3.0 Sales & Marketing Management - 1

Sales & Marketing
Management
Definition of Marketing
Marketing is a social & Managerial

process by which individuals & groups
obtain what they need & want through
creating & exchanging products & value
with others.
Philip Kotler in 1991
American Marketing Association’s
Definition
Marketing is an organisational function & a
set of processes for creating,
communicating & delivering value to
customers & for managing customer
relationships in ways that benefit the
organisation & its stakeholders
Marketing
 Marketing is concerned with anticipating
customer demand & directing the flow of goods
from producers to consumers
 Marketing has to do with matching producer’s
outputs to consumer’s activities (needs, wants)
 Marketing is the business function that interprets
customer needs to the rest of the organisation
Marketing- Definition
Process of Planning & Executing the
conception,pricing,promotion & distribution
of ideas, goods& services to create
exchanges that satisfy individuals &
organisational objectives.
What is Marketed ?
Goods or Products
Services
Events
Experiences
Property, Time share, etc
Marketing Practice
Marketing Triad
Dialogue
Coordination Relationship Customer

Concepts of Marketing
1. The Exchange Concept
2. The Production Concept
3. The Product Concept
4. The Sales Concept
5. The Marketing Concept
Sales & Marketing
Sales: Selling concept is to sell what you make rather
than make what the market wants
Marketing: Emerged in the mid 50s
Customer centered – find the right products for your
customers
Selling Marketing
Selling focuses on the needs of Marketing on the needs of the buyer
the seller
Preoccupied with the seller’s
Idea of satisfying the needs of the
need to convert his product into
customer by means of the product
cash
Sales & Marketing
Starting Focus Means Ends
Factory Products Selling & Profit

Selling Concept: Promotion through
Sales
Volume
Marketing Market Customer Coordinated Profits

Concept: Needs Marketing through
Customer
Satisfaction
Sales & Marketing
Difference between Selling & Marketing:
Selling: Marketing:
Revolves around the Revolves around the

needs & interests of the needs & interests of the
seller buyer
Starts with existing Starts with the

products customers – present &
potential
Seeks profits by
pushing the products Seeks profits by
on the ‘ buyers’ meeting the needs of
the customer
The Marketing Concept
The Marketing concept has four major
distinguishing features:
1. Consumer Orientation
2. Integrated Management, with Marketing
as the fulcrum.
3. Consumer Satisfaction
4. Realisation of all organisational Goals,
including profits
The Marketing Concept
1. Consumer Orientation
Emphasis on the consumer and his need.
Enables the firm to look at its business
from the point of view of the consumer.
When a firm adopts a Marketing concept,
the consumer becomes the focal point of
the business.
Marketing
2. Integrated Management, with Marketing as the
Fulcrum
 All different functions of the business must be
tightly integrated with one another, keeping
Marketing as the pivot.
 All functions have to be integrated and properly
aligned with Marketing
 All elements are seen through the eyes of the
customer and are coordinated so as to produce
the best benefits & satisfaction for the customer,
and no dept. or executive functions in isolation.
Marketing
3. Customer Satisfaction
Integrated Management is the means for
fulfilling the needs of the consumer.
Marketing concept leads to consumer
orientation which in turn should lead to
consumer satisfaction
Marketing
4. Profits
The Marketing concept also considers the
creation of profits or surpluses as an
essential requirement of any business firm
Attractive returns & surpluses are
essential for the survival and growth of any
business.
Marketing
Marketing Concept
The Marketing concept is essentially a
point of view about business. It
enunciates that business is basically a
“need-satisfying process” and that
businesses must be managed keeping
the consumer and his need as the focus.
The concept prescribes that all goals of
business, including profit, must be
realised through consumer orientation
and generation of consumer satisfaction.
Marketing
Concept of Value
 Customer seeks value in what he buys
 He has to pay a cost for acquiring this value
 He is happy when this value exceeds the cost he
incurs
 He also gets satisfaction when using the product
 The larger the value-cost gap, the greater is his
satisfaction
Marketing
 He selects the offer that gives him the best
trade-off.
 Benefit-value-cost-satisfaction-is a challenging
exercise
 Winning combination of the above is the job of
Marketing Management.
 The Marketing concept gets implemented when
a firm searches for the benefits sought from it by
the customer & builds them into its offer
Marketing
Market Offer
The firm incorporates the benefit that it
wants to provide to the customer into its
market offer.
The firm has a value creating & value
delivering system & it includes the firm’s
production facilities, processes,
organisation, expertise, etc.
Marketing
Market Offer
 The firm makes out the best possible bundle of
benefits as per the customer’s expectations and
puts it across in the form of its Market Offer.
 Providing the Best Value-Cost Balance is thus
the key to Marketing
 In its effort to deliver the intended value to the
customer, the firm uses its Tool Kit- Marketing
Mix.
Marketing
Perceived Value
 Every benefit promised by the product, carries a

measure of value to the customer
 The customer mentally judges the value of the
product
 This is called the “Perceived Value”
 The estimate is based on various information which
he has on hand from different sources
 Buyer behaviour also influences the process of
customer value assessment
 Branding can come into play
Marketing
In any Marketing situation, one can discern
four distinct steps in the value providing
process :
1. Value Selection
2. Value Creation / Value Delivery
3. Value Communication
4. Value Enhancement
Marketing
Value Selection
Only after selecting the value to be
offered, can the firm proceed with
production, sales and promotion.
Marketing Planning, Buyer analysis,
market segmentation and targetting are
concerned with Value Selection.
Marketing
Value Creation / Value Delivery
This is the bulk of the marketing job.
Product development, manufacturing,
service planning, pricing, distribution and
servicing, are concerned with value
creation / value delivery.
Thus, technology, design and Engg.,
Finance management and organisation set
up have a role in this function.
Marketing
Value Communication
 The firm first makes out a Value Proposition and
then communicates this to the customer.
 The product offer consisting of the best possible
benefits / value is put forward as a value
proposition
 Personal selling, advertising, publicity and sales
promotion are concerned with value
communication.
Marketing
Value Enhancement
The firm has to continuously and
proactively keep enhancing the value of
the product offering
Firm has to collect feedback from the
customer about his level of satisfaction,
upgrade product value etc.
Market research and other control
activities help in enhancing the value of
the product offering.
Marketing Mix
Marketing
Mix
Products Price Promotion Place

Variety Sales Promotion Channels
Quality List price Advertising Coverage
Design Discounts Sales Force Location
Features Allowances Public Relations Inventory
Advertising
Brand Payment Period Direct Marketing Transport
Packaging Credit Terms
Size
Services
Warranties
Returns
Marketing Mix
Product
1. Product Design, features, brand name,
models, style, appearance
2. Product Quality
3. Warranty / Returns
4. Package : Design type, material, size,
appearance and labelling
5. Service : Pre-sale & after sale, service
standards, service charges.
Marketing Mix
Place
1. Channels of Distribution: Channel
design, types of intermediaries, location
of outlets, channel remuneration, dealer-
principal relations. Etc
2. Physical distribution: Transportation,
warehousing, inventory levels, order
processing etc.
Marketing Mix
Price
1. Pricing Policies, List prices, Margins,
discounts and rebates.
2. Terms of delivery, payment terms, credit
terms and installment purchase facilities
3. Resale price maintenance
Marketing Mix
Promotion
1. Personal Selling: Selling expertise, size
of sales force and quality of sales force
2. Advertising: Media Mix, vehicles,
programmes
3. Sales Promotion
4. Publicity and Public relations
Marketing Information System
(MIS)
Sources:
 Internal Data
 Personal Experience
 External Data
o Internal Data:
» Performance Data
» Written Reports
» Data Handling
o Personal Experience:
» Oral Reports & Feedback
» Questioning
o External Data: Qualitative
» Market research Quantitative
» Desk Research
Marketing Research is now made by leading Management
consultancies
Marketing Intelligence Systems
 Systematic collection & organisation of data relevant to
the needs of the marketer - computerised
Data
Information
Intelligence
Intelligence
 Is the interpretation which is made,following

analysis of above information
 Most important use of MIS data on a large
scale is in “Precision Marketing” where small
groups of customers are used to target
promotional efforts very accurately
Internal Sources of Information
Performance Analysis
ABC Analysis
Variance Analysis
Marketing Research
 Gives a profound insight into the whole of the
marketing process
Syndicated Research
Custom Research
Sub Contractors
Syndicated Research
 Easiest & quickest service
 Some of this can be standard research
 Shared cost is one major advantage
o Areas:
» Retail audits
» Panel research
» Omnibus surveys – Questionnaires
» Consultancies
Custom Research
Specific to Customer needs

Cost is significant
When costs are cut quality suffers
The Marketing Environment
Environmental Analysis
The foll. constitute the environment variables of
Marketing :
 Competition
 Consumer
 Govt. of the land
 Forces of Nature etc
While the Marketing Manager can choose, alter
and control the Marketing Mix variables, he
cannot choose or alter the environment
variables against which he markets his product.
Hence:
Environmental Variables : Non Controllable
Marketing-Mix : Controllable
variables
Marketing – Interaction between
Marketing Mix} Environmental
Variables } & Variables
Marketing Objective is achieved using different
combinations of the Marketing Mix.
Selecting an optimum combination is the
name of the game
The task is to give correct weightage to
the different elements of the mix.
Ensure that all the elements are integrated
The aim is to select a combination which
will have the desired impact on the market
being cost effective at the same time.
Other factors
 Change in Environmental variables
 Change in customer preference
 Changes within the firm
Corporate strategy
Product Lines
Organisation
Resource level
Thus knowledge of Marketing Environment is
central and crucial to Marketing Management
Environmental Analysis
1. Introduction
2. The Environment
3. Analysis
4. Scanning
5. Areas of Information
6. Macro – environmental Analysis
7. Porter’s Five Competitive Forces
Introduction
1. The business environment is the setting within
which a business operates, formulates policies &
makes decisions
2. We can distinguish between Internal & External
environment
3. Considerable control can be exercised over its
Internal environment by a firm, but a firm cannot
exert control in the same way or to the same extent
over the External environment
4. The nature of this environment & the changes
occurring within it, present Opportunities, Threats
& Constraints to an organisations’ activities.
Introduction
5. An Organisation in its environment might be
likened to a ship at sea
6. Organisational environments present the
same kinds of Opportunities ,Threats &
Constraints for the organisation as the sea
does for the ship
7. Organisations need to respond & adapt to
changing environmental conditions if they
intend to survive.
The Environment
1. Infinite number of environmental variables
2. Large number of non – controllable variables
Pose both opportunities &
threats
3. Essence of strategy: Future Orientation
4. We need to understand & diagnose the
environment
5. No simple models or algorithms for success
6. If you get it wrong: You go out of business
7. If you get it right: Does not ensure success
Analysis
1. Identify & Monitor potential threats & opportunities
2. Diagnosis: Through a process of decision making,
assess the significance to the company of
such threats & opportunities
 Analysis of environment:
 Current product / market strategies & predictions of
variance
 Diagnosis stage: Improvements to existing strategies
Therefore,
Environmental Analysis: Integral part of the strategic
planning process
Scanning
 Environmental audit is also referred to as
‘ Scanning’
 There are four forces of scanning:
1. Undirected viewing
2. Conditional viewing
3. Informal search
4. Formal search
Undirected viewing
Exploring information in general without
carrying a specific agenda
Viewer is exposed to a large amount of
varied information
Just a broad attempt to be aware of
factors or areas that may have changed
Conditional viewing
Not an organised search
Viewer is sensitive to information that

identifies changes in specific areas of
activity
Informal search
Organised but limited search for
information to support a specific goal
Formal search
Search is actively pursued & specifically
designed to seek particular information
Balance has to be struck between the

resources allocated to this search activity
& the potential benefits
Areas of Information
Managers search for information in five
broad areas:
1. Market Intelligence
2. Technical Intelligence
3. Acquisition Intelligence
4. Broad Issues
5. Other Intelligence
Area of external Category General Content
Information
Market Potential Capacity, consumption, imports,

Market exports
Intelligence Structural change
Mergers, acquisitions, new entries
Competitors & Industry
Competitor information, Industry
Pricing policy
Sales Negotiations Effective & Proposed prices
Customers Information on specific current or
potential sales
Current or potential customers,
markets & problems
Information
New product, processes
& technology Technical information relatively
Technical Intelligence new or unknown to enterprise
Product problems
Involving current products
Costs
For processing, operations, etc.
Licensing & Patents for suppliers, customers &
competitors
Products & Processes
Information
Leads for mergers, joint Information concerning

Acquisition Intelligence possibilities for the organisation
ventures or acquisitions
Intelligence on broad General conditions General information: Political,

issues demographic, etc.
Govt. actions & policies
Decisions affecting the industry
Suppliers & raw materials Purchasing information

Other Intelligence
Resources available Availability of people, land, other
resources
Miscellaneous
Any other information
Macro - Environmental Analysis
This audit examines the broad range of
environmental issues that may affect the
organisation
P : Political
E : Economic
S : Social
T : Technological
Macro – Economical Analysis
PEST:
The central role of this PEST analysis is to
identify the key factors that are likely to
drive change in the environment
Then, the aim is to establish how these
key factors will affect the industry in
general & the organisation in particular
Political / Legal issues
Govts. Are in a position to take actions which can substantially alter a
company’s marketing environment.
 e.g Duties on cars / commodities
 Import / Export policies
 Telecom Regulations
Political instability in a country can also have a marked effect on

Marketing methods used by exporters.
Other factors include the foll:
1. Taxation policy
2. Monopoly controls
3. Environmental protection measures
4. Employment law
5. Environmental legislation
6. Foreign trade agreements
The Economic Environment
Prosperity demand for well known

& well established products
Sales
Recovery demand for
convenience products
Recession demand for basic

functional & less expensive
products
Time
Effects of booms & slumps in economy
Effects of booms & slumps in economy:
 In each stage of the cycle there are different patterns
 In times of prosperity – consumer spending is high
 Organisations exploit this by:
Extending Product lines
Increasing Promotional efforts
Expanding distribution
Raising prices
 On the presumption that consumers are often willing to
pay more for well known & well established products &
have the means to do so
 Current & Future state of key economic variables used
to describe wealth, purchasing power, savings &
consumption together with government economic policy
deployed to affect those variables
 GDP or disposable income are key determinants of
demand
 Rate of inflation & Govt. policy towards it can greatly
affect consumer’s attitudes to credit
 Other areas considered are:
1. Conservation of Natural resources
2. Costs of pollution
3. Energy consumption
4. Management of natural resources
As part of strategic planning process:
Identification, monitoring & forecasting of
those economic variables to which the
company’s market effort is most sensitive
Key marketing task is to attempt to realise
the relationships between movements in
the economy & changes in the market
place
Economic Factors
Interest rates
Inflation rates
Money supply
Business cycles
Unemployment
GDP trends
The Demographic Environment
Demographic and cultural factors make up society-wide
influences and changes that can affect the marketing
environment.
Factors:
 Population : size, growth rate, distribution
by gender, birth rates / death
rates, life expectancy etc.
 Density : Location, geographic /
regional shifts.
 Hosehold / Family : Size, make-up
 Income / Wealth distribution
 Socio-economic groups : Occupations, ethnic groups.
The Demographic Environment
These factors change slowly over time &
exert powerful effects on the volume &
nature of demand for most products &
services.
e.g. Children’s products & services
Elderly population
Smaller families / Single Parent families
Career couples.
Nature of Cultural Values
 Different regions of a country exhibit different

buying preference patterns that seem to reflect
different cultural & traditional values
 Culture is reflected in the prevalent core beliefs

& values of people.
 These beliefs & values are declared in family &

friendship relations etc.
Nature of Cultural Values
 Religious beliefs, have a major influence on consumer
attitudes & purchase behaviour.
Reflected in the kinds of food that people consume, the drinks

they purchase & even their manner of dress.
e.g. Spate of new restaurants that have come up recently.
Changes in Menu to meet the requirements of the
changing class of people.
Marketers have to understand cultural values in all aspects of

implementing the marketing concept & managing the
Marketing Mix.
Changes in Values & Attitudes
 Attitudes towards credit have changed substantially
since the 1980s.
 Credit has become an intrinsic part in the marketing of
many products.
 Changes in society’s attitudes towards health & wellness
have resulted in an entirely new set of businesses
coming up.
 People are now more weight conscious, exercise
conscious & diet conscious.
e.g Diet India- supplies food which is door-delivered-
three times a day.
 The role of working women in society is also a result of
changing attitudes.
Social / Cultural issues
Other factors
Social mobility
Changes in life style
Levels of Education
Work behaviour
Leisure activities
Patterns of ownership
The Technological Environment
 Technology has always been important but the
rate of innovation has increased so rapidly in
recent years that the impact of technology has
become a principal driving force in business
activity.
 The last three decades have seen an amazing
no. of new technologies that have created new
markets for many electronic and other products.
 Technology can also change how businesses
operate (Banks, airlines, retail stores etc.)
Consumers today enjoy cheque- free banking,
printing of air and train tickets at home etc.
The Technological Environment
 Music industry has been forced to change the
way they distribute music.
 Technological developments are also having a
profound impact on all aspects of marketing
practice :
Marketing communications
Distribution
Packaging
Etc.
Technological Factors
Focus of government research
Rate of technology transfer
Materials
Developing technological processes
Porter’s Five Competitive forces
Threat of
new
Entrants
Bargaining Bargaining
power of Competitive power of
Suppliers Rivalry Buyers
Threat of
Substitute
Products
Competitor Analysis
The Five Forces Model of “Porter”
Introduction
 The essence of Strategy formulation is coping with
competition.
 The state of competition in an industry depends on
five basic forces :
1. Bargaining power of suppliers
2. Bargaining power of customers
3. Threat of new entrants
4. Threat of substitute products or services
5. Competitive rivalry
Competitor Analysis
 The collective strength of these forces
determines the ultimate profit potential of an
industry.
 Knowledge of these underlying sources of
competitive pressure provides the groundwork
for a strategic agenda of action.
 This analysis should be conducted at the level of
the individual strategic business unit (SBU)
 The analysis is as below:
Competitor Analysis
Bargaining Power of Suppliers
Power of suppliers is liable to be strong where:
 Control over supplies is concentrated into the
hands of a few players
 Costs of switching to a new source of supply are
high.
 The supplier has a strong brand
 The supplier is in an industry with a large no. of
disparate customers
 Its product is unique or at least differentiated.
 If suppliers can realistically threaten forward
integration.
Competitor Analysis
Bargaining Power of Suppliers
Depending upon the above factors, a powerful supplier is in

