LEC.

10-13
 Relationship Selling
◻ The process by which a firm builds a long-term
relationship with its customer for mutual
benefits, in order to create a customer loyalty.

◻ Sales people concentrate their team selling

efforts on building trust and services on a few
carefully selected customers over a long period
with an aim of becoming a preferred or sole
supplier.
Present trend
◻ Work to build and maintain long-term mutually
beneficial partnerships with their key
customers.

◻ It is expensive to gain new customers than it is

to keep existing customers.

◻ Effective follow-up and customer service will

help build loyal customers.
◻ It is a part of relationship marketing in which
sales people are involved in building
partnering or collaborative relationships with
carefully selected major customers over a long
period of time.
Chap - 4

Designing sales territories

 Sales Territories

◻ A sales territory consists of existing and potential

customers, assigned to a salesperson

◻ Most companies allot salespeople to geographic

territories, consisting of current & prospective customers
 Major Reasons / Benefits of Sales
Territories
◻ Increase market / customer coverage

◻ Control selling expenses and time

◻ Enable better evaluation of salesforce performance

◻ Improve customer relationships

◻ Increase salesforce effectiveness

◻ Improve sales and profit performance

Procedure for Designing Sales
Territories

◻ Select a control unit (states, cities, pin code

areas, any geographical territorial base)

◻ Find location and potential of present and

prospective customers within control units

◻ Decide basic territories by using

Build-up method Break-down method

 Procedure in Build-up
Method

Calculate Estimate
Decide total
customer workload
customer capacity Make Develop
call calls in tentative final
of a
frequenci each salespers territories territories
es control
on
unit

Objective is to equalise the workload of salespeople

 Procedure in Breakdown Method

Estimate
Estimate Forecast sales
company sales volume
sales potential expected Make Develop
potential for each from tentative final
for total control each territories territories
market unit salespers
on

Objective is to equalise sales potential of territories

 Assigning Salespeople to
Territories

Sales Manager should consider two criterias:

(A) Relative ability of salespeople

◻ Based on key evaluation factors:

(1) Product knowledge, (2) market knowledge,
(3) past sales performance, (4) communication,
(5) selling skills
Assigning Salespeople to
Territories

(B) Salesperson’s Effectiveness in a Territory

◻ Decided by comparing social, cultural, and

physical characteristics of the salesperson with
those of the territory

◻ Objective is to match salesperson to the

territory
 Management of Territorial Coverage

◻ Meaning: How salesperson should cover the

assigned sales territory

◻ It includes three tasks for a sales manager:

● Planning efficient routes for salespeople
● Scheduling salespeople’s time
● Using time-management tools
 Routin
g
◻ Routing is a travel plan used by a salesperson for
making customer calls in a territory

◻ Benefits / Reasons for routing:

● Reduction in travel time and cost
● Improvement in territory coverage
◻ Importance of routing depends on the application:

● Nature of the product – Important for FMCG

● Type of jobs of salespeople

– Important for driver-cum-salesperson job,
– but creative selling job needs a flexible route plan
 Procedure for Setting up a Routing
Plan

◻ Identify current and prospective customers on a territory

map

◻ Classify each customer into high, medium, or low sales

potential

◻ Decide call frequency for each class of customers

◻ Build route plan around locations of high potential

customers

◻ Computerised mathematical models are developed

 Commonly used routing patterns are:

◻ Bas
e ◻ C
1
◻ (B)

◻ C ◻ C ◻ C ◻ C
5 4 3 2

◻ Straight line / Hopscotch

B
Circula
r

Clover Leaf
 Scheduling

◻ Scheduling is planning a salesperson’s visit time to

customers. It deals with time allocation issue

◻ Companies specify call norms for current customers,

based on sales and profit potentials, and also for
prospective customers
◻ How to allocate salesperson’s time?

