2009

Sales and Promotion

Management

S.V. PG COLLEGE,
Dept. of Management,
KADAPA. G. Raja Sekar M.B.A, (Ph.D)
S.V. PG COLLEGE: KADAPA
 Unit – I

Sales Management:
Sales management is concerned mainly with the management of selling function. The sales function in a
business is a basic function. The volume of sales, prices to be charged from the customers and consequently the
margins of profit ultimately govern the profits of the firm, its future growth and expansion.

“Sales management meant the planning, direction, and control of personal selling, including recruiting,
selecting, equipping, assigning, routing, supervising, paying, and motivating as these tasks apply to the personal
sales force”

Nature of the Sales Management:

It is an administrative, operating as well as a staff function.

Sales executives are responsible for organizing the effort, both an administrative as well an executive
function that makes the selling system alert, relevant and effective.
Sales management is a challenging profession. It is responsible for obtaining sales volumes, handling the
sales operations so as to make contribution to profits, and for ensuring continuous growth under the socially
responsible marketing policy. Sales executives must assure the delivery of products with satisfying
experiences.

Functions of Sales Management:

Sales managers, functions involve developing link between sales force and other elements of internal and
external environment. The sales manager’s job requires a unique blend of administrative and sales skills. Sales skills
are very important for the first level or lower level sales manager because these managers have to train and directly
lead the sales force.

Sales management is the administrative channel for sales personal. It links individual sales person to general
management. The sales manager performs the following tasks.

Establishing sales force objection.

Determining the sales force size.
Recruiting and selecting the sales force.
Training and developing the sales force.
Compensating the sales force.
Motivating the sales force.
Setting up sales territories.
Supervising and evaluating the sales force.

Establishing sales force objectives: The first task of the sales manager is to define objectives. Objectives are first
established for the sales force as a whole and then are broken down into objectives for each individual sales person.
Overall sales force objectives are typically stated in terms of total rupee or unit volume, market share or profit and
individual sales people objectives are expressed in terms of rupees or units.

Usually the following criteria’s are used for setting the objectives of the sales force:

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G. Raja Sekar M.B.A, (Ph.D)
 a. Contributing to profit: It may be the primary goal of the company which it establishes for its sales force.
Sales volume and product mix usually influence profit as well as the cost of selling activities.
b. Return on Assets: The objective tasks into account the capital investment for selling activities in such
categories as offices, automobiles and warehouses.
c. Sales Cost Ratio: It is the scale many companies use to evaluate the success of their sales force. Sales
experiences divided by rupee sales volume in the criteria.
d. Market Share: It may also be objective of the sales force sales management may not really care about short-
term profits if market share is growing.
e. Achievement of company or business unit marketing goals: It may imply involved perception, increased
knowledge of the company, or wider acceptance of the particular point of view.

Determining the sales force size: The optimal size of a firm’s sales force depends on how it is structured, sales force
productivity and numerous other factors. The optimal size changes as the firm’s market conditions and marketing
objectives changes.

Recruiting and selecting the sales force: Recruiting is the process of inviting applications for sales positions.
Recruiting can be done through referrals by present employees, news papers, advertisement, and announcement in
the trade publications, through public and private employment agencies and through campus interviews at
vocational technical colleges. After recruitment selections take place. The attributes can be like maturity, personal
selling and sales management skills, appearance, co-operative, communication and public speaking skills, disposition,
punctuality and mannerism.

The three steps in the sales force recruitment and selection are:

Determining the number and type of people wanted by preparing the written job description and job
specification.
Recruiting or inviting an adequate number of applications.
Selecting the most qualified persons from among the applications.

Training and developing the sales force: the new sales person must learn the basic facts about the company and its
goals, plans and polices. The more they understand the company the more they prepared to communicate to both
present and potential customers, the message that company wants its customers to communicate.

New sales people must be thoroughly trained before they are put into the field. Experienced sales people must also
be trained so that they can do an even better job for selling. The training of sales force is important because it can
help them to do the better job, increase their morale, lower selling costs and improve customer relations.

Compensating the sales force: In developing a compensation package for a sales force, the sales manager must first
decide what he wants the compensation program to accomplish. While deciding the type of compensation package
the sales objectives are to be kept in mind.

Setting up the sales territories: The defining and allocation of territories to salesman must be given serious thought
by the sales manager. The object of dividing up the ground into territories and allocating appropriate territories to
salesman is to cover adequately the entire field of operations at the lowest cost.

The following guidelines are to be into consideration while establishing sales territories:

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G. Raja Sekar M.B.A, (Ph.D)
  A sales person should not have to spend more than two or three nights a week away from home to over the
territory.
 A territory will provide adequate income for the sales person and to have growth potential.
 Travel rotes in a territory will be arranged to keep mileage and travelling time to an acceptable minimum.
 The product should some what less than the sales person can call on to maintain the call frequency demand
of the number of established customers in a territory.
 A suitable plan for sales people to live near the geographical center of these should be developed.
 The potential volume of a territory will cover direct expenses of maintaining a sales person there plus an
acceptable profit margin.
 Territorial lines will be observed by sales personal – sales in territory are credited to that territory’s sales
person regardless of who makes the sales.

Supervising and evaluating the sales force: Every person has expectations about performance. It is necessary to
supervise and evaluate any business activity against those expectations for the purpose of reward, promotion and
improvement.

Motivating the sales force: Motivating sales people can be a particular difficult job for the sales manger. However, it
is the responsibility that must be performed successfully, if the sales force is to work up to its maximum potential
and achieve its own and the company goals.

The sales manager and the company policy are the two most significant factors that determine the sales job
satisfaction. Income is important, but it ranks only third as determinant of satisfaction.

For motivating the sales persons the following guidelines are to be followed:

 The sales manager should understand sales people and their needs.
 Goals must be established in order to obtain motivation like obtaining certain sales volume figure, calling on
so many new customers in one month, increasing the size of average order or reducing the travel time by
certain percentage etc.
 Achievement of goals must allow sales people to achieve their needs.
 The sales manger and sales person should jointly set goals.
 The sales force must clearly understand the goals.
 Goals should neither difficult not too easy to achieve.
 Sales quotas are perhaps the most important goal and must be carefully established.

Objectives / Goals of the sales management:

Sales management plays a very important role in the success of an enterprise because sales are the single most
important variable in appraising of the company, its executives and sales personal.

Companies set different objectives for their sales force, depending upon their overall corporate objectives and the
nature of their commercial activities.

There are three general objectives of sales management

Maintain continual growth.

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G. Raja Sekar M.B.A, (Ph.D)
 Achieving sufficient sales volume.
Providing sufficient contribution to profits.

Maintain continual growth: This objective calls for maintain long-term growth of the enterprise to attain an optimum
marketing performance in terms of sales volumes and not profit. This requires an effective overall co-ordination. The
sales management can play very significant role in co-coordinating diverse activities involving the organization, the
planning, and the other elements in the marketing program, the distributive network, and the implementation of
overall marketing strategy.

Achieving sufficient sales force: The top management fixes the sales volume more specific on the basis of market
territory, customer or any other basis which it wants to achieve in a specifically period. The sales executives, during
the planning phase, which precedes goal setting, provide sufficient information regarding market and sales
potentials, capabilities of the sales force and the middle man, and the like.

Providing sufficient contribution to profits: This objective calls for providing ample contribution to profits, mainly
sales volume, gross margin of growth projected for sales of product and amount with bench marks of growth
projected for sales and profits are fixed on the basis of sales managements appraisal of market opportunities.

SALESMANSHIP

Salesmanship:

Salesmanship is seller-initiated effort that provides prospective buyers with information and motivation or persuades
them to make favorable buying decisions concerning the seller’s product or services. The sales man of today has to
read and interact in many different ways to many different people.

“Salesmanship is the power or ability to influence people to buy at a mutual profit, that which we have to sell, but
which they may not have through of buying until call their attention to it. Salesmanship is the ability to persuade
people to want they already need.” Knox

“It is an ability to remove ignorance, doubts, suspicion and emotional objection concerning the usefulness of a
product.” J. C. jagasia

“Salesmanship is the art of increasing satisfaction by persuading those people who should do so to buy specific
goods or services.” Seferd Gross

“Salesmanship is an attempt to induce people to buy goods.” W. G. Carter

“It is the ability to persuade people to buy goods or services at a profit to the seller and benefit to the buyer.”
National Association of Marketing Teachers of America

Nature / Features and Characteristics of salesman ship:

The essential characteristics of Salesmanship are as follows:

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G. Raja Sekar M.B.A, (Ph.D)
  Salesmanship is an educative process. Salesmanship educates people about their needs. Sometimes people
are not aware of their needs or the way in which they could satisfy them. The salesman performs the
function of educating the customers about their needs and their satisfaction.
 Ideal salesmanship aims at serving the producer, distributer and consumer. The salesmen help the producer
in disposing off his goals at profit. While, for the distributor the salesman assists to buy wisely.
 Salesmanship aims at winning the buyer’s confidence. Modern salesmanship does not use doubtful methods
to influence buyers.
 The person involved in selling must possess skill and ability to convince another. The customer ahs to be let
to favorable buying decision by imaginative handling.
 Modern salesmanship does not sell duplicate, fake products to customers. Cheating the customers by selling
state or unusable goods, have no place in modern sales because it can never create a permanent customer.
 The price of the product or service must be reasonable for both the buyers and the seller.
 Salesman always acts as a link between two parties, the seller and the consumer and looks after the benefits
of the parties.
 Salesmanship creates satisfied customers, not just cash producing sales. Modern salesmanship expects to
crate permanent customers and aims to repeat orders.