a position to influence the profitability of a whole industry
by raising prices or reducing the quality of the goods it
supplies.
In recent years, more no. of companies seek a partnership

relationship with their suppliers, the result being:
Lower transaction costs
Improved Quality
Decreased transaction time.
Competitor Analysis
Bargaining Power of Buyers / Customers
Buyers or customers exhibit power when :
 Purchases are in large volumes.
( Especially so when fixed costs are high)
 Buyers control a large % of a volume market.
 Products are standard or undifferentiated.
( Buyers can always find alternate suppliers)
 There are a large no. of small suppliers.
 The product forms a component of its product or is a fraction
of its cost.
 Buyer earns low profits & hence is price sensitive.
 The industry’s product is unimportant to the quality of the
buyer’s products or services.
 The buyers pose a credible threat of integrating backward to
make the industry’s product. E.g. Auto manufacturers.
Competitor Analysis
Threat of new entrants
New competitors add capacity to the industry and
bring with them the need to gain market share
thereby making competition more intense.
The barriers to entry are :
• Economies of scale
Apart from product cost advantage, economies
of scale can also act as hurdles in distribution,
utilisation of sales force, financing & almost all
other part of a business.
2. Strong capital Requirements
Competitor Analysis
3. Product Differentiation
Brand identification creates a barrier by forcing
entrants to spend heavily to overcome
customer loyalty.
e.g. Soft drinks, OTC drugs, cosmetics etc.
Coupled with distribution & marketing, this acts
as a strong entry barrier.
4. Gaining access to appropriate Distribution
Channels can be difficult.e.g Petrol bunks
Competitor Analysis
5. Cost advantages independent of size
Built over a period of time
Experience curve
6. Hostile Reactions
7. New products, marketing etc.
Introduction of new products through R & D,
Marketing initiatives,e.g.long term contracts
etc.
Competitor Analysis
Threat of Substitute Products / Services
Substitute products put a ceiling on the profitability of an

industry by limiting the price that can be charged,
especially when supply exceeds demand.
Substitution can arise in a no. of ways :
 A new product replaces an existing product or service.
Fountain pen by Ball pen
Inland Letter, Greetings Card- E Mail
Gifts- Gift vouchers
Cassettes- CDs- Hard disk / I-Pod etc
 All Products & Services, to some extent, suffer from
generic substitution.
e.g Car instead of a Holiday or vice versa
Competitor Analysis
Threat of Substitute Products / Services
 Substitute products that deserve the most

attention strategically are those that
Are subject to trends improving their
price-performance trade off with the
industry’s product.
e.g. Tea Bags, Shoe polish, self
sealing envelopes, ready to eat snacks
etc.
Competitor Analysis
Competitive Rivalry
Rivalry among existing competitors takes the
familiar form of “Jockeying” for position using
tactics like price competition, product
introduction, advertising etc.
Intense rivalry is related to the presence of a no. of
factors :
 Competitors are numerous & almost equal.
 Industry Growth is slow.
 Product or service lacks differentiation
 Fixed costs are high or the product is perishable
Competitor Analysis
Competitive Rivalry
Capacity is normally augmented in large
increments. E.g chemical, steel etc.
Exit barriers are high
Firms may find it difficult to get out of
business because of the relationship of the
business with other businesses in which
they are engaged.
Rivals are diverse in strategies.
Functions of Marketing
Obtaining Demand:
1. Personal selling
2. Product planning / Development
3. Pricing
4. Sales Promotion
5. Advertising
Servicing Demands:
6. Distribution
Warehousing
Inventory Management
7. Order processing handling
8. Transportation
Transpermeating Activities:
9. General Administration
10. Financing
11. Marketing Research
12. Marketing Info. Management
Product
Product Management
1. Product Management encompasses the whole range
of activities pertaining to Product Planning &
Management
2. Product Planning includes the Basic corporate &

Marketing Plan
3. Product Planning covers the entire spectrum of

Marketing Management like:
1.Pricing
2.Promotion
3.Distribution
4.Products
J.Parthasarathy
Product Management
4. In Products, the objective would be to
raise it to a BRAND status over a
period of time so as to establish a
bond with the customer
5. Product Management also considers
Product Life & Strategies at each
stage of the life cycle
J.Parthasarathy
Product Manager & his Responsibilities
 Product Manager is also called as:

Brand Manager
Marketing Manager
 Responsibilities:
1. Responsibility for Planning Activities related
to the Product or Product Line
 Analyse the market including customers,
competitors & their external environment
 Makes use of this info to make out the
Marketing Objectives & Strategies for the
Product
J.Parthasarathy
Product Manager & his
Responsibilities
2. Responsible for getting the Organisation
to support the Marketing Programmes
recommended in the plan
3. To coordinate with R & D ( For product
line extensions), Manufacturing, Market
Research & Finance
J.Parthasarathy
Product Manager’s Potential
Interactions
Advertising
Manufac & Agency
Distribution Media
R&D Promotion
Services
Legal Product Packaging

manager
Purchasing
Fiscal
Market Publicity
Research
Sales
J.Parthasarathy
Skills required for a Product
Manager
Analytical Ability
Communication skills
Team work
Negotiation
Creativity
Business sense
J.Parthasarathy
Definition
A Marketing Plan is a written document
containing the guidelines for the Business
centre’s Marketing Programmes &
Allocations over the Planning Period
J.Parthasarathy
Objectives of a Marketing Plan
 Define the current situation facing the product
 Define problems & opportunities facing the Business
 Establish objectives
 Define strategies & programmes necessary to achieve
the objectives
 Pin point responsibilities for achieving product objectives
 Encourage careful & disciplined thinking
 Establish a customer – competitor orientation
Customer & Competitor hold the key in today’s
dynamic world
J.Parthasarathy
Componenets of the marketing
Plan
Marketing Plan Summary:
I. Executive Summary
II. Situation Analysis
a) Category / Competitor Definition
b) Category Analysis
c) Company & Competitor Analysis
d) Customer Analysis
e) Planning Assumptions
III. Objectives
IV. Product / Brand Strategy
V. Supporting Marketing Programs
VI. Monitors & Controls
VII. Contingency Plans
J.Parthasarathy
Product Life Cycle
 Introductory Phase:
Growth & size low: Attractive to Pioneer
 Growth Phase:
Market becomes attractive
 Maturity Phase:
Growth is low
 Decline Phase:
Negative Growth
J.Parthasarathy
Product Life Cycle
Product life cycle varies form segment to
segment
Can be 4 to 5 or even 15 years
Industrial products generally have a longer
lifespan than consumer products
When life cycle is low, product
development cycles are to be shortened
J.Parthasarathy
Marketing Strategies across the
Product Life Cycle
Product Life Cycle Stage
Sl. Characteristics
Introduction Growth Maturity Decline
1. Costs High Average Low Low
2. Sales Declining
Low Rising Peak
Level
3. Profits Negative
Rising High Declining
or Low
4. Competitors Few Increase Stabilisation Decline
J.Parthasarathy
Marketing Strategies across the
PLC
J.Parthasarathy
Product Planning
Product Management begins with Product

Planning
Product Planning provides us strategies to
realise our Marketing objectives set in the
Marketing Plan
Environment Scanning
Organisation Objectives
Organisational Strategies
Other
Production Marketing
Departmental
Objectives Objectives
Objectives
Production Marketing Other

Strategies Strategies Departmental
Strategies
Pricing Promotional Distribution Product

Objectives Objectives Objectives Objectives
Pricing Promotional Product

Distribution
Strategies Strategies Strategies
Strategies
Elements of a Product Strategy
1. Statement of the objective the product should
attain
2. Selection of Strategic alternatives
3. Selection of customer targets
4. Choice of competitor targets
5. Statement of core strategy
6. Description of supporting Marketing Mix
7. Description of supporting Functional
programmes
Setting Objectives
 Two important objectives commonly set are:
1. Sales Revenue or Market share
2. Profitability
 Generally one is achieved at the expense of
the other & hence one becomes the Primary
while the other secondary
 Quantifying the objective & setting a time
frame for its achievement is important
Selection of Strategic Alternatives
for Growth
Choice is between:
Long Term
Growth and
Profits
Selection of Strategic Alternatives
for Growth
Growth:
Present New
Present Market Product

Penetration Development
Market
Market Diversification
New Development
Product
Market Penetration
 Increasing sales on existing products in
existing markets
Advertising, line extensions, new
applications, etc.
Increase frequency of use
 Through customer acquisition: Inducing Brand
switching
Through sales promotion: Expensive
Through sales Advertising: Expensive
Market Development
Introduce current products to new markets

– customer acquisition
Enter new markets – approach different
segments
Product Development
Development of new products for existing

customers
Needs time bound action plan with full
knowledge on competitors’ products
Diversification
Growth in sales by introducing new

products in new markets
Diversification can be:
Horizontal – addition of new products
Vertical – moves forward
Long Term Profits
1. Cost Reduction
2. Increasing Outputs
Positioning – Choice of customer
targets
 Positioning is a popular term in ‘Marketing’ first
coined by two advertising executives, A L Ries &
Jack Trout in 1972
 According to them, positioning is a creative
exercise that starts with a product or an
individual brand
 It is an exercise of creating & maintaining an
image for the Product or Brand in the mind of the
Target audience relative to other brands
Positioning – Choice of Customer
Targets
Definition:
A place in the mind of the customers in
relation to competitors
It occupies a distinct & valued place in the
mind of the target customers
Positioning is not what we do to a Product
but is what we do to the mind of the
Prospect
Positioning – Choice of Customer
Targets
After choosing the appropriate Marketing Strategy, we
now have to decide on the customer target & competition
Generally three key considerations are critical:
 Size / Growth of the segment
 Opportunities for obtaining competitive advantage
 Resources available
 Customer targets, competitor targets & some attribute for
differentiation are chosen
 Depending on the Market strategy chosen, the customer
targets are identified
Competitor Targets
In Positioning, we have to decide on the
competitors who are worth competing –
weakest are chosen
Depending on the Marketing Strategy, the
targeted customers are identified
Positioning: Core Strategy
Each Business must have a Core strategy
Core Strategy decides our competitive
behaviour
Different segments require different Core
strategies
There is a need to develop a Core strategy
that runs as a common thread through all
pieces of planning
 Core strategy tells us why customers buy our
product and how we shall compete with others
 Core strategy defines the differential advantage
that is communicated to the target customers
Called - Product Positioning
 I.e.. Positioning a product to specific segments
 In Positioning, we will have to decide our
competitors
Two Methods:
Cost or Price Advantage
Differentiation based on Product
offering
Cost / Price Strategy
 Low Price has been used as a strategy by some
companies
Eg: Walmart, Pantaloons. Nirma, Parle, etc.
Nano car is the latest
 Requires large volume, efficient facilities & benefit of
latest technology
 Control in costs also required in Sales Distribution
Expenses
 Low Price core strategy poses real risks
Customer can shift tastes
Technological changes can bring in more
competitors
 One advantage: There will always be room
Non Price Strategy
 Differential advantage in the product by way of
additional features will fetch a higher price
 Differential advantages are often obtained by
going beyond what customers expect, to provide
unanticipated product benefits
 Focussing on customer benefits & experience
will make their products & services different from
competiton.
Areas for Differentiation
1. Quality
2. Status & Image
3. Branding
4. Convenience & service
5. Distribution
Managing Brand Equity
A brand is built up over a period of time
First level of Brand Equity is Brand
Recognition
Brand Equity is just the process of Brand
Building
Eg: Wills, Lux, Dalda, Amul, Airtel
Many Brands remain powerful & profitable
Aaker (1996) calls Brand Equity a set of
assets associated with a brand & which
add to the value provided by the product /
service to its customers
Brand Equity also refers to the value
inherent in a well known Brand name
Advantages:
Easy acceptance
Willingness to pay more
Preferred shelf space, etc.
Brand Equity
Brand Managers create & enhance four
assets to build Brand Equity
Brand Awareness
Brand Loyalty
Perceived Quality
Brand Associations
Brand Awareness
Top of mind recall

Familiarity – liking
Past experience
Feeling of confidence
Brand Loyalty
1. Brand loyalty gives a stable & growing

market share- Due to Repeat Buying.
2. Reflects in the purchase price
3. Customers are to be retained on a
continuous basis
4. Brand Loyalty can be defined in terms
of consumer behaviour
Brand Loyalty
5. Consumers buy due to commitment & also due
to habit.
6. Strong Brand Loyalty is an effective entry
barrier for competitors
7. Leads to reduced Marketing Costs
8. Brand Loyalty is enhanced by creating Brand
Awareness, improving the perceived quality &
establishing a clear identity.
Brand Associations
 Aaker states that a Brand Association is
anything that is “linked” in meaning to a Brand.
There are many types of associations.
 Consumers associate the Brand with certain
tangible & intangible attributes, a celebrity
endorser or a visual symbol.
 These are derived from Brand Identity & Brand
Image.
 Associations form a Brand Personality that
suggests situations for which a Brand is suitable
/ not suitable- Aaker
Perceived Quality
 Certain Brands convey good quality
Gillette
Bournvita-brand by itself
Blue Dart / Fedex
 Perceived Quality is a result of an understanding
of the requirements of customer segments.
 It is a key positioning dimension & often a part of
company’s mission statement.
 It is necessary to educate the customers about
the right parameters to measure the quality.
Importance of Brand Equity
 Important for Packaged goods manufacturers
that face increasing competition from super-
markets- own label.
 Stretching of successful brand names :
Toyota-Lexus
Nissan-Infiniti
Honda-Acura
 Product Manager must view the Management
& Sustenance of Brand Equity as an
important task.
Product Strategy over the life cycle
 Introductory Stage:
 Market Strategy:
 Examining Price & Promotion variables of the
Marketing Mix. 4 Strategies are available:
Promotion
H L
Rapid Slow
H Skimming Skimming
Price
Rapid Slow
L Penetration Penetration
Introductory Stage
Rapid Skimming Strategy
 Cost structure of the product is largely
variable cost
 Launched at a high price
 Promotional effort is heavy
 Product penetrates the market due to high
promotion
 Risk of competition- Firm has to build up
Brand preference
 Strategy useful when Entry Barriers are high
 Margins can be used to fund investment in R
& D leading to new products
Introductory Stage
Slow Skimming Strategy
Assumed that the Market size is limited

It is perceived that Potential competition
will not be around right now
Introductory Stage
Rapid Penetration Strategy
 More appropriate when Fixed costs are high
 Objective is to bring about a very fast Market
penetration
 Result- Larger Market share.
 Strategy suitable for large markets which are
highly competitive
 Market is price sensitive
 Production costs expected to show a downward
trend with increase in Production
Introductory Stage
Slow Penetration Strategy
Lower prices lead to fast market
acceptance
Healthy Profits
In a large market with high awareness
level & price sensitiveness, this strategy
makes sense. There is some potential of
competition.
Growth Stage
Overall Objective is to sustain the growth
rate.
Strategies have the foll. Elements:
No. of competitors increases
Product quality is improved. New features are
incorporated. Style is improved.
New models are introduced. Flanker products are
introduced.
New Market segments are tapped
Growth Stage
Re Position the product through re
segmenting
Brand building promotion is resorted to.
Pressure on prices
Prices may be lowered to lure the next
layer of price conscious buyers
 Firm has to trade off between high market share
& High current profit.
Maturity Strategies
 Most Products fall under this category
 Fraught with battles for market share, access to
distribution channels, customer promotion &
aggressive pricing
 Foll. Strategies can be tried by Marketers:
Market Modification
Product Modification
Marketing Mix Modification
Maturity Strategies
Market Modification
Market can be expanded by increasing the
no. of users or the consumption
Explore new Market segments or attract
customers of competitors
Discover new applications for the Product
Maturity Strategies
Product Modification
Product can be modified to stimulate thro:
Quality improvement
Feature improvement
Style Improvement
Maturity Strategies
Marketing Mix Modification
 Sales can be stimulated by manipulating one or more
elements of the Marketing Mix
1. Advertising
2. Sales Promotion
3. Personal Selling
4. Price
5. Distribution
6. Services
 As Firms battle it out in the Market Place, there may be
profit erosion for each firm.
Decline Stage
Markets reach this stage for a variety of
reasons
Most obvious reason could be
Technological Obsolescence
Can also be due to shift in customer taste
Try to be the last to quit. Can be the
monopoly and resort to “Harvesting”
Brand Strategy Decisions
Product Category
Existing New
Existing Brand
Line Extension
Extension
Brand Name
New Multiple Brands New Brands

