May 31, 2018

MK0010 [Sales Distribution & Supply Chain Management] Set1 Q1

Q.1 a. Explain the different types of sales organizations. 

Ans:

Different types of Sales Organization 

1) Organizing the Sales Force
An effective sales force is a powerful asset for any company. Doctors & physicians in United States have consistently ranked Pfizer’s sales force as one of the best in the pharmaceutical industry. As a result, when Parke-Davis launched its blockbuster cholesterol-lowering drug, Lipitor, it entered into an alliance in which Pfizer’s sales force helped selling the drug to physicians throughout the United States. 

A company’s management process is fundamentally affected by the firm’s overall business strategy and its strategy for accessing its target markets. The relationship between business strategies, a firm’s marketing strategy, and a firm’s strategic sales force program is discussed in this unit. 

Sales force organization is primarily a function of properly sizing the sales organization to assure that customers and prospects receive appropriate coverage, company products get proper representation, and the sales force is stretched but not overworked. The appropriate planning of the sales force will also depend on the size of the opportunity a firm faces and its expected sales level. 

2) Roles & Structure of the Sales Force: 
To be successful and produce profitable results, the sales force must implement a firm’s business strategy and market access strategy. In other words, strategic plans are implemented through the activities and behaviors of the sales force. Key sales force behaviors include calling on certain types of customers and prospects, managing customer relationships and creating value for individual customers. The role of the sales force in implementing a firm’s market access strategy is very important. 

To meet customer needs efficiently and effectively and to sell the firm’s products and services, a sales force must be well organized. Sales force structure decisions influence how customers see the firm because sales force structure will affect the selling skills and knowledge level required of salespeople. In turn, sales management activities such as compensation, recruitment, training, and evaluation are affected. 

3) Building Sales Competencies: 
Sales managers are responsible for hiring salespeople with the appropriate skills and backgrounds to implement the sales strategy. Good sources must be found for new hires, and those who are weak in these areas must be carefully screened out. In addition to hiring qualified people, salespeople’s competencies are usually developed through training before they are sent into the field. Sales managers are responsible for making sure that training is completed, and they often conduct some of the classes. Most initial training programs are designed to familiarize salespeople with the company’s products, services, and operating procedures, with some time devoted to development of selling skills. Because sales training is expensive, the sales manager is responsible for selecting the most cost-effective methods, location, and materials. 
4) Leading the Sales Force: 
Effective sales managers know how to supervise and lead their salespeople. Sales managers provide leadership by inspiring people to grow and develop professionally, while achieving the revenue goals of the firm. Good leaders provide models of behavior for employees to emulate, often developing strong mutual trust and rapport with subordinates. Leadership styles vary, but effective leaders are adept at initiating structure – that is, organizing and motivating employees, setting goals, enforcing rules, and defining expectations. In addition to leading the sales force in business results, sales managers are also expected to lead by example in encouraging ethical behavior within the sales force. Salespeople are continually confronted with ethical dilemmas. 

Sales managers use a variety of tools in their efforts to motivate salespeople to work more efficiently and effectively. 

5) Goal directed effort: 
There are many techniques that have proved to be effective motivators, including sales meetings, quotas, sales contests, and recognition awards. The most powerful motivator for salespeople is often a well-designed compensation package. Money is an important consideration for attracting and motivating people to work hard. A key task for sales managers is to devise an effective mix of salary, bonuses, commissions, expenses, and benefits without putting the firm’s profitability in jeopardy. 

6) Evaluate the performance of the sales force: 
The final step in the sales management process is to evaluate the performance of the sales force and develop the skills of their people. This involves analyzing sales data by account, territory, and product line breakdowns. It also means reviewing selling costs and measuring the impact of sales force activities on profits. 


b. Define sales quotas with 2 examples.

Ans:

Sales Quotas
Sales quotas are a way of life for the sales force. All activities of the sales force revolve around the fulfillment of sales quotas. Sales quotas are targets assigned to sales personnel. They signify the performance expected from them by the organization. Sales quotas help in directing, evaluating and controlling the sales force. They form an indispensable tool for sales managers to carry out sales management activities. Sales quotas are prepared on the basis of sales forecasts and budgets. Sales quotas serve various purposes in organizations. 

They provide targets for sales personnel to achieve & also act as standards to measure sales force performance and help motivate the sales force. Compensation plans are invariably linked to quotas. The commission and bonuses given to sales persons are based on their meeting quotas set for them. 

The four categories of sales quotas widely used are: 
– Sales volume quotas, 
– Expense quotas, 
– Activity quotas and 
– Profit quotas. 

Sales quota should be fair, challenging yet attainable, rewarding, easy to understand, flexible and must satisfy management objectives. 

It must also help in the coordination of sales force activities. Setting motivating and easy to understand quotas is essential to obtain the cooperation of the sales force. Various methods are used to set sales quotas, among which, quotas based on sales forecasts and market potential are the most common. Skilful administration by sales managers is required for effective implementation of quotas. Convincing salespeople about the fairness and accuracy of quotas helps the sales management to successfully implement quotas. 

Sales quotas have certain limitations such as being time consuming, difficulty in comprehending if complicated statistical calculations have been used and focusing on attaining sales volumes at the cost of ignoring important non-selling activities. Quotas may reduce risk-taking among sales personnel and may influence them to adopt unethical selling practices. With changes in the competitive environment and variations in customer expectations, many companies have started developing compensation plans that are increasingly based on non-traditional aspects, thereby reducing dependency on quotas. 

The process of establishing normal and reasonable sales quotas can vary greatly as a function of the business, industry, type and size of the sales organization, and product and/or service being sold. However, there can often be a great deal of commonality in the approach to this important sales-generating tool.

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