Functions of salesmanship:
Salesmanship creates new wants and preferences. It involves establishing a cordial and biding relationship between
the companies and is based on mutual trust. Some important functions of salesmanship are:

To introduce products to the customers.

To help customers to make buying decisions.
To see how the customer’s needs are transformed into wants and demand.
To negotiate and conduct effective selling at least cost.
To gather information about markets and competitor’s products and transmit it to the company.

Theories of Selling

The process influencing others to buy may be viewed from four different angles on the basis of different theories.
The first two theories based on the experiences of sales persons or advertising professionals. These theories may be
known as salesperson or seller-oriented theories. The third, the buying formula theory of selling is buyer-oriented

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G. Raja Sekar M.B.A, (Ph.D)
and the fourth, the behavioural equation theory, emphasis as the buyer decision process, but takes the sales
person’s influence process into account.

 AIDAS theory
 Right set of circumstances theory
 Buying formula theory
 Behavioural equation theory

AIDAS Theory

It states that during a successful sales presentation (interview) by the salesperson to the prospect (would be
customer), the prospect’s mind goes through four stages via, attention, interest, desire and action, given by the
acronym AIDA. It is important that the salesperson presents and leads the prospect through these stages.

◘ Attention: The salesperson first goal is to get the prospect in a receptive frame of mind. A good first
impression can be created with the neat dress and a friendly smile.
◘ Interest: The second task of salesperson is to turn the prospect attention into a strong interest. To achieve
this, the salesperson has to be enthusiastic about the product. Another method is to hand over the product
to the prospect and let him handle it.
◘ Desire: The third task is to convert interest in desire to a ready-to-buy point. Objection from the prospect
will have to be carefully handled at this stage.
◘ Action: This is the last stage where the prospect should now be ready to act that is to buy. Very often there
may be some hesitation on the part of the prospect at this stage.

The Right set of circumstances theory:

This theory is also known as ‘situation response theory’ can trace origin to psychological experiments with animals. It
demonstrates that the particular circumstances prevailing in a given selling situation provoke the prospect in a
predictable manner. If the salesperson succeeds in securing the attention and gaining the interest of the prospect or
appeals, the desired response will result.

Buying Formula Theory:

This theory emphasis the buyer’s side of the buyer seller dyad. In contrast to the above theories, the needs and
problems of the buyers receive greater attention. Salespeople play the role of agent who helps the buyer to find the
solution to this problem of want. This deals with the actual process of thinking of the mind of the prospects that are
strongly influenced by the internal factors and de-emphasizes the external factors.

The main buying formula was given to this theory by E. K. Strong and the following step by step explanation is
adopted.

Reduced to their simplest elements, the mental processes involved in the purchase process are

Need (or
Problem) Solution Purchase

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G. Raja Sekar M.B.A, (Ph.D)
As one purchase leads to further purchase and continuing relation, a fourth element is added i.e. satisfaction

Need (or
Solution Purchase Satisfaction
Problem)

When a definite buying habit has been established the buying formula covering the element involved in buying

Need (or Product or Satisfaction /

Trade name Purchase
Problem) service dissatisfaction

The interest behind all the theories is to improve the importance of the effective interaction between the buyers and
the salespeople. There are a number of elements of salesmanship that facilitate the salesmanship to be successful
venture. These elements can be summed up as

 Salesmanship aims at establishing sound and lasting relations between the seller and their buyers.
 It can be created wants that never existed before, by showing the prospective buyers, how goods or services
satisfy their demand.
 It consists of one human mind influencing another human mind.
 Salesmanship involves not only in selling the product and services but also in providing the knowledge,
technical assistance and counsel and advice.
 It brings reasonable profit to the seller and definite benefits to the buyers, in the efforts of inducing the
customer to buy the goods and services.

Behavioral Equation Theory:

This is sophisticated version of the “Right set circumstances” theory holds that the customer express his buying
behaviour in terms of his purchasing decision process.

B = P*D*K*V

B is a function of variables P, D, K and V where

B = Behaviour which is equivalent to response the act of purchasing a brand or patronizing a supplier.

P = Pre deposition the inward respond tendency which is the strength of the habit. It must be sharply distinguished
from the response tendency (B) which is the product of the inward response tendency (P) and the variable like D, K
and V

D = Present Drive Level

K = Incentives potential which is an increasing function of the magnitude of the brand being purchase.

V = The intensity of the cue.

Drives are strong internal stimute that impel the buyer’s response.

There are two kinds of drivers

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G. Raja Sekar M.B.A, (Ph.D)
  Innate drivers: - The psychological needs such as hunger, thirst, pain, cold, and sex.
 Learned drivers: - Learned drivers such as striving for status.

Cues are weak stimuli and are distinguished from strong stimuli that underline drives. Cues determine when the
buyers will respond.

 Triggering cues inferences the decision process for any given purchase.
 Non triggering cues inference the decision process but do not active it, and may operate at any time even
though the buyer is no contemplating a purchase at the moment.

THE SELLING PROCESS

The essence of personal selling is a sales communication between a salesperson and a prospect through which a
salesperson endeavors to convert the prospect into a customer.

The process of selling process involves the following steps

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G. Raja Sekar M.B.A, (Ph.D)
 Identifying and Qualifying
Prospect Potential Customers

Pre Approach
Preparing Call Planning

Approach
Presentation Demonstation

Timing
Handling Price
Objections Competition

When to Close
Closing How to close

Developing Customers relations

Follow up Maintaining Contact with Customers

Prospecting:

Identifying potential customer is a very important aspect of the customer strategy. In the terminology of personal
selling this process is called prospecting. A potential customer, or prospect, is a person who has three basic
qualifications.

◘ First, the person must have a need for the product or service.
◘ Second, the individual must be able to afford the purchase.
◘ Third, the person must be authorized to purchase the product.

Prospect involves the following two stages

Identifying prospects
Qualifying prospects

Identifying prospects: The identification of potential customer is not an easy task. Prospect come from many sources,
friends, other salespeople, previous, customers, suppliers, non-sales employees in the firm and social & professional
contacts. A few of the best sources and techniques for finding prospects are described below.
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G. Raja Sekar M.B.A, (Ph.D)
  Former customers
 Present customers
 Cold calling (involves knowing on doors)
 Mailing list
 Endless chain
 Advertising
 Personal contact
 Directories
 Trade shows and exhibits
 Spotters

Qualifying prospects: Once a sales representative has identified potential customers, he must qualify them to
determine if they are valid prospects. Unless this is done, time is wasted in selling to people who cannot or will not,
purchase the product or service.

There are several factors to consider when qualifying a prospect. One approach to qualifying often called the MAN
(money, authority and need) approach, involves answering following three questions about the prospect.

◘ Question about money

◘ Question about authority
◘ Question about need

Sales Preparation:
Anticipating the salesman getting ready, a salesman has to serve the customer. He must identify a customer’s
problems, solve that problem and prescribe a solution to the customer accordingly. He should be aware of current
competition and market environment in which he has to operate, background knowledge of the company, its
products and its rivals constitute the essence of presale preparation.

Sales preparation involves the following two stages

Pre – approach
Call planning

Pre – approach: If the pre-approach or fact-finding stage of sales planning, additional information is gathered about
the prospect and his needs. There are certain questions that a sales person must answer about customers.

 Who is the customer?

 What are the customer’s needs?
 What other information are required?
 From where to obtain information?
 What do other employees know about the customer?

Call planning: call planning involves a specific planning sequence. It is as follows

 Specifying the objective

 Developing a strategy
 Making appointment

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G. Raja Sekar M.B.A, (Ph.D)
Specifying the objectives:

The primary goal of any sales effort to get the order.

 To obtain more information about the prospect.

 To rate the prospect need and concerns to features and benefits of the product or services.
 To obtain permission to make a formal presentation on the product or service.
 To settle a past billing dispute.
 To introduce a new distribution.
 To get the prospect to accept the review promotional and technical literature.

Developing a strategy:

The sales representatives must develop a strategy or course of action to achieve. Careful consideration of the
prospect’s background and needs is required in order to be able to formulate a tailor made strategy appropriate for
the prospect.

Making appointment:

Sales calls are costly, so they should be arranged in advance cold calls-those made without specific appointment,
may be appropriate for introducing the salesperson or dropping of information, but this method is generally
inefficient for selling most product and services and is not consistent with modern professional selling.

Presentation:

The presentation consists of several interrelated swelling activates. It begins with the prospect’s interest and
attention. The rest of the presentation involves efforts to direct attention to product features that he may desire and
to demonstrate the products benefit.

Sales presentation involves the following stages

Approach
Presentation Techniques

Approach:

The third step is the stage where the salesman comes face-to-face with the prospect.

Approach involves the following stages

 Making first impression

 Beginning the presentation
 Convincing the prospect

Stage – 1: Making first impression: A favourable first impression is not just important. It is crucial to the success of
sales call before buying a product or service, a prospect must first accept the seller.