The Product Life Cycle
New Products
New Products
1. Introduction
2. Product Modifications
3. Line Extensions
4. Inputs for New Products
5. Testing slightly new products
6. Forecasting
7. Brand extensions
8. Real New Products
9. Summary
Introduction
1. Introduction of New Products is the
responsibility of the Product Manager, Brand or
Category Manager & is part of the Marketing
Plan
2. Most new products introduced by companies
are only variants
3. Purpose: Can be introduced to either :
 Gain sales or share
 To match or block competitors
4. While launching a new product, you need to
decide on :
 Brand to be attached to the product
 Customers targetted
5. The development of new products typically
occurs in stages.
Product Modifications
1. New Products introduced may be :
 An upgrade ( Soap, software etc )
 Different
 Inferior ( Value engg., less expensive )
2. Reactions can be from :
 Loyal customers
 Occasional Buyers
 Current non-customers
3. After trials, profit implications need to be studied
4. Modifications can also be made in the foll. areas:
 Distribution channel
 Price
 Service
 Packaging
5. Modifications introduced only after careful consideration of all
the above.
Line Extensions
Popular method of using an existing
brand
Generally product families are all found
with close relatives – designed to
appeal to various segments
Eg: Cinthol soaps
The objective of introducing multiple
versions is to appeal to multiple
segments
Price differential brings in users with
different needs & preferences
Line Extensions
More versions – Less efficiency of
operations ( Production, Inventory ,
Distribution)
Less versions – Better efficiency
Over use of a brand – with extensions may
dilute & weaken Brand Equity
 Ultimate form of product variants – Introduced &
practised by Dell – P.C Business
 The downside – Operational Inefficiency
Line Extensions
Adding a Product variant:
1. One reason to add a product variant is to

attract new customers – Market Development
or Penetration
2. Maruti does it frequently
3. Cannabalisation can occur
4. Since profits can be affected, you need both
customer & cost data to evaluate the effect of
adding a product variant
Line Extensions
5. Adding versions sometimes lead to customer
confusion & dilution of Brand Equity
e.g. Different models in automobile Industry
6. If Quality spread is more, a new name is given
7. If the number of versions is very high, the
information overload facing a purchase
sometimes makes customers postpone a
decision because of confusion
Line Extensions
Dropping a Product Variant:
1. A variant may be dropped due to slow sales or low

profits
2. Reaction of customers, besides cost & operational
issues are considered before taking a decision
3. However, dropping one variant, may add to the cost
of the others
4. Dropping a variant will be seen as an admission of
failure by customers & distribution channels & will
also be an indication of reduced commitment to the
Product Category
Inputs for New Products
For product modifications & extensions the
following are done:
1. Customer Analysis
2. Competitor Analysis
3. Active Search:
Of new products & processes in other
areas with a view to incorporate them in
company’s own product
4. Category Analysis
5. Brainstorming
Other sources include the following:
 Customers
 Employees
 Suppliers
 Distribution Channels
 Operations people
 Internal & external R & D
 Entrepreneurs
Testing slightly new products
All new products need to be tested for a
feedback:
Foll. methods are used :
Concept Testing
Product Testing
Market Tests
Quasi Market Tests
Testing slightly new products
 Concept Testing is done through:
 Surveys
 Focus Groups
 Demonstrations
 Product Testing involves physical use by customers and
used for :
 Diagnostic
 Trial
 Placement of product
 Discrimination & Preference Testing feedback is
obtained.
 Market Tests are done to predict sales and to set up the
infrastructure for selling
 Quasi Market tests tend to be a little expensive.
Forecasting
 Forecasting for New products though difficult needs to
be done.
 It is done using the foll. 4 key factors :
Awareness
Trial
Repeat
Usage Rate
 Different Models are available for carrying out these
exercises.
Brand Extensions
Of late customers extend Brands beyond
their original category
Eg: Nike – Sportswear
Dunlop – Sportswear
Reliance – Fresh, Footwear
Sony- Entertainment
Godrej- Housing, Food etc.
Brand Extensions
 Carries a lot of Risk
 Product Manager has no control over these Brand
Extensions
 Brand extension value depends on the value of the
original Brand and the fit in the new category.
 Fit depends on the technical competence and Image
match
 A key issue regarding extensions is the impact of the
extension on the original brand.
 Research continues to be done on the success of Brand
Extensions & acceptability by consumers.
Real New Products
Some examples are :
1. Packaged Food
2. Bottled Beverages
3. Cut & frozen veg, fruits etc.
4. Cell phones
5. ATMs
6. R.O.water filters
7. Microwave ovens
8. Tata Sky programme recorders
9. Gym Products
10. Neutraceuticals
Real New Products
Create or expand a new category
New to customers-have to learn
Require new channels & Team to handle.
Real New & Slightly New Products
Before introducing a slightly new product,
a detailed analysis & review needs to be
done. Ref. annex.
For a real new product, there is no
industry to analyse & the competitive set is
not defined
Emphasis is more on achieving sales &
advertising is used only to build
awareness.
Customer Feedback
Survey
Involvement with customers – Industrial
Products
Scientists
New Technology
Evaluation of New Products
Real new products tend to take a few years for
development
Following Characteristics are analysed :
 Relative Advantage
 Compatibility – Retrofitting should be feasible
 All types of risks
 Complexity
 Communicability
 Trialability
Conclusions
New Products are the lifeblood of many
companies.
Eg: 3M, Gillette, HP, Sony, Nokia, etc
Slightly new products are relatively easy to
forecast & low in risk
Real new products take time to develop &
hard to forecast
Summary
1. Most Product Managers have limited flexibility in
changing product composition
2. Proper evaluation is made considering the
following, before any new product is introduced:
 Customer need and acceptance
 Impact on Brand value / Equity &
customer loyalty
 Capability to produce
 Impact on costs
 Long term profitability
3. Product Manager has to form teams across
functions- Mktg., Design, R & D & Operations &
coordinate with them for the systematic
development of new products.
Pricing Decisions
Pricing Decisions
1. Introduction
2. Elements considered when prices are fixed.
3. Types of Market Situations
4. Marketing Strategy & Prices
5. Measuring Perceived Value & Price
6. Psychological Aspects of Price
7. Competition & Pricing
8. Pricing Objectives
9. Other Factors affecting Price
10. Specific Pricing Tactics
11. Summary
Introduction
1. Price is one of the most important factors that
determines the success or failure of a product
in a market.
2. Originally Pricing was cost based:
Price = Cost + Profit
3. Different Prices produce different levels of
Demand.
4. Customer plays an important role in the Pricing
of a Product.
Introduction
5. Customer does not care about your cost.
Looks at Value
6. Purpose of Price is to capture the perceived
value of a Product in the mind of the customer
7. Price is therefore not determined by internal
factors alone, but also by customers
8. Pricing has become one of the most innovative
areas of Marketing.
Elements considered when Prices
are fixed
1. Production cost
2. Profit Plans
3. Brand Image / Equity
4. Seasonality of Business
5. Market Segment
6. Competition
Elements considered when Prices
are fixed
7. Product Life Cycle stage
8. Guarantee / Warranty
9. Payment Methods & Terms
10. Discounts / Special Offers
11. Range of Products with the Firm
12. Product value & utility for the customers
Types of Market Situations
There are usually three types of market
situations and each gives pricing
opportunities in diff. ways :
1. Monopoly Market
2. Oligopoly Market
3. Perfect Competition
Types of Market Situations
Monopoly Market
There is only one supplier of the product and in such
cases the firm has the foll.options :
 Charge Premium price or keep skimming price
 Keep cost plus pricing
Oligopoly
 Four to Five suppliers
 Customer’s purchasing power governs the price
 Sometimes cartel formed
Perfect Competition
 Large no. of suppliers of the product, Size,
category etc.
 Perfect competition usually brings about
penetrating prices.
Marketing Strategy & Prices
 Price must be consistent with the Marketing Strategy that
is developed.
 Marketing Strategy consists of Market segmentation &
core strategy or Product Positioning decisions.
 Prices can vary widely over segments leading to Price
Discrimination.
 Substantial price variation can exist even within a
targetted segment- Price Bands.
 Product Manager to understand price sensitivity of the
different mkt. segments & the flexibility (width of the price
band)
Measuring Perceived Value & Price
 Perceived value of a Product by the customer
becomes very important
 Customers have some notion on what constitutes a
good or a bad price
 Notion is developed by :
 Comparing the price being charged to the
perceived value or benefits that would be
derived through purchasing.
 Comparing price to a reference point-past
price
Three possible relations
1. Perceived value > Price > Variable cost
2. Price > Perceived value > Variable cost
3. Price > Variable cost > Perceived value
Perceived value > Price > Variable cost

Product Manager “leaves money on the
table”-sacrifices profits by charging less
than what he can obtain.
This situation is extremely difficult for the
PM to discover without using Market
Research methods
“Value Pricing” is sometimes done
deliberately as a strategy.
Price > Perceived value > Variable cost
 The Product is a bad deal.

 Customers simply do not buy the
Product.
 Increase in customer value or
downward price revision is necessary.
 Competition is used as reference point.
Price > Variable cost > Perceived value
 Product needs to be withdrawn from

the Market.
 Such products need to be weeded out.
Measuring Customer Value
Psychological Aspects of Price
Customers continuously assess the prices
charged for products based on prior
purchasing experience, formal
communications etc.
The concepts relating to psychological
aspects of pricing are :
Reference prices
Relationship between Price & Perceived Quality
Reference prices
1. External prices are prices marked or Retail Prices
2. Internal prices are mental prices used to assess an
observed price
3. Internal reference prices include :
 Last Price paid
 Price frequently charged
 Fair price
 Upper amount someone would pay
 The price of the brand usually bought
 Average prices charged for similar products
 Expected future price
 Typical discounted price
Reference prices
 Concept of Reference price has important implications
for Product Managers
 During a promotion, the special price offered would
seem to be the reference price for the consumer
thereafter
 Customers also resort to predicting future prices and if
they feel it is going to drop, wait for the price cuts
 Some PMs, knowingly or unknowingly, create
predictable pricing patterns. Customers make decisions
based on their personal forecasts of future prices.
Relationship between Price & Perceived Quality
 In some situations, higher price can lead to
higher demand.
 Customer perceives the higher priced
product to be of higher quality
 The Brand imparts a feeling of Prestige to the
owner
 Other examples are when it is difficult to
assess the product’s quality. E.g.
Experience,- Perfume, wine, services etc,.
Competition & Pricing
1. PMs have to estimate competitor’s
cost in the Product category
2. It helps in determining margins in the
category & useful in the case of a
Price war.
3. Also helps in deciding amount that can
be spent in Brand building
4. Two ways of estimating :
 Reverse Engg.
 Use of Publicly available data.
Use of Publicly available Data
Average margins are ascertained
Experience curve is used to understand
current costs & forecast future costs.
The assumption is that costs are a
decreasing function of accumulated
“Experience” or production volume.
Ref. notes.
Historical Pricing Behaviour
Historically, certain brands tend to be the
first when it comes to price increases
Competitons follow suit
Most PMs tend to be pro active
Competitor Analysis and Objectives of
competitor will help the PM to decide on
the Pricing strategy.
Pricing Objectives
Pricing Objectives are set after the PM has carried out
the analysis on Category, Customer & Competition
Penetration Pricing
 This strategy is often used as an entry strategy for a
new product
 The Objective of Penetration pricing is to build or
keep a market share
 Not to be used when the product has a strong
competitive advantage.
Prices for Industrial Products
 Customers prefer stability
 Look at transparency and a Model / Formula
 Some customers like GM look at YOY price
reductions
Pricing Objectives
Skimming
It is the opposite of Penetration pricing
Reasonable objective when there is little
chance of competition in the immediate
future.
Also a good objective when costs are not
related to volume
Pricing Objectives
Competitive Pricing
Here the PM tries to maintain a
“Competitive’Price
Done either by pricing at Category
average or equivalent to the competitor’s
price
May be necessary in a Product Category
with high Fixed costs.
Other factors Affecting Price
Stage Of Product Life Cycle
Other factors Affecting Price
Category Conditions
Threat of New Entrants
Power of buyers / Suppliers
Rivalry
Pressure from Substitutes
Unused capacity
Specific Pricing Tactics
1. Product Line Pricing
2. Price bundling
3. Complementary Pricing
4. Value Pricing
5. Price Discrimination
6. Seconds Market
7. Seasonal pricing
8. Auctions
Summary
1. Price Objectives and Pricing made only after
an analysis of the market & finalisation of
Marketing Strategy.
2. Customer plays an important part in the Pricing
of a Product
3. Reference Price & perceived value affects the
strategy and profits of the company
4. Product Manager’s role is crucial in the pricing
of a Product which affects the fortune of a
company.
Sales Promotion
Sales Display & Sales Promotion
1. Objectives of Sales Display:
Products shown to potential customers
Details & features about product seen by
customer
Display induces customer to purchase
Reminds customers about the need & they
are attracted to buy
2. Types of Sales Display:
There are three forms of display:

1. Interior Display
2. Exterior Display
3. Other Displays
a.Interior:
Floor / Walls / Showcases, etc.
Display / Lighting / Colour matching
b. Exterior:
Show window
Attracts attention
c. Other displays:
Show room / Show cases
Outside – Places of public interest
Inflatables – Outside the show room
 Classes of display:
1. Product Unit Display
2. Life – style Displays
3. Assortment
 Open – Super market
 Closed Jewellery
4. Rack Display
3. Role of Retailers in Sales Displays:
Retailers have a major role to play
They need to be:
Trained & Motivated
Training
 Space Utilization
 Rotation
 Creative displays
 How to attract customers
Motivating the Retailer:
Display contest
Publicity through newsletters mentioning
retailer’s name
Provision of display goods & fixtures at
subsidised prices
Sales Promotion
Role of Sales Promotion
 Informs
 Persuades
 Reminds
Definition
Sales Promotion consists of a diverse
collection of incentive tools, mostly short
term, designed to stimulate quicker and / or
greater purchase of a particular product by
consumers & traders.
Kotler
Push- Pull Strategy
Aimed at channels of distribution.
Distributors / Wholesalers / Retailers
Includes a lot of Personal Selling & Sales
Promotion
Factors Influencing Sales Promotion
a. Target Market / Segment
b. Nature of Product & Services
c. Stage of the Product Life cycle
d. Budget available for Promotion
a. Target Market / Segment
Customer may be in any one of the foll
stages :
 Awareness
 Knowledge
 Liking
 Creating preference
 Conviction
 Purchase
b. Nature of Product & Services
Product Attributes which influence the
Promotional Strategy
 Nature of pre-sale & post sale
 Unit Price
 Degree of customisation
Factors Influencing Sales Promotion:
c). Stage of the product Life cycle:

Both Advertising & personal selling are critical
in a Product’s Introductory stage
d). Budget available for Promotion:
Budget for Sales promotion can be prepared by:
Follow Competition
% of sales
Budget by objectives
Fixed funds
available
Tools of Sales
Promotion:
7. Entertainment of customers
1. Prize schemes 8. Sales contests – Sales
2. Trade fairs & exhibitions personnel
3. Free samples 9. Price – off
4. Correspondence 10. Refunds
5. Catalogues 11. POS materials
6. Advertising Novelties 12. Boosters for dealers
Summary:
Sales Displays are very important for

Retailing
Attracts customers & enhances image
of the stores
Increase sales & Profitability
Dealers need to be motivated
Sales Promotion Strategies
1. Introduction to Sales Promotion
Objectives
2. Launch New Product & Increase Trial
3. Encourage Repeat Purchase
4. Sales Promotion & Consumer Behaviour
5. Consumer’s Price Perception
6. Perceived Risk & Attitudes
7. Consumer Decision Making
8. Profiles of High & Low Involvement
Consumers
9. Rate of Discount, Terms & Conditions
10. Protection from Competition
11. Summary
1.0 Introduction to Sales Promotion Objectives:
 Sales promotions are used to achieve some of
the marketing objectives
 Some of the Sales Promotion objectives are:
Proactive:
 Increase Revenues / Market share
 Expand the target market
 Add extra value to the product & develop brand
franchise
Reactive:
In response to competitive moves
Due to excessive Inventory
Generate short term cash
When you discontinuous a product or
close down the business
 It is important to spell out the objectives which

the sales Promotion offer is intended to achieve
 The objectives should be:
Specific Practical & realistic
Measurable Affordable
Clear & concise Attainable

Examples:
a) Marketing objective:
 To increase market share from 15% to 20%
 Increase sales by 15%
 Increase profit by 10%
b) Marketing Strategy:
 Promotion to use a combination of ‘Pull’ &
‘Push’
 Increase purchase rate of Trade
Promotion objectives:
 Increase purchase rates by consumer
 Maintain distribution at 85%
 Decrease inter – purchase duration for 8 weeks
to 6 weeks
Sales Promotion Strategies:
 Use Trade & consumer deals
 Use ‘Pull – Push’ sales promotions to encourage
faster usage rate & frequency price cuts
 Stop common promotion which are unprofitable
Promotion Objectives can be:
Increase sale volume
Speed up sales of slow moving
products
Attract new customers
Launch new product & increase trial
Encourage repeat purchase
Clear excess inventories
Motivate dealers / Sales force
Improve relationship with dealers
Block competitors’ moves
Supplement Advertising & Personal
Selling efforts & deflect customers’
attention from price
2.0 Launch New Product & Increase Trial
 Small budget companies that cannot afford
sustained advertising expenditure to introduce
new products, find sales promotion very cost
effective & helps in generating Sales volume
 Extra benefit to customers & retailers help in
trial by customers & in obtaining shelf space
 Freebies with the product together with
attractive displays at the Retailer shops help
in initial trials by consumers
3.0 Encourage Repeat Purchase
 Repeat purchase leads to increased sales volume
 Offers may be given by way of ‘Freebies’ or tokens, etc.
Block competitor’s moves:
 A company threatened by competition sometimes plan to
load consumers to increase the interval of purchasing
 Bundled offers for soaps, etc.
 Attractive retailer schemes to block shelf space is
combined with above
 A ‘Push – Pull’ strategy is used
Encourage Dealers to participate in Display &
Sales contests:
 Display is a powerful tool to enhance sales.
Generate higher sales volume
 They encourage unplanned purchases
 Contests are used to motivate dealers.
Combination of incentives & certificate
 Contests help in attaining short – term objectives
& improve company reseller relationship
Advertisements:
Print advertisements with ‘Free’ offers
often catch the eye of consumers
4.0 Sales Promotion & Consumer Behaviour:
Understanding consumer behaviour can help in
launching appropriate sales promotion
measures
Classical Conditioning:
 A brand frequently associated with premiums &
contests can excite customers to buy
 Customers get conditioned by performing a
certain type of behaviour repeatedly
 Customers have learnt to be smart shoppers
because of this conditioning
Instrumental Conditioning:
Behaviour is a function of its
consequences
Favourable experience as the outcome
becomes instrumental in encouraging
the consumers to repeat the behaviour
in future
A coupon inside the product pack
serves as a good example of
instrumental conditioning
Attribution & Dissonance Theories:
 Group of inter – related psychological principles
 Consumer’s explanation on their behaviour is
called attribution
 Attributions have a direct effect on attitude but
have no direct effect on behaviour
 Attitudes affect behaviour – hence relevant to
sales promotions
Self Perception:
 Consumer’s behaviour due to external causes
(sales promotion) or internal (favourable brand
attitude)
 Consumer’s behaviour in using a combination of
these at the time of buying
Object Perception:
 If a particular brand alone is offered at a
discount, frequently, consumers may draw a
conclusion
that the brand is inferior
Dissonance Theory:
Dissonance or Discomfort is felt by
consumers when they are exposed to
information that conflicts with their original
belief or attitude
Especially in expensive high - involvement
product purchases
Post purchase dissonance is quite normal
5.0 Consumer’s Price Perceptions:
 Consumer’s perceived prices are important to
determine the appropriate price reduction
 Amount of difference between the list price &
the promoted price should be sufficient
enough to be noticeable
 To protect the shift in consumers’ perceived
reference price, marketers often provide a
reference price in their communications of
sales promotion
 Eg: Rs. 18 Rs. 16

