Sales Management

Sales management is the planning, organizing, directing, staffing, motivating and controlling of the sales force and sales activities to achieve the firm's sales objectives efficiently and profitably.

• Identify prospects and generate new business.
• Present and demonstrate products to customers.
• Negotiate prices and terms and close sales.
• Maintain relationships and provide after-sales service.
• Collect market and customer feedback and report sales performance to management.
• Coordinate with marketing and other departments.

In a line sales organization, authority flows directly from top to bottom in a single chain of command, and every sales manager handles all functions of their line. In a functional sales organization, sales activities are divided by specialised functions (such as selling, advertising, training, research), each headed by a specialist, so a salesperson may report to several functional heads.

Management by objectives (MBO) is a management system in which managers and subordinates jointly set specific, measurable goals for a period, then review performance against them. In sales it means that sales targets are agreed together and performance is judged by results achieved.

• Sales forecasting
• Setting sales objectives and targets
• Sales budget
• Sales quotas
• Sales territories
• Sales strategies, programmes and policies
• Allocation of resources and control measures

Fringe benefits are indirect, non-cash or additional benefits given to employees besides their salary and commission, to improve their welfare and motivation. Examples are medical insurance, provident fund, paid leave, housing, company vehicle, paid holidays and retirement benefits.

Salary is a fixed payment made at regular intervals regardless of sales volume, giving income security. Commission is variable pay calculated as a percentage of sales (or profit) achieved, so earnings rise with performance and carry no guarantee.

An agent is a person or firm authorised to act on behalf of a principal to buy or sell goods and who usually works on commission, often on a continuing basis, without taking ownership of the goods. A broker is an intermediary who brings buyers and sellers together to negotiate a deal for a fee or brokerage, without taking possession of the goods or having a permanent relationship with either party.

A sales territory is a geographical area, or a defined group of customers, assigned to a salesperson, branch or sales unit, who is responsible for selling the company's products within it.

1. Setting standards (targets) of performance.
2. Measuring actual performance.
3. Comparing actual performance with the standards.
4. Finding the deviations and their causes.
5. Taking corrective action and following up.

Sales management is important to a firm for the following reasons:

1. Achieves sales objectives. Planning and control of selling effort ensure that targets for sales volume, market share and profit are met.
2. Generates revenue. Sales are the main source of income, so effective management is necessary for the survival and growth of the firm.
3. Efficient use of resources. It allocates people, time, money and territories so that selling costs are kept low and productivity is high.
4. Builds customer relationships. The sales force is the main link with customers, and good management ensures service, satisfaction and loyalty.
5. Motivates and develops the sales force. Selection, training, compensation and motivation raise the skills and morale of salespeople.
6. Provides market information. The sales force gives feedback about customers, competitors and trends, which helps product and marketing decisions.
7. Coordination. It links sales with production, finance and marketing so that they work toward common goals.
8. Meets competition. Strong sales strategy helps the firm respond to rivals and changes in the market.

Setting up a sales organization is carried out through these steps:

1. Set sales objectives. Decide what the firm wants from selling, such as sales volume, market share, profit and customer coverage.
2. Identify and group the sales activities. List the work to be done, such as selling, servicing, collecting, promotion, and market research.
3. Decide the type of structure. Choose the basis of organization, whether line, line and staff, functional, or by territory, product or customer type.
4. Assign activities and form positions. Group activities into jobs and sales units and define the duties of each.
5. Delegate authority and fix responsibility. Give each position the authority needed and define reporting relationships and span of control.
6. Staff the organization. Recruit, select and train suitable sales managers and salespeople.
7. Establish coordination. Set up communication and links between the sales department and other departments and levels.
8. Review and revise. Evaluate the structure against results and change it when market conditions or objectives change.

Sales planning is deciding in advance the sales goals and the ways of achieving them. Its importance is:

1. Gives direction. Clear targets and strategies show the sales force what to achieve.
2. Coordinates effort. It links the sales plan with production, finance and marketing plans.
3. Reduces uncertainty. Forecasting and anticipating market changes lowers risk.
4. Better use of resources. Budgets, territories and quotas help avoid waste of time and money.
5. Basis for control. Plans provide standards against which actual performance is measured.
6. Improves motivation. Realistic goals and quotas give salespeople targets to work toward.
7. Aids decision making. It supports decisions on staffing, training, compensation and expansion.

Straight commission method. It is a compensation plan in which the salesperson is paid only a commission, as a fixed percentage of sales or profit, with no fixed salary. Earnings depend entirely on the results achieved.

Advantages

1. Strong incentive to sell, since pay is directly linked to performance.
2. Fair reward: high performers earn more.
3. Selling cost varies with sales, so the firm carries little fixed cost.
4. Simple to understand and calculate.
5. Attracts ambitious, self-motivated salespeople and discourages the idle.

