Methods of Selling and Channel Management and Channel strategy

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

Channel Management and Channel strategy:

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

Channel strategy decisions:

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

Some Channel Definitions:

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

Channel selection criteria:

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

Roles/responsibilities of channel members:

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

Company responsibility to channel members:

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

The Sales Organization:

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

Forecasting:

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

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

Sales Budgets:

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

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

Sales Policy.

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

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

Administrative Functions:

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

Short term performance initiatives:

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

Some Suggestions:

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

Sales Organization Types:

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

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

Recruitment,training and compensation of sales force:

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

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

Training of Sales force:

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

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

Compensation and Motivation of Sales Force:

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

Motivation of Sales Force:

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

Right Sales Goals-the right approach:

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

The Sales Goals:

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

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

Rewarding Performance as well as Potential:

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

Channel Partner Management:

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

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

Company responsibility to channel members:

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

Merchandising:

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

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

Conclusion

Sales are the exchange of a product or service for money. It also used to refer to reducing the price of a commodity; i.e, putting the commodity "on sale" or conducting sales of goods. People that sell goods are frequently referred to as being in sales; i.e., that is their profession.

The chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer. A distribution channel can include wholesalers, retailers, distributors and even the internet. Channels are broken into direct and indirect forms, with a "direct" channel allowing the consumer to buy the good from the manufacturer and an "indirect" channel allowing the consumer to buy the good from a wholesaler. Direct channels are considered "shorter" than "indirect" ones.

Control questions:

1. Can you give the definition of price?

2. Give more information about variable-cost pricing.

3. What do you know about pricing and competitive interaction?

4. Give the information about markup pricing.

5. What do you know about pricing considerations?

Literature

1. English for economists and managers: textbook/ O. V. Ulyanov, S. V. Grishin; yurginskiy technological Institute. – Tomsk: Publishing house of Tomsk Polytechnic University-theta, 2011. – 111 p.

2. Besanko D.A, Brauetugam R.R, Gibbs M.J Microeconomics,2011, Chicago

3. Griffiths A, Wall S.Economics for business and management,2011, England

4. Varian H.R. Intermediate microeconomics,2010, University of California at Berkeley

5. Boyd, W. Harper. Marketing Management.- Boston, 2010

Advertisement. Packing

The purpose: Consider the main aspects of advertising, marketing and packing

Key words:advertising, packing, marketing, produce, promotion, public relations, commercial, large packing

Questions:

15.1 Definition of advertising

15.2 Advertising and Marketing

15.3 The main aspects of packing