Job Description Private Equity Vp Sales by prl13206

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									                 CHAPTER 1: SALES OVERVIEW

A. INTRODUCTION:
   “The top line of the income statement and the driving force of all
   organizations, ideas and progress... also used to describe the greatest
   profession in history and greatest skill one can ever have.” That is how Sales
   is described and this statement is a testimony to the importance sales has in
   an any organization.

    Sales refers to the exchange of Goods or services for some consideration be it
   money or some equivalent. Sales organization is like a fuel to the engine and this
   is the only department in the company which generates revenue. While other
   functions are equally important and play a vital role like Advertising, Marketing,
   Public relations etc the money spent and resultant impact would not be there if the
   sales process and person are ineffective.

    Sales in some form has been there from times immemorial. For example in Stone
   age, while there has been no formal process , they used to leave some gifts/articles
   for a Safe passage. Slowly socialization started increasing and the concept of
   Demand/Supply started taking shape. When men started cultivating and
   harvesting crops around 10,000 BC they used to go around to sell the extra
   surplus in lieu of Jewellery and other valuable metals. Agriculture produce
   slowly started coming to the marketplace and the concept of intermediaries started
   evolving. This prevailed for several thousand years and with the advent of the
   Shipbuilding industry, rapid advancement was made and goods started selling
   across the seas. Sales person were employed on commission or on a daily basis.

   Gradually commercial laws were passed and currency started finding a place in
   the market. Around 670BC Government backed coinage was issued which
   facilitated Trade and then after a brief period of lull due to fall of Rome, Trade
   started picking up again in the middle east and Trade fairs started gaining a lot of
   acceptance. The industrial revolution brought a dramatic change in the selling
   process and gave rise to the modern sales and marketing practices. Advancement
   in the means of Transport like Roads, Rail, Air and Shipping have further
   revolutionized the selling process. Thus a constant evolution has happened in the
   Sales function from the early Stone Age through the Iron and the Middle ages.

   The selling function in addition to generating revenue for the organization,
   builds relationships with Customers, suppliers and distributors and constantly
   tries to capture the right value for the company produce. In spite of being a
   pivotal function it has got some kind of a negative image in the society and a
   career in sales is something which is viewed with a bit of negativity. This has got
   to do more with the general misconceptions which the larger people have rather
   than based on hard facts.



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   The main objectives of sales function is to:-
        generate revenue
        increase the customer base
        maintain or increase the profitability of the company products so         that
          the right value is captured.

   Marketing is one more function within the broad area of Sales and Marketing, It is
   important that both these functions perform like a well oiled machine, have a
   sound understanding between them, failing which, there will be a lot of chaos in
   the marketplace and the intended strategies of marketing can never get executed
   to perfection by the Sales organization.

   AGRICULTURE INDUSTRY SALES OVERVIEW: The customers are
   farmers and they buy Agriculture equipment (Tractors, Motors, Pumps, etc)
   Seeds, Pesticides, Herbicides, Fertilizers and Micro nutrients. Sales and
   Distribution largely was in the Govt. and Public sector domain and it was more a
   seller driven market with quotas and allotments—The key input was Fertilizers
   and seed which was also supplied by the Govt. agencies or the farmer largely used
   saved seed. However things started changing and chemicals (Pesticides,
   Fungicides and Herbicides) usage was being propagated largely by the European
   and American Multinationals. Agriculture equipment industry was largely driven
   by big Indian Industrial houses with collaboration from MNC’s. The seed industry
   evolution is more recent relatively in the Agriculture industry with a very
   aggressive participation by the Private industry (Indian and MNC) with lot of
   technological breakthrough’s.

   Currently there is a lot of investment being made by organizations in Sales
   and Marketing and from a seller driven market it is now turning into a buyer
   driven and the farmer has got a wide choice across the inputs.

   Unlike the FMCG industry DEMAND GENERATION is largely a function of
   sales given the MEDIA DARK markets in which we operate and the non-
   impulsive nature of the product .Demonstrating the product features and benefits
   on the field is one of the important ways of driving sales. The position of a sales
   person becomes much more critical as in most of the cases he is everything to the
   prospective customer(farmer). He would plant a new variety of seed only
   depending on the rapport he enjoys with the salesman and his confidence on the
   neighborhood retail. Since the selling process involves a lot of technologies it is
   essential that apart from a formal qualification in Agriculture he should be willing
   to walk that extra mile and keep himself updated on the latest technological
   advancements.

B. ROLE OF SALES ORGANISATION:
   The main component of a Sales Organization is the sales force which is guided
   and kept constantly motivated by a team of sales managers. The sales
   organization acts as a medium through which the sales managers achieve the
   overall objective of the organization.

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The specific roles of a sales organization are:-
i) Creating specialists : who can help appropriate the product in the right
   manner. In Agriculture industry within the sales organization we have
   personnel who would specialize in Agronomy and whose job is to help the
   product get into the right segment and position it accordingly so that it is
   suited to those environment conditions and delivers the best. During product
   launch/ new product demonstrations or preseason it is not uncommon in our
   industry to find few hundreds who are recruited with a special mission of
   canvassing for company products.

  ii)Achievement of company’s objectives: The structure of the sales
  organization should be in line with the company objectives. For
     example, if some company believes strongly in demand generation
     and pull activity, it should accordingly make heavy investments on the
     field force and impart training accordingly. In the other instance if a
     company believes in Trade push as their core of the strategy then the
     resourcing intensity as well as the specs of the resourcing needs will
     be different. Similarly during the case of special projects and special
     drive companies put huge manpower for short period of 3-6months to
     propagate the products.

iii) Coordination and balance: A sales person is involved in selling as well
     as administration activities with respect to reporting, analysis, statutory
     compliance apart from spending major part of his time in building
     relationships. In order to do justice to the variety of activities within the
     broad function --Span of control or supervisory control should be
     restricted to 6-7. This way the supervisor can devote quality time to
     their team members and guide them and keep them motivated for
     deliveries.

iv) Time optimization: Organizations may follow different structures depending
    on what they want to drive in the marketplace. In our industry there are
    organizations which drive the business, Product wise (Key crops) and some
    drive it across the crops through one person in specified geography. None of
    them is right or wrong as long as the objectives for driving in a particular way
    are clear and are articulated rightly with the support to the frontline person.


The basis for designing a sales organization mainly depends on the following:

i)Vision and the Mission of the organization
ii)Target Market segments
iii)Core competencies
iv)Flexibility
v)The type of culture one wants to show
vi)Size of the sales force
vii)Compensation
viii)Market strategy( Push or Pull)
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       ix)Technology
       x) Company size

         The types of the organization are:
         i) Formal and informal organizations
         ii) Horizontal and vertical organizations
         iii) Centralized and decentralized organizations
         iv) Line and Staff organizational structure

         The types of Sales force structure:
         i)Product based sales force structure
         ii)Geographic based sales force structure
         iii)Customer based sales force structure
         iv)Combination based sales force structure

          Sales culture:
          Every sales organization has a unique culture that is created by the
          beliefs, attitudes and values of its members and top managers. Sales
          culture can be successful if every member of the organization imbibes
          it. The vision of the organization is shared with the larger sales force
          which motivates the frontline sales personnel and makes them feel
          tied with.

 For example -DuPont Pioneer has Safety, Valuing people,                 Environmental
stewardship & Ethical behaviour apart from LONGLOOK of Pioneer which has been
the guiding principle of Pioneer business for the 75Years of its existence across the
globe. Similarly Monsanto has a pledge and articulates it very aggressively.

Sales culture also has unique set of jargons, rituals, values and beliefs which are unique
to an organization.

In the Indian Agri input industry we have following sales force structure
                product based ,
                geographic based
                combination of both of them.
All the chemical companies in India follow geographic based structure whereas in
the seed Bayer and Monsanto follow a combination of product an geographic
whereas Pioneer-Dupont follows geographic based structure. Syngenta follows a
product based sales force structure.


C) SALES FUNCTION AND POLICIES:
 We will discuss about the hierarchy in a Sales organization and the different roles each
of them play in the Sales organization. Indian Agriculture Organizations largely have 3-
5 levels in a Sales organization.

The frontline is typically called as Sales officer/Sales Executive/ TerritoryManager.
He would be covering a predefined geography consisting of a District or couple of
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Districts. He is like a CEO of his Territory and is responsible end to end, i.e. from
Demand generation to connecting the demand back to the channel, Services the channel
(Distributor and Retail), Collects money for the good supplied and is also responsible for
discovering new markets and expanding the channel. Demand generation as I told in the
earlier chapters is the responsibility of Sales in the Agri Input industry because of the
product not being an impulse purchase, Media dark, Illiteracy and the farmer wanting to
see the results practically before making the purchase decision. A frontline sales person
has also to file MIS in predetermined reports and keep his Manager updated on the
cropping trends and market. In Non-Agriculture industry the frontline sales personnel is
largely involved in servicing the channel, channel expansion and discovering new
markets, though he promotes the product using some sales promotional schemes—
However the major responsibility of generating demand lies with the marketing function.

 The middle level manager is called as a Regional Manager or Area Manager as the
case be , he is responsible for a state or part of the state depending on the potential,
current turnovers of the company and the geographical distance. He supervises 5-7
frontline sales personnel line- Salesofficer/Sales executive or Territory Manager. The
middle level manager is the vital link between the frontline and the corporate. He
presents the vision and mission of the organization to the frontline and aligns them with
the broad objective of the organization and translates all the corporate dreams and at the
same time presents their aspirations and concerns to the top management. He is
responsible for strategizing at a regional level for the crops and drive distribution and
farmer engagement programmes. Organisations with a strong middle management are
extremely successful. It is important to have a strong and committed middle management
failing which, most of the company’s objectives would not go beyond them and success
will not be on the expected lines.

The Sales Manager is known by different designations like National Sales Manager,
VP(Sales) and Head( Sales). He is responsible for :
               i)     Preparing sales plan and budgets
               ii)    Set Sales force goals and objectives
               iii)   Estimate demand and forecast sales
               iv)    Determine the size and structure of the sales force organization
               v)     Recruit, select and train sales people
               vi)    Design sales territories, set sales quotas and define the
                      performance standards
               vii)   Compensation and motivation of the sales force
              viii)  Conduct sales volumes, cost and profit analysis
                ix)   Evaluate sales force performance
                X)   Monitor the ethical and social conduct of the sales force.

Apart from the above , agriculture industry employs a lot of seasonal Manpower. These
people report to the frontline( Sales officer/Territory manager). Each of the frontline
would typically have 2-6 people reporting to them depending on the aggression of the
company on investments on ground as well as the maturity of the market. These people
in most of the cases are Agriculture graduates.



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Sales force remuneration can be in the following ways :
               i)     Straight salary
               ii)    Straight commission on sales
               iii)   Salary and commission on sales
               iv)    Salary and commission on sales above a certain amount
               v)     Salary and different rates of commission on varying totals
               vi)    Salary and share in profits

 The compensation structure is largely driven by a combination of fixed and variable
amount. The variable compensation as part of the salary goes up as the level (depends
on the level in the organization). Current system followed by most of the organizations
in the Agriculture industry is to have a higher variable pay at the higher levels of the
organization. The frontline also have special incentives for certain products if they
achieve some benchmark volumes. Apart from the incentive there are             other non
financial motivators like year end meetings at exotic locations, mementos and
certificates for outstanding performance. The temp staff reporting to the frontline has a
larger component of their salary on variable compensation and is sometimes on a per
unit basis. Some of the established companies in the field of direct marketing keep their
90% of the compensation as variable, Eureka Forbes is a good example which has been
following this system successfully for so many years.