To make a favourable first impression, a sales representative must look and act like a professional. Some specific
suggestions for making a favourable first impression are to:

 Wear neat, conservative clothes

 Be clear and carefully groomed

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G. Raja Sekar M.B.A, (Ph.D)
  Know the prospect’s name and pronounce it correctly
 Be alert and pleasant
 Let the prospect offer to shake hands
 Forget about yourself and concentrate on the prospect
 Avoid smoking and chewing gum

Stage - 2: Beginning the presentation: There are many techniques for beginning the sales presentation. Each seller
must choose the one that best fit his personality and the specific sales situation. Six proven techniques for getting
favourable attention and stimulating a prospect’s interest are as follows

 Ask questions
 Use a referral
 Offer a benefit
 Offer a service
 Compliment the prospect
 Give something of value
Stage – 3: Convincing the prospect: Convincing the prospect is the case of the sales process. A presentation is the
crux of the salesperson prospect delayed. The feedback mechanism of the interaction reflects how the presentation
has been received, that is, whether the response has been positive, negative or indifferent.

Presentation Techniques: In approach stage, sales dialogue also contain examples of techniques by which a sales
representatives can prove, how an item will be benefit a customer. Prospect buy benefit and they must be convinced
that they will receive the benefit. To convince, other techniques for convincing the prospect include:

 Exhibits
 Testimonials
 Examples
 Guarantee
 Demonstration

Handling Objections

At any stage during the sales interview the salesman may be confronted by an objection. Prospect will
always try to resists a sales by raising argument for not buying the product. Unless the objection is satisfactorily
answered, the sales cannot take place. In many cases objections are really disguised requests for additional interest
in the product.

Although a salesperson encounters many types of objections but all the objections can be broadly classified into
following three types

Timing
Price
Competition

Timing: Most people wishing to make decisions especially important decision dealing with money. In most cases, the
best approach is to find out the reason for the delay and the point out the advantage of making a decision
immediately.

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G. Raja Sekar M.B.A, (Ph.D)
Price: This form of objection arises when the prospect feels that he has financial constraints or can get a better price
from a competition. Price objection can be handled best by pointing to quality and other benefits, the customer will
receive.

Competition: This type of objection is frequently countered when calling a new customer. These prospects find their
present supplier satisfactory and they are unwilling to change.

CLOSEING

Closing the sales is not as easy as is considered by some people. A salesman has to act with patience and intelligence
to close the sale. A salesman may periodically venture a trial close in order to sense the prospect’s willingness to
buy. He asks some “either or” questions from the prospect for this purpose.

The alert salesperson should know when the prospect is ready to make a commitment. The key aspects of closing are
as follows:

When to close
How to close

When to close: Trying to close a sale too early too late will generally result in lost sale. If a close attempted too soon
before the prospect in convinced, the seller will give the impression of being overly aggressive. Closing too late, after
the person’s interest has peaked, may result in the prospect’s becoming bored or impatient.

The following are some indications of the time when to close a sale

1. Looking and listening for buying signals

1.1. Verbal buying signals
1.2. Non-verbal buying signals
2. Making trail close

How to close: Closing is simply asking for the order. The professional salesperson knows several closing techniques
from which to select one that fits the specific prospect and selling situation. Some effective closing techniques are
listed below:

 The gift close

 The direct close
 The alternate proposal close
 The one more – yes close

FOLLOW UP

Many sales representatives make the mistake of assuming that the selling process has been completed when the
sales is made. This is a critical mistake. After sales activities are very important. Effective sales follow up reduces the
buyer’s dissonance, or doubts and it improves the chance that the person will buy again in the future. Sales
representative must always follow up the sale.

For making the sales process successful following points should be taken into consideration while following up the
sales:

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G. Raja Sekar M.B.A, (Ph.D)
 Developing customer relations.
Maintaining contact with customers.
Making a self analysis.
Keeping serving the customer.
Show appreciation.
Handling complaints promptly and pleasantly.

SALES QUOTAS
Sales quotas may be defined as estimated volume of sales that a company expects to secure with in a definite period
of time. Quota is the amount of business, in terms of value or in terms of unit sales, which is fixed for every
salesman. It may be fixed for a geographical area to be achieved with in a definite period of time, a month or a year.
“A sales quota is a part of a company’s total estimated sales assigned to a salesman, a territory, a branch, a
distributor or dealer or to some other selling unit, as a goal is to be attained in a designated future period of
time.” -- Paul H. Nostrum
“Quotas are quantitative objectives to sales personnel and other units of the selling organization”
Objectives / Reasons for setting sales quotas:
A sales quota is a device merely used to achieve the desired sales objectives. The primary objective is to facilitate
and improve control over sales activities and sales efforts so that the management can achieve desired goals through
its available sales force in the desired direction. The main objectives of setting sales quotas are:
To motivate salesman
To provide quantitative performance standards
To use in connection with sales contest
To obtain an effective budgetary control over sales
Other objectives

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G. Raja Sekar M.B.A, (Ph.D)
To motivate salesman: - Quotas cab be used to motivate salesman to achieve higher performance level. Some of
quotas are used as incentives; the performance under them is used for compensation, promotions and other
decision but the management must be very cautions in fixing sales quotas because too higher quotas will discourage
the salesman.

To provide quantitative performance standards: -If quotas are intelligently set, they represent realistic level of
desired performance. They can provide quantitative standards of performance identify weak or strong point of the
selling efforts.

To use in connection with sales contest: - As the main basis of making awards, the quotas fulfillment is a popular
techniques. If quotas serve are set accurately and adjusted for differences among territories they may serve
comparison purpose very well.

To obtain an effective budgetary control over sales: Budget quotas serve as a control device for selling expense. The
management assures reimbursement of sales level. The salesman performance can be measured in terms of
reduction of selling expense.

Other objectives: -

To estimate the future requirement of the enterprise.

To establish territorial objectives.
To maximize sales in physical as well as in monetary terms.
To facilitate distribution of sales to various market segment territories.
To ensure a systematic and rational physical distribution of product.
To make the best of available sales force by fixing sales quotas.

Advantages or Benefits of setting sales quotas:

 A sales quota helps the sales organization to judge the performance of each individual salesman. Accordingly
payments can be made.
 It becomes easier to locate weak and underdeveloped market areas. Special efforts can be made in such
areas to develop the market.
 Sales quotas create interest in work and it is device to stimulate the selling efforts of the sales force. Better
sales people are able to get rewards.
 Sales quotas also stimulate salesman to work for the company in a distinctive manner. Salesmen are likely to
work more harder to attain the targeted sales.
 A sales quota enables the management to estimate the total sales for the coming years. This helps to adjust
the production to meet the demand.
 Fixation of sales quota help the sales force to work in planned manner to attain the target.
 Sales quotas create interest in work and it is a device that stimulates the selling efforts of the sales force.
Sales quotas are also useful in connection with the conduct of sales contest. Sales performance against the
sales quota becomes the base for awarding the salespeople.

Limitations of Sales Quotas:

 If situations are changed, the quota fixed may become ineffective.

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G. Raja Sekar M.B.A, (Ph.D)
  If the quota is too small, the salesman will relax and if the quota fixed is too large or unattainable, the
salesman loses initiative.
 In many cases the sales quota is fixed arbitrarily.
 It is difficult to set an accurate quota.

Factors to be taken into consideration while deciding sales quota:

A number of factors are used in establishing sales quotas, following factors are to be taken into
consideration.

 Past sales records

 Buying power of customers
 Company’s polices
 Total production for the year
 Competition
 Opinions of those who know
 Consumer standards

Past sales records: - Past sales for established firms form a good index for future performance. Thus, while setting
sales quotas past sales may be taken into account. New companies can fix their sales quotas by observing past sales
of competing firms.

Buying power of customers: - A manufacturer can roughly estimate the buying power of customers of particular
area. The buying power of particular area can be known by the economic states, income of the customers living in
that area. Accordingly, the manufacturer can estimate sales quotas for that particular area.

Company’s policies: - Liberal credit polices high quality goods, higher rate of discounts, installment selling have a
direct impact while estimating sales quotas for salesman. These polices help to increase sales quota of each
salesman because the demand for goods and services remains higher under such conditions.

Total production for the year: - A company’s total production in a particular year determines the size of the sales
quotas.

Competition: - If the competition for a particular company is high, then the size of the sales quota should be less on
the other hand.

Methods of setting sales quota:

The sales quota is determined in many ways. Some important methods are as follows:

Top management: Downward

Territory estimates : Upwards
Combination of top management : downward and territory estimate upward
Past performance method

Top management: - In this method the management and executives estimate the total sales for the coming year by
their experience and judgment. This total sale is divided into sales quotas for each sales division, district branch and

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G. Raja Sekar M.B.A, (Ph.D)
individual salesman. This is sometimes called as guess work quota method because it is estimated on the basis of
executives thinking of guesses.

Territorial estimates: - This method is also known as gross root approach. In this method, the salesmen are
interviewed by their managers and the reasons for the quotas system are explained to them. They are then asked to
anticipate their sales for the coming years. The district and divisional sales managers makes further adjustments with
the co-operation of the salesman. Thus, the sales quota under this method is decided by the salesman.