● Sales manager communicates to salesperson major

activities and time allocation for each activity

● Salesperson records actual time spent on various

activities for 2 weeks

● Sales manager and salesperson discuss and decide

how to increase time spent on major activities
 Time Management
Tools
To help outside salespeople to manage their time
efficiently and productively, the tools available are:

● High-tech equipment like laptop, blackberry

phones
⬜ Inside salespeople can be divided as

1. those who provide clerical support,

2. technical support, and

3. telecallers for prospecting, and qualifying, as

● Outside salespeople can then spend more time
getting more orders & building relationships with
major customers.

⬜ Outside salespeople travel outside the

organisation.
Chap - 4
 Sales
Quotas

◻ What are Sales Quotas?

● Sales quotas are sales goals or targets set by a company for

its marketing / sales units for a time period

● Marketing / sales units are regions, branches, territories,

salespeople, and intermediaries

● Generally, company sales budget is broken down to sales

quotas for various marketing units
◻ Objectives of Sales Quotas

● To use quotas as performance standards or

performance goals

● To control performance

● To motivate people by linking quotas to compensation

plans

● To identify strengths and weaknesses of the company

 Types of
Quotas
Organisations set many types of sales quotas:

(1) sales volume

(2) financial

(3) activity

(4) combination
Sales volume quotas

● For effective control, sales volume quota should

be set for the smallest marketing units, such as
salesperson, districts / branches, product items /
brands

● Sales volume quotas can be stated in (a) rupees /

dollars, (b) units, or (c) points

● Rupees / dollars sales volume quotas are

appropriate when salespeople are required to sell
many products
 Sales Volume Quotas (Continued)

◻ Unit sales volume quotas are suitable when

● Salespeople are selling a few products
● Prices of the product fluctuate rapidly
● Price of each product / service is high

◻ Point sales volume quotas are appropriate when

the company wants salespeople to sell products
that contribute more to profits
 Financial Quotas

◻ Financial quotas control :

(a) gross margin or net profits, and (b) expenses of marketing

units

◻ Gross-margin / Net-profit quotas

● Calculate gross margin by subtracting ‘cost of goods sold’

(i.e. cost of manufacturing) from sales volume. Sales
managers are not responsible for cost of manufacturing

● Net profit quotas are generally accepted by sales mangers

as it is calculated by subtracting direct selling expenses from
the gross margin
◻ Expense quotas

● In many companies, expense quotas are stated as a

percentage of sales

● Expense quotas to be administered with flexibility, to

make salespeople cost conscious, allowing reasonable
expenses
 Activity
Quotas
◻ These are set when salespeople perform both
selling and non-selling activities

◻ Objective is to direct salespeople to carry out

important activities

◻ For effective implementation, activity quotas

are combined with sales volume and financial
quotas

◻ E.G. Calling on high potential customers,

payment collection from defaulting customers
 Combination Quotas

◻ Used when companies want to control

salesforce performance on key selling and
non-selling activities

◻ Focus on a few types of quotas, to avoid

confusing salespeople.
 Combination
Quotas
An example:
Type of Quota Quota Actual Percent Weight Percent
Quota (Importance) Quota x
Weight

Sales Volume (Rs) 5,00,000 4,50,000 90 3 270

Receivables (days) 45 50 89 2 178
New Customers 04 05 125 1 125
(Nos)

Total 6 573

• Total point score=573/6=95.5 for a salesperson

• Typically use ‘points’ as a common measure to resolve the
problem of different measures used by various types of quotas
 Methods for Setting Sales Quotas

● Several methods are used for establishing sales

quotas

● In practice, companies use more than one of the

following methods to increase their confidence in
sales quotas

■ Total market estimates

■ Territory potential
■ Past sales experience
■ Executive judgement
■ Salespeople’s estimates
 Total Market Estimates Method

◻ The Process followed by established

companies is as under:
1) Estimate next year’s total market demand, or
industry sales forecast, using sales forecasting
methods
2) Decide the company’s estimated market share
for next year
3) Company’s next year sales forecast= (1) x (2)
4) Find each territory’s percentage share out of
the total company sales in the previous year
5) Territory sales quota = (3) x (4)
 Territory Potential
Method