D) PERSONAL SELLING:
 It is the process of selling goods/products directly to the customer. Professional selling
requires sales representatives to develop an efficient, systematic approach adaptable to
the particular customer type and selling situation. The seven major steps that have been
identified in the selling process are:
                i)      Prospecting
                ii)     Pre Approach
                iii)    Approaching the prospect
                iv)     Making the sales presentation
                v)      Handling objections
                vi)     Closing the sales
                vii)    Follow-up on the sales

 In our Industry most of the sales is personal selling. Most of the times while it may
not be restricted to a single person it might be for a group of people and hence in the
Agriculture industry sales professionals require to learn both the Personal as well
as group selling dynamics.

Prospecting is important to increase the sales as well as replace the customer we would
have lost in the course of time. The sales person can obtain leads from secondary
information like telephone directories, directories of concerned associations and
membership firms. The process involves making cold calls as the first step to find the
interest of the customer followed by warm calls which eventually turn out to be hot calls
or prospects. In Agriculture industry the prospecting can be done by looking at the
acreages of the crops and the cropping pattern subsequent to which the sales person can
generate the list of the lead farmers/early adopters.
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After qualifying a prospect as a potential customer the sales person can learn about the
prospect, his personal qualifications, his authority in the company, level of technical
knowledge and other personality traits. In our Industry it is good to know the farmers
cropping pattern, intensity of the Agriculture he does, his level of input usage,
irrigation facilities and his risk taking capacity to try out newer products.

The various types of approaches which can be followed is introductory approach,
reference approach, customer—benefit approach, compliment approach, free gift
approach, question approach, ingredient approach. A combination of the above
approaches is followed in practical situations by sales personnel. It is advisable to have a
strong introduction about the company, its legacy and its work in the past substantiated
by blockbuster products of the yester years. One can use a flipchart or some kind of a
detailing folder to articulate the above. After the introduction the sales person can go for
the benefit approach on what the product can do for the customer and how will it benefit
his income levels. Cost benefit ratios are pretty common in the Agriculture industry for
Intra and inter crop( Hybridwise Comparisons). Once the benefit approach is over,
one might like to close the sale by giving him a momento or sample seed.

 Once the customer is convinced and gives a go ahead then the formal presentation on
the Features, Benefits and Advantages of the products can be explained. This can be
through a formal audio visual presentation using LCD, LAPTOP etc, product literature
or briefs and in a majority of the cases in the Agriculture industry demonstrating the
product on the field vis-à-vis       the Competition. The use of satisfied customer
testimonials also comes very handy during this time. The Agriculture industry follows
the practice of bringing farmers who have used their product to talk on their
experiences.

The customer may raise a lot of objections and seek clarifications with respect to the
product presentation. This need to be clarified to his satisfaction, On some occasions the
customer experience of a certain product may not be up to the mark. It might not
necessarily be because of a product issue but because of the environment and the crop
management interface. This is a right opportunity to put things straight so that everyone
is on the same page on the expectations. coveted

This is the most important step in the personal selling process. Some techniques used
for closing sales are :
                i)      Clarification closes
                ii)     Psychologically oriented closes
                iii)    Straightforward closes
                iv)     Concession closes

In the Agriculture industry we would normally follow the clarification closes coupled
with some concessions with respect to the price and the offerings in the market. The
clarification close is reiterating the benefits of the product vis- à-vis the competition by
way of demonstration on the field. Normally since the product is available through a
channel it is important to keep the concerned retailer in the loop and wherever possible
take him too for the sales call.
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Following up is the most important activity. In fact in our industry the actual selling
starts post selling the product. Handholding the farmer throughout the crop cycle
specially in the Seed industry is very critical for further success. If the farmer has
followed the practices recommended he will benefit the maximum out of the product and
he might increase the acreages in the subsequent year as well as recommend to his fellow
farmers. Any laxity in follow up will have disastrous consequences for further sales and
will result in a dissatisfied customer.

The sales personnel have a variety of communication tools at their disposal and with
technology available, companies are leveraging the most of it by equipping their sales
force with Laptops, handhelds and LCD’s. The automation in the sales force reporting
has also helped the salesperson in getting different analysis by customer, geography and
product lines as well as profitability by product/customer. These data help the sales
personnel in making the necessary course corrections.




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                         CHAPTER 2 : SALES PLANNING

       A) MARKET POTENTIAL ESTIMATION:
Assessing the market potential is the first step of the planning process. This is an
important input to the strategy and overestimation/underestimation of the potential might
lead to huge losses or missed opportunities as the case may be.
In certain cases the entry to the market may be a little early and the market may not be
ready for that kind of a product offering whereas in other cases it might take time to
graduate the customers to the next level which requires a lot of patience, commitment and
investments from the company. Once the marketer is convinced about the potential of the
product, it makes sense to invest and be patient. Some of the celebrated success in the
Indian context are Dabur Real fruit juices, Kellogg’s Corn flakes and in our
industry the Biotech revolution led by Bollgard.

There are 2 ways to analyze the Market potential which are Ability to Buy and
Willingness to Buy .Here sources of data can be primary information straight from the
customer by way of market research, dipsticks and focused group of studies. Most of the
times marketers would take the concept of the product and test it out directly from the
customer. The secondary source of data is from the Government on demographics,
National level institutes and syndicated studies.

In Agriculture industry the potential estimation is done by crops –The gross crop
acreages are first taken into account and potential is arrived at by the cropping
pattern, irrigation/rainfed, commercial/non commercial, farmer’s input, Investment
levels and severity of the pest/disease and the economic loss it would cause to the
farmer. The dosages or the seed rate are used to calculate the final potential in
MT/KL. Similar is the case with the fertilizer industry which is more driven by the
supply constraints—However the Agri equipment industry potential estimation
depends on the Government support in terms of loans and subsidies.


B)FORECASTING :

The importance of the Sales forecasting has been increasing over the years because of
constantly changing environment, changing customer attitudes and preferences as also to
maintain optimum inventory levels. Forecasts are both short run( 1-3 months and annual
sales plan) and long run( Typically the 5-10Year plan)—The short run forecasts are done
for meeting the objectives of the current year and deriving the production planning and
Cost estimates. Forecasting in the seed industry has to be done an year in advance
since it has to be produced live and not an assembly line production. One needs to
keep a close watch on the product performance and accordingly estimate for the
demand. Any excess of production may discard the product if its not meeting the
qualities which will hit the bottom line. In case of the Agri chemicals since it is an
assembly line production with a higher shelf life it can be planned within a short
time unless there is a technical which is getting imported. In case of fertilizers too it
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depends on the raw material usage and transport being a critical component
because of the load factor it needs to be planned a little more in advance than the
chemicals. The long run forecasting (5-10Years) is more to do with the macro
cropping trends, new technology interventions and is required to plan investments
in plant, regulatory, trials and people. This type of planning makes assumptions of
the growth in the industry, changing trends in the crops depending on the
commodity cycles, Government intent and priorities as well as changing climatic
conditions.

There are controllable and uncontrollable factors in the forecasting, Controllable factors
are pricing policies, Distribution channels, promotion campaigns, new product
development and investments to some extent.
Uncontrollable factors include larger climatic shifts, state of economy (though some
predictions are made but still there can be always surprises) and competitive landscape.
In case of the seed industry any product advancement not happening as per the
timelines might hit the volume plans—Typically the products might not get
advanced because of sufficient trials not getting into place which restricts the
evaluation (This may happen because of adverse climatic conditions) .Similarly in
the chemical industry a product might not get launched if the regulatory authorities
are not convinced about the trials.




                        Exhibit 1 :RETAIL SALES FORECASTS in INDIA

During 2003-07, retail sales in India are forecasted to grow around 6% per annum.
Retailing in India is largely under the unorganized sector and organized retailing is still a
new and developing concept in the country.It is estimated that organized retailing is
poised to grow substantially due to the rising income levels of consumers, industry
deregulation and increased global influences. Analysts believe that growing trends of
consumer financing is one of the major factors influencing retail sales growth. Retailers
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of refrigerators, televisions, washing machines, computers and other household
appliances are collaborating with banks and financial institutions to provide loans at low
interest rates to their customers in order to increase their sales. It is also felt that
customization of products according to local tastes will also play a major factor in the
sales growth. Retailing of food and groceries has good sales prospects. According to the
estimates of CII 50% of the retail sales in India takes place through supermarkets.

Sales forecasting methods are broadly divided into Qualitative and Quantitative.
The expectations of the customers, the sales force, executives and experts about the
future trends in sales are used in qualitative methods whereas forecasting through the use
of mathematical models comes under quantitative methods.

Qualitative methods:
i)Sales force composite: Totaling the estimate of each sales persons during the forecast
period.

ii)Jury of the executive opinion : This method is based on the opinion of the senior
executives of the company.

iii)Delphi Technique: In this technique the experts involved are beyond the company
and would include experts from universities, Government institutions and industry.

iv)Market Test: The product is tested in a limited area and based on the results the
forecasting is done. In the Agriculture Industry sampling of the seed or chemical is a
very common practice and based on the results of the sampling future decisions of
scale up are taken.

  Quantitative methods:
i)Time series analysis: Time series analysis is a method of estimation of future trend
based on the past performance of the organization. The past sales performance forms the
basis of the future sales for the company.

ii)Moving Average: An extension of the time series analysis is the moving average
model. In this method sales are forecasted based on the sales of the previous period and
this is done on the assumption that environmental factors prevailing in the previous
periods will also be present in the future period.

iii)Exponential smoothing: Exponential smoothing is a further refinement of moving
average methods for sales forecasting. In exponential smoothing greater weightage is
attached to the sales in recent periods compared to sales in earlier periods.

iv)Regression and Correlation analysis: Regression and correlation analysis are used
for forecasting the sales of a firm. Regression analysis is used to identify factors that
influence sales. If there is only single independent variable then it is called simple
regression analysis and when the number of variables is more it is called multiple
regression analysis. Correlation analysis is carried out to measure the degree of
relationship between the sales and other variables. This method helps identify a
coefficient of correlation, The value of the coefficient ranges from -1 to +1( -1 represents
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perfect negative correlation and +1 represents perfect positive correlation). A correlation
coefficient of + would indicate that for each unit change in the independent variable there
would be equal change in the sales in the same direction in the independent variable. The
converse is true in case of negative correlation. Multiple regression analysis will help
forecaster to identify the relationships between sales and several independent variables.

The appropriate sales forecasting method for a particular purpose can be selected
depending on factors and requirements like accuracy, costs, type of data available,
requirements of software and experience of the company. The difficulties associated with
forecasting are lack of adequate sales history, lack of time, money and qualified
personnel, changing customer attitudes and fashions and fads.


C)SALES QUOTAS :
Quotas are quantitative sales goals assigned to a unit of the sales organization. A sales
unit may be sales person territory, branch office, and regional distribution centre. They
are used as standard of measurement of performance in a sales organization. The concept
of Quotas originated in the goal setting theory propounded in 1968 by Edwin Locke, an
organization behaviorist.

The purpose of assigning sales quotas is to achieve organizational objectives and
provide a direction to the sales activities.

Sales quotas are used to plan control and evaluate sales activities. They provide
          i)      Goals and incentives for the sales people.
          ii)     Evaluate their performance and control their activities.
          iii)    Uncover the strengths and weaknesses in the selling process.
          iv)     Improve the compensation plan’s effectiveness.
          v)      Control selling expenses and enhance sales.


There are 5 basic procedures for setting sales volume quotas:
i)The simplest method is based on the sales units past sales results. Sales of last year or
previous few years is taken and averaged out and extrapolated looking at the trends in
the marketplace.

ii)The second method uses the sales potential of a territory or assigned geography.
Estimating the potential would be the key to get the right volume quota and as
discussed in the earlier chapter the potential is estimated on the basis of macro, micro
and other environmental factors. The middle management and top management would
then adjust the potential depending on the pricing, investments, supply position etc. It
might like to exploit the potential in a phased manner.

iii)The third process uses an estimate of the market , then determine the employee’s
sales potential and individual quotas are set on the basis of this potential. Either we do it
 for the company as a whole and then split it territory wise or alternatively do it territory
wise and sum it up for the country.