Combination of top management: - In this method the above two methods, of estimating sales quotas are combined.
At the home office, management by their experiences and judgment estimates sales quota. The salesmen are than
asked to make their own estimates of sales quota. Next, both the estimates are put together and ultimately a final
sales estimate is made for the company. Then the estimate is divided into territories, products and salesman.

Past performance method: - In the past performance method, the post sales figures are taken as a base and total
sales estimates are made for the next year by increasing the sales by a certain percentage. Then this total estimates
is divided into sales quota for each sales division, district branch and individual salesman.

Types of Sales Quotas:

Sales quotas are mainly of four following types:

1. Sales Volume Quotas

a. Unit sales volume quotas
b. Value sales volume quotas
2. Activities Quotas
3. Expense Quotas
4. Budget Quotas
5. Combination Quotas

Sales Volume Quotas: - The sales volume quota is the oldest and most common type. It is an important standard for
appraising the performance of individual sales personnel, other units of the sales organization, and distributive
outlets. Sales volume quotas communicate managements’ expectations as to “how much for what period”. Sales
volume quotas are set for geographical areas, product lines, or marketing channels or for one or more of these in
combination with any unit of the sales organization. The exact design of sales quota depends upon, what facets of
the selling operation management wants to appraise. Sales volume alone although important is not sufficient, profits
are necessary for survival.

Unit Sales Volume Quota: - Sales volume quotas in units of products are used in two situations one is that in which
prices fluctuate considerably. In this situation, unit sales volume quotas are better yardsticks than are rupee sales
volume quotas. If the product is now priced at Rs. 80 per unit, 600 units sold means Rs. 48000 in sales, but if the
price rises by 25 percent (to Rs. 100 a unit), only 480 units sold brings in the same rupee volume.

The second situation occurs with narrow product lines sold at stable prices. In this situation, rupee volume
and the unit volume quotas might both appear appropriate, but especially if the prices are high, unit quotas are

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G. Raja Sekar M.B.A, (Ph.D)
preferable for psychological reasons – sales personnel regard a Rs. 1 lakh quota as a higher hurdle than a forty-unit
quota for machines prices at Rs. 25,000 each

Value sales volume quota: - companies selling broad product lines set sales volume quotas in rupee rather than
units of products. These companies meet complications in setting unit quotas and in evaluating sales performance
for individual products. A key advantage of the rupee sales terminology is that the rupee sales volume quotas relate
easily to other performance data, such as selling expenses, through ratios or percentages.

Activities Quotas: - Certain companies set quotas for the activities of their sales personnel, in order to control and
allocation of time of the salespeople. A company, using such quotas defines the various activities which are
commonly performed by the sales people and also set target performance frequencies. The activities, for which
quotas are fixed, are total sales calls, calls on particular classes of customers, calls on prospects, number of new
accounts, missionary calls, product demonstrations, placements or erection of displays, making of collections and the
like. Activities quotas are appropriate when the sales people also perform important non-selling activities.

Setting activity quotas involves large amount of clerical and record keeping work. The main problem in
administering activity quota system is that of inspiring the sales force to perform the specified activities effectively.

Expense Quotas: - Expense quotas are used most often in combination with sales volume quotas. Frequently,
management seek to provide sales personnel with financial incentives to control their own expenses either by trying
performance against expense quotas directly to the compensation plan, or by offering sales personnel expense
bonuses for incurring expenses lesser than the quota estimates.

Budget Quotas: - Budget quotas are set for various units in the sales organization to control expenses, gross margin,
or net profit. The intention in setting budget quotas is to make it clear to sales personnel that their jobs consist of
some thing more than obtaining sales volume. Budget quotas make personnel more conscious that the company is in
business to make profit. Expense quotas emphasize keeping in alignment with sales volume, thus indirectly
controlling gross margin and net profit contributions. Gross margin or not profit quotas emphasize margin and profit
contributions, thus indirectly controlling sales expenses.

Combination Quotas: - Combination quotas are used when management desires to control sales force performance
to both selling and non-selling activities to the medium of a single summary performance measure.

SALES TERRITORIES
If the sales force is reasonable large or covers a significant geographical area, it is useful to split the
aggregate market into manageable units, normally called territories.

“A sales territory is a particular grouping of customers and prospects assigned to an individual salesman.”
Cundiff and Still

“By sales territory is meant the geographical area assigned to a salesman for his operations or selling
activities.” Philip Kotler

Sales territories may be planned either on geographical basis or on the basis of number or nature of customers.
Once the territories are defined, personal selling resources as well as other marketing resources can more easily be
allocated, monitored and controlled.

Reasons / Objectives of planning the sales territories:

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G. Raja Sekar M.B.A, (Ph.D)
The objectives of planning the sales territories are as follows:

 Work load for each salesman can be equitably be distributed, in terms of sales volume.
 It prevents the duplication or overlapping of sales efforts.
 Sales can be realized more effectively in the assigned territory.
 Head quarters of each sales territory can be located in a place, where greater numbers of customers are
located.
 It is possible to have increased market coverage, not losing the order to competitors. He meets the
competition wisely as it is pre-planned, because he knows the local conditions.
 The activities of salesman can easily be controlled more effectively by the sales manager through
comparison of selling opportunities.
 A control of selling expenses is possible and at the same time it increases the sales volume.
 It is a good basis to evaluate the salesman’s performance.
 A salesman can gain good knowledge over his territory, in respect of local problems and the existing
competition.
 A good territorial allocation brings higher sales volume at lower sales expenses.
 It allows salesman to spend more time on calling customers rather than in Journey, to serve the customers,
to whom the product(s) has (have) to be sold. Customers can be served advantageously.
 The interest and morale of each salesman can be improved in the respective territories.
 Disparities in the work load can be improved easily.
 To bring co-ordination of personal selling and advertising efforts more beneficially, territorial assignment to
each salesman is a must.

Benefits / Advantages / Merits of setting sales territories:

Dividing the total operating area (setting sales territories) offers the following advantages:

 To evaluate performance.
 Benefit to salespeople and the company.
 To improve customer relations.
 To obtain thorough coverage of the market.
 To reduce sales expenses.
 To allow better matching of sales person to customer’s needs.
 To establish sales person’s responsibilities.

Factors taken into consideration while developing sales territories:

While deciding the size of sales territories, the sales manager has the following factors to consider.

Nature of the product

Competition and frequency of contact
Demand for the product
Ability and experience of salesman
Density of population
Availability of transport facilitates
Advertising and sales promotion activities
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G. Raja Sekar M.B.A, (Ph.D)
 Distribution system.

Nature of the product: - There are certain consumer items which have constant demand in the market. They are high
turnover goods and this needs little selling efforts. Thus, for such products a small territory can be assigned. For
luxury, large and durable articles, which need higher selling efforts and less turnover, small sales territory can be
assigned.

Competition and frequency if contact: - Competition cuts the size of the territories and increase the frequency of
contact. In other words, the salesman has to meet dealers and customers very frequently in highly competitive
areas. This is highly essential to maintain the market for the product. Therefore, where the competition is intense,
the field sales should be divided into small territories.

Demand for the Product: - While allocating sales territories to salesman, the demand for a particular product should
also be taken into account. If the demand for a particular product is constant and frequent, then the whole sales
field can be divided in to small sales territories. However, in case of low demand and infrequent purchase of articles,
the size of the sales territory should be large.

Ability and experience of salesman: - the size of the sales territory also depends on the ability and experience of the
sales force. Experienced and talented salesmen are able to sell more and therefore they can easily be allotted large
sales territories. On the other hand, ne and inexperienced salesman are usually allocated small sales territories as
their ability to sell is limited.

Density of population: - The density of population in a particular area determines the size of the territories. In other
words, if a particular area of a sales field is thickly populated, there arises the need to divide the sales field into small
territories. On the other hand, if the area is thinly populated, then larger sales territories can be allocated to
salesman.

Availability of transport facilities: - The marketing of a particular product depends to large expent on the availability
of transport facilities. If the transport facilities like Road, Railway link, Air link etc. are satisfactory in the sales field,
then large sales territories can be allocated to salesman. However, sales fields having poor transport facilities should
be divided into very small territories.

Advertising and sales promotion activities: - Companies which have widespread advertising and others sales
promotion activities can give small sale territories to each salesman. This enables them to sell extensively in that
particular area. On the other hand, low advertised products need large sales territories for each salesman.

Distribution system: - very often the distribution system of a particular organization determines the size of its sales
territories. In case, the company sells through middleman like wholesalers, dealers, retailers etc., large sales
territories can be allocated to salesman. On the other hand, if the product is sold directly to consumer, very few
middleman are used, small sales territories can be assigned to salesman.

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G. Raja Sekar M.B.A, (Ph.D)
 ROUTING
Once a sales person has been assigned to work in particular territory, decisions have to be made concerning to the
geographic pattern of account coverage. This is referred to as routing. Calling sequence is laid out that satisfy the
dual objectives of travel time minimization and visitation frequency.

The geographical locations of actual and potential customers have to be put detailed map of the territory. This is
often done with a wall chart using different colours pins to indicate account potential and desired call frequency.

The principles apply in connecting the customer locations on the map into a routing plan are obvious. Travel distance
between two calls should be minimized, back tracking on the same route and criss crossing back and fork across a
territory should be avoided at all costs.