◻ The procedure followed by new companies is as under:

1) Estimate next year’s industry sales forecast or market

potential, using sales forecasting methods

2) Estimate multiple factor index (MFI) for each territory,

based on factors that influence sales of the product.
These factors are given weights corresponding to the
degree of sales opportunity.
3) Industry sales forecast in a territory (or
territory market potential=(1)x(2)

4) Territory sales quota = (3) x estimated

market share of the company in the
territory
 Past Sales Experience
Method

◻ The process consists of taking past one year’s

sales (or an average of previous 3 to 5 year’s
sales), adding an arbitrary percentage (or a
percentage by which the market is expected to
grow), and thus setting each territory sales quota
◻ The assumption that future sales are
related to past sales may not be always
correct

◻ This method should not be the only

method used

◻ Past sales should be one of the factors

used for deciding sales quotas
 Executive Judgement Method

● Senior executives use their judgement when the

product, territories, and the company are new or
very little market information is available

● Executives predict company sales budgets and

also territory sales quotas

● This method should generally be used along with

other methods
 Salespeople’s Estimate Method

● Some firms ask their salespeople to set their own

quotas

● Many salespersons either set very high or too low

sales quotas

● For setting proper quotas, many sales managers use

2 or 3 of above methods, discuss with salespersons to
get their inputs, and decide sales quotas
 Compensation Plan Method

● Some organizations set quotas to fit with their sales

compensation plan

● E.G. A company wants to pay a monthly salary of Rs 5000,

and a commission of 3% on monthly sales above Rs
1,00,000. The quota of Rs 1,00,000 is set in such a way that
salesperson would find it very difficult to cross total
compensation of Rs 8000 per month (5000+3000)

● Sales quotas should not be based only on this method,

because it would “put the cart before the horse”
Insight into Setting & Administration of Sales
Quotas

◻ Set realistic quotas

◻ Understand problems in setting quotas

◻ Ensure salespeople understand quotas

● By allowing salespeople to participate in the process

● By continuous feedback to salespeople on their

performance compared to quotas
◻ Have flexibility in administering quotas

● Change quotas in cases of major changes in market

demand or company strategies

◻ Use monthly or quarterly quotas for incentives and

annual quotas for performance evaluation

◻ Select a few quotas that have relationships with

marketing environment and sales situations
Chap - 5
 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
 Line Organisation

Characteristics: All managers have line authority to direct and control

subordinates. Used in small firms / departments

Advantages: Simple organisation, clear authority, quick decisions, low

cost

Disadvantages: No support to line managers from subordinates who

have specialised knowledge / skills. Less time for planning / analysis
 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
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
 Horizontal Organisation

Research & Operations Team:

Design Team: •Production /
•Customer Operations
Research •Quality Assurance
•Product / Service •Systems
Design Planning Team: Engineering
•Strategic Planning
•Accounts, Finance
•HR, Administration
•Chief Operation
Officer

Customer Customer
Support Team: Satisfaction
•Information Team:
•Service •Sales & Marketing
•Training •Pricing, Promotion
•Channels, Logistics
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.
Specialisation within Sales Organisation

◻ Needed to increase effectiveness of salesforce

◻ Done by expanding basic sales organisation
◻ Basis of specialisation
● Geography
● Type of product
● Market
● Combination of above

◻ Criteria for selection – (1) nature of product, (2)

salesforce abilities, (3) demands of selling job, (4)
customer and market facts
Geographic Specialisation
Characteristics: salespeople, assigned geographic areas,
are responsible for all selling activities to all customers
within assigned areas. Branch sales managers adjust
marketing plan to local needs

Advantages: Better market coverage and customer

service, more control over salesforce, quick response to
local conditions & competition

Disadvantages: Limited specialisation of marketing tasks.