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iv)Quotas based on the sales force compensation in mind. The quotas are worked out in a
manner where the sales personnel gets higher amount as incentives and stays motivated.
The ranges are fixed from 50% to 200% attainment of quota and overachieving it.

v)Quotas fixed by sales people themselves.



Types of Sales Quotas :

Sales volume quota is the most commonly used type. It can be measured in terms of Rs
or physical units.

Profit Quotas are the other way of looking at it—There are some organizations where a
profit objective is given. The profit Quota may be a territory level or at the region level.
In this case selling more necessarily should not be the objective, profitable selling and
selling a portfolio of products with higher margins is what the salesperson would look
for.

Expense quota is an indicator where the fixed cost of a sales person for a year is fixed as
an absolute amount or as a % to sale.

Activity quota is basis for evaluating non selling activities like maintaining customer
relations, providing after sales service to customers, helping retailers display product on
the company shelves.

Typically some Indian organizations have Agronomy goals for the sales personnel apart
from Sales development goals. This helps them drive these activities which further the
sales.

These quotas are driven independently or a combination of these are assigned to the sales
people


D)SALES BUDGETING:
The sales budgeting process is an exercise which starts in the 3 rd quarter as one gets fair
indications of the progress the company is going to make for the year. A typical
budgeting process in a Seed company would start with the sales forecast regionwise /
cropwise /hybridwise taking into account the actual sales till date and the estimates
for the balance of the year.The closing stock is taken into account and any discards
and rejects are factored before arriving at the final quantity for production. This is
then given to the production manager to plan the quantitative and block the
acreages accordingly. This budget then goes for 2-3 iterations and the volumes for
production are accordingly revised. Once the broad budgets are agreed upon they
are sent back to the region to be split up territory wise and resend to corporate for
uploading in the system.



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The travel/market promotion and allied expenses are also budgeted subsequently
territory wise. All the fixed costs are budgeted as per the broadly agreed norms as a
% to the revenue and monitoring and evaluation is done on a monthly basis.



E)SALES AND COST ANALYSIS:
Sales control involves the statistical and accounting analyses that help a sales manager to
determine the profitability of the company based on product lines, customers etc.

The objectives of the sales control are
i)Performance management : The performance management helps the sales manager
evaluate the progress the sales organization is making in achieving the objectives. The
ratios used to evaluate the sales force performance include Sales/Quota ratio,
Sales/Budget ratio, Sales this period/ Sales same period last year( SPLY) and closes/call
ratio.

ii)Problem identification: Sales control helps managers to identify problems in sales
before they become liabilities to the firm. Some of the common sales related problems
that organizations face today are the inability of sales personnel to bring in adequate
business, inaccurate sales forecasts, difficulty in increasing profit margins and the
inability of the sales management to capitalize on revenues from existing customers.
Constant feedback would help the sales personnel in setting the problems right at the
beginning.

iii)Identifying opportunities : Identifying opportunities before the competitors do and
thus helping the firm gain a competitive advantage.

 A sales manager’s job is not to only set quotas but to make efforts to ensure that the sales
personnel achieve the quotas by providing them all the necessary support in terms of
resourcing, inputs & investments. While setting a quota the sales manager also has to see
that there are no biases creeping in and the process is very objective & transparent. The
quota setting process should follow the principles of SMART which stands for Specific,
Measurable, Agreeable, Realistic and Time bound. Once the quotas are set there should
be a general briefing explaining the broad logic of the quota setting followed by a
detailed planning exercise on strategies to be developed to achieve the quotas, resource
planning and a detailed activity schedule with clear accountabilities. This activity
schedule needs to be monitored and course corrections if required to be done to achieve
the final objective.

The sales manager needs to coach their team members constantly to achieve the
objectives as also find out how they can exceed their expectations.

            Exhibit 2:Sales Planning by Objective at Pinoeer.:

 Goal 1: To Achieve 140 MT of Corn against a base of 70MT in Chitradurga territory by
end of 31st December 2008.

                                                                                          15
       Key Actions:
       Review current farmer base for 70MT volume.
       Incremental farmer contacts to be made – Use Customer calculator.
       Identify the markets in which these farmer contacts have to made.
       Determine how much of farmer contacts through PDA and through pre season.
       Arrive at Budget and seek approval.
       Maximize and Project Manpower requirement based on need ( Proposal with
        justification is required).
       End of the season analyze and present the impact on the above.
       Appoint retailer based on need assessment focus. No access areas or less access
        areas.
       Identify Villages / do an analysis for Positioning and to place product for
        sampling / selected villages. Having an account for 1) Sample at existing
        customer 2) Competitors Customer hold and 3) New customer .

   Sales Analysis involves gathering, classifying, comparing and studying the sales data
of a company. It helps identify the strengths and weakness of the company thereby
allowing the management to formulate suitable marketing strategies for it. Sales analysis
also helps the management in production planning, cash management, inventory
management and other non-marketing functions.

 A typical sales analysis involves comparing the sales of a company at two different time
periods or comparing it with the peer group companies.The key elements that constitute
the sales analysis process are :
i)Purpose of evaluation: The objective behind the analysis needs to be defined clearly
before getting into the analysis.
ii)Comparison standards : This analysis compares the company sales with certain
benchmarks and industry standards.

iii)Reporting and control systems : A sales information’s system uses mathematical and
statistical procedures to generate reports that depict trends, seasonal patterns, regression
analysis etc.

iv)Hierarchical sales analysis:This involves studying the sales performance at a micro
level by investigating and analyzing its components. The sales manager may like to look
at a particular territory in the region for either an increase or decrease in the sales of that
region. This will help in looking at factors resulting in such performance which can get
replicated to the other territories.

Steps in sales analysis :
i)Determining the sources of sales information
ii)Collection of sales data
iii)Processing of sales data
iv)Studying the results

Variations of sales analysis
                i)     Sales analysis by region

                                                                                            16
                 ii)     Sales analysis by sales officer/Territory manager
                 iii)    Sales analysis by product line
                 iv)     Sales analysis by customers
                 v)      Sales analysis by distribution channels
                 vi)     Sales analysis by SKU
                 vii)    Sales analysis by Hybrids( In case of Seed company


 Sales Audit is a periodic review of a business activity. A sales audit covers the sales
management environment, sales            management organizational evaluation, sales
management planning system and sales management planning functions as represented
diagrammatically. Marketing cost analysis involves the collection, classification,
Comparison and study of marketing cost data. The types of costs are:
i)Natural and functional costs: Natural costs are the costs that are recorded in the books
of accounts like salaries and rents whereas functional costs costs associated with specific
business activities like sales and production.

ii)Direct and Indirect costs : Salary and commission are a good example of direct costs
whereas administrative costs are indirect.

iii)Fixed and Variable costs : Fixed costs don’t change with the volume whereas variable
costs fluctuate with change in volumes.

 Profitability Analysis: The profitability analysis of a firm can be done using techniques
such as
                   i)      Breakeven analysis
                   ii)     Capital budgeting
                   iii)    Return on Asset management.

 Breakeven analysis is calculation of the breakeven point. It is the point at which the total
revenue from sales equals the total costs. The formulae would be as under:

  (Unit sales price—Unit variable cost)*No: of units=fixed costs is Equal to operating
income in equal to zero
.
For example the selling price of perkg of seed is 106Rs and variable cost per kg is
6Rs, Fixed costs are 10,000Rs/-

                     ( 106-6) * No of units—10,000=0
                         100N=10000
                            N=10000/ 100
                            N= 100Kgs of seed has to be sold for breaking even.

 Capital budgeting tools like Net present value(NPV), Internal rate of return ( IRR), Pay
back period are also used for taking decisions on marketing expenditure.

 Similarly ROAM is calculated using the following formula:

                                                                                          17
  Contribution margin or netprofit * Sales/Sales assets managed

Note : The above financial analysis are not being explained in depth as you
       might cover it in management accounting.




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                                NOTES

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                                                                      19
                  CHAPTER 3 : SALES FORCE MANAGEMENT

      A) RECRUITMENT:

   Recruitment is finding potential job applicants, telling them about the company and
getting them to apply. Sales force recruitment has been one of the most important
responsibilities of the sales manager because to most customers
and prospects the sales people are the company. Over the years sales force recruitment
has become even more important since the cost of hiring and training has increased
dramatically. In the Indian context we are going through a very dynamic stage.
Agriculture Industry which hardly had any attrition is seeing double digit attrition.
Opening up of the Retail, Rural banking, commodity and the general bullishness in
the Seed Industry is throwing lot of opportunities to the existing employees as well
as fresh Agriculture graduates.

 An effective selection process is key to getting the right person on the ground
 and every organization has its own selection process ranging from written test,
 group discussions and series of personal interviews in addition to a battery of
psychometric tests. Once we get the right person chances of his staying back
for a reasonable period of time becomes more and the company would have recovered the
cost of recruitment and training on the individual. The typical process followed is in the
order mentioned below:
          i)      Sourcing the candidate
          ii)     Screening the candidate
          iii)    Selection Test---Personality, Psychometric and Honesty tests
          iv)     Background check
          v)      Personal Interview
          vi)     Letter of recommendation( Referral checks)
          vii)    Physical examination
          viii) Making the employment offer

 The process of recruitment starts with basic adherence to a RECRUITMENT
 STRATEGY which most of the big Indian and MNC companies have. The strategy
would clearly determine the composition of the entry level sales personnel w.r.t to MBA
hires, Agriculture graduates, Non Agriculture graduates from Non Agriculture industries
and internal promotes from Temp staff. Similarly strategy of recruitment for other levels
of the organization is also documented. For Example Pinoeer Hi-bred International
(A Dupont company) has
Agronomy and Sales development function which requires some special skills and is
not available in the open market. The company generally builds up the talent pool
by recruiting fresh postgraduates in Agronomy as trainees and grooms them for the
larger roles of Regional Agronomists.

 The recruitment process can be once or twice in a year with the company inviting
 applications from prospects through paper ads, participating in the campus recruitment
programmes, going through referrals from the existing employees, asking consultants to
send a shortlist of the prospects or searching through net.
                                                                                       20
Given the current growth trends coupled with attrition, recruitment has become a daily
process and hence organizations have gone a step ahead of maintaining a databank of all
the hot prospects.Companies in IT industry as also the other conventional industries have
started creating benchstrength to mitigate the risk of loosing people during peak seasons
and cycles.A standard job description should be well in place before the recruitment
process kicks off. Now a days prospective employees would like to have the job
description to ascertain themselves of their fit and liking. Even some companies conduct
guided tours of their campus for all the prospects before the start of the interview.

Exhibit 3 : Sample Job Description of a Territory Business Lead of Pioneer(A
DuPontCompany)

Job Description For- Pioneer Frontline

Name : -                                        Position Title : Territory Business Lead

Locations : Any where in India                  Department : Sales

Reports to : Regional Manager                  Amount of Supervision Received : Regular

POSITION PURPOSE

Organising sales, collections, sales development, conducting product advancement trials
and forwarding harvest data, implementing free sample distribution / side-by-side/
demonstration programmes, maintaining farmer contacts, providing feedback on market
conditions and product performance, responsibility for market development activities in
the assigned territory.