This circularity is often achieved by identifying customer location that is situated at the outer perimeter of the
territory. From this basic route brief detours are then arranged to take in accounts located in the interior position of
the territory. Where this is not a good approach because of the size and diversity of territory, a colour leaf pattern of
four more adjoining circular sequences can provide the desired intensity of coverage without sacrificing economy.

Responsibility for route planning depends largely on the nature of the product and account mix as well as the
management philosophy. At one extreme, head quarter does all the routing possibly with the help of computer
models. At the other extreme, territory managers are left to their own devices in developing calling patterns. In
between these streams is that possibility of the district sales manager’s deciding the calling sequence.

Whereas geographic and account potential consideration predominate in routing decisions, proper use of the sales
person’s time leads to all account activities performed by the sales representatives during a day or week.

SCHEDULING
Scheduling refers to the task of allocating the sales person’s time. In scheduling a particular week’s activities,
estimates have to be developed for customers contacts waiting and travel times involved with specific accounts that
forms the agenda for the incoming call sequence. Although average based on historical data and experience will
provide approximation, they have to be modified and adjusted to reflect the circumstances of the specific planning
period. Depending on the person to person to see in each customer firm and subject addressed more or less time
may be needed than in past visits, waiting time on customer premises may also or even time of day as well as the
number of people involved. Building some buffer time into the daily programme permits flexibility to deal with
unexpected events such as car trouble, new business opening and the like, since also has to be set aside for planning
and support activities. The success of scheduling is enhanced when appointments are setup ahead of time.

Each territory manager’s planned use of time should be compared with the time actually during the week. Reason
for divergence should be investigated to sharpen future scheduling.

SALES CONTESTS

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G. Raja Sekar M.B.A, (Ph.D)
A sales contest is a special selling campaign offering incentives in the form of prizes or rewards beyond those in the
compensation plan. The underlying purpose of all sales contests is to provide extra incentives to increase sales
volume, to bring in more profitable sales volume, or to do both.

Objectives:

Sales contests are aimed to accomplish specific objectives, generally one par contest, within limited periods of time.
Most sales contest aim to motivate sales personnel.

 To obtain new customers.

 To secure larger orders per sales call.
 To push slow-moving items, high – margin goods, or new products.
 To overcome a seasonal sales slump.
 To sell a more profitable mix of products.
 To improve the performance of distributor’s sales personnel.
 To promote seasonal merchandise.
 To obtain more product display by dealers.
 To promote special deals to distributor’s dealers, or both.

Contest Prizes:-

There are four kinds of contest prizes:

Cash
Merchandise
Travel
Special honors and privileges.

Cash: The potency of cash as an incentive weakens as an individuals unfulfilled needs are pushed farther up in the
hierarchy. Once basic physiological needs and safety and security needs are satisfied, whatever potency money
retains as an incentive relates to unfulfilled esteem and achievement needs.

Merchandise: It is superior to cash in several respects. Winners have permanent evidence of their achievement. The
merchandise prize is obtained at wholesale, so it represents a value larger than the equivalent to cash. For the same
total outlay, too more merchandise prizes than cash award can be offered; hence, the contest can have more
winners.

Travel: Travel award are popular. Few things can be glamorized more effectively than a trip to a luxury resort or an
exotic land.

Special honor or privileges: This award has many forms: a letter from a top executive recognizing the winner’s
superior performance, a loving cup, a special trip to a home office, meeting, or membership in a special group or club
that has certain privileges.

UNIT – II

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G. Raja Sekar M.B.A, (Ph.D)
 COMPENSATING THE SALES FORCE

The major motivating factor in selling is compensation given to the sales force. The amount of reward paid to the
sales people has got a direct impact on the efficient working of the organization and the sales force. Better sales
leads to higher profits and it leads to higher remuneration to the sales force. This in turn results in greater sale
efforts and higher sales. Thus, this is a continuous circle, one leading another. A good plan or remuneration is a
means of securing better control of salesmen’s activities, greater incentives to increase sales, more loyalty, higher
morale and greater enthusiasm and interest. It should be planned in a manner that the employer gets higher sales
and the employees get higher income.

Compensation is the amount received by salespeople in exchange of the work or services performed by them.
Compensation in the form of salaries or commission enables the sales people to meet their needs and those of their
families. Financial compensation is a vital source of satisfaction.

An appropriate compensation package gives employees a sense of satisfaction and motivates them to strive more
and more to achieve the set objectives. An inappropriate compensation adversely affects performance motivation
and satisfaction. Therefore, a proper remuneration or compensation package is of vital importance, if effective and
competent work force is to be retained and maintained.

Objectives of a compensation plan:

The general objectives of a sound compensation and remuneration plan are as follows:

 It should not need frequence changes.

 It should stimulate the salesmen to put forth his best efforts in the accomplishment of his tasks by
establishing visible correlation between efforts plus results and rewards.
 It should help in the early elimination of the men who do not fit into the long run plans of the firms.
 It should ensure the full support of the sales force.
 It should enable the firm to attract, retain and develop a contented, efficient and loyal sales force.
 It should enable the firm to control and direct the activities of the salesman.
 It should provide for extra benefits for doing duties other than selling.
 It should direct salesman’s efforts and activities to the profitable end for the firms.
 It should be simple enough to be understood by a salesman of ordinary prudence and intelligence.
 It should cause the salesmen to give proper consideration to the interest of his customers.

Essential elements of a good compensation plan:

The following characteristics and elements of sound compensation plan are as follows:

It should be simple.
It should have controlling capacity.
It should be economical.
It should provide adequate income.
It should be flexible.
It should be fair and equitable.
It should lead to ease of administration.
It should be simple: - The compensation plan must be so designed that will not confuse the salesmen who have little
interest in the details and lack of mathematical aptitude. Many plans are designed by statisticians, engineers, or cost

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G. Raja Sekar M.B.A, (Ph.D)
accountants, who use statistical methods in reaching conclusions; these are beyond the reach of an average
salesman. Therefore, simplicity is the fundamental principal of sound plan.

It should have controlling capacity: - Direction and Sales is another point that can hardly be forgotten. It is through
such a well designed sales remuneration plan, that one can direct and control the activities. For instance, salary
scheme are better suited for this purpose than those of commission plans. If commission is the basis for payment,
employees develop a freedom of independence. They hate direction and supervision because they earn if they work.
Thus, control is wreaked. That way, salary system is one where the employee is paid on the basis of time spent in
selling house. Employer has every right to get the work done in the manner he likes. He can very well control them.
Any way, the plan of compensation must have this tenet.

It should be economical: - The purpose of a sound compensation plan is to realize the sales at a profit. That is,
decreasing sales cost per limit must be the aim of compensation plan via increased volume, lower expense and
higher profit margin on sales. The earning of a salesman must be kept within the kilt, as sales remuneration is one of
expenses.

It should provide adequate income: - it is already said that the remuneration should be incentive-oriented. It is not
all the incentives that are added, must be given to the workers earlier, to have deep rooted effects upon the mid of
their. Many a time, bonus earning are declared but are held up to a quarter, semi-annual and year end. This delay in
payments weakens the desire on the part of employees. By the time he receives the payment, he might have lost his
interest and enthusiasm.

It should incentives oriented: - It must keep the employees spurred. Monetary reward for effort is really a nice
stimuli to many of the salesmen who exceed the normal performance level. Such additional amount given results in
increased volume of sales, grater profit on each transaction, lower expenses and increased activities.

It should be flexible: - The plan so designed must be capable of being adopted to various selling conditions that vary.
The plan should be adjustable to the variables like types of salesmen, territories, products and the competitive
conditions that are present in any sales organization. Such a plan is to work well in limits-both good and bad.

It should be fair and equitable: - To win the co-operation and much desired loyality, the compensation plan will not
pay some employees much and some less than normal. Discrimination is a costly mistake that the executives will
have to pay in intangible terms.

It should lead to ease of administration: - Administrative ease implies, reduction in computations, consuming less
time by accounting department and minimization of paper work by salesmen. Statistical calculations to have
elaborately evolved plans are that bound to increase the administrative costs in terms of money and time.

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G. Raja Sekar M.B.A, (Ph.D)
Types of Remuneration Plans:

Monetary compensation is the single most important factor to affect efficiency of salesman. Efficiency of salesman
has direct relation with the method of remuneration adopted by the company. There are number of methods of
rewarding salesmen, it can, however, be brought under the following three basic types compensation plans.

1. Straight salary method.

2. Straight commission method.
3. Combination of salary and commission (other variables elements)
4. Salary, commission and bonus methods.

Straight Salary Method: The most common form of rewarding a salesperson is to put him on a straight, fixed monthly
salary. This ensures that the salesperson takes home a fixed income every month and hence he can plan his living
accordingly. It also ensures that the firm knows its financial commitment and that even the non-selling jobs like
information gathering and customer service get adequate attention. The salesperson will not necessarily put all
efforts in selling fast moving items.

Merits:

 The schema is simple to understand.

 It leads to security and stability of income to salesman.
 It helps to develop satisfied and loyal sales force.
 It is a good system when sales are uncertain.
 Consumer’s need and desire are better served.
 The army of salesmen can be controlled easily.
 When new salesmen are appointed, it is an effective scheme.
 It lowers labour turn over.
 It assures a definite guaranteed income to the salesmen.