6.0 Perceived Risk & Attitudes:
 Perceived risk is defined as ‘the uncertainty
that consumers face when they cannot
foresee the consequences to their purchase
decisions’
 Two important dimensions associated with
the purchase of a new brand –
 Uncertainty & Consequences
 Only the risk which is perceived by the
consumers will affect the purchase decision:
Will not affect the purchase behaviour of the
consumer if not perceived
Risk can be:

Functional Physical
Financial Social
Psychological
Two ways that consumers use to reduce risk
Reduce uncertainty
Reduce consequences of a wrong choice
High risk perceivers reduce the risk by purchasing well
known brands
7.0 Consumer Decision Making
Four types of behaviour depending on the degree
of perceived differences among brands & the
level of consumer’s involvement in a purchase
situation
1. Complex Buying behaviour
2. Dissonance reducing buying behaviour
3. Habitual buying behaviour
4. Variety seeking buying behaviour
8.0 Profiles of High & Low Involvement
Consumers
To maximize the satisfaction from their
purchases is the purpose of highly
involved consumers
Consumers with low involvement seek
only an acceptable level of satisfaction
after the use of the product
9.0 Rate of Discount, Terms & Conditions
 Price elasticity of low prices products is high
because consumers do not perceive much
difference between brands & do not mind
switching to another brand
 In case of trade promotion, the producer may
specify the minimum purchase value or the
quantity of product to avail the benefit of
promotion
 Terms & conditions vary with products, market
conditions & consumers response patterns
10.0 Protection from Competition:
Normally for any promotion, competitor
follows suit
One way to gain protection is to make the
promotion a little complex & difficult to
copy
Company can also tie up with a non -
competing product
Summary:
 Sales Promotion aims at inducing purchasers to
buy a product
 It involves, demonstrations, contests, coupons,
etc.
 Sales Promotion activities are designed to
encourage resellers to sell the product
 Sales Promotion objectives are to be consistent
with Marketing objectives
 Sales promotion alters the market share
permanently
Sales Promotion Budget &
Evaluation
1. How are sales affected by Sales
Promotions ?
2. Sales Promotion Design Issues
3. Testing the Sales Promotion
4. Guidelines to Planning Sales Promotion
Evaluation
1.0 How are Sales affected by Sales Promotions ?
Sales Promotion affect sales through these
mechanisms
 Brand switching
 Repeat buying
 Purchasing more or accelerating timings
 Increasing category expansion & consumption
Sales Promotion Budget & Evaluation
Brand Switching
Objective of some sales promotions is to
induce brand switching
Repeat Buying
Sales Promotion scheme is introduced to
promote repeat buying of the same
brand.
Objective is to make it a habit especially
for Low-involvement products
Purchasing more or Accelerated Timings

Consumers buy more qty. than their
immediate requirements or the purchase
timings are changed.
Increasing category Expansion &
Consumption
Consumption of total product category is
increased by the consumers as a result of
sales promotion.
Evaluation
2.0 Sales Promotion Design Issues
1. Promotion Choice
2. Product Choice
3. Choice of Market Areas
4. Promotion Timing, Duration & Frequency
Sales Promotion Design Issues
Promotion Choice
Different types of promotions that can be used singly or in
combination:
 Consumer Promotion
 Trade Promotion &
 Sales Force Promotion
Two major approaches for consumer & Trade promotions
 Same for Less
 More for the same
Two types of promotions are usually offered:
1. Immediate value offer vs Delayed value offer
2. Price cut vs extra Value Offer.
Product Choice
Sales Promotions can be run on the entire
product line or only selected items in the
line.
Choice of Market Areas

 National or regional markets can be
chosen.
Sales Promotions of similar value products
are normally announced at the same time
everywhere.
Promotion Timing, Duration & Frequency

 Normally promotions are introduced when
the channels have enough inventory
Duration of consumer promotion should be
such that a larger % of customers get
exposed to the promotion offer.
Low involvement products have a shorter
duration
3.0 Testing the Sales Promotion

Pre Testing
Pre test helps to find out what is likely
to be the perceived value & the risk
Pre test can be conducted by using “
Focus Groups” & “consumer Panels”
Concurrent Testing
Is done when the sale promotion is in
progress. Helps in modifying the
promotion if needed.
Post testing
An evaluation is done on the success of
the promotion at the end of the scheme.
Helps in the launch of future promotions.
Guidelines to Planning Sales Promotion
1. The first step in Promotion Planning is

“Situation Analysis”
2. Based on Marketing Objectives & Strategies,
the promotion objectives would be developed.
3. Measurable objectives must be set.
4. Allocation of Budget to Sales Promotion from
the Total Budget is made.
5. Considering the objectives & the Budget
allocation, each promotion event must be
carefully created.
Types & Techniques of Sales
Promotion
Promotion
1.0 Types of Sales Promotions:
Promotions are generally offered by

Manufacturers
Retailers
Promotion
2.0 Sales Promotions- Tools & Techniques
Price deals Continuity plans ( Flap exchange)
Bonus paid Trade coupons
Coupons Trade allowances
Contests Exchange offers
Sampling Trade fairs / Exhibition

Event sponsorships
Above list includes both Trade & consumer Promotions
Used for a variety of Products
Promotion
3.0 Price Deals
 Generally used when Brand Loyalty is low
 Product category is considered a commodity
 Price is the primary consideration
Price Discount:
 Discount given to beat competitors’ prices
 Also used to generate additional sales & increase in
Market share
 Communication through:
 Press / TV / POP / Display
 Retailers offer discounts to liquidate inventory
Discounts from 5% to 20%
Promotion
Advantages:
Flexibility & convenience of
implementation
Discount offers immediate value
‘Pull & Push’ can be implemented
Price offers can be kept flexible:
Products / Discount / Period
Promotion
Disadvantages:
 If competition offers similar discount, advantage
is lost
 Sales may drop when discounts are withdrawn
 Price discounts may lead to decrease in Brand
Loyalty
Price – Pack Deals:
 Also called value – packs
 Bonus Pack / Branded pack
Promotion
4.0 Refunds & Rebates
Refund orders are used to :
• Encourage trial of a new product
• Purchase of increased quantity
• Increasing the frequency of purchase
• Encourage customers to purchase those
products whose purchases can be
postponed.
Promotion
Refunds & Rebates
Some of the offers make the customer buy
the product on trial basis with an option to
return if they are not satisfied.
Refund offers are only limited by the
imagination of the promotion planner and
the budget allocation.
Promotion
Coupons
1. Coupons can be used to achieve many
different sales promotion objectives.
2. Coupons are particularly attractive to
consumers who are price sensitive.
3. Coupons generally attract older, better
educated, urban, miiddle-income families.
Distribution
Coupons can be delivered direct to customers,
through the print media or along with the
product.
Promotion
Coupons can be used to serve the foll.
Objectives:
1. Encourage trial
2. Encourage Brand switching
3. Encourage Repeat Purchase
4. Supplement Print Media Advertising.
5. Price Discrimination.
Types & Techniques of Sales Promotion
Contests
1. Among all the sales Promotional devices,
probably the most exciting & highly
rewarding are the contests & sweepstakes.
2. A contest is an event that invites the
customer to apply skill to solve or complete
a special problem. American Assoc. of Adv.
Ag.
3. A contest is based on testing skill or ability
& may not involve proof of purchase to
enter the contests.
Types & Techniques of Sales Promotion
4. Two stages :
 Contest in terms of skill.
 A draw of chance to decide the
winners
5. A sweepstake is a random drawing
& is sometimes called a chance contest.
May or may not involve purchase of any
product or service.
6. Often a combination of contest &
sweepstakes is employed in some
promotions
Promotion
Premiums
1. A Premium (Gift) is a reward given to the
consumer for purchasing a product or service.
2. Premium may be given free or made available
at a price well below the market price. E.g.
 Printer free with computer
 DVD Player free with LCD TV.
3. Premiums are chosen carefully to appeal to
the consumer.
Promotion
In-Pack, On-Pack & Container Premiums
 Premiums are attached either to the product,
enclosed with the product or otherwise available with
the product when the consumer buys the product.
 Premiums can be used to solve a competitive price
advantage or to counter the competitor’s coupon
promotion.
In-pack Premium
Premium is enclosed inside the product pack. Such
premiums are generally small & low priced.
On-Pack Premium
Attached to the outside of the product package. Also
known as banded premium.
Promotion
Near-Pack Premium
Premium bulky in size & cannot be enclosed
or packed with the product. E.g. Bucket
Container Premium
Product itself is packed inside the premium,
which is a container.
E.g. Bru, Tata Tea, Pet jars, glass tumbler
etc.
Promotion
Summary
 Premium selection should be based on Pre
testing
 The premium should be a known brand name.
 Premium should communicate its good quality &
Value
 Premium should (if possible) be related to the
promoted product or the promotion theme.
 Premium should be as distinctive as possible.
Promotion
Summary
Promotions are generally offered by both
Manufacturers and retailers.
Price appeal include Price-cuts, coupons,
rebates, bonus packs etc.
Promotions are powerful competitive tools.
Distribution Management &
Marketing Mix
Distribution Management & Marketing Mix
1. Introduction
2. Distribution Management
3. Distribution Channel
4. Distribution Channels-Why are they
required?
5. Activities of a Distribution Channel
Distribution Management & Marketing Mix
6. Functions of Distributor Channels

7. Value enhancement through the
Distribution Function
8. Distribution channel strategy
9. Setting distribution Objectives
10. Overview of Distribution Channels
11. Patterns of Distribution
1.0 Introduction
 Distribution Management deals with the ‘Place’
part of the ‘Marketing Mix’
 Provides Place, Time & Possession utility to the
customer
 Customer buys a product at a particular Place &
Time & takes Possession of it by making the
payment without the direct involvement of the
manufacturer
 This is the role that the Distribution Management
function of the company has played
2.0 Distribution Management
Definition:
 The Management of all activities which facilitates
movement & coordination of supply & demand in
the creation of time & place utility in goods
 The art & science of determining requirements,
acquiring them, distributing them & finally
maintaining them in an operationally ready
condition for their entire lives
 Broad range of activities concerned with the
efficient movement of finished products from the
end of the production line to the customer
3.0 Distribution Channel
Definition:
 Distribution channels are sets of
interdependent organisations involved in the
process of making a product or service
available for use or consumption
- Stern & El Ansary (1992)
 They play a critical role in the overall
marketing function
 As companies expanded, direct distribution
became unmanageable & also quite
expensive
Distribution Channel
Definition:
 Intermediaries came into the picture
 Intermediaries are a link between the
manufacturer & his customers
 Their primary job is to re – distribute the
products of the company in a manner that it
reaches the ultimate consumer & gets used
 Intermediaries are able to perform the
Distribution functions & deliver benefits at a
lower cost than if the company were to do it
by itself
4.0 Distribution Channels-Why are they required ?
Channels or intermediaries exist for the following
reasons;
 They help in the smooth flow of goods & services
 They improve the efficiency of the process
 They adjust the discrepancy of assortment
through the performance of the sorting process
 They hang together in channel arrangement to
provide for the routinization of the transactions
 Channels facilitate the searching process
5.0 Activities of a Distribution Channel
 Discrepancies creep in between a typical
production activity & a typical consumption
activity
 General discrepancies are:
Spatial Discrepancy
Temporal discrepancy
Need to break the bulk
Need to provide assortment
Information Gap
Need for Financial Support.
Activities of a Distribution Channel
a). Spatial Discrepancy:
 Can be defined as the discrepancy that exists
because of the physical distance between the
location where a product is manufactured & the
location where the product is eventually
consumed
b). Temporal Discrepancy:
 Can be defined as the discrepancy that exists
because of the inevitable difference in the point
in time at which a product is manufactured & the
point in time when the product is consumed
 If the stock consists of perishable items, the task
for bridging the temporal discrepancy becomes
all the more complex & critical
c). Need for breaking the Bulk:

To achieve economies of scale, products
have to be manufactured in bulk quantities
Products are consumed in smaller
quantities Without the routinization activity,
performed by the intermediaries, millions
of small transactions will take more time &
effort
d). The Need for Assortment:
 Most of the time, consumers demand an assortment &
not just a single product
e). Information Gap:
 This is especially true in the Travel & Tourism Industry
f). Need for financial support:
Combination works better:
Most companies use a combination of a direct & indirect
distribution modes
Technical equipment requiring technical knowledge & high
value products are sold directly by the company & not
through intermediaries
6.0 Functions of Distributor Channels
1. Collection of information about
customers, competitors & any other
entities which can affect a company’s
marketing efforts
2. Provide for storage & physical
movement of the goods
3. Place orders on the manufacturers of
the goods for delivery to end users or
other customers
4. Canvass sales of products through
effective communication
Functions of Distributor Channels
5. Act as a link for transferring ownership of
the goods from one party to another
6. Finance the inventories after the goods
leave the manufacturer till they reach the
end user
7. Provide credit facilities to their buyers
8. Help the manufacturer to effectively run,
trade & consumer promotions
7.0 Value enhancement through the
Distribution Function
1. Distribution function complements the form utility by
providing the time & possession utility
2. Time Utility:
 Customer need not buy in advance & stock the item.
Can buy when he requires
3. Place Utility:
 Products are available at a convenient location
4. Possession utility:
 Channels routinize transactions & maintain linkage with
the upstream entities
Value provided by a distribution channel often goes beyond
the three utilities provided
8.0 Distribution Channel Strategy
 Distribution, being part of the Marketing effort, forms
a critical part of the Marketing Strategy.
 It is critical because the distribution channel strategy
cannot be frequently changed as it requires building
a network based on sound, & long term
relationships.
Distribution looks at some of the foll. Factors:
 Defining customer service levels
 Define the distribution objectives to achieve these
service levels
8.0 Distribution Channel Strategy
Outline the steps or activities required to
achieve the Distribution channel objectives
Decide on the structure of the network.
Make out a Policy & Procedure for the

network to carry out its daily activities
Outline the key performance indicators
Understand the critical success factors to
make the distribution Strategy effective.
Overview of Distribution Channels
Distribution Channels can broadly be

classified as :
Sales Channel
Delivery Channel
Service Channel
Overview of Distribution Channels
Distribution Channels normally include the foll:

 Co. owned Distribution centres
 Carrying & Forwarding agents ( C & FAs)
 Consignment selling agents
 Distributors, stockists, value added reseller
agents.
 Wholesalers
 Retailers
Patterns of Distribution
This determines the intensity of desired
distribution
Intensity denotes the service level that the
organisation provides to its customers
There are three types:
Intensive distribution
Selective distribution
Exclusive distribution
Intensive
This strategy is to make sure that the product is
made available in as many outlets as
possible so that, anywhere the consumer
goes, he or she should be able to get the
product of his choice. E.g HLL, FMCG,Auto
spares etc
Selective
Outlets are carefully selected by the co. in line
with the image it wants to project about itself
and its exclusive products. E.g Philips,
Tanishq etc.
Exclusive
Exclusive- as the name suggests
Co. keeps a close watch & control on the
distribution of its products.
Summary
 Companies cannot reach hundreds of customers
directly and hence have to use the medium of
distribution channels
 Distribution channels provide the right situation
for time, Place & Possession Utilities for the
company’s products
 Distribution Channels provide financial support
to the Marketing effort to maintain healthy
inventory levels & credit in the market place
 Companies can also decide on the intensity of
the distribution effort.
Marketing Channels
Marketing Channels
1. Introduction
2. Five kinds of Flows
3. Information Flows
4. Marketing Channel & Formats
5. Relationship of Flows to Service Levels
6. Channel Levels
7. Service Channels
8. Expectations from Channels
9. Channel Systems
10. Multi Channel Marketing Systems
Introduction
Company Customer:
Products
Current
Potential
Introduction
 Co. needs to communicate to the customers on :
 Price
 Availability
 Other terms & conditions
 Channel Partners- Facilitate change of title of
the products from manufacturer to the end
users
 They take physical possession of the goods,
pay for it & are also responsible for the stock
including its condition.
 Channel is responsible for the safe keeping of
stocks & takes the risk towards storage,
losses, price fluctuations etc.
Introduction
 The physical movement of goods is also the
responsibility of the channel partner
 Channel also takes care of :
Sales on credit
Insurance
Complete documentation
All statutory levies.
Five kinds of Flows
a) Physical Flows of Goods
b) Title Flow of the Goods( includes
negotiation, ownership & risk sharing)
c) Payment Flows for the Goods
d) Information Flow about the Goods, orders
placed, executed & so on
e) Promotion Flows about the advertising &
other support to the customer
 Channel Partners or members are involved
in various degrees in all these flows
 For every flow in the channel, there is an
element of cost involved
Information Flows
1. Correct, accurate & immediate information on
all transactions at each stage must flow to the
channel members, company & customers
2. Info. Flows are in the nature of reports &
records. Examples are :
 A one time info. to the channel members on
the features of the co. products, details of
customers, prices, margins & any promotional
or merchandising support.
3. Inventory levels to be held by the distribution
centres
Information Flows
4. Frequency of stock receipts, production
centres etc.
5. Indents / orders from distributors to C &
Fs
6. Info. on targets, performance- monthly
etc
7. Info. to customers on co. products by
distributors, including promotional offers.
8. Details of Invoices generated
Marketing Channels- Formats
Channels can be categorised depending
on who drives the channel:
Producer Driven
Seller Driven
Service Driven
Others
Producer Driven
Co. owned Retail Outlets
Licensed Outlets
Consignment selling agents
Brokers
Franchisees
Distributors
Seller Driven
Existing Retailers
Wholesalers
Franchisees
Modern Store Formats
Specialty stores
Discount stores
Agents, Dealers, stockists
Door to Door sales people
Service Driven
Carrying & Forwarding agents
Transporters
Warehouse owners
Couriers
Credit Card companies
Financial Institutions
Logistics Service Providers
Others
Multi level marketing
Co-op Societies
Kiosks
Vending Machines
Gift Makers
TV Home Shopping
Catalogue Shopping
Internet Based Sellers
Exhibitions, Trade Shows
Database Marketing
Relationship of Flows to Service Levels
Channel Design depends on the