SUPERVISORY RESPONSIBILITIES

List the titles of positions that report directly to this position. Indicate which positions are
part time
            Regular Employees – Nil ;        Seasonal Workers – 5 to 10



How many employees are supervised indirectly (through direct reports ) – Nil


CONTACTS

CONTACT                                          REASON
     Regional Agronomist                             To take guidance regarding all
                                                       Promotional Programmes, PAT,
                                                       Product Placement suggestions etc.
                                                       To provide feedback regarding
                                                       performance of our products and
                                                                                             21
                                                 Competitors’ products
   All distributors / preferred dealers /      To sell and collect payment
    important retailers
   VIP / key farmers/ Ego farmers              To discuss about Pioneer products /
                                                 obtain feedback/ building direct
                                                 relationship & providing service
   Officers      of      Government            To      build    and     strengthen
    Departments /Agencies                        relationship
   Officers of Seed / Agri input               To build Pioneer image / Market
    companies                                    intelligence


RESPONSIBILITIES


      Regularly meet the distributors, obtain orders, execute supplies and
       collect payment on time to achieve target.
      Monitoring C&F points wherever applicable.
      Organise market development activities as per monthly plan to
       disseminate product performance.
      Conduct VIP farmer meetings on weekly basis involving external
       faculties also, with relevant training support materials.
      Distribute free samples, organize side-by-sides & demonstrations
       collect and analyse yield data to bring out yield book.
      Plan and organise harvest days / crop tours at the appropriate crop stage
       in Demo / Free Sampling / Side by Side plots.
      Layout Product Advancement Trials as per target, regular follow-up till
       harvest, collect data and forward to RM on time.
      Regularly provide feed back to RM / R.AG about Pioneer /
       Competitors’ product performance.
      Regularly monitor stock availability with distributor/retailers, divert
       unsold stocks in order to liquidate stocks & to avoid sales returns.
      Provide feedback to RM regarding important activities of competitors /
       Government agencies.
      Driving and generating demand through large scale farmer contacts in
       Preseason and Postseason activities


WORKING CONDITIONS

   Contacts                Working conditions:

                           Overnight Travel       Multiple Deadlines    Unfavorable
                                                                        Conditions
       Primarily inside the < 10 days/yr.              Few                 Little or none
   company
     X Primarily outside the 11 - 50 days/yr.          Moderate             Occasional
   company
                                                                                   22
         Equal inside and   ___51 - 130 days/yr.        Frequent             Moderate
     outside the company
      X Seeks/                X 131 - 200 days/yr. X_ Continuous         _X__ Frequent
    provides information
       X Discusses                > 200 days/yr.                             Constant
    project results
         Instructs others   Other :
      X Coaches or
    Persuades others
      X       Negotiates
    with others



REQUIREMENTS

Education : Bachelor or Master Degree in Agriculture

Experience : Two years experience in seed/ agro-input industry


KNOWLEDGE, SKILLS and ABILITIES


      Good knowledge in crop management techniques.
      Good communication -oral and written- in both English and local language.
      High stamina to perform regular tours.
      Strong persuasive & group as well as individual customer focused selling skills.
      Excellent interpersonal skills.
      Objection management skill & Problem solving ability.
      Capability to achieve sales targets, by still retaining control on the market.
      Strong commercial acumen, understanding of the margin structure,
       conceptualizing schemes and articulating the advantages of our margins and
       schemes to the Dealers and Distributors.


B) COMPENSATION:
Every organization has a compensation and benefits philosophy and benchmarking within
the industry as well across the industries. The benchmarking can be targeted to be at a
certain percentile of the industry. The broad components of the salary follow the
philosophy. The variable pay as % of the total pay varies from organization to
organization and the % tends to be more at the higher levels. Organizations have also
come out with stock options to motivate the employees and make the part of the profit
sharing. Most of the components of the compensation are taxable and very few
companies are offering voucher payments. Statutory payments by law have to be put with
by the companies and there is very little choice, however some of the companies go
beyond the statutory laws and offer more long-term incentives in order to retain talent

                                                                                    23
like higher PF contribution (Higher base pay), superannuation, medicals and insurance.
The annual increments subsequent to the employee joining are on the basis of his
performance. After a six-twelve months probation, on satisfactory discharge of his
responsibilities he/she is confirmed in the company and during that time the
compensation might get positively effected.



C) TRAINING and DEVELOPMENT:
 The success of an organization depends on the effectiveness of its sales force to convince
customers to make the purchase. The purpose of a sales training programme is to increase
the effectiveness and productivity of the sales force and to refine the selling techniques.
The maximum allocation of the training budget goes to the sales personnel in any
organization. According to a research study, a salesperson spends around 37 hours of
training per year.

Sales training depends on the timing and the target audience. The first training which
any sales person goes is the INDUCTION programme. This programme basically takes
him through the organization’s mission/vision and value systems apart from the broad
strategies and philosophy. It also gives the employee an exposure to the various functions
of the organization. If the employee is a fresher from the college without any formal sales
experience he is then taken through a longer period of induction in the Sales and
Marketing function with practical training in the field with Temp staff in selling and
demand generation process. It is not uncommon in the companies to put the new recruits
through a very strenuous and hard grind from basic selling to the shopkeeper,
merchandising activity and travelling in the wholesale vans for redistribution to mofussil
markets and in the Audio visual vans for promoting the products. The duration of the
initial sales training for fresher may range from 3-6 months subsequent to which he is
given a posting to handle an independent territory.

There are a battery of tests which are conducted post training to evaluate the employee on
his understanding of the sales concepts and areas where he would require some more
help.

There are refresher training programmes which are conducted at regular intervals.

 There are training programmes conducted by the companies to the distributor’s
 sales force and also sometimes to the customers. In the Durable industry the counter
sales person are given special trainings and incentive programmes are run for them
on successful conversion. In certain cases the sales and service personnel are the same.

In the Agriculture Industry training is given a lot of importance. It is important
since the sales personnel are going to recommend to the farmers on the usage of
their products and any wrong recommendation would cause irreparable damage to
his crop and finances.

There are structured training programmes which are given to all the sales personnel
at the beginning of the year. These programmes are supplemented by
                                                                                        24
literature, notes, PowerPoint presentations and reference books. Also all the Temp
staff are trained in the relevant products they handle withFAQ’s(Frequently Asked
Questions) for them to handle farmer query. Some companies also invest on training
the Retailers and Distributors every year on the product features and benefits.

Apart from the formal product training there are training programmes on the
following :

i)      Personality development
ii)     Communication
iii)    Media handling
iv)     Objection handling
v)      Supervisory skill development programmes
vi)     Individuals nominated for programmes to develop certain specific skills
vii)    On the job training programmes to develop certain skills
viii)    Group selling skills

Training programmes can be :-

i)      Centralized training
ii)     Third party training
iii)    Training tours
iv)     On-Site training
v)      Training through postal material
vi)     Satellite delivered training
vii)    Online training

 Training programmes are evaluated through an impact assessment study formally by HR
as well as informally by the line manager on a daily basis.The assessment will throw
open feedback for course corrections for future training programmes as also the relevance
and impact of the programmes.


D) MOTIVATION and MONITORING:
The word motivation is derived from the latin word movere which means to move.
Motivation is a process that induces goal directed behavior in an individual. The key
motivational theories are as follows:

i)Maslow’s Hierarchy of needs :
  Physiological needs form the lowest or most basic level of needs and include the need
for food, drink and clothing etc.The second level includes safety and security needs i.e.
protection from physical, psychological and financial harm.
The third level includes social needs of love, affection and belongingness. Self esteem
forms the next level and includes the need for achievement, recognition and status. The
highest order of needs in the Maslow’s hierarchy is Self Actualization and involves
seeking fulfillment by making maximum use of one’s abilities or skills.



                                                                                      25
When applied to the sales function Physiological needs take the form of need for a steady
income and good working conditions. Safety and security needs include the need for job
security and safe working conditions. Social needs include the need for acceptance by
peers and good interpersonal relations with organizational members and customers. Self
esteem needs include the need for status or job title, recognition, rewards and promotion.
Self actualization needs refer to the need for growth in one’s career, need to exploit one’s
full potential and need for autonomy and self development.

ii) Hertzberg’s Two-Factor theory:
The theory states that job environment of an individual is characterized by two
fundamentally different set of factors—Hygiene factors and motivational factors.
The hygiene factors are known as maintenance factors or job contest factors.
Working conditions, job security, company policies and quality of the technical
supervision and interpersonal relations are some of the examples. While these may not
motivate the employee, absence of it may cause de-motivation. The motivational factors
are job content factors and related to the content of the job like responsibility, work itself,
promotion, recognition and achievement.

iii) Goal setting theory:
 Goal setting theory presumes that people have specific needs and aspirations and in order
to fulfill these they set certain goals for themselves. It is also known as Management by
Objectives (MBO) as discussed in the earlier chapters. Setting goals encourages a person
to work persistently towards the same and helps the person plan their activities better,
align then with organizational objectives and formulate action plans to achieve their
goals.

IV) Expectancy theory:
 This theory states that motivation is a function of three factors—Individual has certain
expected outcomes (expectations), the extent to which the outcome is valued by the
individual (valence) and the probability that the efforts expended by the individual will
help in attaining the outcome (Instrumentality). Thus motivation is a function of
expectation, valence and instrumentality represented by the equation:
Motivation=f (e*v*I) where ev and I represents expectancy, valence and instrumentality.

v) Job design theories:
Job design theories correlate motivation with job satisfaction. Job satisfaction is the
feeling of pleasure that one derives from one’s experiences in a job. Job design theories
suggest that job satisfaction can be created by means of job enrichment, job rotation and
job enlargement.

Sales force productivity is defined as the ratio of sales revenue to sales expenses
        Sales force productivity==Sales revenue/Sales expenses
Sales force productivity is a function of many factors such as work environment, work
methods, selling skills of the sales person and salesperson motivation.

Sales person has been characterized into four personality types and all these types
differ in their needs and motives and require to be motivated in different ways:

                                                                                            26
i) Competitor: This type of sales person thrives on beating the competition and is
motivated by sales contests, plaques and perks.

ii) Achiever: Achiever set their goals and perform purely on self motivation. They don’t
require motivation from the sales managers and they don’t bother who get the credit as
long as the team wins. They are good team players and excel in team selling. These
people can be motivated by giving challenging tasks and designing long term plans for
them.

iii)Ego-Driven : These type of sales person consider themselves to be the best in the
organization. They like to be given importance and opportunities for decision making.
They make good coaches and mentors.

iv) Service oriented: Their strength is their empathy and ability to build relationships.
They may not get big business for the sales organization but their ability to delight the
customer helps maintain its territory irrespective of the competition.


E)PERFORMANCE MANAGEMENT:
Performance evaluation is an important process for supervisors and employees. It is a
tool that can enhance the way in which an organization is managed. It allows employees
to be recognized for good performance and provides recommendations for further
improvement. If done properly it strengthens the relationship between the sales manager
and sales personnel, increases the flow of communication between the sales force and
 management, highlights present expectations from the management and appraises past
performance. Another important use of performance evaluation is to provide feedback to
the sales personnel and sales managers about any inherent weakness in the selling
approach and process.


The sales force evaluation process has the following steps :

i)Determine factors that influence the sales force performance
ii)Select the criteria for sales force evaluation
iii)Establish performance standards
iv)Compare sales force performance
v)Performance review and feedback

 The objectives of the performance evaluation:
 i)To be aware of the company objectives
ii)To improve motivation and skills
iii)To appraise past performance
iv)To develop a sales plan to increase future sales

 The evaluation should be done by the immediate supervisor as also seconded by
supervisor’s supervisor( Father/Grandfather appraisal).This removes any bias the
supervisor would have on his team Member. The frequency of the appraisals are
normally twice a year although informal feedback is encouraged every time the
                                                                                      27
supervisor sees that his team member is faltering on some issues and coaching and
feedback is required.

 Information sources for evaluation are:
i)Company records
ii)Reports from salesperson
iii)Customers
iv)Managers field visits
v)Managers personal insights
vi)Feedback from others( Distributor, customers, other functional heads)

  Criteria for the evaluation of sales force performance:
  i)    Qualitative
 The qualitative goals look at the process and adherence to the systems which the sales
personnel may have followed in delivering his/her goals. This becomes important from
the long term sustainability of the performance. It also eliminates any shortcuts which the
sales personnel might have taken in accomplishing his goals. Typically the planning and
prospecting records, customer database and participation in non core sales activities,
reporting and feedback are taken into account.

   ii)Quantitative:
Quantitative measures include sales volume, sales revenue, gross margins, fixed cost as
% to sales, stock management, inventory management, collection efficiency as well as
distribution addition and retailer involvement.