Demerits:

 It does not stimulate the salesmen to work harder because salary is paid irrespective of sales volume.
 Reward is unrelated to effort or effort is unrelated to reward, as under this system, there arises no relation
between effort and reward.
 The selling cost is not related to the sales volume.
 It makes no difference between the idle salesmen and an efficient sales man, as all get equal salary.
 It over compensates the inefficient and under compensates the efficient.

Suitability:

 Where several salesmen have to co-operate for a sale.

 Where job needs missionary or educational effort.
 Where the sales cannot be measured satisfactorily.
 Where the salesman job is just routing order taking.
 Where the salesman works at the sales counters.
 Where the market, for the products, is seasonal.
 Where a new market is to be explored.
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G. Raja Sekar M.B.A, (Ph.D)
  Where new salesmen are employed.
 Where the job needs pre-sale and post sales service or in case of complex products.

Straight Commission Method: - Here salesmen only get a fixed percentage of the sales of the profit volume.
Naturally, his earnings are in direct promotion to his input and the results. This type of schema is particularly popular
while selling insurance, operating as agents to overseas suppliers, selling real estate etc. The salesman may not
highly favour this schema because there is no guarantee of minimum fixed income even though much higher
earnings are possible.

Merits:

 Cost of administration is low.

 It provides maximum monetary incentives to salesmen.
 Salesmen are free birds.
 The plan is simple to understand and easy to operate.
 There is a direct relationship between selling costs and sales revenue.
 There is a clear distinction between efficient and inefficient salesmen.
 The scheme works as a grate incentive to efficient salesman.
 Personnel/sales management problems are the least.
 It attracts salesmen of better ability and caliber.
 An effective cost control system can be formulated, as there is a direct relation between selling cost and
sales amount i.e., both will move hand in hand.

Demerits:

 Fast moving goods are sold faster, but slow moving goods are sold still slower.
 Salesmen can not be controlled as there arises nominal relations, and he may quit the job at any time.
 There is always uncertainity about the income and his position is insecure.
 Non-selling tasks are ignored and attention is focused only on selling aspect.
 Salesman may use undesirable methods to boost sales.
 The plan is unsuitable during depression or war periods.

Suitability:

 When high incentives is required to achieve sufficient rules.

 When the financial position is not strong to meet the fixed cost of straight salary.
 When the firm can not control the activities of the salesmen.

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G. Raja Sekar M.B.A, (Ph.D)
Combination of salary and commission (other variable elements): - The limitations of the above two methods of
compensation are sought to be overcomed through combination plans. I this plan, a base salary is determined which
the sales person will carry home each month, no matter what the sales or profits are in that month. This enables him
to plan the monthly living. Normally, this is adequate enough to take care of the essential needs of the salesperson
like food, clothing, children’s, education and his other commitments like monthly rent etc. The next part of this plan
is commission which the person has to earn. This is linked to sales and price realization. To an adequately reward
and challenge individual’s potential, the sales manager also uses non-monetary incentives like contests, sales
meetings, and conventions at holiday resorts and training.

This system of combination of salary and commission works in the following two patterns.

a. Salary plus commission on total sales.

b. Salary plus commission over certain quota.

Salary plus commission on total sales: - Under this system, a salesman is paid a salary (pre-determined) and also a
commission on total sales made by him.

Salary plus commission over certain quota: - Under this method, a salesman is paid a pre-determined fixed amount
as salary and commission which is calculated on the amount of sales over and above the sales quota. In case, the
salesman cannot sell even the quota fixed, he is entitled only for the salary and there is no question of commission.

Merits:

1. The plan is acceptable and is more suitable and appropriate to salesman.

2. There is control over the salesman’s activity.
3. There is a minimum guaranteed income.
4. Salesman takes more initiative to sell, as they know that more effort means more reward.

Demerits:

1. More records have to be maintained.

2. There is an increase in the office cost-administration cost.

Salary, Commission and Bonus Method: - Sometimes the salesmen are paid a straight salary. This salary is paid for
certain specific duties performed by the salesmen. In case, the salesmen puts extra efforts or sells beyond a
predetermined limit, he is paid commission and for bonus. This commission or bonus is meant for the results over
and above certain satisfactory level of effort. The main advantage of this method is that the salesmen have security
about their income and incentive for better results.

In addition to the above schemes of remuneration, the sales manager can also follows various other schemes. The
important schemes are:

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G. Raja Sekar M.B.A, (Ph.D)
 a. Sales contests and prizes
b. Promotions
c. Bonus
d. Profit sharing plan
e. Other financial incentives

Sales contests and prizes: - Some companies use sales contests and offer prizes to boost the competitive spirit of the
salesman. As a result to win sales contest, salesmen make special effort to increase sales volume. Special quotas are
fixed or special targets are set and salesmen who are able to reach those targets are properly rewarded. These
rewards may be in the form of cash or other benefits.

Promotions: - Sometimes salesmen are given incentive by way of promotion. Those salesmen who have performed
exceptionally well or who are able to sell beyond a limit are given special promotions. Sometimes junior’s salesman
also promoted for special effort to increase sales.

Bonus: - Bonus is paid to salesmen who put extra efforts to increase the sales volume. This amount is given in
recognition of services and talent of salesman, as it is paid over and above the regular income.

Profit sharing plan: - Some firm disburse a portion of their divisible profits amongst their salesmen thus in effect
giving a share in the profits earned by them to their salesman. The amount to be disbursed may be calculated on the
basis of over all profits of the firm or the profits earned on sales in a given sales territory.

Factors Considered While making the remuneration Plan:

The following factors are to be considered while designing the remuneration plan.

Conditions prevailing in the market.

Advertising activities of the concern.
Nature of the sales job.
Ability of sales force.
Nature of product handled.
Channel of distribution.

Conditions Prevailing In The Market: - The nature and extent of demand determines his earnings. If demand is
regular and large, he is going to earn more even if remuneration fixed is low, in terms of commission. Existence of
keen competition forces the salesman to accept lower earnings.

Advertising Activities Of The Concern: - Salesmanship is influenced favorably by the efforts of advertising and sales
promotional activities as they create a fertile ground for the sales force to perform well in the line of selling. It has
been already stated that advertising efforts create a stage I the background of which salesman is partly improving
the selling ability.

Nature Of Products-Handled: - The nature and number of commodities handled decide his level of earning. Speaking
comparatively, in case of basic necessities like staple articles, food products, the demand is assured and is not
requiring special effort to sell there. On the other hand, items of luxuries and comforts, personal selling plays its own
role in persuading the customers .

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G. Raja Sekar M.B.A, (Ph.D)
Ability Of Sales Force: - Much depends on the ability of a salesman, his skill or knock acts as a foundation to create
sales. A creative salesman is one who finds his job to give new colour to his efforts, to increase the sales.
Salesmanship is an art that makes him either to earn sumptuously or go with little. Therefore, salesman with sales
acumen efficiency, dynamic, earn naturally mare than the sulky, dosile and inefficient one.

Nature Of Sales Job: This is going to decide whether the compensation is to low or high, and to be individual or
common. If the job calls for much time consumption, hardous and tedious, the remuneration is to be high. If the
work is simple, that hardly requires personal sacrifices, and it can be low.

Channel Of Distribution: - the length of the channel has its influence on his earnings. If the channel is longer or
longest, seller has no much work then accepting the orders, where middlemen play significant part. On the contrary,
in case of shortest channel, he has a simple scope to get better and higher rewards for this

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G. Raja Sekar M.B.A, (Ph.D)
 Unit –III

ADVERTISING

A Basic responsibility of the marketing manager is to ensure that the company’s message reach its potential
customers. A main method by which companies deliver their messages to groups of customers and, in fact, make
their initial contact with most potential customers is through the advertising.

Advertising is any paid form of non-personal communication through the mass media about a product or
idea by an identified sponsor. It is a powerful promotional tool which individuals, business and non business
organizations use for informing, persuading and reminding their targets audiences.

Various authors have defined advertising in the following ways:

“Advertising ha been defined as the dissemination of information concerning an idea, service or product to compel
action in accordance with the interest of advertiser” M. Banerjee.

“Advertising consists of all the activities involved in presenting to a group, a non-personal, oral or visual, openly
sponsored message regarding a product or service, or idea.” Stanton.

“The purpose of advertising is to reduce percentage cost of production and distribution.” Cundiff & Still.

“Advertising is a salesmanship without a personal salesman” Journal of marketing, America.

“Advertising is a paid form of non-personal presentation or promotion of ideas, goods or services by an identified
sponsor.” Richard Buskirk.

“The purpose of advertising is to sell goods, services or ideas to a large group of prospective purchaser”
Convese, Huegy & Mitchell.

“Advertising can be described as an art of creating a demand for article or a service.” C. L. Bolling.

“Any paid form of non-personal presentation and promotional of goods, services and ideas by an identified
sponsor.” Mason & Rath

Nature / Characteristics / Features of Advertising:

From the definitions, the following characteristics and features of advertising can be identified:

◘ Persuation of buyers: - Advertising compliments or may substitute for personal selling. To persuade the
buyers the advertiser makes his products buyers satisfying. It is an art of influencing the human action to
possess one’s product.
◘ Matter of record: - It is a matter of record furnishing information for the benefit of buyers. It guides or helps
buyers to make satisfactory purchases. The contents of an advertising are what the advertiser wants to
communicate.
◘ Paid form of Publicity: - Advertising is a paid form and hence commercial in nature. Thus, any sponsored
communication designed to influence buyer’s behaviour is advertising because advertiser pays for it.