Product, the customers & what
competition has to offer
Cost associated with the channel
system should be affordable to the co.
The nature of the product dictates the
flows required in the channel system
Consumer Product- C & F –Wholesalers
etc
Relationship of Flows to Service Levels
Ownership flow is relevant as the products

change hands before reaching the final
customer
Each channel member performs only
some of the channel flows. The channel
flows performed by all the channel
members put together helps deliver the
customer service output.
Channel levels
No. of Channel members decides the level
of the channel in operation
Zero-Level Channel : Direct distribution.
Co. to end user or consumer directly
One-Level channel : Consists of one
intermediary. E.g. Big Bazaar, Vivek & co.
Two-Level Channel : Two Intermediaries.
E.g. FMCG.
Service Channels
Service : Education, Banking & Insurance,
Hospitality, Financial Services, etc
Companies have to establish their own
unique channels for distribution of their
service to the largest no. of end users
Each of these, uses a unique channel to
promote their business.
Expectations from Channel
Expectations of the end user or consumer is
as follows:
Variety of Products
Location-Proximity to the consumer
Speed of Delivery
Availability-In terms of sizes as well
Home Delivery, credit, packing etc.
Expectations from Channel
Services of Channels
Channels take care to provide the foll:
 Provide smaller qtys
 Place utility
 Min. cycle time
 Variety, assortment etc
In the case of consumer durables, the channels
provide:
 Installation support
 After sales support
 Training of personnel
 Finance
Company Policies
Co. takes policy decisions to enable the channel
partner to deliver
 Clear Pricing-MRP on pack
 Clear terms on payment, sales returns,
damaged goods, etc
 Frequency of Delivery
 Min. Inventory
 Assignment of territory
 Any other support
Channel Systems
1. Vertical Marketing Systems
2. Horizontal Marketing Systems
3. Multi Channel marketing Systems

Channel Systems
Vertical Marketing Systems
 When the manufacturer, Distributor & retailer act
together as one team to provide service to the end
user, it would be called a “Vertical Marketing
System”
 All members cooperate & work together
 Conflicts are avoided
 Improves efficiency & Marketing effectiveness
 Benefit from size, bargaining power & reduce
duplication
Three types
1. Corporate
2. Administered
3. Contractual
Channel Systems
Vertical Marketing Systems
Corporate
Successive stages of production &
distribution are handled by one entity
Gives a high degree of control over the
channel for the co.
Retailers are resorting to this for their own
brands
e.g Mico filters
Channel Systems
Administered VMS
 One entity or a distributor controls other channel
partners.
 Manufacturers like HUL or Nestle dictate terms
to retailers on stock levels, shelf space, displays
etc- Coca Cola, Gillette etc
 These products and brands enjoy a strong
consumer franchise
 All channel members are proud to stock and sell
these products & willing to listen
Channel Systems
Contractual VMS
 Convenient arrangements between channel
members when they get together to achieve
economies of scale or use favourable
opportunities to increase their sales.
Can take the form of:
 Retailer co-operatives like Janatha Bazaar,
TUCS etc
 Manufacturer sponsored-car dealers of Maruti
& Hyundai
 Bottlers of pepsi or Coca Cola
 Service firm sponsored: Retailer franchise
like Coffee Day, MacDonalds etc.
Channel Systems
Horizontal Marketing Systems
 Two or more unrelated companies.
Arrangement provides benefits to both
 Highly opportunistic arrangement
 Each co. exploits the strength of the other. A
mutually beneficial arrangement
E.g. Supermarkets- ATMs
Café Coffee day- Airports
Retail Outlets in petrol pumps
Veg shop / soup counters / etc in dept
stores- Vitan
Channel Systems
Multi Channel Marketing Systems
Companies use 2 or more marketing channels to
reach different customer segments.
FMCG- Different for Retail & Institutional
Benefits
 Better coverage of the market and its various
segments
 CSD-classified as a separate customer /
segment
Channel Systems
Multi Channel Marketing Systems
Generally used where :
 Same product is sold to different segments
 Un related products are sold in the same market
 Size of buyers varies
e.g Tea / Coffee- Retailers & Hotels, Hospitals &
Nursing Homes
 Urban & rural Markets
Designing Channel Systems
1.0 Channel Design & Planning Process
The foll. are considered in the Designing &
Planning process:
Customer Needs
Channel Objectives
Cost of the Channel
Evaluating alternatives
Channel system has to be a combination of
Revenue generation & Physical distribution
Servicing can also be a third entity.
1.1 Factors considered
Foll. factors are considered :
 Activities channel members are required to
perform
 How these activities are going to help the co.
achieve its customer satisfaction objectives
 No. of channels required.
 Definition of roles & responsibilities
 Compensation to channel members
 Evaluation of channel members’
performance
Stages in Channel Planning
Segmentation Positioning Focus Development

Stages in Channel Planning
Segmentation
Putting customers in similar groups based on their
needs.
Positioning
 Ideal channel partner chosen for each segment.
 No. of channels & service objectives also decided.
Focus Stage
Focus segments are selected out of the different
segments already chosen,
Developing the right channel alternative
 Best possible alternatives are chosen
 Channel partners of competitors also studied
Defining customer needs
Customer needs are defined by the desired
customer service levels expected out of the
channel system
Service levels relate to :
 Lot size
 Waiting time
 Choice to the customer-assortment
 Place utility
 Service support
Defining Channel objectives
 Channel objectives are simply what the channel
system is expected to do to support customer service
 Channel system to carry out all the activities required
to achieve the service levels at the least cost.
 Service levels required may vary between segments.
E.g. Consumer > Retail
> Institutional
 Channel objectives also depend on product
characteristics
Indl. Products
Consumer products
Ice creams
Seeds, Fertilizers > Rural Marketing
 Channels adopted by competitors also need to be
reckoned
Channel Alternatives
After selecting the target segment and the service
deliverables, channel alternatives are looked at :
 Current Business intermediaries available in the
market
 The No. and type of intermediaries required
 Any new channel members that need to be
specially developed. E.g. Technical Training
 Roles of each of the channel members.
Cost of the Channel System
Cost elements of the channel network include:
 Margins of the channel partners
 Cost of transportation of goods between the co.
and the end user
 Cost of order booking & execution
 Cost of stock returns / date expired.
Stocks taken back from the market
 Cost of any reverse logistics reqd.
6.1 Current Intermediaries
 Distributors or Re distribution Stockists
 C & F agents
 Logistics service providers
 Manufacturer’s agents, stockists, etc
 Financing agencies
 Wholesalers / semi-wholesalers
 Retailers
 Service centres
6.2 No. of Intermediaries
Nos. should be adequate for covering the
targetted segment
Too many can add to competition,
reducing their margins
It is not easy to get rid of channel partners
The No. depends on the “Intensity of
Distribution” the co. desires.
Evaluation of Major Alternatives
Evaluation is done using the foll. criteria:
Cost
Ability to manage & control
Adaptability
Range & volume to be handled
Selecting Channel Partners
The process of recruitment includes:
Placing advertisements
Getting the sales people to visit the
markets
Getting references from existing channel
partners about prospects in other towns
Selection criteria depends on whether the
channel partner reqd. is a C & F agent,
wholesaler, Distributor etc.
Training Channel Members
 Training is a continuous process & starts right
from the time the channel partner is appointed
 Since the channel partner represents the co., he
has to maintain a high profile.
Training includes:
On the job training to channel sales people
Class room training to the distributor & his staff
on the co. products, competition etc.
Training on submitting reports & maintaining
records
Training Channel Members
Statutory requirements
Care of the co. products in the custody of
the channel member
Technical training if the product is
technical
Repair, maintenance, demonstration etc
Servicing.
Motivating Channel Partners
 Channel members need to be kept highly
motivated to deliver results consistently.
 French & raven have suggested the foll.
Power format which can be used on the
intermediaries to make them effective:
Referent Power
Expert
Legitimate
Reward
Coercive
Motivating Channel Partners
 The foll. two can also be added to the above :
Support
Competition
 For multilevel marketing cos. like Amway,

Tupperware etc, relationship is the main source
of motivation. Promotions like meetings, trips
abroad etc are also used.
Evaluating Channel Members
 A company’s success depends on the effectiveness of
its distributor channel.
 Co. needs to keep reviewing the performance of the
channel partners to ensure the highest standards of
performance
 Evaluation done against agreed performance criteria
like :
 Targets / Sales Quota
 Avg. level of inventory held
 % of volume achieved by extending credit
 Productive calls per day
 Servicing complaints handled and so on.
 FMCG cos. Work on 30 % ROI for the distributors &
support with schemes & promotional programmes
when the % falls
Modifying an Existing Channel
Network
Channel Design comparison
factors
Efficiency
Effectiveness
Capacity
Agility
Consistency
Reliability
Integrity
Channel Design Implementation
Channel Management
Channel Management
1. Use of Channel Power
2. Channel Conflict
3. Principles of Channel Management

Use of Channel Power
 Co. & Channel members are dependent on each
other
 Dependence on each other considers the foll:
% of channel partner’s business from the co’s
products
Ability of co. to find alternatives who are better
than the existing
Consistent good performance of the channel &
co’s dependence on the channel
Channel becomes indispensable when
customers, wholesalers & retailers depend
entirely on the channel partner.
Five sources of Power
1. Rewards
2. Coercion
3. Expertise
4. Legitimacy
5. Reference
1. Rewards
 Reward is a benefit given to a channel member
for him to conform his behaviour in line with the
system.
 Reward can be financial or otherwise
 e.g Incentives on achieving sales targets.
 Best Distributor award in the Annual Sales
conference
 Reward power is the most popular in the
administration of Marketing channels
2. Coercion
 This is a hint of punishment for the channel
if he does not fall in line with the
requirements
 E.g. Withdrawing of incentive
payments if promised infrastructure
is not built up.
 Being more strict on payment mode,
methodology etc.
3. Expertise
Special knowledge that the Principal / co.
has which is of benefit to the channel
Principal & channel partner trust each
other
Co. to make efforts to renew the expertise
continuously.
4. Legitimacy
 These are contracts or agreements entered by
the Principal with the channel partner.
E.g. Stock Keeping, Credit etc.
 Most of these clauses have been developed
over a period of time & have become standards.
 Legitimate Power is the most objective of all the
powers between the channel partners.
5. Reference
Referent Power helps in companies being
selective in the channel partners they
would like to work with.
Referent Power can be developed over a
long period of time with a lot of hard work.
Countervailing Power
At times, the channel may have some

influence on the Principal.
The Distributor can have referent &
expert power over his own customers &
this is equally valuable to the company.
This leads to “Interdependence of
Channel Members”
Countervailing Power
This is called as “Countervailing Power”
It reduces confrontation & improves

cooperation which is good for the
channel system
However, at times, the relationship

seem to exploit the weaker parties.
Channel Conflict
 A situation of discord or disagreement between
channel members from the same marketing
channel system
 Driven more by feelings than by facts
 When one entity in the relationship is behaving
in a certain way or doing some things which will
directly affect the performance, of the first entity,
or come in the way of its goals, a situation of
“Conflict” arises.
Channel Conflict
Channel conflict arises when the behaviour
of a channel member is in opposition to its
channel counterpart. It is opponent
centered and direct, in which the goal or
object sought is controlled by the
counterpart.
Channel Conflict
Channel conflict occurs when one member of a
channel views its upstream or downstream
partner as an adversary or opponent. The key is
that interdependent parties at different levels of
the same channel (upstream & downstream)
attempt to block each other.
Conflict implies an incompatibility at some level.

Channel Conflict
Some features of Conflicts are:
It is initially latent & does not affect the
working of the channel members
It is not possible to detect till it reaches a
level of disruption.
Channel Conflict
Stages of Conflict
Latent
Perceived
Felt
Manifest
Measuring Conflict
Index
Conflict = Importance * Frequency* Intensity.
When conflict is desirable
Opposition actually makes a relationship
better on certain occasions :
This is Functional Conflict.
Functional conflict is common when channel
members recognise each other’s
contribution and understand that each
party’s success depends on the other.
When conflict is desirable
Conflict can be Functional because
channel members drive each other to
improve their performance.
By raising and working through their
differences, they incite each other to do
better and challenge each other to break
old habits and assumptions.
Channel Conflict
Reasons for Channel Conflict
1. Roles not defined properly
2. Resource scarcity
3. Differences in perception on the Business
environment.e.g Quantum of credit.
4. Channel members have certain expectations
from each other. If they do not materialise,
conflicts can arise
5. Decision Domain disagreements
6. Goal Incompatibility
Channel Conflict
Reasons for Channel Conflict
7. Communication Difficulties.
8. New Channel Partner
9. Target fixing exercise
10. Extension of credit
11. Multiple Distributors
12. Loss of opportunity
Managing Conflict
There are four steps to be taken to resolve
conflicts:
1. Understanding the nature of the conflict
& measuring its intensity
2. Tracing the source of the conflict.
3. Finding out the consequences of the
conflict
4. Strategy and action plan for resolution
Managing Conflict
Nature & Impact of conflict
 List down the major issues
 Tackle routine issues
 Check frequency of the issues
e.g Distributor coverage
 Assess perception of each party on the issue
 Lastly, take an inventory of all the issues ranked
in terms of importance.
Managing Conflict
Tracing the source of conflict
 Objectives may not have matched
 Channel members may have read the
business differently
 Understanding of the Domain may be
different
 Check with channel members at regular
intervals- on each other’s performance
 Their opinion on the irritants in the system
 Salespeople to continuously assess the
performance of the channel members to
sense any latent conflicts.
How Conflicts escalate
Conflict can escalate into a dispute
There is an element of “Distrust” built into
the system
Ideal to identify the conflicts in the early
stage itself & resolve them
Use the power of Coercion.
Conflict Resolution
If conflicts happen, they have to be
accepted & resolved
Where conflict arises between channel
partners who are not bound by contracts
or agreements of any kind, the conflict
resolution is guided by the best past
practice.
Conflict Resolution
Other Methods:
Joint membership of trade associations
Distributor councils
Personnel exchange between channel
partners
Mediation through Trade Associations
Final stage: Through Arbitration
Building Channel Relationships
Use of Motivational Tools
 Payments for shelf space
 Higher Trade discounts
 Higher margins for better distribution
 Strong Advertising, merchandising &
promotional support
 Support of field sales people- particularly in
achieving secondary sales.
 Provide sales training to distributor salesmen
Building Channel Relationships
Use of Motivational Tools
Offer Financial assistance- subsidies on
distribution to new markets or rural
markets
Provide logistical support
Generate customer leads and pass on to
channel members
Communicate promptly all crucial
marketing related decisions
Principles of Channel Management
Channel Management is in four steps:

1. The Planning effort-setting the objectives
2. The Organisation structure to deliver the
customer service objectives-the people and
the channel members & a clear definition of
responsibilities
3. Ability to control the channel- measuring
progress towards the objectives & making
course corrections
4. Measuring performance for constant
improvement.
Physical Distribution Management
The Management of all activities which
facilitate movement and coordination of
supply and demand in the creation of time
and place utility in goods
Physical Distribution Management
Summary
 Transportation
 Warehousing
 Packing & Packaging
 Handling of Materials
 Maintenance of Stocks, inventory controls
 Orders, processing, despatch
 Customer services, complaints, redressals
 Maintenance of records related to these
activities
Transportation
Transport system in an organisation should be :
 Efficient
 Economic
 Reliable
 Meeting customer needs in a timely manner
 Experienced
 Capable of meeting emergencies, special needs
Warehouses
Facilities Offered
Storage
Stacking
Ease of handling
Re Packing
Delivery
Safety measures in stocking-fire, burglary..
Safety- Insects, rodents etc
Warehouses
Classification of Warehouse
1. General warehouse
2. Bonded warehouse
3. Cold storage
4. Warehouses meant for agricultural goods
5. Buffer storage warehouses
6. Import-Export warehouses
Modes of Transportation
 Railways
 Road
 Air
 Sea
 Inland waterways
 Ropeways-hilly areas
 Postal
 Courier
 Hand carts, cycle rickshaws
 Bullock carts etc
Distribution Agreement
Covers the foll:
 Price
 Discount structure
 Credit period
 Area of operation
 Min. order qty.
 Right to appoint additional distributors
 Termination clause
 Type of expenses to be borne
Segmentation
Segmentation
1. Introduction
2. Why segmentation & Why segment ?
3. Segmentation Process
4. Segmentation Criteria
5. Choosing Attractive Market Segments
6. Different Targetting strategies
Segmentation
1. Introduction
 Segmentation process is a crucial aspect of
Strategic Marketing.
 It is central to strategy & can be broken into
three distinct elements:
1. Segmentation
2. Targetting
3. Positioning
Segmentation
Segmentation
Market segmentation is the process by
which a market is divided into distinct
subsets of customers with similar needs
and characteristics that lead them to
respond in similar ways to a particular
product offering & marketing program.
Segmentation
Targetting or Target Marketing
Evaluating the relative attractiveness of various
segments in terms of :
 Market Potential
 Growth Rate
 Competitive Intensity
& other factors
And the firm’s mission & capabilities to deliver
what each segment wants, in order to choose
which segments it will serve.
Segmentation
Product Positioning
Product Positioning entails designing
product offerings and marketing programs
that collectively establish an enduring
competitive advantage in the target market
by creating a unique image, or position, in
the customer’s mind.
These three are closely linked and have
strong interdependence
Segmentation
Why segmentation ?
 A Market segment is a section of a market
which possesses one or more unique features
that both give it an identity & set it apart from
other segments.
 Market segmentation amounts to partitioning a
market into a number of distinct sections, using
criteria which reflect different & distinctive
purchasing motives & behaviour of customers.
 Segmentation makes it easier for firms to
produce goods or services that fit closely with
what people want.
Segmentation
Why Segment ?
1. Meet consumer needs more precisely
 Customer has different wants &
needs
2. Increase Profits
3. Gain segment leadership
4. Retain customers
5. Focus marketing communications
6. Population growth has slowed
 More Product Markets are maturing
 Competition becoming more intense
Segmentation
7. Expanding disposable incomes
 Different resources at the buyer’s
disposal
8. Higher educational levels
9. More awareness of the world, resulting in more
varied & sophisticated needs, tastes &
lifestyles
10. Increasing and important trend towards micro
segmentation.
Careful segmentation & accurate targetting
keeps a firm close to the market, reduces
waste, finds the best customers & helps to
keep them satisfied.
Segmentation Process
The segmentation process involves establishing
criteria by which groups of consumers with
similar needs can be identified.
These criteria have to establish consumer groups
that have the foll. characteristics :
 The consumers in the segment respond in the
same way to a particular marketing mix.
 The consumers within the segment have to react
in a clearly different way from other groups of
consumers to the marketing mix on offer
Segmentation Process
The group has to be large enough to

provide the return on investment
necessary to the organisation
The criteria used to identify the segment