 All these are measured against the Targets which are set or against certain standards/
benchmarks which are followed within the industry.

 The following methods of sales force evaluation are followed:
i)Essays : Sales managers describe the performance of sales personnel in few paragraphs.
He mentions the individual potential, strengths, weakness and other relevant matters.

ii)Rating scales : Sales manager identifies certain specific criteria for a particular type of
job which might be personality, behavioral or performance related. The sales personnel
are evaluated on the extent to which they meet the desired performance criteria.

iii)Forced choice method : In this method the sales manager is asked to go through a
group of statements and select the best that explains the
individual.

iv)Ranking : All the sales personnel working in different areas are put together and then
subjective as well as objective criteria are used to rank them in order of merit.

New methods of evaluation which are being used by some sales organization:
i)360-degree performance evaluation

ii)Critical incident appraisal: All the positives and negatives behaviors are documented
and shared with.
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iii)Work-Standards method: List of the different activities and job duties which the sales
personnel is supposed to perform is shared with.

iv)Management by Objectives: It is an objective evaluation which looks at the results and
not the behavioral or personality traits.

v)Behaviorally anchored rating scale(BARS) : A combination of critical incident
method and a graphical rating scale which helps in increasing the accuracy of sales force
evaluation by emphasizing objective measures rather than subjective ones.

vi)Family of measures (FOM): FOM is a new tool which helps measure the progress
made by the sales person individually and not by given ratings. It compares the results
with the previous results over a time period. It is a continuous evaluation process.




                                                                                       29
Exhibit 4 :- Elements of Sales Force Management Audit




                                                        30
Exhibit 5 :- Common Drawbacks cited in Formal Appraisal Programmes




                                                                     31
Exhibit 6 :- Recognition as a Motivating Factor




                                                  32
Exhibit 7 :- Motivate Employees with fun




Exhibit 8 :- What motivates the Japanese Salesperson

                                                       33
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                                                                      34
                   CHAPTER 4 : DISTRIBUTION OVERVIEW



   A) LOGISTICS:
 It is a complete process by which companies transport products, parts and materials from
the place they are manufactured to the place where they are required. Companies are
finding way and means of creating a difference in the way they manage logistics as it is
turning out to be a competitive edge.

The importance of Logistics can be attributed to the following reasons:
i)    Companies now have a wider choice of alternatives available to them to maintain
      cost and service standards. These alternatives may be in the form of shipping
      products through containerization, using mini computers and sophisticated
      satellite communication system to track shipment or transporting them by air to
      ensure speedy delivery of products.
ii)   The location of the retail outlets is based on the proximity to market. During
      energy shortages transportation costs becomes very critical and in times like this
      it is very advantageous for companies having their own logistic system which
      helps in minimizing the cost and overruns.
iii)  The growing complexity of product lines and the increasing shortage of raw
      materials are forcing companies to focus on logistics management to ensure
      constant and steady supply of raw material to manufacturing locations.
iv)   An effective logistics system (Computerized inventory control) will help them
      tide over any crisis that may arise on account of swings in the business cycle,
      changes in interest rates and increase in the cost of labour.

Functions in Logistics Management:
 i)     Procurement/Purchasing: Procurement is the process of buying goods and
        services for the user department based on the order specifications given by the
        department. Procurement begins with sending the purchase order to the
        supplier. Procurement or Sourcing department as it is called in different
        companies involves maintaining an active list of vendors/ constantly updating
        them, negotiating prices either on a yearly basis or as and when required, terms
        and conditions of supply along with payment schedules, organizing delivery of
        orders, arranging for insurance and sending the purchase order to the suppliers.
        It also monitors whether the supplies are being affected as per the quality
        standards and penalty clauses are incorporated if supplies either fail to meet the
        quality criteria or the timelines.
 ii)    Inward transport is the function of the logistics process in which parts
       and components are moved to warehouses before they are finally
       shipped to their destinations.
 iii)   Receiving is the function in which the material is received at the
       warehouse for storage, checked for the quantities and quality matching
       as per the purchase order.
 iv)    Warehousing is the function in which the material received for the
        productions/shop floor is stored before it is finally dispatched for
          trade. Since goods can’t be shifted to the trade directly from the
                                                                                       35
manufacturer because of quantity limitations, they are shipped from
the factory to warehouses located at various points in the geography
and demand is then serviced from these warehouses. This ensures that
the market would keep getting their requirements as and when they
require. This helps the companies also in ensuring that goods outflow
and payments inflow is in tandem and the risk is spread out. The other
role which warehousing plays is in pre testing of the products before
they are released in the market.




                                                                         36
Exhibit 9: Warehousing trends in the 21st century


 v)      Stock control in logistics is the function that involves keeping track of
         the amount of stock present in the inventory. Timely stock audit on
          agreed frequency is one of the important responsibilities.
 vi)     Order picking is the function of the picking or retrieving products stored
          in the warehouse from their respective storage locations to cater to
          customer orders. Companies have different ways and systems to
          arrange the stocks in the warehouse for easy retrieval.
 vi)       Material handling is the function that involves the movement of
           materials required for operations. It might take place within different
           sub functions in the warehouse.
 vii)     Outward transport : It involves shipping of the material from the
           factory to different warehouses and subsequently dispatch of the
           material to various distributors in the market place. Outward transport
           has therefore 2 components—Primary and Secondary transportation.
 viii)      Recycling, returns and waste disposal: This involves handling of the
           goods which have come back from the market, sorting them out w.r.t
           their quality and putting it back for reprocessing or destruction as
           the case may be.

 Technology has become a key factor in which companies are gaining a competitive
 advantage over other players in the industry. Advances in the technology in the form of
 WAP phones, Personal Digital Assistants(PDAs) etc allow companies to keep track of
 the shipment progress along the logistics chain of process. The various types of
 technology available are :

                                                                                      37
  i)Electronic Data Interchange( EDI) : It is the exchange of the routine business
  information between distantly located computers. The exchange of the information
  takes place in a standardized local format through the use of networks. EDI facilitates
  the exchange of structured business messages such as invoice forms, purchase orders
  etc. This technology helps the companies in maintaining their inventories at optimum
  levels and avoids cash flow problems as well as manage working capital mote
  efficiently.

  ii) Artificial Intelligence: It refers to the ability of the machine to process data and
  response with human like intelligence. The areas where AI is used in logistics is
  management assessment or audit, inventory planning and control, purchasing analysis,
  production planning and scheduling , freight rate negotiation, transport routing and
  scheduling and management information systems.

  iii)Expert systems: Expert systems can be defined as an artificially intelligent computer
  program that makes use of knowledge and problem solving logic of human experts to
  solve problems at an expert level. They can process both qualitative and quantitative
  data.

  iv)Communication Technology: Companies use various methods like satellite
  communication using WAP enabled phones, pagers, handheld devices such as delivery
  information acquisition devices (DIAD), radio frequency identification (RFID)
  technology, specially designed packaged delivery vehicles and global communication
  and computer systems. Some of the companies use advanced wireless communications
  in their operations.

   v)Bar coding and Scanning : Barcodes are a series of black and white
stripes printed on the labels glued to items and provide a unique identification in these
items. They work on auto data capturing technology which is based on reflective optics.
The black and white stripes in bar codes absorb and reflect light rays in various
intensities and thus help in identifying the product. Bar code requires a scanner for
reading the code.

 There are several benefits of using bar codes for product identification.Apart form
tracking shipments of packages in warehouses it results in improved data accuracy,
consistency, improved efficiency and inventory and asset management.

 The local and global challenges in logistical management:
 i) Integration of logistics activities : Most operations within the logistic function
operate independently and in the absence of integration the customer satisfaction
becomes an issue.

ii)Lack of qualified personnel .

iii)Distance : Since distribution of materials involve great distances to be covered it
involves longer pipelines, great lead times and accuracy. This is more applicable for
international logistics.

                                                                                        38
 iv)Modes of transport : This becomes very critical when goods are shipped
 internationally as it would involve Air/water— They require a different set of
 knowledge as one has to understand the intricacies involved in conference and non-
conference rates , ports, schedules and sailings.

v)Documentation : Extensive documentation is required for transport by Air and surface
and knowledge in Exports/Import clearances.

vi)Coordination of intermediaries : Various intermediaries like transportation companies,
warehousing firms, customs personnel and even banks. Any slippage on one of the
intermediaries would delay the process of shipment

vii)Cultural differences : Language is one of the biggest barrier.

viii)Government/political difference : Differences in regulatory constraints are a natural
consequence of the global movement of materials. One needs to understand the rules and
regulations prevailing locally as well as the tax structure .

B) PHYSICAL DISTRIBUTION SYSTEM:
Physical distribution is a term used for the outgoing product flow from the firm to the
customer through some defined network of transportation and storage or distribution
nodes called distribution network.




Exhibit10: Flow within the logistics pipeline



                                                                                       39
Exhibit 11: Operational elements of a physical distribution system


The physical distribution function offers great potential for profit improvement.
Distribution cost can be as much as 30-40% of the total cost . An integrated physical
system can reduce the visible costs such as transportation, warehousing and inventory
management in addition to controlling the distribution costs. There are hidden costs and
profit opportunities lost due to failure to ship the product on time, cancelled orders and
customers dissatisfaction associated with stock outs.

The Physical distribution cost is the total concept and provides the following guidelines
for achieving the critical balance between the costs and the level of service provided by
the system. The four main components of physical distribution concept are :
 i)      Total cost perspective : The key to the total cost approach is to consider
         simultaneously the cost of all physical distribution elements visible and hidden
         when trying to achieve specified levels of customer service.
 ii)     Understanding of the relevant trade-offs among cost: The cost patterns of
         different activities of the firm sometimes display characteristics that put them in
         economic conflict with one another. Like for example as the number of

                                                                                         40
        warehouses increases, transportation costs decline and the inventory and order
        processing costs increase. Even though some costs increase the reduction in
        certain others may balance it out.
iii)     Zero sub optimization: When one function is optimized the result will likely be
        an impairments of the performance of other distribution function for example:
        a) Lowering of warehousing cost by reducing inventory levels might also reduce
            customer service.
        b) Reducing inventories might involve reducing assortments and thus reducing
            the systems ability to fill orders on time.
        When the physical distribution functions are coordinated and integrated
         the focus of the system management should be to minimize sub-
          optimization or ideally reach Zero sub optimization.
iv)     Total system perspective: It extends the PD concept to hide trading off the cost of
        performing different functions throughout the entire marketing channel. Like for
        example Price ticketing of the goods is done at the retail level which involves
        labour and time. Some big retailers have negotiated with the companies so that
        price ticketing is done at the supplier cost at an incremental cost.


    C) CHANNEL INTEGRATION
  Channel integrations shifts the point of logistics management from simply total cost
reduction to a return on investment focus. Its purpose is to streamline the physical and
information channel flows by reengineering the distribution process.