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G. Raja Sekar M.B.A, (Ph.D)
 ◘ Non-Personal Communication: - It is a mass non-personal communication, reaching large groups of buyers. It
is not delivered by actual person. It is not addressed to a person. Whatever be the form of advertisement-
spoken, written or visual, it is directed at a mass audience and not at the individual as in personal selling.
◘ Identifiable with the sponsor: - Advertising is identified with its sponsoring authority or advertiser. It
discloses or identifies the source of opinions and ideas, it presents.

Objects of Advertising:

The main objective of advertising is to communicate about the product and services to the prospective
customer. Its long term objective is to generate profit to the firm. General object of advertising is to inform the
customers about the attributes and uses of the product.

The objectives of advertising can be discussed through the following points:

 It leads to Creation of demand.

 To educate customer.
 To expand the market for new buyers.
 To face the competition.
 To announce a new product or service.
 To prepare ground for new products.
 To create or enhance good will.
 To intimate customers about new uses of the products.
 To indicate potential customers to buy.
 To develop servicing link between manufacturer and customers.
 Barring new entrants.
 To neutralize competitors’ advertising.
 To create brand preference.
 To announce product modification.
 To make special offers through sales promotion.
 To announce location of dealers and retailers.
 To passify stockists and dealers.

Important / Advantages / Utility of Advertising:

In modern business, large companies have to produce goods on a large scale to stay in business. Mass
production demands mass consumption which necessitates use of mass media i.e., advertising to provide
information about the products to the consumers, i.e., right up to the very homes of the target group so as to elicit
their desired response.

 Advertising generates income and employment in advertising and media industries.

 It helps in building the image of the product, brand and the company.
 It makes the work of sales force easy and helps them to establish more stable relationships with customers.
 Advertising creates mass markets and helps the manufacturers to derive production economics, reduce costs
of production and provide products to the customers at cheaper prices.

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G. Raja Sekar M.B.A, (Ph.D)
  Advertising makes the market more competitive, competition leads to enhancements of quality and product
value.
 It helps to increase sales, market share and profits.
 It helps furthering social and environment causes.
 It establishes direct contact between the producer and the consumer.
 It creates an awareness among customers of products especially new products and innovations resulting in
better choiced and improved standards of living and leading to attitude change.

Demerits / Weakness / Objections against Advertising:

Advertising, many a time, lacks credibility and trust worthiness.

It is essentially one way means of communication. It can not obtain quick and accurate feed back in order to
evaluate message effectiveness. In absence of feed back, the services personal salesman becomes necessary.
It is much less effective than personal selling and sales promotion at later stages in the buying process e.g., in
convincing and securing action.
It is much efficient communication (very low cost per prospect) but it is least effective as a tool of
communication.
It is less flexible than personal communication. It can not answer objections raised by prospects.
Advertising medias e.g., newspaper, magazines, carry many messages competing to secure attention of
audience simultaneously. Thus, it creates noise in communication.
It is unable to reach prospects when they are in buying need. Hence, we have to repeat advertisements and
repetition involves additional cost.

ADVERTISING MEDIA

The method or means adopted to communicate the message of an advertisement is known is known as the
medium of advertising. In other words, medium is the vehicle of carrier of advertising message to the target
customers or prospects. The basic purpose of using the media is to bring products and services to the notice of
potential customers.

Media advertising provides useful support to personal selling. Salesman and traders find it easier to impress
potential customers about the usefulness or quality of products when the prospective buyers are already
informed about the same through advertisements. Thus, media advertising may be regarded as complementary
to personal selling.

Types / Kinds of Media:

A variety of media are used for advertising purposes. The use of media not only facilitates communication of the
sponsored message to the largest possible number of customers but also enables repetition of the message as
often as may be necessary.

Different types of media differ as regards geographical coverage, the type of customers that medium can reach,
nature of appeal to customers, cost involved etc. Use of particular type of media makes it possible to convey
information in as much detail as required by adjusting the size of the message to space or time.
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G. Raja Sekar M.B.A, (Ph.D)
On the basis of the distinguishing features, the media may be divided into the following categories.

1. Indoor Advertising Media

a. Broad Casting Media
i. Television
ii. Radio
b. Press Media
i. Newspaper
ii. Magazines & Journals
2. Outdoor Advertising Media
a. Electric Signs
b. Posters
c. Travelling Displays
d. Sky Writing
e. Painted Displays
3. Direct Advertising Media
a. Envelop enclosure
i. Folders
ii. Circulars
iii. stuffers
b. Sales Letters
c. Gift Novelties
d. Package inserts
e. Booklets and Catalogs
f. Broad sides
g. Store publications
4. Miscellaneous Advertising
a. Counter display
b. Window display
c. Exhibitions
d. Showrooms
5. Special Media

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G. Raja Sekar M.B.A, (Ph.D)
Indoor Advertising Media

(a) Broad Cast Media: - Advertisers use two types of broad cast media to reach customers.

Television: - Television is the latest medium of mass communication. It can create audio-visual impression. It makes
appeal through the eyes and the ears. Television is becoming popular in India since the inception of cable T.V.

Merits:

1. It is highly visible mass medium.

2. It provides great flexibility for use of creativity.
3. It has a short lead time to place the advertisement.
4. It appeals to the senses as it has visual and audio capabilities. It uses sight, sound motion to transit a
message and capture high attention. It provides instant exposure of picture and ideas.
5. It reaches mass audience.

Demerits:

1. It has high cost which makes it some times prohibitive.

2. It has little audience selectivity and can not reach some specific target audience.
3. It requires the services of promotion specialists.
4. It has short fleeting exposure.

Radio: - Radio has an important position among the media of advertising. Commercial broadcasting has become a
very popular from of promotion in many countries. Radio advertisement is given in the form of ‘spot advertisement’
or ‘sponsored programmes’.

Press Media: Press medium is a print medium which comprises of newspapers and magazines.

Newspapers: - Newspapers have secured the most important position among media of advertising. Effectiveness of
newspaper advertising depends on the selection of a proper newspaper, its circulation, time of the issue, selection of
appropriate space etc.

Merits: -

1. It gives good local market coverage.

2. It conveys broad information on product and companies and ahs broad acceptance.
3. It has high believability which can benefit the advertiser.
4. It reaches large audience.
5. It takes short time to place the advertisements.

Demerits: -

1. It has a non-selective audience and the advertisement may not be relevant to a large number of readers.
2. Its cots are relatively high.
3. It has a short life.
4. If does not last long and has a small part along audience.
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G. Raja Sekar M.B.A, (Ph.D)
 5. It has a limited appeal to young.
6. It has poor reproduction to quality.

Magazines and Journals: Magazines and journals are better media for advertisements which use high quality printing
and colour. Magazines are generally read during leisure time while newspapers are read in a hurry.

Merits: -

1. The quality of production is high. Some magazines add a touch of class.

2. They have a high credibility and prestige which can benefit the advertiser.
3. The advertisement lasts longer and has a good relationship.
4. Its reach is high for demographic and geographic segments. It offers concentrated coverage.
5. The cost varies from magazines to magazine, from Journal to Journal.

Demerits: -

1. It has a long time to place and purchase the advertisement. The advertisements need to be booked in
advance.
2. There is circulation wastage and this medium has limited flexibility in capturing attention.

Outdoor Advertising Media: - Outdoor or mural advertising is the cheapest and perhaps the oldest from of
advertising. It is still popular even today. Posters, electric signs, neon signs, car cards, sky writing and sky advertising
pointed display, banner and the like are examples of outdoor advertising media.

Merits:-

1. It has a relative low cost.

2. It evinces little competition.
3. The advertisement gets repeated exposures.
4. It is highly visible mass medium.

Demerits: -

1. It has no audience selectively. It can not reach well defined audience.

2. It is subject to regulations of local public authorities.
3. It has a very short exposure time.
4. The ability to convey product information is limited.

Direct (Mail) Advertising Media: Direct mail is any advertising sent by mail (postal transmission) including sales
letters, folders, pamphlets, booklets, catalogues and the like. Direct mail is the most personal and selective media. It
reaches only desired prospects. It has minimum waste in circulation. The advertising copy can be very flexible. It gas
maximum possible personal features even without personal contacts. It can provide detailed information about the
product or service, creating lasting impression. Its effectiveness is measurable. The result of direct mail advertising
can be checked up by means of an incorporated in mailing. However, direct mail is costly. We may not have proper
mailing list. Receiver may consider it as just mail as it may not have entertainment value. It is not a good means of
mass communication.

Merits: -

1. It is completely controlled medium.

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G. Raja Sekar M.B.A, (Ph.D)
 2. There is no competition within the same medium.
3. There is immediate response.
4. It is easy to personalize the advertising and message copy and layout.
5. It is highly selective and personal and provides flexibility in reaching the target audience.

Demerits: -

1. It has a low response rate.

2. It is relatively expensive as obtaining appropriate mailing lists is a costly task.
3. It has junk mail image and is treated as such.