Disadvantages

1. Income is uncertain, giving insecurity and anxiety.
2. Salespeople may use high-pressure selling and neglect service and non-selling duties.
3. Low loyalty to the firm and high turnover.
4. Difficult to direct the sales force or assign them to unproductive territories and new products.
5. Pay falls during recessions or off-seasons, causing dissatisfaction.

Channel conflict is disagreement or rivalry between channel members, such as manufacturers, wholesalers and retailers. Its main reasons are:

1. Goal incompatibility. The manufacturer wants market share and growth while the dealer wants high profit margins.
2. Role and territory confusion. Unclear rights and responsibilities, or overlapping territories, create disputes.
3. Differences in perception. Members interpret market conditions and the economy differently, such as whether to push price discounts.
4. Dependence. Dealers rely on the manufacturer for supply and policies, which causes resentment if one side uses power.
5. Multiple channels. Selling through direct, online and retail channels at the same time causes competition and price cutting among members.
6. Pricing and margin disputes. Disagreement over discounts, credit terms and margins.
7. Poor communication. Lack of information sharing leads to misunderstanding and distrust.
8. Supply problems. Delayed delivery, stock shortages or unfair allocation of goods.

Some firms do not use sales territories. The reasons are:

1. Small market. A firm with a limited market or few customers may not need to divide it.
2. Few salespeople. With a very small sales force, territories add no benefit.
3. Cost and effort. Designing, balancing and revising territories needs time, data and money.
4. Flexibility. Without territories salespeople can go anywhere, follow high-potential customers and respond quickly.
5. Product nature. Products sold in large single transactions or to a few key accounts may be handled by specialists instead.
6. Resistance from salespeople. They may feel restricted in earnings or independence.
7. Changing conditions. Rapidly changing markets make fixed territories quickly out of date.
8. Online and direct selling. Internet and telephone selling remove geographic limits.

However, lack of territories can cause duplication of effort, neglected areas, conflict among salespeople and difficult control.

Meaning. Sales control is the process of setting sales standards, measuring actual sales performance, comparing it with the standards and taking corrective action to ensure that sales objectives are achieved.

Need for sales control

1. Ensures goals are met. It checks progress toward targets and quotas.
2. Finds deviations early. Problems such as falling sales or high expenses are detected and corrected in time.
3. Controls cost. Selling expenses are monitored and kept in line with budget.
4. Evaluates the sales force. It provides a fair basis for rewards, promotion and training needs.
5. Improves efficiency and productivity. Weak territories, products or customers are identified.
6. Coordinates activities. It keeps selling in line with the overall marketing plan.
7. Supports planning. Control information helps future forecasting and strategy.

Sales executive. A sales executive is a person responsible for planning, directing and controlling the sales activities of a firm, or part of it, and for achieving its sales targets. He or she may be a sales manager or the head of a sales department who often reports to the senior management. Their duties include forecasting sales, setting quotas and territories, recruiting, training and motivating the sales force, evaluating performance and maintaining customer relations. Sales executives also act as a link between the company and the market.

Relation with other departments

1. Marketing. Jointly plan products, pricing, promotion and distribution; sales gives customer and market feedback and marketing provides leads, advertising and research support.
2. Production. Sales provides forecasts and customer requirements so production can plan quantities, quality, variety and delivery schedules; production informs sales about capacity and lead times.
3. Finance. Sales prepares budgets and expense plans, and finance sets credit policy, collects receivables and approves funds and incentives.
4. Purchasing and inventory. Sales demand forecasts guide purchase and stock levels to avoid shortage or excess.
5. Human resources. HR assists in recruiting, training, compensation and welfare of the sales force.
6. Distribution and logistics. Co-ordinate order processing, transport and timely delivery to customers.
7. Customer service. Pass on complaints and after-sales needs to retain customer satisfaction.
8. Research and development. Sales provides customer needs and competitor information for new or improved products.
9. Accounts. Provide sales reports and invoices needed for records and analysis.

Good coordination with these departments avoids conflict and improves customer satisfaction and profit.

Sales force motivation. It is the process of stimulating salespeople to put their best effort toward achieving sales goals through rewards, recognition, a good work environment and personal growth. A motivated sales force raises productivity, reduces turnover and improves customer service.

Theories of motivation

1. Maslow's hierarchy of needs. Human needs form a hierarchy and a satisfied need no longer motivates. From the bottom they are physiological (basic pay), safety (job security, insurance), social (team belonging), esteem (recognition, titles) and self-actualization (growth, achievement). A sales manager should find which level each salesperson is at and offer matching incentives.

2. Herzberg's two-factor theory. Hygiene factors (salary, company policy, supervision, working conditions) prevent dissatisfaction but do not motivate. Motivators (achievement, recognition, responsibility, advancement, the work itself) create satisfaction. Sales jobs should include both.