Logistics system is making great physical contribution to corporate goals of
   i)      Revenues : Positioning of goods and stocks in locations and facilities where
           they can be delivered reliably and swiftly.
   ii)     Expenses : Key contributors are transportation, warehousing and inventory.
   iii)    Capital investment

The core components of channel integration are :
   i)     Development of customer service standards
   ii)    Selection of transportation modes
   iii)   Determination of optimal number and location of warehouses
   iv)    Setting of inventory management and control procedures
   v)     Determination of production scheduling
   vi)    Design of order processing



D)AGRI- INPUT INDUSTRY DYNAMICS :
 The Agri- input industry can be classified into Fertilizers, Seeds and chemicals
(Pesticides/fungicides), each of the input has its own dynamics and nuances, and we will
deal in brief on each one of them:
i)Fertilizers: Logistics is the most important factor in this industry. Goods are shifted
normally in RAKES (Train loads) and subsequently transshipped into full truck loads
from the rail heads. Negotiation with railways on rates as well as the schedule becomes
very important for achieving the desired outcome. Since the rail heads are not as
                                                                                        41
extensively spread as surface transport—it is important to get into structured agreements
with the transporters on transshipment from the rail heads. Any delay in transshipment
beyond the specified time frame would attract demurrages and incremental cost. Since
some of the components are imported—the transshipment would happen through ports
and adequate know-how of the practices and skilled manpower is very critical to sail
smoothly through the custom and import/export process. Warehousing is another
important cost and direct shipments to the distributor in full truck loads would save
monies as compared to holding huge inventories in company warehouses and the
associated cost. Documentation of the entire shipments as per the formats is critical since
there is a subsidy which the government extends to the industry on the freight.

ii)Seeds: Seeds are live material and perishable in nature. Moreover most of the
Agriculture in this country is rain fed. Packing of seeds is done in poly bags for
consumers and bulked in secondary bags for the wholesale. Rough handling by the
godown keepers and hamals result in damage of secondary bags and tearing of the
primary bags of the customer. Availability of seeds in time and in required quantities
would make the companies successful. The rain fed cultivation results in a very short
buying cycle and hence companies should ensure availability of material in time.
Estimation of demand would be very critical as over placement of stocks in the market
and poor sales will result in huge returns; 50-60% of the return stock in the seed goes into
discards thus impacting the bottom-line of the company. Shuffling of stocks quickly to
places where the season is in progress from the places where season is over would help in
better inventory management and reduced discards. Warehouses should be equipped with
skilled manpower and sufficient space to reroute returns after screening for return rejects
and damages. Transport contracts should be in place for all secondary as well as primary
shipments to be in time. The Service level agreements (SLA) and Turnaround time (TAT)
for all the destinations has to be documented. The cost of the goods is high unlike
fertilizers and does not require shipment through rail. Vegetable seeds are dispatched
even through courier since goods are of lesser weight and the quantity requirement too is
less on a per acre basis.


iii) CHEMICALS : In terms of the space and bulk they would fall between Fertilizers
and seeds. Their packing is normally in cartons or bulk containers, they would occupy
more space in proportion to their weight. Since chemicals are not live material their shelf
life is longer and hence the impact on bottom lines in the event of over placement in the
market is minimized. However transportation cost for all the return material to be shipped
back to the plant and also reprocessing if the product has been for 2-3 seasons can have a
hit on the bottom-line. The other issue is of leakages and damages. This is very common
in this industry and manufacturers normally provide for an allowance tothe trade on this
account.




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                                                                      43
      CHAPTER 5: CHANNEL EVOLUTION, EVALUATION & CONTROL

 As mentioned in the earlier chapters the evolution of the marketing channels has taken
place in tandem with businesses’ response to environmental forces. The evolution has
been over the 4 Eras’.

A) EVOLUTION OF MARKETING CHANNELS:
Production Era :where the supply was sufficient to cater to the demand and there was no
surplus, management’s focused on cost and production efficiencies.

Sales Era :began when Industrialization and economic prosperity were at their peak,
continuous technological advancements and labour efficiency drove production to newer
heights and the supply-demand equation tilted towards supply. Sales assumed
prominence as management understood that selling involved much more than goodwill,
convincing skills and minimum knowledge.
Large scale distribution systems started developing to spread the excess produce.

Marketing Era: started during the Second World War when technological advancements
achieved newer heights and Industrial boundaries got eroded.
Steel industry started facing stiff competition from plastic and glass started facing
competition from paper. Customers were more educated and sophisticated. The
marketers’ job was not only restricted to selling but also find out alternative and new
ways of product usage. Thus the sales person in the marketing era became a problem
solver, educator and an emphathizer. There was a shift in the focus from sales volume to
profitability of the company or the product line.

Relationship Marketing Era :the present day highly competitive marketplace has found
business to first determine the needs and wants of users and then produces the goods and
services that fulfill these needs. It is one thing to acquire a new customer and the other to
retain them. Retention has become one of the big pieces of marketing strategy as the cost
of acquiring a new customer is 3 times the cost of retaining an existing one. Loyalty
programmes in different formats have been rolled out by majority of the companies to
secure their customer base. It is a two-way interacting system and the company is
constantly trying to find out the unmet needs or the changing needs and design products
accordingly.

Channel is a set of interdependent individuals and organizations involved in the process
of making a product or service available to the end-user for use or consumption. The key
constituents of the channel are manufacturers, intermediaries and end users.
Manufacturers are the owners of the product and are liable for it till it reaches the
intermediary. They are at all points of time responsible for the quality and the delivery of
the product as per the promise.
Intermediaries are merchants or agents—the former owns the title of the producer
whereas the later only facilitates the negotiation. Merchants can again be classified as
Whole sellers and retailers whereas agents can either be manufacturing, sales or brokers.
                                                                                          44
 End users are the final consumers or sometimes in the industrial product they may use
these as inputs into their product.

Role of channel members:
i)     Facilitate the search process of buyers and sellers: +They make the products
       and good available to the end-user and thus reduce the uncertainty among them.
ii)    Sorting: They make homogenous lots among the different assortment of goods
       they get from different manufacturers. This helps the end user in getting a wide
       variety and within the variety homogeneity.
iii)   Making transactions routine: Channel members help in making transactions
       routine through standardization and automation for example like placing orders,
       lot size , payment etc..
iv)    Contractual efficiency: Since the flow of goods take place typically from
       Manufacturers—Distributor—Retailer—Customer and the flow of payment
       takes place in the reverse direction, it would be extremely cumbersome and
       inefficient if a manufacturer has to transact with each and every end user, thus the
       intermediaries bring in a lot of efficiency and speed in the system.

Function of channel members:
 i)    Market coverage and product availability: The marketing channel does this by
       contacting existing and potential customers and provides customers support
       services in the form of credit, delivery and technical advice.
 ii)   Market development: The channel also contributes towards expanding the
       manufacturer’s market share by soliciting new business from customers.
 iii)  Technical support: Channels do extend technical support and there are exclusive
       channels for after sales service in case of durables and computes.
 iv)   Market information: They provide insights on customer usage as well as
       demographics.
 v)    Inventory Management: Channels maintain optimum inventory which results in
       a steady supply of goods to the customers thus ensuring that there are no stock
       outs. In this way the channel makes investments in the product.
 vi)   Risk taking: Channel also takes the risk of damage, storage losses, misplaced
       items, product obsolescence and bad debts. However the channel negotiates with
       the manufacturers; on giving allowance on these areas and depending on the
       company, product and the market those allowances are given.


B) CHANNEL EVOLUTION IN THE AGRICULTURE INDUSTRY:

 Agriculture interventions in this country were largely driven by the Governments in the
early years post independence and hence most of the distribution was done through
different departments of the Government and through their outlets. Also as the market
was regulated ,it was more of a seller driven and customers used to get the supply as per
prescribed/pre-allotted quotas. The Green revolution and the target of achieving self
sufficiency in agriculture attracted investments from the private sector with Government
encouragement through incentives and tax sops.



                                                                                        45
 Indian companies invested in the fertilizer industry and pesticide industry attracted lot of
European and American MNC’s with superior molecules and break through technologies
for pest control and productivity improvement. Seed Industry has been seeing a lot of
action in the last two decades and with an aggressive participation of private companies
and public private partnership the availability in terms of quantity, quality and variety
has increased.

 All this ensured regular, timely and uninterrupted supply at majority of the times and the
customer getting wider options to choose from.

Channel development and associated interventions started gaining a lot ofimportance and
attention since goods had to be reached to the interior markets and limitations of
infrastructure, rain fed cultivation and seasonal nature add to the inefficiencies.
Investments in demand generation have been intensified and the Point of sale has been
brought closer to the customer. Apart from the conventional channel of Distributor
(Whole saler) and retailer there are many Government channels like Primary Agriculture
 Cooperative Societies(PAC’s), Farmer societies and clubs, State seed development
corporations, Agriculture extension offices to name a few.

The investments by the channel in stocks and infrastructure is relatively less compared to
the other industries. Channel at this point of time makes advance investments in the
fertilizer industry whereas in seed the investments would be in the range of 20-25%, the
balance being mostly after the sales. Pesticide industry of late has been witnessing very
little advance investments and the credit period would be anywhere in the
range of 15-45Days. The infrastructure owned by the channel is very basic and servicing
of the retailers/dealers to the interior markets is still a point of concern. The channel has
been evolving and with corporates participating more aggressively in the interior markets,
the service levels, advise and availability has been witnessing a change.




                                                                                          46
        Exhibit 12: Channel Dynamics in AG input Industry, SVS Anjaneyulu, IIM(A)




 C)DESIGNING CHANNELS:
 The design of a channel is influenced by factors like technological advancements,
changing demographics and competition. There are several dimensions of choosing a
channel which include :

Channel length : Number of intermediaries between producer and customer.
Channel breadth : Number of outlets available to customer. Costs involved in selecting
a particular channel.

 Channel Structure :
i)Manufacturer--------------Customer
ii)Manufacturer--------Retailer/Dealer--------Customer
iii) Manufacturer---Distributor----Retailer/Dealer----Customer
iv) Manufacturer---Superstockist----Distributor—Retailer/Dealer—Customer.

 The examples of some companies in the above channel structures are :
 i) Direct marketing companies like Modi Hoover/Eureka forbes
 ii) Automobile/Oil companies/Durable industry
 iii)FMCG/Ag Inputs/Durable Industry

                                                                                    47
iv)Ag Inputs/ FMCG.

  Channel Intensity:
   i)    Intensive distribution: Producers of mass consumption and convenience
         products store their products in as many counters as possible and this is
         known as intensive distribution.
   ii)   Exclusive distribution: Automobiles, Apparels and high end lifestyle
         items apart from select durables have exclusive distribution restricted to
         few outlets and it is the distributors’ responsibility to provide the after
         sales service.
   iii)  Selective Distributors: Manufacturer supplies product to select outlets
         within certain geography like frozen products where the channel member
         is expected to invest in the cold chain and maintain the products as per the
         required specifications.

  Types of channel intermediaries at each level:
   i)     Manufacturers’ representative: He sells the manufacturer’s
          products to whole sellers and retailers. He works on a commission
          and may sell products for more than one manufacturer.
   ii)    Manufacturers’ sales force :These people are on the manufacturers’
          role, get a fixed salary and commission and work exclusively for the
          manufacturer only.
   iii)   Industrial Distributors : These are independent firms consisting of sales
          and support personnel. They take possession of the product
          they sell and have a partnership arrangement with the manufacturer. 3M,
          Norton and Pfizer follow this route. The advantages are: Manufacturing
          firms gain access to specialized knowledge about the markets which
          would have been costly and time consuming otherwise, the distributors
          name and goodwill helps in overcoming the customer resistance. The
          disadvantages are Stocking of the product and the associated sales might
          not happen as enthusiastically as it would have happened with a
          manufactures sales force. Margins of the industrial distributor would
          push the price of the product further. The distance between the
          manufacturer and consumer might increase.




                                                                                  48
  Exhibit 13 :Marketing flows in channels of Distribution:


 Hybrid Marketing channels:
 Companies have been looking for alternatives to the traditional systems of selling in
view of the ever increasing competition, difficulties in sustaining profitability and
changing consumer tastes. Companies traditionally depended on sales force or
distributors for selling but now host of options like retail selling, direct mail, internet
selling and telemarketing are available. The use of different channels is known as
 Hybrid marketing system. IBM was one of the first companies to use it. The costs of
selling it through a direct sales forces versus direct mail or telemarketing is substantially
higher.