Miscellaneous Advertising: - Audio visual, film advertising, Documentary Films, Straight advertising films and
Sponsored advertising. All have their own merits. Their coverage is very wide. Appeal is made to all sections of
the people. They are able to explain and demonstrated the use of the product which makes the product more
appealing and acceptable.

The audio visual methods have their own limitations. The production cost of a film is very high. Sometimes
there are restrictions against screening of films e.g., there is censoring. A film can be shown only to the people
who come to the theater. Besides for screening films cooperation of theaters is inevitable. Crowding of such
advertisement films, which is very common now, makes the audience feel bored.

Businessman are using some special media for giving production to their products and promoting sales like
counter display. Show room display, window display etc.

1. Counter display: - Products are displayed inside the shop. The attention of real buyers who step into the
shop id directed towards the articles displayed.
2. Window display: - The articles are displayed inside a glass window which is decorated attractively. The
price of the product is also attached to the product. This is done through price tags. ‘Come and have’ is
the motto behind this method of advertising.
3. Exhibitions: - Putting special displays of several products in Exhibitions is a good promotional device.
4. Show room: - In case of certain products, personal inspection is an important pre-requisite. Mixers,
washing machines etc. are always purchased only after a close look at the products. This is the reason
why manufactures keep show rooms at a huge expenditure. The location of the showrooms is very
important, it should be easily accessible.

Special Media: - It is usual practice now with the manufacturers to provide free of cost various articles of low value
to the existing and prospective customers such as diaries, calendars, ball pens, match boxes, key rings etc. these are
called advertising specialties. These are given to consumer as gifts. The name and address of the advertiser, his
phone number, and a short sales message are imprinted on these items.

ADVERTISING COPY

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G. Raja Sekar M.B.A, (Ph.D)
Advertising copy may be defined as “all the written words in printed or spoken matter and actions aimed to convey
the desired message to the target consumer.” Thus, an advertising copy conveys to the target consumers on
impersonal way through audio visual media what an advertiser is unable to do personally.

Copy is the like blood of advertisement. A copy is a written content of the advertisement include the text and head
line. Copy is the wording part of the advertisement, which explains the central idea to an advertisement. All the
planning research and expense would go waste if proper care is not taken to draft a copy that will achieve the
purpose of advertising. A copy gas got to be drafted carefully so that it can win attention, create interest, produce a
desire and lead the prospect to action.

Essential Features / Characteristics of Advertising Copy:

The effective advertising copy must possess the following characteristics.

1. It must be concise and complete.

2. It must create an urge.
3. It must be honest.
4. It must be informative.
5. It must be simple.
6. It must be enthusiastic.

It must be concise and complete: - The copy must be complete and brief. It is in complete. It fails. Brevity is essential
(consideration). Completeness should never be sacrificed for brevity. It must make people to understand it.

It must create an urge: - It must reveal unknown or unseen features of t5he products. The public should be informed
about the product’s use and merits by the advertiser. It must create a good will in the mind of the public. Its aim
must be trust the firm and its products. It should have an effective salesmanship in absentia.

It must be honest: - It must be honest and truthful towards the public. If the copy is untrue, then the confidence and
the value of promotion goes down. The public should not be cheated. The public, who are the final users of the
products, are the witness of the product quality.

It must be simple: - The copy must give the information which the reader wants to know about the products, in
order to buy. Hence, it must give the real facts. The information must be natural and straight forward. It must make
people read it, i.e., people should be informed.

It must be simple: - It must be simple and easy to understand. A copy writer must be use short, simple,
understandable words. The words or sentences used must be remembered by intelligent persons and non-intelligent
person. It must make people to see it i.e., it should arrest their attention.

It must be enthusiastic: - Salesman’s talk in the written form is the copy. The copy tells the reader what the product
or merchandise will do for him.

Elements of an Advertising Copy:

An advertising copy includes the following elements:

Body.
Slogans.
Headline.
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G. Raja Sekar M.B.A, (Ph.D)
 Sub-headlines.
Illustration.
Identification mark or logo.

Body: - It is the body of the copy that conveys the story in detail in the form of selling points. Practically, many
readers curiously glance at headlines or subheadings along with pictorial presentation. Such prospects read and
brush aside the paper or a magazine. There are prospects with real intention of buying who are deeply interested in
the literature of the copy. That is why the body of the copy must be smart, attractive, readable, clear, pleasing and
posing. It must be so long as not bore the reader. There are a number of ways in which such a message is presented.

Slogans: - A slogan is any word or group of words regularly used by advertiser to impress upon the reader a basic
unchanging. A slogan is not necessarily the part of copy. Some slogans are so catching that they are remembered by
even a common reader for a longer period, slogans widen the horizon of advertisement. It refers to either quality of
a product or specialties of a concern so advertised.

Headline: - the most common ways of attracting attention of prospects to an advertisement is to use effective
headlines. It is almost impossible to find an advertisement without a headline. Advertising copy defines headlines as
“the name given to the display line which appears at the top or near the top of the advertisement and acts as a
signpost in stopping the reader and in impelling him to read the message.” The headline is having stopping power
representing the message in gist-at-glance. The primary purpose of any headline is to attract potential purchasers to
such a degree that read the entire piece of advertisement. A secondary purpose is to exclude non-prospects, who
can have no interest in the product.

A headline should be sweet, smooth and short enough to enable a reader leafing through a magazine or a
newspaper to read it at a glance.

Sub-headlines: - Sub-headlines are subordinate captions that expand the headline thoughts in the manner that the
newspapers, clarifies and completes the headline. It divides the copy into shorter segments. This may summaries the
additional selling points. Since a headline makes only main point, it is quite essential to employ sub-headlines to list
features of the product.

Illustration: - From times immemorial, people have universally shown keen interest in pictures. Pictures, in one way
or the other are used to invite quick understanding of a given idea. Illustration, in advertising, therefore has a long,
standing heritage. Illustration in advertisement is an important device to attach attention and explain the advertising
idea of products.

Identification Mark or Logo: - The last part of advertisement copy is that of advertiser name, brand name or
identification marks. Every manufacture has a trade mark or brand name. After all brand is a symbol, a word, Word
of letter or a combination of these used as a means of communication that brings about an identity of the product,
manufacturer or dealer

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G. Raja Sekar M.B.A, (Ph.D)
 ADVERTISING AGENCY

An advertising agency is a professional organization of specialists operating under a system created by advertising
media to which the advertiser entrust, drawing up and carrying out of this advertising plans. Advertising agency is a
service organization which is being accepted as a professional body that undertakes planning and presentation of
advertisements. It has emerged out as a highly specialized marketing institution. It is a firm specializing in advertising
that provides counseling relating to advertising and allied operations to its clients and actually prepares, buys space
and time for and places a large part of advertising and of its clients.

Role / Need / Importance of Advertising Agency:

In advertising media, owners, sponsors and advertising agencies are the three major participants. The owner of
different media may be regarded as the space or time for the respective media, while the buyers of the media space
or time are the sponsors or advertisers. The advertiser and media owners in many cases directly deal with each
other. The advertiser selects the medium and negotiates the terms and conditions with the media owners, who
have purchased rates depending on the size, designs, duration etc. of the advertisement.

However, over the years, advertising agencies have developed to undertake the advertising function on behalf of the
advertiser. The skill and expertise which characterize the advertising agencies enables large companies to take
advantage of their services on payments of a fee or commission besides the cost of preparing the layout design etc.
of the advertisement. Most of the agencies handle all aspects of advertising including media selection on behalf of
their clients. These agencies perform an important role in providing expert services as media specialists and creative
specialists which the advertiser would not be able to develop in their own organization.

Well established advertising agencies in India offer a mix of the following services i.e., copy writing, media buying,
media planning, and personnel placement advertising, marketing research, sales promotion and merchandising,
public relations and advertising research.

Research on marketing practices of Indian companies brought out that nearly ninety percent of the large sized
companies surveyed hired the services of advertising agencies. The major services for which assistance was solicited
include developing advertising campaigns, Media selection, measuring the effectiveness of advertising campaigns,
developing of point of marketing material, organization of consumer contexts, test marketing and market research.

Reasons of Hiring an Advertising Agency:

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G. Raja Sekar M.B.A, (Ph.D)
A full advertising service agency provides the advertiser with a full package of advertising services. There are many
reasons why the services of full service agency should be utilized. John Monsattal has given the following 10 reasons
for hiring the advertising agency.

1. Better working environment.

2. Simplified co-ordination in marketing area.
3. Stringer pool of talent.
4. Sales oriented creative work.
5. Grater objectivity.
6. Synergistic experience.
7. Centralization of responsibility and accountability.
8. Less expensive in the long run.
9. Simplified co-ordination and administration.
10. Professional strength in marketing area.

Better working environment: - Advertising is very creative and offers challenging opportunities. Accordingly a reliable
advertising agency attracts conscientious person who take pride in doing a first rate job. This creates a better
working environment which is always necessary for productive outputs.

Simplified corrective changes: Since all the advertising activities are centralized with in one agency, necessary
changes to promotional messages and campaigns can be incorporated quickly.

Stronger pool of talent: A full service agency has many specialists dealing areas of advertising process working at one
location, so that it can react to problems quickly in any of the various aspects of the process.

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G. Raja Sekar M.B.A, (Ph.D)