products to increase
saleability
 It includes product packaging, placement,
promotion and “special pricing”
 One other form of merchandising is using the
brand power of one organization to sell products
of another.(sports personalities and
entertainment cos lending their brand names to
various products)

Merchandising
 Mostly merchandising focusses on presentation
of products including displays and special
instore storage and packaging(gift bags, racks,
trays), posters, danglers, special
cards/brochures
 It also features discount schemes along with the
pricing and packaging features
 Outdoor signage and on shop and in shop
signage could also feature as part of
merchandising

Planning and evaluation
 Some aspects like signage should be
considered as longer term and should feature as
investment
 Others including displays and special
packaging and pricing initiatives would be
shorter term and should be expensed
 All expenditure should be justified in terms of
real sales increase(not changing the timing of
purchase by customer as in most festival sales)

Planning and Evaluation
 Test marketing and post purchase surveys of
customers should be the basis of evaluation
 One tip is that all merchandising should keep
the customer in mind. Need to avoid feeding the
creative instincts or egos of marketing personnel
in the company
 Merchandising should be the joint responsibility
of Marketing and Sales sub functions of the
larger Marketing function

Summary
 Defining larger Marketing process and Sales
sub process
 Areas of Sales responsibility, forecasting, sales
organization, selection, training and retention
issues, compensation, motivation of sales force
 Sales strategy, types of selling viz direct selling,
through channel members, mail order, e selling
 Sales budgeting, how to develop the budget as
effective planning and control tool

Summary
 Essentials of space planning and inventory
management
 Channel members types and roles, selection
of channel partners
 Mutual expectations of firm and its chnl.
Partners, training, rewards/recognition
 Sales goals optimizing the long term
volume/margin combination

Summary
 Company responsibility to channel members
including promotional and information systems
support
 Merchandising basics, role of company and
channel partners

Thank You !
Vishal Joshi
+91-9099089387
Ahmedabad

Sales and Distribution Management

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