3. McGregor's Theory X and Theory Y. Theory X assumes people dislike work and need control and threat; Theory Y assumes people enjoy work, seek responsibility and are self-directed. Sales motivation is more effective with a Theory Y approach of participation and trust.

4. Vroom's expectancy theory. Motivation = Expectancy × Instrumentality × Valence. A salesperson works hard if effort is believed to lead to performance, performance is believed to lead to rewards, and the rewards are valued.

5. McClelland's need theory. People are motivated by needs for achievement, power and affiliation. Salespeople with high achievement need like clear targets and feedback.

6. Adams' equity theory. People compare their input and reward with others. Unfair pay or promotion lowers motivation, so rewards must be fair.

7. Locke's goal-setting theory. Specific, challenging, accepted goals with feedback raise performance, which supports quotas and MBO.

Physical distribution. Physical distribution is the set of activities involved in moving finished goods from the producer to the final consumer or user in the right quantity, condition, place and time, at the lowest cost. It is also called logistics or marketing logistics.

Components of physical distribution

1. Order processing. Receiving, checking, recording and executing customer orders, including invoicing and credit approval. Fast and accurate processing shortens delivery time.
2. Transportation. Moving goods by road, rail, air, water or pipeline. The choice depends on cost, speed, reliability, capacity and nature of goods.
3. Warehousing. Storing goods until they are sold, with proper location, handling and protection. It balances supply and demand.
4. Inventory management. Deciding how much stock to hold and when to reorder so as to avoid stock-outs and excess stock, minimising carrying cost.
5. Materials handling and packaging. Loading, unloading, sorting and packing in a way that protects goods and reduces damage and cost.
6. Customer service level. Delivering on time, with correct goods, and providing information and after-sales support.
7. Communication and information. Information systems that track stock and shipments and link the firm with its channel members.

Efficient coordination of these components lowers cost and satisfies customers.

Sales quota. A sales quota is a target of sales volume, value or other activity (such as calls, new accounts or profit) assigned to a salesperson, branch, territory or channel member for a given period. It is used to direct, motivate and evaluate the sales force.

Reasons for not using sales quotas

1. Unfair or inaccurate quotas. If set on poor forecasts, quotas may be too high or too low, causing frustration or complacency.
2. Quotas may demotivate. Salespeople who find them unreachable lose morale and may give up.
3. Short-term focus. Salespeople may chase volume and neglect customer service, relationships and non-selling duties.
4. Unethical practices. Pressure to meet quotas may lead to hard selling, false promises, discounts or dumping stock.
5. Cost of setting and administering. Gathering data, forecasting and reviewing quotas takes time and money.
6. Wrong emphasis. A volume quota may ignore profit, and salespeople may push easy, low-margin items.
7. Unsuitable for some jobs. In creative, missionary, team or technical selling, results come from several people or over a long period, so individual quotas are hard to apply.
8. Changing conditions. Economic changes, competition and uncontrollable events can make quotas irrelevant.
9. Conflict and stress. Quotas can cause rivalry between salespeople, stress and high turnover.

(a) Position of the Sales Executive in the hierarchy

Everest Corporation follows a functional structure. The CEO is at the top, with the Vice-Presidents of Sales, Marketing, Production and Customer Service reporting directly to the CEO. Within Sales, the Sales Executive reports to the Sales Manager, who reports to the Vice-President of Sales. The sales executive is therefore at the operational level, as the front line and main point of contact with customers, while also working with Marketing and passing information up to management.

(b) Challenges in coordinating with other departments such as marketing

1. Differences in goals and priorities: marketing may stress brand and long-term image, while sales stress short-term targets.
2. Communication gaps, resulting in sales strategies and campaigns that are not aligned.
3. Disagreements over credit for results or blame for poor ones.
4. Marketing leads or messages may not match what customers actually want, which the sales executive notices first.
5. Ambitious sales targets and time pressure leave little time for coordination.
6. Functional structure creates departmental silos and slows decision making.

(c) Impact of clarifying the Sales Executive's role

1. Avoids duplication and confusion about duties.
2. Allows executives to concentrate on direct customer engagement, finding new business, negotiating and keeping relationships.
3. Improves accountability, making performance easier to measure and reward.
4. Improves communication with management and marketing.
5. Raises motivation and efficiency, leading to higher sales performance, as happened at Everest.

(d) Why communication between Sales Executives and Sales Managers matters

1. It ensures that targets and strategies are clearly understood and aligned with company goals.
2. Regular reports on sales and customer feedback help managers refine tactics and products.
3. Managers can offer guidance, training, support and resources quickly when problems occur.
4. It allows early detection of problems and fast corrective action.
5. It builds trust and teamwork and improves morale.
6. It supports co-ordination across departments, so the whole organization works toward its goals.