Hence, it is combined with product / market sales
 Product Specialisation

◻ Used when the company has many products and /

or brands

◻ Two types of product specialisation

(x). Sales organisation with product specialised salesforce

(y). Sales organisation with product managers as staff

specialists
 Fig. ‘y’ Sales Organisation with Product Managers as Staff Specialists
In fig. ‘x’: Characteristics: Salespeople in each product group sell only the products
in that group
Advantage: Each product gets specialised attention from
the salesforce

Disadvantage: Sometimes, more salespeople contact the

same customer, resulting in customer dissatisfaction and
higher cost

In fig. ‘y’: Characteristics: Each product manager plans

and implements marketing plan, for a product group

Advantage: Corrects the problem of duplication calls on a

customer by salespeople

Disadvantage: Lack of product specialisation by

Market
Specialisation
◻ Characteristics: Desirable when customers are
classified by type, user industry, or channel.
Salespeople carry out all activities for all products only
for specific customer groups

◻ Advantages: Meets needs of specific customer groups,

implements customer-centred philosophy of the
company

◻ Disadvantages: Geographic duplication, high cost

 Combination Sales
Organisation

◻ Characteristics: Many firms use some combination of specialisation

organisations, called hybrid or combination sales organisation, with
a view to minimise disadvantages and maximise advantages of
specialisation organisations
 Alternatives for Major Accounts

◻ Major accounts / customers are called by various

names like key accounts, corporate accounts, house
accounts

◻ They make up a large share of a firm’s sales volume

and profits
◻ Firms use the following alternative approaches to
deal effectively with them

● Create a position of major / national account

manager

● Use existing territory sales managers

● Create a separate division

● Create a separate salesforce

 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
 Workload Method

◻ Assumption: All salespeople have equal workload

◻ Steps involved to calculate salesforce size are:

1) Classify customers as per their sales potential

2) Decide time per sales call and call frequencies for

each class of customers
1) Calculate total market workload = (1) x (2) in hours

2) Decide total work time available per salesperson

3) Divide total work time available by different

activities per salesperson in hours

4) Calculate total number of salespeople needed

 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 size

S=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
 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
 Salesforce Staffing

◻ It is one of the most challenging and important

responsibilities / activities of sales management

◻ Salesforce Staffing Process includes following

stages:
● Planning
● Recruiting
● Selecting
● Hiring
● Socialisation
 Planning Stage

◻ It consists of three steps:

● Establish responsibility for staffing process

● Decide number of salespeople needed

● Outline the type of salespeople needed

◻ Establish responsibility for staffing process

● Company management decides responsibilities for

various stages / activities of staffing process

● Generally in a medium / large size company, middle

and senior levels H.R. and sales managers are
responsible

● Proper coordination needed between sales,

marketing, and HR executives
 Planning Stage (Continued)
Decide the number of salespeople needed

◻ Steps followed by each territory sales manager to plan

requirement of sales people:

1) Decide optimum salesforce size (using methods

discussed earlier)

2) Add number of promotions, retirements, transfers out,

terminations, resignations expected from existing
salespeople

3) Subtract expected transfers into the territory and

existing salesforce
 Outline Type of Salespeople Needed

The steps involved in the process are:

● Conducting a job analysis

● Preparing a job description

● Developing job qualifications / specifications

Conducting a Job Analysis

● It is done by a person from sales / H. R. department, or

a consultant. It consists of two tasks:

(1) Analyse environment in which the salesperson would

work – E.G. nature of customers, competitors,
products.

(2) Determine duties and responsibilities of the

salesperson. Obtain information from sales managers,
customers, etc.
 Preparing a Job Description

◻ It is a written document developed from the job

analysis

◻ The detailed job description is a useful tool for

recruiting, selecting, training, compensating, and
evaluating salespeople

◻ Some of the points it generally covers are:

● Job title, reporting relationship, types of products /
services sold, types of customers, duties and
responsibilities, location and geographic area to
be covered
 Developing Job Qualifications / Specifications

◻ These are generally based on job description

◻ Job specifications / qualifications include education,

sales experience, skills, and personality traits

◻ Many studies done, but no generally accepted job

qualifications for selecting salespeople, due to many
types of sales jobs
◻ Some methods used for developing job specifications
are as under:

● Study job description. Useful for a new company

● Analyse personal histories of salespersons

● Ask customers
 Recruiting Salesforce

◻ Recruiting include activities to get individuals who will

apply for the job

◻ The general purpose of recruitment is to get enough

qualified candidates, to enable company select the right
persons

◻ H.R. and sales managers must update information on

government employment regulations
◻ Recruiting stage / process includes following activities:

● Finding the sources of sales recruits

● Evaluating and selecting recruiting sources

● Contacting candidates through the selected source

 Finding the Sources of Sales Recruits

◻ For identifying prospective candidates, firms use internal

and external sources. They include:

Internal Sources External Sources

• Employee referral
programmes
• Current employees
• Promotions and transfers
• Advertisements in
newspapers and journals /
magazines
• The Internet (job sites)
• Educational institutions
• Employment agencies
• Job fairs
• Other companies
 Evaluating and selecting Recruiting Sources

◻ Recruiting sources are evaluated based on the database

built over number of years

◻ Evaluating factors are:

● Performance rating of salespeople, after 2 years
working

● Percentage of salespeople retained, after 2 years

working

● Total cost of recruiting

● Selecting most effective source of recruiting at least

cost
 Selecting Salesforce

◻ Selection process consists of seven major selection

steps / tools

◻ Companies differ in using selection tools, depending on

expenditure budget and time available
◻ Major selection tools / steps are:

● Screening resumes

● Application blank

● Initial interview

● Intensive interview

● Testing

● Reference check

● Physical examination
 Screening Resumes

◻ It is done when the company receives many resumes

◻ This step / tool not required, if somebody else like

employment agency does initial screening

◻ Initial screening of resumes are done by comparing with

job specifications
 Application Blank

◻ Widely used, it is a methodical way of

collecting relevant information from the
applicant

◻ Advantages of using application blank (also

called “formal application form”) are:

(1) Easy comparison of many applicants

(2) Useful for asking question during

interview sessions
 Interviews

◻ Widely used selection tool

◻ A good predictor of the candidate’s performance

◻ Initial interviews are used for screening candidates

◻ Intensive interviews are conducted to get indepth view of

candidates
◻ Interview structure / type of interviews:

● Structured / patterned / guided interviews

● Unstructured / non-directed / informal interviews

● Semi-structured interviews

● Behaviour and performance based interviews

● Stress interviews

◻ Purpose is to decide a candidate’s fitness for a job

 Testing

◻ Many firms use tests as a selection tool – EG P&G, IBM

◻ Purpose of testing: To find whether applicants have traits /

characteristics that lead to success in sales job

◻ Tests must have reliability and validity

◻ Tests should be one of the selection tools and not the only tool
◻ Type of selection tests:
● Aptitude tests measure ability for selling and learning

● Intelligence tests find out mental intelligence or intelligence

quotient (IQ)

● Interest tests find out level of interest in a sales career

● Knowledge tests measure knowledge of products,

markets, etc

● Personality tests find out attitude or traits like empathy,

self-confidence
 Reference Checks

◻ They are important due to possibilities of resume frauds and

false personal information

◻ They are done by letters / e-mails, telephones, or personal

visits

◻ Instead of candidate’s references, previous employers /

customers to be included for reference checks

 Physical Examination

◻ Objective is to find a physical problem that

may prevent job performance of an
applicant

◻ Most companies want their prospective

employees to undergo physical
examination

◻ Increasing number of firms ask applicant

 Hiring Stage

◻ After completing selection process, a list of candidates to

be hired is made

◻ In hiring stage, two activities are performed:

(1) The company making the job offer

(2) Persuading the applicant to accept it

 Socialisation Stage

◻ It is the process through which new

salespeople learn values, norms, attitudes,
and behaviour of people working in the firm
◻ Socialisation process starts before the new
salesperson accepts the job offer and
continues until the person is assimilated into
the company culture
◻ Assimilation is the second stage of
socialisation process
◻ Companies have this process, in order to
retain new salespeople