                                                                                          49
         Exhibit 14: Developing strategies for designing Hybrid Marketing channels

Agriculture industry follows an intensive distribution with largely 2/3 tier structure to
reach its product to the farmers. It has also started experimenting with parallel concepts
of marketing through the channel routes of direct mailing( Largely postcards are used),
Coupon redemption( The coupons are given either at the time of product demonstration
or preseason campaign) , Telecalling( There are toll free numbers which are publicized
for a free service, alternatively there is a prospect calling and product detailing which
happens through a call to the concerned) apart from using referrals and chain marketing.




                                                                                       50
 D) RECRUITING & MOTIVATING CHANNEL MEMBERS:

 Distribution function is a key area which can be outsourced but channel members have
to be selected carefully. An ideal channel member is one who will serve the right
customer at the right time and with the right attitude.




 Exhibit 15 :Effective Channel Management.

 Recruiting is a continuous process since some of the channel members may wish to leave
and some of them may get terminated due to performance issues. The company may also
expand into newer areas or wish to intensify their resource in the existing geography.

The criteria used for selecting channel partners after the initial screening is :
  i)      Sales Factors : knowledge, ability to sell and expertise in the market.
  ii)     Product Factors: The channel members experience in the relevant category or
          product line.
  iii)    Experience
  iv)     Administrative: Pricing pattern and the infrastructure like salesperson,
          transport, godown etc.
  v)      Risk factor : Financial standing in the market and investment potential
  vi)     Reach : Retail/Dealer universe covered and rapport with the members of this
          chain.

 MOTIVATING CHANNEL MEMBERS Agriculture Industry specifics:
   i)   Ensuring that sufficient demand is created so that the channel members
        turnovers are in line with his expectations and he earns decent monies out
        of the company business.

                                                                                    51
      ii)    Setting expectations on earnings as well as deliverables to the channel
             members in advance in order to avoid any confusion at a later stage.
      iii)   Distributor and Retail clubs, these clubs create a loyalty among the channel
             members as well provide a forum where the company can hear their
             grievances and take their inputs on way forward.



E)EVALUATING CHANNEL MEMBERS:




   MODIFYING CHANNEL ARRANGEMENTS
This again is a continuous process and companies should have an
open mind in looking at this issue –constant changes in the customer preferences,
emerging competition, expanding markets and other environmental factors influence
market performance. The factors would influence the modification process are:
i)Product lifecycle changes : Initially if the product is highly technical in nature it might
require a specialist channel as customers have to be educated about the product and its
working and maintenance in detail, later on when the product becomes generic it may be
sold through many outlets and when it is on a decline stage the company may decide to
add on newer channel members to increase the reach and attract new customers. In the
Agriculture industry –Bollgard( Biotechnology cotton) when it                  was initially
launched , it was sold through very selective outlets in selected markets and the
company( Mahyco-Monsanto) invested lots of amounts in training the channel as
well as conducting awareness programmes for all the stakeholders. 2 years down


                                                                                          52
the line when the product gained acceptance and understood the channel as well
as the markets were opened .

ii)Customer-Driven refinement of existing channels: customer expectations and
requirements keep changing continuously and the company might like to improvise on
their channels. Typically in the consumer durables/telecom space there is a sprucing up
which is done in the showrooms at regular intervals to give a fresh look and feel and to
keep it contemporary .

iii)Growth of multi-channel marketing systems: companies have a broad range of
products which can be best appropriated using multi channel approach. This also keeps
the cost of contact lower and delivers bang for the buck. For example Eureka Forbes may
choose to sell its water and air purification systems through personal selling to industries
and institutions whereas it may use telemarketing for individual customers.

 EVALUATING CHANNEL PERFORMANCE:
i)Channel efficiency dimension judges the ability of intermediaries to undertake the
necessary channel functions with a minimal cost. Productivity and efficiency deal with
maximizing outputs for a given level of inputs while keeping the costs down.

ii)Channel effectiveness measures channel performance and considers its ability to satisfy
customer needs. It focuses on issues like lot size, delivery time and location convenience.

iii)Channel equity refers to the distribution of opportunities available to all customers in
accessing the marketing channels of a region.

The Agriculture industry channel is/can be evaluated by the following parameters:
i)Achievement w.r.t Target
ii)Growth over previous year
iii)Market share improvement
iv)Coverage reach( Interior markets as well as new Point of sale additions)
v)Investments in Market development or participation in the same
vi)Collection efficiency( Days Outstanding)
vii)Sales Return %

 Six sigma interventions will help us in assessing the channel profitability too. Price value
capture(PVC) and Channel value capture( CVC) are some of the sophisticated and
advance tools used for arriving at the profitability each channel member contributes too.
They can be classified as Stars, Deadweights, Light weights and fit categories.

 There are several incentives given to the channel members subsequent to the evaluation
and the Agriculture industry also runs Long term channel loyalty programmes.

Models to diagnose channel profitability:

Strategic profit model: Return on Net worth ( RONW) is the most informative and
significant measure of profitability. Net profit/Net worth is formulae used to calculate
this parameter.
                                                                                          53
F)MANAGING CHANNEL CONFLICTS:




         Exhibit 17 : Channel conflict model.

Conflicts arise because of a faulty channel design and can be broadlydivided into those
arising from attitudinal differences and those arising from structural differences.
Structural causes arise mainly due to :
a)Goal divergence or incompatibility among channel members.
b) Tendency towards autonomy.
c) Greater control by channel members.
d) Competition for scarce channel resources( Financial and tech support).

Attitudinal sources arise from difference in perceptions, channel roles and channel
communications. Unexpected changes in the competitive environment, consumers and
markets, differences in economic and ideological objectives among channel members
also lead to conflicts.

Third reason can be because of a specific channel market strategy adopted by the
companies.




                                                                                    54
           Exhibit 18 : Market channel strategies

Common sources of conflicts:
i)Goal incompatibility: Differences in policies and procedures of a channel member may
be problematic and impede the progress of other channel members. Difficulty in
measuring goal is the other reason for goal incompatibility. Thirdly because of the
limitations of resource and infrastructure constraint each channel member may tamper
with the goal and may try developing some thing on is own.

ii) Differing perceptions of reality: When one channel member wrongly perceives the
 role of another channel member regarding marketing channel functions and flows, it
 hinders the proper communication flow among the channel members.

iii) Clashes over Domain: This is a very common cause of complaint and we often see
channel members crossing their domains and selling across the borders. The domain
definition would include Product allotment and Territory allotment .

Types of conflicts:
There are conflicts which arise with different objections and clarifications asked before
the contract is signed off. Also, there are conflicts which arise once the contract is signed.
.There may be certain unforeseen situations which would arise. The channel level
conflicts take place between the manufacturer and Channel member, between the channel
members and when the manufacturer tries to appoint alternate channels.


                                                                                           55
   Conflict Management techniques:
i) Negotiation: It can be over price, cash credit, discount, delivery, inventory level and
other elements of the marketing mix.
ii)Persuasive mechanism: In this technique each of the parties tries to persuade the other
and bring him to his viewpoint.
iii)Problem solving strategies: Alternative solutions are looked for in this technique with
each member of the channel trying to understand the goals and objectives of others.
iv)Personal relationships: This is very commonly used by all the
members of a channel and is most of the times found effective. It at least temporarily tries
to put the issue at rest.

 CHANNEL INFORMATION SYSTEMS:
  The channel information systems are a mechanism to preserve, collect, interpret and
transmit useful and timely information to respective channel members. The impact of
the channel information systems on the channel flow is :
                i)     Transaction flow
                ii)    Inventory flow
                iii)   Distribution flow
                iv)    Promotional fow
                v)     Negotiation flow


 G. WHOLESELLING:
 A whole saler gets the good from the producer and delivers them to the other
intermediaries down the channel. Those intermediaries may either directly give it to the
consumer or may change one more hand before it goes to the Wholesalers They resell
the merchandise to retailers, industrial, commercial, farm or professional business user or
to semi-wholesalers.

This trade is common in foods products, beverages, drugs, tobacco products, Household
goods etc.


In the case of the Agriculture Industry too the wholesalers model is prominent. He is the
person who would do the investments and also absorb the shocks of the trade. Over the
years with penetration into the interior markets –The wholesaler has started loosing
some of its importance with companies trying to appoint the big retailers in the interior
markets as their direct POS. The northern states of Punjab and Haryana witness most of
the wholesalers retailing the stocks to the consumers directly to the tune of 50% upwards
whereas in U.P and Bihar the whole selling goes on at 2-3 levels before the product
reaches the customer.

 A wholesaler brings down the manufacturer’s cost by stocking adequate inventories,
shipping it forward in smaller lots to the next intermediary. They also help in sorting out
the product into homogenous lots of smaller quantities at the same time providing the
range and the variety which is required by the end consumer. The functions of the whole
seller can be thus broadly classified into transactional, logistical and facilitating.

                                                                                         56
       Whole sellers can be classified as under:
       i)    Merchant Wholesaler
       ii)   Full-service merchant wholesaler
       iii)  Limited service merchant wholesaler
       iv)   Cash and Carry wholesaler
       v)     Agents and brokers
       vi)    Manufacturer’s wholesaler

        The highly competitive market place, changing customer preferences, direct
        selling without intermediaries and e-commerce have made it necessary for
        whole sellers to design innovative strategies to survive in the business.

The key issues in whole selling are :
    i)      Target Market : Identification of the right retailers, customer base,
            distance from his location and service requirements.
    ii)     Product offerings: Assortment of products to be offered has to be decided;
            Investments in inventory and warehouse should be justified.
    iii)    Product pricing: Breakeven prices and markups have to be clearly decided
            and while margins can be compromised at certain times, one should also be
            careful not to resort to undercutting.
    iv)     Product positioning : They should constantly keep talking about their
            product features and benefits and try to differentiate them from the
            competition.
    v)      Promotion: Wholesalers are stepping their promotional activities in the
            recent years; previously they were directing their efforts through direct sales
            force.
    vi)     Place: Availability of products in time and closer to the customer is a big
            challenge and whole sellers have to constantly keep working on this aspect.

        The concept of whole selling is ceasing to exist with most of the corporate
        channels trying to have their own direct company retail outlets.


 H) RETAILING:

    Retailing is the last step in the distribution process and if customer is a KING
   then retailers are KING MAKERS. The importance of retailing is as follows :

  i)         Customers: Retailers add value to the distribution process by ensuring that the
             customers get the right product at the right time and the right place. A retailer
             helps in inventory management, providing product variety and disseminating
             information.
  ii)        Importance to other Channel members: They are an important source
             of information to manufacturers about consumer requirements, feedback on
             the quality and usage. They enjoy the advantage of being the closest to the
             customer and interacting with them at a very high frequency.
  iii)       Source of employment: It is a labour intensive activity and employs
             large number of people.
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     Retailers can be classified based on the type of ownership:
   i)      Independently owned
   ii)     Chain owned
   iii)    Franchise-operated
   iv)     Leased department format
   v)      Consumer cooperatives

     Retailers can also be classified according to the products they handle:
   i)      Food retailers
   ii)     Convenience stores : Open for longer hours and sell soft drinks,
           Snack foods, car wash, lottery tickets, courier service, gasoline, ATM
           services and so in. They are attached to petrol stations. This trend which was
           more prevalent in the western countries is catching up fast in India.
   iii)    Food based superstores
   iv)     Limited-Restricted item stores
   v)      Warehouse stores/Discount stores: These are huge stores where products
           would be available at a cheaper price compared to the normal retail. However
           these discounting is available on minimum purchase quantities. The variety of
           the goods available may also be restricted during times.
   vi)     Speciality Stores
   vii)    Department stores : They carry the maximum product range and each of the
           broad categories are arranged separately.
   viii)   Full line discount stores
   ix)     Variety stores: Examples are DOLLAR STORES which have come up at
           different locations in India.
   x)      Thrift stores or Second hand stores
   xi)      Mobile Retail or HAATS---This is more typical of India and some of the
           countries in Africa and Asia. Markets congregate at a place on a
           particular weekday and exchange of goods takes place between the
           intermediary and the consumer.