have to be operational.
Segmentation Criteria
The development and implementation of a Market
segmentation strategy can incur greater costs
(e.g market research, separate promotional
campaigns, distribution channels etc) than a
mass-marketing strategy. Therefore, each
segment must meet the foll. basic criteria:
1. The organisation must be able to identify and
measure each segment
2. The market must be substantial enough
3. The organisation must be able to reach
customers
1. Customers in the selected segment must

be responsive
2. Characteristics of the segment are
relatively stable over a long period
Broadly there are three major categories for both consumer
and organisational markets :
1. Geographic
2. Demographic
3. Behavioural
 Some Marketers also use Geodemographic and
Psychographic as additional criteria for segmentation.
 More the variables-better- Tighter target market.
 Leads to :
Less waste, more relevant offers to
appropriate customers & higher customer satisfaction.
1. Geographic
 Used more extensively in the past
 Different locations vary in their sales potential,
growth rates, customer needs, cultures,
climates, service needs and competitive
structures as well as purchase rates for a
variety of goods.
 Used in both consumer & organisational
markets
 Retailing & many service businesses-esp.
because customers are unwilling to travel very
far to obtain the goods or service they require.
GeoDemographic
 Targeting of one demographic group in an area
 This segmentation can be used to aid decision making in
a variety of areas:
Identifying favourable retail locations for a
specific retail format
The specific mix of products & services
delivered in a particular retail location.
Decision on direct mail campaigns
Boundaries of specific sales territories
Selection of Media
This has been used very successfully in Europe spread
across many countries
2. Demographic
 Key Demographic variables consist of Age,
Gender, Income, Occupation, Education and
Family Life cycle
 Age and Gender can be combined
 Products and markets are also created &
targetted based on life cycle.
Micro segmentation groups are also created by the
characteristics of the individuals who influence
the purchasing decision.
3. Behavioural
The influences that affect consumer’s purchasing
decisions can be broken down into four major
categories :
I. Social
II. Personal
III. Psychological
IV. Situational
V. Benefit Segmentation
VI. Usage Segmentation
VII. Purchase occasion
3. Behavioural:
1.Social:
 There is a range of social influences on a consumer’s
purchasing behaviour, in particular culture & social
class
Culture
Social class
Reference groups
Family
2.Personal:
Age
Occupation & Financial situation
Personality
Family life cycle
3.Psychological:
Motivation
Perception
Learning
Beliefs & Attitudes
All the above are influences on
consumer behaviour
4.Situational:
Self Image
Perceived risk, eg – Expensive purchases
Social factors – level of social acceptance may
depend on the right purchasing decision
Hedonistic factors – Concerned with products or
services that are linked to providing to personal
pleasure
5.Benefit:
Based on the concept that the key reason a
consumer buys the product or service is for the
benefit that product or service gives them
To identify groups of consumers that are seeking a
common benefit
6.Usage:
The characteristics & patterns of consumer
usage are the essence of this segmentation
approach
Use of PPPPP analysis - can lead to the
identification of new segmentation
opportunities
7.Purchase occasion:
Marriage
New Year, etc.
Organisational Market Segmentation
Organisational markets can be segmented

according to the characteristics of the
organisation. Factors that would be
analysed at this level would be:
Industry sector
Size of the organisation
Geographic location
End use application
Organisational Market Segmentation
Organisational markets can also be segmented
according to the characteristics of the decision
making unit; also called micro segmentation.
Factors include:
 The structure of the decision making unit
 The decision making process
 Structure of the buying function
 Attitude towards innovation
 Key criteria used in reaching a decision on a
purchase
 Personal characteristics of decision makers
Organisational / Industrial
Segmentation Techniques
Choosing Attractive Market Segments
1. Select Market – Attractiveness & Competitive –
position factors
2. Weigh Each factor
3. Rate segments on Each factor, Plot Results on
Matrices
4. Project future position for each segment
5. Choose segments to Target, Allocate
Resources
Different Targetting Strategies
Niche Market
Mass Market
Growth Market
Developing Competitive Brands
Strategy Formulation
Approaches to Differentiation
 There are many approaches or strategic
orientations that can lead to sustainable
differentiation strategies.
Employing Quality
&
Building strong Brands,
are two of the most important approaches.
Quality option
 Here, the Business will deliver and be

perceived to deliver a product or service
superior to that of competitors.
 A Quality strategy can mean that the brand,
whether it is a hotel, car or computer, will be
a premium brand as opposed to a value or
economy entry.
 To be the quality option, a business must
distinguish itself with respect to delivering
quality to customers.
Quality option
A Quality focussed Management
system that is comprehensive,
integrative and supported throughout
the org. is required.
A hallmark of most customer driven
organisations is that the top executives
have regular meaningful one-to-one
contact with customers.
Building Strong Brands
Differentiation can also be accomplished

by building strong brands to create Brand
Equity.
This strategy is likely to prove sustainable
since it creates competitive barriers.
Brand equity generates value to the
customer that can emerge either as a
price premium or enhanced brand loyalty.
Building Strong Brands
 Brand Equity is a set of assets and liabilities
linked to a brand’s name and symbol that add to
or subtract from the value provided by a product
or service to a firm or that firm’s customers.
Aaker-1991
 The assets and liabilities on which Brand equity
is based can come under:
Perceived brand Quality
Brand Identity
Brand awareness
Brand Loyalty
Brand Valuation
Brand Equity has led to Financial valuation of the
assets in a company’s balance sheets.
Factors seen as indicators of a Brand’s Value
Market Type
Market Share
Global Presence
Durability
Extendability
Protection
Superior Products & Services
Brand Valuation
 Market Type
Brands operating in a high margin, high
volume & stable markets carry a higher
valuation than brands in less profitable or
stable sectors.
One of the aims in developing a strong
brand is to allow a company to compete on
other factors than price in order to make
strong margins.
Brand Valuation
 Market Share
Brands that are market leaders are
deemed to command a premium because
competitors will find it difficult to overcome
a consumer’s tendency to buy the dominant
brand.
Holding the market leadership position is
seen as a barrier to entry for other brands.
E.G. Titan, Horlicks, etc.
Brand Valuation
Brand Equity has led to Financial valuation
of the assets in a company’s balance
sheets.
Factors seen as indicators of a Brand’s
Value
 Global Presence
Brands that are accepted in the Global
market carry more value than brands within
a purely domestic market.
Brand Valuation
 Durability
Some Brands manage to maintain a contemporary
appeal & retain their relevance to customers over
a long period of time.
These brands have created strong customer
loyalty & become an established player in the
market. E.G. Cadbury, Gillette, Kodak, Colgate
etc.
Brand Valuation
 Extendability
Brands that have the ability to be extended into
related markets or stretched in new markets offer
greater value than brands with more limited
options.
 E.g BIC successfully extended from disposable
pens to razors etc.
Brand Valuation
 Protection
Brands that have some protection from being
copied through patents or registered trade marks
or designs, potentially offer greater value.
However, retailers have been able to offer similar
products in similar packaging in their own brands.
 Superior Products & Services
Brands that offer the consumer products and / or
services that are superior to those of competitors.
Strategic Brand Management
Successful Brand development consists of
“Elements of brand delivery” visible and not
visible to the consumer.
Elements visible
 Symbols
 Brand name
 Packaging
 Advertising
 Price
Successful Brand development consists of
“Elements of brand delivery” visible and not
visible to the consumer.
Elements not visible
 Quality
 Production efficiency / operational costs
 Research & Development
 Service delivery systems
 Sales service
 Supply chain
 Organisations now have the option of
coordinating activities without necessarily
owning all the assets and competencies
needed.
 The capability to support a brand is done
through various forms of relationships and
alliances. The foll. options are used :
1. Manufacturer’s Brand system
2. Retailer’s own Brand system
3. Franchise Brand system
4. Manufacturer’s private label Brand system
Manufacturer’s Brand system
 Such companies produce products under their own
brand name. E.g Kellogs
 The majority of the businesses is owned by the
company.
Retailer’s own Brand system
 The Brand is owned by the Retailer and there are
suppliers who supply the Retailer in the required Brand.
 Product development is sometimes undertaken by a third
party but definitely under the guidance and care of the
Retailer.
 E.g Gap, Marks & Spencer etc
Franchise Brand system
 The retail outlets are mainly Franchise
operations
 The key skills relating to core aspects of the
Brand’s quality are kept in-house.
Manufacturer’s private label Brand system
 These are companies that supply goods under
a certain Brand name to the retailers. E.g.
Marks & Spencer.
 These companies create their competitive
position through highly efficient manufacturing
skills, customer service and new product
development abilities
Brand Name Strategy
 An organisation has to decide its policy for
naming brands across all its products &
services.
 The focal point of decisions on Branding strategy
is about the emphasis the org. wishes to place
on creating a distinctive offering in the market
against the weight it wishes to place on the
origin of the product or service.
 Between these two extremes lie several options:
Brand Name Strategy
Ref Fig.
Brand Name Strategy
1. Corporate Brand
2. Multi Brand
3. Company and Individual brand
4. Range Brand
5. Private Brand
6. Generic Brand
Brand Name Strategy
1. Corporate Brand
 Organisations that follow this approach use
one corporate name across all products.E.g
Cadbury, Heinz etc Individual products merely
carry a descriptive name under the corporate
umbrella.
 Strong overall image
 Opportunity to create economies of scale in
marketing comm, distribution etc.
Brand Name Strategy
2. Multi Brand
 This is the complete opposite of corporate
branding approach.
 Each product is given its own unique brand
name.
 The aim is to build completely separate brand
identities.
 Appropriate if the org. is competing in a no. of
different segments. E.g. Washing powder.
Ariel, Tide etc.
Brand Name Strategy
3. Company and Individual brand
 This is the “Endorsed” approach
 Endorsing the product with the corporate
name gives a new product credibility
while at the same time allowing the new
brand some degree of freedom.
 Different companies adopt different
approaches to this strategy.
Brand Name Strategy
4. Range Brand
 Some organisations use different brand names for
different ranges of product, in effect creating a family
of products. E.g Maggi
5. Private Brand
 This is the Distributor’s own brand.The private brand is
owned and controlled by the distributor who makes
decisions regarding the product’s position in the
market.
 The distributor is likely to use either a strategy of
corporate or a company and individual brand for its
products.
Brand Name Strategy
6. Generic Brand
 This strategy involves the product having
no brand name.
 The product’s packaging merely states
the contents of the package. Flour, liquid
soap etc.
Each of the approaches to Branding
outlined above has advantages and
disadvantages.
Combined Brand Strategies
 Large organisations may use a mixture of Brand
strategies to manage their large product portfolios.
 The approach an organisation adopts to branding is
a crucial decision relating to the overall strategy the
company has decided to pursue . The branding
policy should be developed in the light of:
The nature of Product or service
The pattern of consumer behaviour in the
specific market
The company’s competitive position.
Combined Brand Strategies
 Depending on resources, companies invest on
promoting and developing new brands.
 This is normally done when the target market is
large enough and has the potential profitability to
justify investing in creating a new brand.
 Lexus by Toyota- Premium cars
 Aashirwaad by ITC
 Tanishq by Tatas
Companies can also choose to use a current brand
name and opt for a brand extension or brand
stretching policy.
Brand Extension
There are occasions when an organisation
will try to extend the use of a brand name
to new products in the same broad market.
Brands that carry high Brand equity are
candidates for brand extension as they
have the ability to increase the
attractiveness of the new products.
E.G Horlicks, Maggi etc.
Brand Stretching
 Brand stretching takes place when an
organisation stretches a brand into new
unrelated markets.
E.g. Godrej into Frozen Foods, properties
 HDFC into Bank, Insurance
 Mahindra into Holiday Resorts,
Gensets
 Reliance- Footwear, Retail etc
 Nike and others into apparel
Brand Revitalisation
 Over a period of time, it is likely that an
organisation will be required to undertake
actions to improve the performance of a brand.
 This can be due to new technology, changing
consumer behaviour or new competition.
 Options open to a company are either to
increase sales or to raise Brand profitability.
 Brand revitalisation and Brand repositioning are
two approaches that can be employed to
increase the sales volume of a brand.
Brand Revitalisation
 Brand revitalisation involves gaining sales
volume by expanding the market for a brand.
 Four significant opportunities exist that can
expand the market:
Enter new markets
Exploit new market segments
Increase the frequency of use
Increase quantity used.
Brand Repositioning
 Brand repositioning is undertaken in order to
increase a brand’s competitive position and
therefore increase sales volume by seizing market
share from rival products.
 When repositioning, companies can change aspects
of the product, change the brand’s target market or
both.
 This gives four repositioning options:
Image repositioning
Market repositioning
Product repositioning &
Total Repositioning
Brand Repositioning
Image Repositioning
 Here, The Product &Target market remain unchanged.
 Aim is to change the image of the product in its current
target market.
Market Repositioning
 Here, the Product remains unchanged but it is
repositioned to appeal to a new market segment.
e.g. Adults to children etc.
 Ordinary beverage to a health drink etc.
Brand Repositioning
Product Repositioning
Here, the Product is materially changed.
However, aimed to appeal to the same
target segment. Done to suit the changing
tastes of the consumer.
Total Repositioning
This option involves both a change of
target market and accompanying product
modifications.
Sales Management
Definition Of Sales Management
The Planning, Direction & Control
of Personal selling, including
recruiting, selecting, equipping,
assigning, routing, supervising,
paying and motivating as these tasks
apply to the personal sales force.
J.Parthasarathy
Importance Of Sales Management
 Development of large
business operations.
 National level presence.
 Importance & Management

of Sales Force.
Sales Management Process.
The sequence of activities that guides

managers in the creation &
administration of sales programmes
for a firm is known as the Sales
Customer
Management Process.
Sales
Field force
Manager Customer
Recruit / Train /
Motivate / Compensate / Evaluate
 Products / Services
 Selling Strategy & Plan of Action.

 Relationship between individuals.
 Between Sales Personnel & Customers.
 Between Sales Management & their Sales

Personnel.
Marketing Mix & Sales
Management
Marketing
Mix
Products Price Promotion Distribution
Public Relations Personal Sales

Advertising
Selling Promotion
Sales
Management
Sales Management
Sales
Management

 Planning  Motivating
 Budgeting  Compensating
 Recruiting &  Designing Territories

Selecting 
 Evaluating Performance
 Training
Sales Management
The Planning, Implementing & Control of

personal contact programmes designed
to achieve the Sales & Profit objectives
of the firm.
Managing the Sales Force
Sales Force:
Need to be efficient, effective & focussed on customer
value.
Requirements:
Right organisation in terms of:
4. Experience
1. Qualification
2. Aptitude 5.Well trained
3. Knowledge 6. Commitment
• Selling 7. Right strength
• Product 8. Right compensation &

Knowledge Incentive system
Most Powerful Motivator : A well designed Compensation Package

Designing & Managing a Sales
Force
 Set out objectives

 Design a Sales Force
 Structure & Size
 Territory Allocation
 Make out Compensation Package
 Recruitment & Selection
Designing & Managing a Sales
Force
 Training
 Set out Duties & Responsibilities
 Direction & Control
 Motivation & Supervision
 Performance Appraisal
Sales Manager’s Duties &
Responsibilities
Set Goals / Targets
Define Expectations.
Evaluate Product features, Performance,
Competition, etc.
Set out strategies
Establish Sales Controls
Sales Manager’s Duties &
Responsibilities
Develop Plans / Help Develop Plans

Execute Programmes
Controlling Distribution Expenses
Get the Best output from the Sales
Force.
Recognition & Awards
Sales Manager’s Job Skills
Two skills essential in Sales Management :
 Leadership
 Organizational Ability
Leadership
 Intelligence
 Energy  Vision
 Personal Impact Motivation
 Persuasiveness Inter Personal Skills
 Ambition
Empowerment
Value congruence
Organisational Ability
Time Management
Handle & Manage office staff
Preparation of Budgets in time
Handle Sales Reports & other MIS
Organise travel programmes
Routine office Functions
Organisational Ability
 Hold Meetings
 Coordinate with Production / Accounts &
other departments from time to time.
 Implement sales promotional programmes
 Handle & Manage Sales Staff
 Regular & Timely communication with Sales
Force.
 Enforce Policies & Rules of the Company.
Challenges for the Sales
Manager
 Getting the right person in the team-

Qualification, Age & Experience.
 Budgeting in line with capacity.
 Product Range, New Products, etc.
 Issues on Logistics.
 MIS Availability.
Challenges for the Sales Manager
 Fixing of acceptable targets to sales force in line with the

budget.
 Delegation of Authority to sales force to help them deal
with their customers
 Dealing with frequent problems on prices, claims,
promotion, quality, etc.
 Being unable to personally visit all the areas to meet all
the customers on a regular basis.
 Collection of old outstandings, change of payment terms,
problems of discontinued dealership, etc.
Sales Strategies
Relationship Strategy:
 To Establish working relationship with customers in

which mutual support, trust & goals are nurtured over
time.
 Usually done by high performers
 Customer is treated as a partner

Win – Win Strategy
 Concept is very Powerful
 The only real alternative to lose – lose.
I Win, I Win
You Win You Lose
I Lose I Lose
You Win You Lose
Partnership, Win – Win, must always be looked for