 NON STORE BASED RETAILING:
 Direct marketing, Catalogue retailing, Direct mail, Direct selling, Multilevel Marketing
(AMWAY, TUPPERWARE) and Automatic vending machines are some of them.

NON TRADITIONAL RETAILING:
Internet, online shopping, Business to consumer, Video catalogs and videoKiosks.

      Key issues in Retailing are:
      i)     Store location
      ii)    Retail store image
      iii)   Services rendered
      iv)    Store personnel
      v)     Layout and Ambience
      vi)    Product assortment
      vii)   Customer profile
      viii) Store Size
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       ix)     Promotional offers

  As discussed earlier the Agriculture industry is undergoing a revolution in the channel
design and specially in the RETAILING front. Participation of corporates like TATA’s,
ITC-E CHOUPAL, DCM SHRIRAM, GODREJ                            and smaller corporates like
KHUSHALI and VISHWAS to name a few. These corporates are giving a new
dimension to the experience which the customer was having till this time. Normally the
retail outlets in the countryside were small and dingy with the customer hardly having
any say in choosing the product. It was mostly by the retail recommendation or even if
the customer(Farmer) was asking the product he was not sure about the price and shelf
life. The corporate retail outlets are like Agriculture supermarkets where the customer is
assured of the quality and products from credible and reputed companies. He can touch
and feel the product and also ask for any clarifications from the extension officials on the
usage of the product as well as the efficacy of it. It is also a one stop shop where he can
also shop for other consumables like food, clothing etc. Customers have appreciated this
effort and the response has been good.




Exhibit 19: Corporate channel update




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            CHAPTER 6: SALES PROMOTION & MERCHANDISING

  Sales promotion is a tactical weapon used to increase sales.

A . Types of Sales Promotion:
ATL(Above the Line) is a direct media advertisement( Print, TV and Radio), Outdoor(
Hoardings, Bill boards and any sponsorship activity at the national level)

BTL( Below The Line) is all promotions which are done at the field level like consumer
contact programmes, trade connect programme, participation in the local events, fairs
and melas apart from creation of visibility at the outlets and in the market through use of
banners, posters, dangler, literature and any other POP material.

Advantages of sales promotion :
  i)    Very flexible and adaptable in terms of tackling specific problems or
        supporting mainstream marketing communication at national level.
  ii)   Capable of specific action through a specific focus and structure.
  iii)  Relatively shot lead times to design and implement.
  iv)   Easy to monitor through tangible results.
  v)    Economical and cost saving possibly with economies of sale.
  vi)   Can be adopted to large and small market major or minor products or brands.

Key to successful use of sales promotion:
  i)      Narrow in its focus of objectives.
  ii)     Simple to comprehend and implement.
  iii)    Simple to measure and monitor.

If a promotion is successful then it should increase sales above the base level at the time
of promotion. Sometimes the sales may come back to normal levels post withdrawal of
the sales promotion as the customers may try the product and eventually then might not
repeat the same. Sales promotions sometimes is also required to increase the pipeline and
create some kind of pressure on the supply chain and block the channel investments.

Different types of Sales Promotion:

The different types of sales promotion are Introductory offers/incentives:

   i)      Product training programmes (Through lectures/film shows etc),
   ii)     Giveaways on products,
   iii)    Performance incentives( Trips to domestic locations or foreign locations),
           Personality promotions and sponsorship of events ( Sponsorship gives ample
           opportunity to display products and communication material),
   iv)     Points    of    sales    material(     POP      as     communicated      earlier),
           Merchandising(Display of the POP material and product in the shelves or
           creatively displaying it in different formats. There are contests and gifts
           planned for the best display to the outlets as well as the salesman concerned.
   v)      Sampling and product use demonstration.
   vi)     Promotional aspects of packaging.
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vii)      Press meets and public relation exercise.
viii)     Consumer competitions.
ix)       Consumer coupons.
 x)        Cash Discounts and lifting discounts.


B. Objectives of Sales promotion:

The key objectives of sales promotion is:
   i)     Product awareness—Promote awareness of the product.
   ii)    Product distribution—Expand the reach so that more users can try.
   iii)   Product trial------------Increase trails.
   iv)    Product usage--------Explore newer ways of usage of the product.
   v)     Product display-------Create visibility( If it is seen it is sold).
   vi)    Block competitors----Block the shelf space and prevent competition.


C. SALES PROMOTIONAL PLAN:

  The annual promotional plan should have:

   i)       Timings of the promotions for each product taking into account the
            seasonal factors.
   ii)      Objectives of each promotion.
   iii)     Special promotional media support.
   iv)      Special packaging requirement and production lead times.
   v)       Manufacturing, shipping and other distribution lead times.
   vi)      Promotional aides and other materials needed to support the activity.

   Each promotion programme should have a fully detailed written plan
   incorporating the following:

   i)       Budgeted expenditure in total.
   ii)      Objectives of the promotion.
   iii)     Lead time for preparation of all the support material required.
   iv)      All rules applicable to any competition.
   v)       Legality and any approvals if required for promotions.
   vi)      Criteria to measure the promotion success.



D. EVALUATING AND MONITORING PROMOTION:

  Evaluation of a sales promotion can be done on the following parameters:

   i)       Sales volumes through specific accounts( Pre and Post promotions).
   ii)      Increase in product user base.
   iii)     Increase in display facings in targeted outlets.
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      iv)     Increase     in    product      availability    throughout       the    supply
              chain(Distributors/Retailers).
      v)      Increase in product distribution (Pre and Post).
      vi)     New trade channels being opened up.
      vii)    Response to consumer audits increasing product trials.

    E. SALES PROMOTION IN THE AGRICULTURE INDUSTRY:

 Agriculture industry has traveled a long distance as far as sales promotion is concerned
and some of the sales promotion techniques can be compared to be at par with the Non-
Agriculture industry both in terms of concept, creativity as well as execution. The
Government chips in whenever it feels that the product deliveries are being over
promised. While the core of the sales promotion remains in the product demonstration at
the field level—

Creative approaches of communication have been employed to convey the product
features and benefits. Typically the fields are decorated and given a festive look, farmers
are taken around the field explaining about each and every aspect of the crop and the
associated impact on the yield either due to the application of a fertilizer in time or use of
pesticide. The commitment from the farmers is taken and to translate the commitment to
confirmed sale thereare coupons which are given wherein they get additional discount if
they exchange the same during the buying season. The preseason campaign are the one’s
which are done during the months of May and June. They aremore of reminder
campaigns and companies use Audio visual vans, Nukkad nataks( Street plays) and even
local folklore and artists to conveythe message in a more creative, simple and interesting
way. The communication through print, TV and outdoor medium is also getting exploited
of late in a big way as most of the villages have access to the TV and Print. Government
of India through its Agriculture extension machinery also does parallel campaigns on
relevant crops and their Agriculture management practices through their staff and also by
way of seminars and Agriculture fairs.

 There has been a lot of Public private partnership in promoting high quality Agriculture
inputs and the Indain farmer has responded very positively in adopting the same.


F.MERCHANDISING:

 It can be defined as the physical placement of the product in a store in a location that is
easily accessible by the consumers and the display is enhanced by the use of Point of sale
material. This may gain customer attention and he may make the right choice after
feeling, seeing and reading about the product .

Basic objective is to gain attention of the customer and influence his purchase decision in
the last minute. In the earlier years it was restricted to cosmetics, perfumes,
confectionary, ice-cream, soft drinks etc. but now it is getting extended to industrial,
durable and even real estate.



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        Advantages of Merchandising:
        i)   Helps generate increased revenue and profits for no additional
             investment.
        ii)  Key sales force activity that can have an immediate impact on off take
             through retail channels.
        iii) All levels of distribution channels work towards a common goal of
             maximizing the sales opportunity with a lot of team work.
        iv)  Effective space management and creative merchandising combine to
             optimizes the use of key resources of space and investment in stock.
        v)   Improved stock management resulting from a space management
             programme reducing stock out situation and resultant lost sales.
        vi)  Enhanced image of trade outlets in the eyes of the customers.

 Benefits of merchandising for different levels of supply chain:

 Manufacturer: Effective use of promotion funds, Develop total product category,
Increase Turnover, Improve quality of display, build market share , Improve the pull
factor and induce retail push, establish as a product category manager and as a concerned
supplier, gain retailers respect from expertise and genuine contribution to their growth
and endorse brand images at the point of sale.

Distributor : Generating data from retail outlets, Improve ROI, Product pull and
improved forecasting, induce retail push , improve the quality and effectiveness of the
sales force, improve turnover on company portfolio, Improve retailer relationships and
earn retailer respect for their genuine contribution to growth..

Retailer: Reduce stock out situations, influencing customer purchase Decisions, store
image, improve turnovers and return on investments.

Consumers: Time saving , stock available to purchase, better quality of choice, improve
loyalty and enhanced display allows more opportunit to make purchase decisions, easier
to shop from a logical layout and receive correct brand message and knowledge.

 MERCHANDISING TOOLS :
i)Leaflets
ii)Stickers
iii)Posters
iv)Showcard and cardboard cutouts
v)Dump bins
vi)Injunction mounded characters
vii)Holograms
viii)Standies
ix)Banners
x)Desk calendars
xi)Key chains, caps
xii)Display shelves( In the shop)
xiii)Interactive POS system
xiv)LCD Video terminals
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xv)Window displays
MEASURING MERCHANDISING EFFECTIVENESS:
i)Record of sales of a particular product if more shelf space is allowed.
ii)Sales response to new advertising campaign and price change.
iii)Stock contract
iv)Daily, weekly and monthly fluctuations.




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                         CHAPTER 7 : BUSINESS ETHICS

 Ethics is defined as a system or code of morals of a particular person, group or
profession. Business ethics is a collection of principles and rules of conduct based on
beliefs about what is ‘right and wrong business behavior’. It has a variety of aspects such
as expectations of society, fair competition, social responsibilities, consumer , autonomy
and corporate behavior in the home country as well as abroad. Accounting ethics is the
code that guides the professional conduct of accountants.

The four levels of ethical questions in day to day business are :
1.Societal level

2.Stakeholders : Honest, transparent and fair dealing with employees, channel members,
vendors and customers.
As far as customers are concerned , one should advertise vigorously about products and
attributes, there should be no over promise and the claims about the superiority of the
product should be substantiated by facts and logic.

3.Internal Policy : This has to do with contracts and terms and conditions of employment
of employees with employer.

4.Individual: Treatment of individuals as Human beings first and then the roles they play
in the company and their hierarchy.

Every company has some or the other form of ethics or code of conduct written which is
articulated and reinforced through a series of communication in oral and written form
apart from contests and visibility through lot of communication material. Also companies
proactively share incidents of ethical violation as well as high ethical behavior with all its
employees.

 Ethical concerns of Sales Force:

 The broad areas which the sales force has to deal with are :

1. Product quality and service: Deceptive product advertising, misleading product
    warranties, odd size packages that make price comparisons difficult, oversized
    packages for small products and surrogate indicators for product features and quality
    which might not be true.
2. Price : Inflating prices and offering discounts subsequently, giving a better deal but
    cheating on quality and downward price revisions not getting appropriated in time
   ( This happens when there is a stock hoarding at either higher or lower prices.)
3. Distribution : Control over the channel in applying all the policies uniformly
    and the frontline not getting hand in glove with distribution in doling out
     undue favors to few channel members. Also the distributors not passing all
     the benefits to the retailers and customers.

4. Promotion : Deceptive advertising, stereotyped portrayals of women or
   people from a group.
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