Win – Win Strategy
Outcome:
Both come out of the sale feeling satisfied
with neither having taken advantage of the
other.
The stage is set for a long term
relationship, repeat business & future
referrals.
Account Relationship Management
 Deals with a single customer
 Especially applicable for all OE Sales.
 Focus on clients needs, problems & Successes.
 Clients’ wants & needs become the most important
factor driving any selling process.
 Sales persons are in touch with the customer almost
everyday to give them information, support, service, etc.
to solve their problems.
Service Strategy
 Aim is to provide enhanced and better quality service
to all customers.
 Better service includes all activities starting from
order acknowledgement to after - sales service.
 Service led to the concept of “ supply chain
management”.
 Linked to QCD triangle.
• Highest Quality
• Lowest Cost.
• Least Delivery time
 Company strives continuously to improve their
service / product to help increase the customer base
& to retain loyalty.
Methods of Selling
Telemarketing
Reach
Personal
Saves on Time
Cost
Immediate Feedback
Telemarketing
Products
Insurance
Holiday Resorts
Consumer Durables
Other Products
Internet Selling
Products
FMCG
Lifestyle Products
Chocolate
Bouquet etc.
Direct Selling
Eureka Forbes
Amway
Modicare
Tupperware
Others.
Sales through Wholesalers &
Retailers
 Chain is created by the company
Products made available
Promotions done by company.
Directly
Jointly
Retailing- Separate Chapter
Mail Order Sales
Old & Traditional- Reader’s Digest
Sales of different items through credit card
operations.
Sales Manager as Coordinator
Coordinates with :
Production
Accounts
Higher Management
R&D
Quality
Service Dept. if separate.
Conclusion
Thus we see that the Sales Manager & his
team play a very important role in the
success of the company.
Personal Selling
Personal Selling
1. Features,Importance & Advantages of
Personal Selling
2. Personal Selling- Then & Now.
3. Role of Sales Personnel in Mktg. Mix.
4. Diversity in Selling Situations.
5. Advertising & Personal Selling
6. Steps in Personal Selling
7. Theories of Selling
8. Overall Skills required by Sales People.
Features, Importance &
Advantages of Personal Selling
1. Enhances Customer’s confidence in the Seller.
2. Provides human touch to business
transactions.
3. Promotes Long Term business relations
through personal intimacy.
4. Seller is able to understand customer’s needs
& preferences more clearly.
5. Customer gets satisfied when his product gets
modified to suit his needs.
Features, Importance &
Advantages of Personal Selling
6. Powerful & effective tool for convincing
the customer about the product.
7. Seller & Customer- Always in touch
resulting in better understanding.
8. Use of language known to & comfortable
to the seller enhances the relationship &
reduces the time for conversion of
prospect into sales.
Personal Selling – Then &
Now:
1. Was one of only persuasion
2. One time effort & result
3. Current role:
a) Consultative Selling
b) Cultivates long term relationship
Personal Selling – Then & Now:
c) Mutually beneficial Sales Relationship
d) Role of a Psychologist with some
individuals
e) Advisors
f) Personal friends – Relationship Building
Role of Sales Personnel in
Marketing Mix
Product:
 Aware of Product Features
 Knowledge of Competitors’ Products & Features.
 Functioning of Products
 Product complaints & servicing
 How to identify a genuine product from a
spurious one
 Packing / Date of manufacture, etc.
 New Products & Design
Marketing Mix - contd.
Pricing
Statutory levies
Dealer & Distribution margins
Market prices
Competitors’ prices
Unorganized sector
Marketing Mix- contd.
Promotion
Coordinates on Promotion
Event Management
Demonstrations
Works out schemes in coordination with
the dealer, etc.
Synchronise Personal selling with
advertising- speak the same language.
Marketing mix – Contd.
Distribution
1. Selection, Performance & Monitoring of
Dealer’s Performance.
2. Continuous survey on adequacy of
outlets
3. Availability of Product in right nos. /
quantity.
4. Logistics
Marketing mix – Contd.
Distribution
5. Exclusive outlets for different product
categories
6. Impart Training to Dealer Salesmen
7. Help Dealer-Overall display, Ads, POP,
signboards, etc.
8. Promotion / Sales of new products.
Diversity in Selling Situations
Service Selling:
Retail shop: “ Waits on” customer
Delivery Salesperson: Milk, bread, etc.
Merchandising Salesperson: Cyclical visits
to customers
Missionary: To build goodwill & to educate
Technical
Diversity in Selling Situations-
contd.
Developmental Selling
Creative: Vacuum cleaners,
Encyclopedias, etc.
Creative intangibles: Insurance,
Educational programmes, Time share, etc.
Diversity in Selling Situations-
contd.
Developmental Selling with unusual
creativity
Commodity Selling:
Salesperson takes care of key buyer’s
other interests in golfing, fishing, etc.
Engaged in multiple sales:
Only one can say “ Yes” while several can
say “ No”
Advertising & Personal Selling
Common Objective
The seller seeks to motivate the

prospective buyer to behave favorably
toward the seller
Advertising & Personal Selling
Sl.
Personal Selling Advertising
No.
1. Two way Communication One way Communication
Direct contact with No direct contact. Customer
2.
representative of Company arrives at his own Perceptions
& conclusions
Major role in pre purchase, Mainly in pre purchase & to
3. during purchase & post some extent in post purchase
purchase
Result can be seen during and Cannot be measured
4. after interaction & can be
easily
measured
Advertising & Personal Selling-
contd.
However, Advertising & Personal Selling

often supplement or support each other
and the buyer reacts to their combined
impact.
Steps in Personal Selling
1. Prospecting
2. Pre-Approach
3. Approach
4. Presentation & Demonstration
5. Handling Objections
6. Closing
Steps in Personal Selling-contd.
Prospecting:
Is the process of identifying potential
and likely buyers of a product or
service.
Prospect :
Prospects are those who have a need
or will to buy and the power to pay for
the product / service.
Methods of Prospecting
References
Acquaintances / Friends
Cold Calling
Centre of Influence
Direct Mail / Telephone
Exhibitions / Seminar / Leads created.
Pre Approach:
Salesman aware of the specific needs,
preferences, behaviour, etc. about the
customer.
Can plan to give an effective presentation.
Pre Approach – Advantages
 Saves on time & energy – Presentation limited to
only the prospects.
 Has all information about the prospect –
Salesman can be fully prepared
 Sales Presentation can be fully focussed around
the needs of the prospect – Can be made short
& meaningful.
 Can grade the prospects in term of Hot / Medium
/ Low – Accordingly priority can be given.
Steps in Personal Selling
Approach :
1. Salesman to make best use of the
opportunity.
2. Approach should not fail as it gives an
opportunity to the competitor.
3. To meet different people at lower levels who
can influence the decision making process.
4. One of the better methods – is to try & get
an appointment through a reference.
Approach, Contd.
5. Some salesmen send gifts in advance-
also called “ Door Openers”
6. Can use the Brand name
7. Customer Benefit Approach
8. Product Trials
9. Free Gift Offer
Approach :
Dos
1. Take prior appointment.
2. Maintain Punctuality
3. Go in a formal attire
4. Make the presentation short &
effective
5. Make the prospect feel important &
pamper his ego
Approach
Don’ts
1. Do not try to meet during odd hours
2. Do not show over anxiety to sell
3. Do not be tense
4. Do not apologize for the time taken
Presentations & Demonstrations
1. Attractively packaged
2. Prominent location in the store
3. To spell out features of the product, its

advantages, benefits, etc.
4. Demonstrate the product to highlight its

features & benefits to the customer
Presentations & Demonstrations-
contd.
5. As soon as customer takes a decision,
discreetly stop discussion on the product
& remove the other products from view
6. Make the customer handle the product at

the right time
Handling Objections
1. Listen carefully to all the objections of the
customer
2. Acknowledge that you have understood
the objections
3. Sales person should be able to identify a
real objection from an excuse & tackle
accordingly
4. Clarify or overcome the objection with
genuine answers
5. Present options / solutions at each stage
6. Get the customer to acknowledge the
clarification before you move on to the next
objection
Closing Sales
 Ask for the commitment from the customer –
order
 Do not have “ Fear of Rejection”
 Ask for leading questions half way through
 Look for signs / gestures / body language
which may suggest that the customer has
take a “ Buy” decision
 If all previous steps have been done
correctly, closing the sale does not take much
time
Theories of Selling
AIDAS Theory of selling.
1.A ttention
2.I nterest
3.D esire
4.A ction
5.S atisfaction
 Many Training Programmes are organized
around this concept.
 Based on experiential knowledge.
 Known to be in existence as early as 1898.
Theories of Selling-contd.
AIDAS Theory of Selling
Attention:
1. First few minutes are crucial.
2. Prospect- Receptive state of mind.
3. Salesperson to be a skilled
conversationalist.
4. To have ample supply of
“Conversation Openers.”
Theories of Selling – contd.
AIDAS-contd.
Interest :
Objective is to convert the attention into
a strong interest.
Maintain the interest of the prospect
throughout the presentation.
To seek the selling appeal that is most
likely to be effective.
Usually – a lot of Questions & Answers.
AIDAS-contd.
Kindling desire :
Goal is to kindle the prospect’s desire
to the “ready–to–buy” product.
Objections to be anticipated &
answered to the prospect’s satisfaction.
To concentrate on projecting the
benefits of the product.
AIDAS-contd.
Inducing Action :
Buying must be induced.
To be done only after overcoming all
possible objections.
To ask leading questions.
Check if any other person is to
participate in the decision making
process.
AIDAS-contd.
Satisfaction :
Order is the climax of the selling
situation.
Customer to be reassured that the
decision was correct.
To complete all formalities as quickly as
possible.
B : Right Set of Circumstances.
Everything was right for that sale.
Situation – Response Theory.
Hinges on the skill of the Salesperson.

C : Buying Formula
 Buyers’ needs or problems receive major
attention.
 Need ( or problem ) – Solution – Purchase –
Satisfaction.
 Solution can be a product or service or both.
 Buyer thinks of a solution – Product – Trade
name – Purchase – experiences satisfaction
or dissatisfaction.
 Buyer should experience a pleasant feeling of
anticipated satisfaction.
Theories of Selling
D : Behavioral Equation:
 Sophisticated version of the “ Right set of
circumstances ” theory.
 Buyer’s behaviour in terms of Purchasing
Decision process.
 This stimulus – response model includes the
elements- Drive, Cue, Response &
Reinforcement.
 Relation among the variables is multiplicative.
 Salesperson’s response to “ Buyer Behaviour
” & the different elements determine this “
Buyer Behaviour”
Overall Skills required by Sales
People
1. Be Thorough in your product knowledge
2. Know your competitor & his products well
3. Should know how to prospect
4. Establish rapport with strangers
5. Be a good listener
Overall Skills required by Sales
People
6. Good at making oral presentations
7. Demonstrate Product Benefits
8. Handle customer concerns
9. Be well groomed, dress well & maintain
good oral hygiene
10. Speak slowly, clearly, flawlessly & with
confidence
Sales Organisation
Sales Organisation
1. Definition
2. Pre – Requisites
3. Purpose of sales organisation
4. Span of control
5. Setting up a Sales Organisation
6. Functions of Sales Organisation
7. Role of Sales Administration
8. Developing a Sales Organisation
9. Field Sales Organisation
10. Conclusion
Sales Organisation
Definition:
It is the systematic coordination of the
various functions which are essential to
achieve the organisational objectives
Sales Organisation
Pre requisites :
Should anticipate changing situations.
Should be able to adapt to diverse
marketing environments
Purpose of Sales organisation
 Ideal Organisation:
No duplication of effort
Less friction
Maximum cooperation
 To have a combination of intelligent leadership, informal
organisation & formal organisation to facilitate
achievement of objectives
 Use of specialized personnel
 Assignment & Delegation of Authority
Purpose of Sales organisation
 Coordination:
 Motivating individuals to work together towards common
objectives is important in achieving coordination
 Authority:
 All executives should understand the nature of their
authority with respect to each aspect of the operation;
otherwise friction develops
 To achieve harmony:
 Continuing coordination
 Free flowing communication systems
Span of Control
Refers to the no. of subordinates who are
supervised by each manager.
It ranges from 5:1 to 10:1 depending on
industry, experience & nature of job
responsibility
Setting up a Sales Organisation
Most problems of Sales organisation are
problems of re- organisation.
Goal is to make it more effective
Five major steps in setting up a
Sales Organisation
1. Defining the Objectives
2. Determination of Activities & their
Volume of Performance
3. Grouping Activities into positions
4. Assignment of personnel to positions
5. Provision for coordination & control
Sales Organisation
1. Defining the objectives
 Set Qualitative & Quantitative objectives
 Sales volume
 Produce profits
 Through profitable sales
 Controlling costs
 Growth in Sales & Profits
Sales Organisation
2. Determination of Activities & their volume
of performance
 Determine all necessary activities &
estimate their volume of performance
 Determine executive positions,
relationships to other positions & duties
& responsibilities
Sales Organisation
3. Grouping Activities into positions
 Activities are classified & grouped so that
closely related tasks are assigned to the
same position
 Positions to offer job challenge, interest
& involvement
Sales Organisation
4. Assignment of Personnel to positions
 Different personnel assigned to various
positions
 Sometimes job specifications are
modified to suit individuals
 Sometimes preferable to have individuals
grow into particular jobs rather than have
the jobs grow up around individuals
Sales Organisation
5. Provision for coordination & control
 Written job description – a formal instrument of org.
control
Also used at the time of employee selection process
Also used as yardsticks against which to appraise the
performance
 Control & coordination by sales executive is done
through formal & informal means
 Organisation manual is also made out
Contains departmental objectives & policies as also
write- ups of job descriptions & specifications
Functions of Sales Organisation
1. Planning Functions:
 Sales Forecasting
 Sales Budgeting
 Selling Policy
2. Administrative Functions:
 Selecting Salesmen
 Training Salesmen
 Remuneration of Salesmen
 Control of Salesmen
3. Executive Functions:
 Sales Promotion
 Selling routine – Execution of orders
Role of Sales Administration
 Order Processing
Transit Insurance
 Delivery
Excise / Sales tax Formalities /
 Logistics Documentation
 Maintenances Stock Sales Documentation
Packing / Packaging
 All communications to
:
Sales Returns
o Sales & Regional
offices
o Customer
o Ware houses
Developing a Sales Organisation
1. Formal & Informal Organisations
2. Horizontal & Vertical Organisations
3. Centralized & Decentralized
Organisations
4. Line & Staff components of Organsations
5. Size of the Company
Developing a Sales Organisation
Formal & Informal Organisations
Every firm has a formal & informal

organisation
It is basically a communication pattern
To be recognized as being useful
To be encouraged to the extent
Horizontal & Vertical Organisations
Vertical
General Manager
Sales Manager
Regional Sales Manager
District Sales Mgr
Sales Supervisor
Horizontal Organisations
General
Manager- Sales
Export Regl. Regl.

Manager- Distribution
Sales Manager-
South Manager
Manager North
Regl Manager- Regl Manager- Mktg. Services

West East Manager
Horizontal & Vertical Organisations
Span of control decides whether you need
a vertical or Horizontal Organisation
Each company must determine the span
of control that works best for its Sales
Organisation
Span of Control should be monitored
periodically in order to assure maximum
effectiveness
Centralised & De Centralised
Organisations
Decentralised Organisation: Responsibility
& Authority are delegated to lower levels.
Centralised Organisation: Concentrated at
higher levels of Management.
Organisations
Centralised Organisation: Economies of scale.
Uniformity in an organisation’s product
& service offerings
Encourages coordination & integration
of sales peoples’efforts & behaviour
Decentralised Happens when the organisation grows
Organisation: in size
Due to a more diverse customer base
With improved communication
facilities, becoming more feasible
Organisations
Mixture of both:
Certain organisations use both where
certain functions are centralised while
certain others are decentralised.
Eg: Recruitment, Training, etc.
However, when Responsibility is de-
centralised,organisation must take care to
ensure that there is adequate authority.
Line & Staff Components
Line Function: Primary Activity
Staff Function: Supporting Activity
Line Staff
•Advertising
•Selling
•Market research
•Planning
•Training
•Market Services
Small Firms: Have only one line function
Line & Staff Components
Staff Activities report to the position they
support
Eg: VP
 Has advertisements, Market research –
as staff functions
Whereas GM :
Has Training, Sales & distribution,
planning, etc. as staff functions
Size of the Company
An organisation evolves as a company
grows in size
Specialist functions are added
Eg: Sales Head, Production Head,
Personnel, Finance & Accts, etc.
Field Sales Organisation
Geographic Sales Organisation
Product based sales Organisation
Customer based Organisation
Activity / Function based Organisation.
Hybrid Sales Organisation
Team based Organisation
Geographic Sales Organisation
Sales Manager
South West North East

Product based Organisation
Product ‘A’ Product

Product‘A’
‘B’ Product ‘C’
North North North
South South South
East East East
West West West

West
Duplication of coverage
Increased costs
J.Parthasarathy
Customer based Organisation
Sales Manager
Regl. Mgr. S Regl. Mgr. W Regl. Mgr. N Regl. Mgr. E
Asst. Mgr.
Asst. Mgr.
TVS
Hero Honda
Asst. Mgr. Asst. Mgr.
Ashok Leyland Maruti

Suzuki
Activity based Organisation
Used in high cost selling methods
Eg: One to one
Prospecting
Presentation
Installation
Service
Hybrid Sales Organisation
Any two organisation types are combined
to suit the problems of individual sales
organisation
Advantage: Customer service
Disadvantage: Difficulty in managing
multiple sales force
Team based Sales Organisation
Customer
Marketing Technical Manufacturing

support
Conclusion
Coordination is the key
Formal interactions
Informal coordination
Companies use a combination of types –
Sales Organisation
Customer service – Primary concern
Recruitment & Selection
Recruitment & Selection
 Need for Recruitment
 Organisation for Recruiting & Selection
 Job Description & Specification
 Important qualities of salespeople
 Recruitment Sources
 Selection Procedure
 Sales Force Training
 Summary
Need for Recruitment
 Recruitment is a continuous process
 Natural growth of organisation
 Growth due to:
 Addition of new products
 Acquisitions
 Change in selling policy
 People outgrowing positions
 Growth of new industries & resultant attritions

 Induced vacancies
Organisation for Recruiting &
Selection
Varies from company to company
Recruitment normally handled by Sales
Department
Personnel Department handles only a few
aspects of recruitment
Where a company operates with
branches, to some extent, the process is
decentralised
Job Description & Specification
Title of the job
Duties & Responsibilities
Reporting methods
Minimum qualifications & experience
Territory to be covered
Important Qualities of Salespeople
 Aptitude
Educational background
 Communication skills
Determination
 Personality Intelligence
 Product knowledge Business sense
 Self motivated Confidence
Recruitment Sources
Pre Recruiting reservoir
Advertisements
Sources within the company
Sources outside the company
Competitors & other Industries
Past employees
Pre – Recruiting reservoir
Many companies have a pre - recruiting
reservoir:
 Through Sales people
 Customers
 Through centres of influence
 Earlier list of shortlisted candidates
Reservoir names to be reviewed

periodically
Advertisements
Newspapers, magazines & trade journals
Quick to reach
Immediate response
Response normally overwhelming,
depending on reputation of company
Highly time consuming & expensive
Sources within the company:
Company Sales Personnel

 Individuals known to sales staff
 Very familiar with the company; products,
policies, culture, etc.
 Especially helpful when filling up vacancies in
remote territories
 Internal transfers
 Between different departments in marketing
 Between different departments
Sources outside the company
 Recruitment Agencies
 Direct unsolicited Applications
 Educational Institutions
 Sales forces of non – competing companies
Sources of recruitment agencies to be evaluated
periodically for their success ratio:
 Quantitatively
 Qualitatively
Competitors & other Industries
Advantages of trained, knowledgeable &
experienced manpower
Downtime is minimised
Can be expensive at times
Can also be taken from other industries to
bring in sea change - inspiration
Past Employees
 Especially when employees have left due to
Higher studies
Gone abroad
Returning to hometown
Change in management, etc.
Selection Procedure
Preliminary Interview
Formal Application
Interview
Psychological Testing
References check
Physical examination
Job offer
Preliminary Interview
Screening process
Done by someone at a lower level
Only those who fulfill minimum
requirements in terms of age, qualification
& relevant experience are short listed
Formal Application
 Detailed application form given to the few short listed
candidates
 Generally covers the following:
Present job Earnings
Dependants Reasons for leaving each job
Education Membership in professional
organisation
Employment record
Training programmes attended
Duties & Responsibilities handled
Achievement in each
Health
organisation
Personal data
References
Interview
 Most widely used
 Application form becomes the basis
 Covers:
Oral communication
Personal appearance & manners
Attitude towards selling
Achievements, etc.
 Different techniques used:
Formal or structured
Informal or unstructured
Interview
 Applicant to be made more comfortable
 Good rapport to be maintained throughout
 Interaction interview is used at times
 Rating is done in a format individually by each of
the team members
Psychological Testing
• Four types of testing used:

»Tests of ability / aptitude
»Habitual characteristic
»Interests tests
»Tests of Achievement
Indicate applicants’ ability to learn
quickly
Ability / Aptitude
To arrive at accurate answers under
pressure. Also measures ego & Empathy
Habitual Attitude, personality & interest tests.

Characteristics Personality test is mainly used to identify
persons with abnormal personalities
Interest Tests Used when two people have equal ability

Assumption: Interests are constant
Used to determine how much individuals

Achievement know about a subject
Tests
Achievement tests can assess the
knowledge applicants posses in such
areas as the product, marketing channels
& customer relations
• All tests have their own limitations
• Faking is one of the major reasons for
these limitations
References Check
Generally provides information on the
applicant not available from other sources
Personal contact is the best way to obtain
information from references
Reference checks normally done before
the final interview
References Check
Important points covered include the
following:
Earnings
Performance
Position in co.
Interpersonal skills
Reasons for leaving
Habits
Strengths
Weaknesses
Physical Examination
 One of the last steps in selection

 Done to check whether a candidates
possesses the required stamina, strength &
tolerance needed under hard working
conditions
Job Offer
A final decision is taken on hiring the
person after considering the position,
future opportunities, etc. & then a written
offer is made as mutually agreed upon
Sales Force Training
Purpose & Benefits:
 To achieve improved performance
 Contributes by accelerating the process of learning
through experience
 Substitutes for or supplements experience
 Helps new sales personnel to perform their job
satisfactorily, thereby improving efficiency & reducing
attrition
 Continuing sales training improves job performances for
both ‘ Born & made ’ sales personnel
Identifying Training needs
Analysis of three main factors
Job specification
Trainees’ background & experience
Sales related Marketing policies
Identifying Continuing Training
Needs
 Covers experienced Sales personnel
 Changes in products & markets give rise to needs for
training
 Changes in company sales related marketing policies,
procedures & organisation
 Changes in working habits of sales personnel also give
rise to a need for continued training
 Management can also get to know the training needs by:
Salesperson’s reports
Sales records
Personal observation
Training Content
 Initial Sales Training programme normally covers all
important aspects of performance
 Continuing programmes concentrate on specific aspects
of the job where the sales person has deficiencies.
 Initial sales training programme to cover the following
main areas:
Product Data
Sales techniques
Markets
Company information
Training Methods
Lecture
Personal conference
Demonstrations
Role Playing
Case discussion
On the job training
Summary
 Recruitment is a continuous process
 Recruitment normally handled by the sales department
 Job description & specifications are important & need to
be clearly spelt out
 Sources are many & a combination is used depending
on the industry & company
 Formal interview is still by far the accepted method for
selection
 Training needs to be identified, content decided &
training to be imparted
Motivating Sales Personnel
Salesman’s Job Objectives
Care is taken in the selection of Sales
Personnel
Training imparted so that the Salesman
acquires the necessary skills required for
his performance
Job Objectives are clearly outlined
Education, Experience & Training – Help
achieve the job objectives
Motivation
Some are self starters
What causes the salesperson to expend
the necessary effort ?
Behavioural concept called Motivation
Most Sales Personnel require Motivation
Motivation
Motivation is a goal-directed behaviour
aimed toward achieving given results,
which in turn, provide rewards in line with
the goal
Also defined as an individual’s willingness
to exert effort to achieve the organisation’s
goals while satisfying individual needs
Needs & Desires
 Needs: Lack of something that reaching the goal could
satisfy
 Desires: Suggests positive ardour & strength of feeling
 Expending effort on each activity making up the sales job
leads to some level of achievement on one or more
dimensions of job performance.
Drive & initiative with Direction
Quality of effort- Intensity
Persistence to expend effort to meet or
exceed objectives
Motivation
Motivation can be
Intrinsic
Motivated Internally
Extrinsic
Someone provides the Motivation.
e.g. Pay, Promotion or recognition.
Some may be both Intrinsically as well as
Extrinsically Motivated.
Reasons for Motivation
Inherent nature of the sales job
Salesperson’s Boundary Position & Role
Conflicts
Tendency towards Apathy
Maintaining a Feeling of Group Identity
Inherent Nature of the Sales Job
Will have to deal with different kinds of
people – some are rude & difficult to deal
with
Work round the clock
Sacrifice a lot of personal life
Travel a lot – Sometimes during odd hours
away from family & friends
Salesperson’s Boundary Position &
Role Conflicts
 Conflict of Identification:
With customer
With company at office
 Advocacy conflict:
Advocates the customer’s position to
other groups in the company
 Conflict due to salesperson’s dual role:
Sometimes paid on the basis of sales
volume
May be selling a product whose
usefulness is limited
Role conflict on sales force morale can be reduced by
improving sales training & revising selection criteria
Tendency towards Apathy
 Some cover same territory & virtually the same
customers every year
 Lose interest & enthusiasm
 Believe that good salesmanship is no longer
necessary
 Competing salesman succeeds using different
selling techniques
 Additional motivation therefore required to
maintain enthusiasm & to generate interest in
the work
Maintaining a feeling of Group
Identity
Working alone, finds it difficult to maintain
a feeling of Group Identity
Team spirit is weak
Sales Management tries to bring in a
cooperative endeavour
Need Gratification & Motivation
 All human activity – is directed towards
satisfying certain needs – reaching certain goals
 Individuals seek to fulfill different sets of needs
in different ways
 Different motivational patterns & amounts &
types of efforts they exert in performing their
jobs exist
 Individual’s behaviour depends upon the nature
of their fulfilled & unfulfilled needs – based on
their environmental & social backgrounds
Needs are primary & secondary
Primary
 Food, water, Secondary
rest sleep, sex Safety & security,
& so on
Belongingness, social
relations, self esteem,
self respect
Maslow’s Hierarchy of Needs
Self Actualisation Needs
Esteem Needs
Belongingness & Social

Relations - Needs
Safety & security Needs
Basic Physiological Needs

Maslow’s Hierarchy of Needs
For some salespeople, order may be
slightly different
Individuals continuously try to fulfill even
larger portions of their need structures
Unsatisfied portions exert the strongest
motivational pull
Motivation – Hygiene Theory –
Frederick Herzberg
Hygiene needs:
Working environment
Compensation
Fringe benefits
Type of supervision
The presence of these factors provide no
motivation but the absence causes
dissatisfaction
Motivation – Hygiene Theory –
Frederick Herzberg
 Fulfilling the hygiene needs leads to the achievement of
a neutral point known as ‘ A fair day’s work’
 Performance at this point does not result from motivation
 The individual becomes ripe for influence by the
motivation factors.
 Motivation factors:
Achievement
Work itself
Recognition Growth potential
Advancement Responsibility
Two Implications for Sales
Management
Job to provide conditions that prevent job
dissatisfaction – Hygiene factors
Management must provide opportunities
for achievement, recognition, responsibility
& advancement.
Achievement – Motivation Theory –
David Mc Clelland
 Person has a high need for achievement
 ‘Need for achievement’ – is a motivation to
exceed some standard of quality in personal
behaviour
 Individual is self - motivated
 Self – starters
 Constantly challenge themselves to improve
their own performances
 Require right kind of job environment
Expectancy Model – Vroom
Perceived
Perceived Perf. Rewards
Effort-Performance
/ Punishments Relationship
Relationship
Individual Individual Organisational

Needs Individual Rewards /
Behaviour
(Goals) (Effort) Performance Punishments
Recycling
Expectancy Model – Vroom
 Individual’s desire to produce or act at a given
time depends on his specific goals & perception
of the relative worth of performance alternatives
as paths to attainment of these goals
 Individual also looks at the rewards /
punishments -whether appropriate for that kind
of performance & to what extent it will satisfy his
needs / goals
 Model concerned with expectations for Sales
management
 Such sales personnel need counselling &
support
McGregor’s Participation Model
Theory “X” & Theory “Y”
Theory X Theory Y
Direct efforts People are Creative.
Motivate them Self Fulfillment.
Control their actions Ego Satisfaction.
Modify their behaviour to fit Satisfaction of the social needs of
organisational needs
Individual workers.
Pertains to unskilled &
uneducated human workers For skilled & Educated human
workers.
Theory “Z”- a Hybrid Model
William Ouchi
 Integration of American & Japanese
management practices.
 Adopted for analytical & Promotional purposes.
 Salient Features
 Strong Bond between co. & employees.
 Employee’s participation
 Mutual trust.
 Integrated Org.
 Human Resources development.
Interdependence & Motivation
 Salesman depends on the supervisor for reaching
his individual goals
 Superior depends on the salesman to achieve the
organisation goals
 Therefore the relationship between a salesman &
his superior is one of interdependence
 Usual situation in sales force – superior
relationships is one of partial dependence
 Each salesperson has a ‘zone of acceptance’ a
range over which he or she accepts directions from
the superior
 Each superior has a similar zone over which he
or she honours requests from the salesperson
 Within their respective zones of acceptance, too,
both the salesperson & the superior exhibit a
‘degree of acceptance’ that varies – from
grudging acquiescence to enthusiastic
cooperation
 The sales manager should try to widen the zone
& increase the degree of acceptance of each
salesperson
 Through effective supervision, the sales manager
satisfies many of the salesperson’s needs & at the
same time obtains fuller cooperation from them by:
Giving due credit for good work
Convincing each salesperson of his job
importance
Earning the sales personnel’s
confidence in his leadership
Following other enlightened supervisory
practices
 Under this sort of supervision, sales personnel work
hard to earn praise & recognition & the resulting
social approval, esteem & self respect
Other means of Motivation
Show leadership
Establish good communications
Interpersonal contact
Motivational Interviews
Written communications
Career Stage Characteristics
Sl. Exploration Establishment MaintenanceDisengagement
Career Successfully Hold on. Completing

Right
1. concerns occupation establishing Reassures one’s career
a career in a career
certain Look for re
occupation direction
Sl. Exploration Establishment MaintenanceDisengagement
2. Dev.
Motivational Establish
Learn Using Broader
needs – Job strong self
skills skills to view of
related identity
produce work &
Become outside of
results org.
a work
contribut Adj. to Maintain Maintain
ing working high acceptable
member with greater performan pref level
autonomy ce level
Sl. Exploration Establishment Maintenance Disengagement
3. Personal Establish Producing

Maintain Acceptance
challenges a good superior
motivation of career
initial results –
profession looking for Facing accomplishm
al self promotion concerns ents
concept about aging
Sl. Exploration Establishment Maintenance Disengagement
Physiologi Support Security Detachment

Achievement
4. cal Needs peer Helping from the org.
Esteem
acceptance, younger & org. life
Autonomy
challenging Colleagues
Competition
position
Motivating Sales Personnel
Sales Contests.
Sales Conferences & Conventions.
Sponsorships towards Training Programmes.
Reward & Recognition.

Compensating the Sales Force
Compensation
A Sales Compensation Plan is an essential part of the total program

for motivating sales personnel.
A well designed compensation plan gives returns both for the

company & its sales personnel.
Normally a well laid out plan is in place.
Two situations where overhaulings done :

1.0 Sales Force has low morale due to a poor compensation plan.
2.0 The company is anticipating the cultivation of new &
different markets.
Requirements of a Good Sales
Compensation Plan
1. Provides a Living Wage in the form of a

secure income.
2. Fits with the rest of the Motivational Program.
3. Plan is fair- within the limits of seniority. Sales
Personnel receive equal pay for equal
performance.
4. Easy for sales personnel to understand and
calculate.
Requirements of a Good Sales
Compensation Plan
5. Plan adjusts pay to changes in

performance.
6. Plan is economical to administer.
7. Plan helps in attaining the objectives of the
sales organisation.
Devising a Sales Compensation
Plan
Define the Sales job.
Consider the company’s General
Compensation structure.
Consider compensation patterns in
Community & Industry.
Determine compensation Level.
Compensation Elements
Fixed Salary- to provide stability of
Income.
Variable element- Commission, Bonus etc
as an incentive.
Fringe Benefits- Paid vacations, Life
Insurance, Pensions etc.
Expense Allowances or Reimbursement of
Expenses.
Types of Compensation Plans
Straight Salary.
Straight commission.
Combination of Salary & Incentive Plan.

Elements of a Good Compensation
Package
1. Basic Salary.
2. City Allowance.
3. Accommodation.
4. House Rent allowance.
5. Medical Reimbursement.
6. Insurance—Medical / Accident / Group
7. Transport Reimbursement.
Elements of a Good Compensation
Package
8. Education Reimbursement-Self.
9. Entertainment Exp.
10. Uniform Allowance.
11. Meals allowance.
12. LTA
13. Retirement Benefits- Superannuation
14. Vehicle Allowance.
15. Home Loan.
Conclusion
 Sales Compensation Plan is an essentail part
of the total program for Motivating Sales
Personnel.
 Basic sales compensation elements should be
in amounts large enough to provide the living
wage.
 Fringe benefit elements need to be chosen
and administered carefully.
 Good sales compensation policies attract
promising recruits and encourage satisfactory
performers to remain in the job.
 Reduces time and effort devoted to other
aspects
of sales force management.
Monitoring of Sales Force Working
Monitoring of Sales Force working
Establish Performance Standards.
Record Performances.
Evaluate Performances against the set

standards.
Take Action.
Sales Evaluation Programme
 Structure, design & scope varies from firm to
firm.
Consumer / Industrial
Export / Domestic / Govt.
Size of Sales force
 Sales Force monitoring may be informal as well
as formal.
 May be simple or complex.
 However be realistic in nature to achieve the
organisational objectives
Sales Evaluation Programme
Objective must be to improve sales.
Scope of an evaluation programme must
be more to find out why one is not able to
perform & take corrective actions
Evaluation programme must be positive in
nature
Principles of Sales Evaluation
 Should be pragmaticParticipative
 Transparent in natureObjective
 Realistic Flexible
Specific
 Positive in spirit
Cost effective
 Informative Should be a means & not an
end
Performance Standards
Can be Quantitative as well as Qualitative
To be in line with Marketing Objectives of
the company
Policies of Sales & Marketing
Management should be cohesive & role of
Marketing should be supportive
Marketing policies should be in line with
changing market demand
Quantitative Performance
standards
1.Quotas:
 Expressed in absolute terms over a period of
time to a marketing unit
 Used to measure sales volume, gross margin,
net profit, expenses, etc.
2.Selling Expense ratio:
 Using the selling expense ratio, a salesman can
affect the profit by not only controlling the
expenses but also making sales
standards
3. Gross margin ratio:
 Used for comparing territories
 Sales of a balanced line of products is crucial
4. Territorial Market share:
 Market share is compared
5. Sales Coverage:
 Measures the efforts of a sales person to
convert prospects into customers
standards
6.Call frequency ratio:
 Number of sales calls to number of customers
for a particular class of customers
7.Calls per day:
8.Order call ratio:
 No. of orders / No. of calls
9.Average cost per call:
 Salesman to make profitable calls
standards
10.Average order size:
 Used to control the frequency of calls on
different accounts
11.Non- Selling Activities:
 Meeting end customers
 Conducting campaigns
 Training of Distributors’ sales personnel, etc.
12.Multiple Quantitative Performance standards
Qualitative standards
 Personal effectiveness
in handling customer
relations problems
 Product knowledge Punctuality
 Relationship with Diligence
customers Cooperation
 No. of sales calls Adaptability
 General attitude Reliability, etc.
Performance & Job description
Written job Descriptions, upto date &
logical to be made.
Each firm develops its own set of

Qualitative criteria based upon the job
descriptions.
Recording Actual Performance
System of Data collection to be set in
place
Periodic review is a must
Field sales reports provide good control
information
Field sales reports help Sales
Management to give direction to field sales
personnel
Different types of Reports exist
Supervision
Depends on the Organisation chart

Experience & Relationship – key
Summary
Objectives of Sales Department
Departmental Policies formulated
Promotional Programmes & campaigns
are mapped out
Quantitative performance standards are
set
Summary
Actual performance is recorded
Comparison made with standard set –
Qualitative & Quantitative and judgement
reached
Actions taken
Evaluation & Supervision- both
instrumental in achieving sales force
control
Sales Forecasting
Forecasting
1. What is sales forecasting?
2. Factors to be considered
3. Market Decision Support System
4. Importance of Sales Forecasting
5. Approaches to Sales Forecasting
o Break Down Approach
o Build up Approach
6. Sales Forecasting Methods
o Qualitative
o Quantitative
Forecasting
7. Qualitative Methods
o Expert Opinion
o Survey of Buyer’s Expectations
o Sales Force composite
o Delphi Technique
o Historical Analogy
Forecasting
8. Quantitative methods
o Moving Averages
o Exponential smoothing
o Naïve / Ratio method
o Regression Analysis
o Test Marketing
o Trend Method
Forecasting
9. Guidelines for Selecting suitable
Forecasting Method
10. How to improve Forecasting Accuracy
What is Sales Forecasting ?
An estimate of sales during a specified

future period which is tied to a proposed
marketing plan & which assumes a
particular set of uncontrollable &
competitive forces
Cundiff & Still

Factors to be considered
Market Potential
Market forecast
Growth rate in the category
Market share of the firm
Sales Potential
Sales forecast
Sales Budget
Sales Quota
Market Decision Support System
Organisation to have a well designed
Marketing Decision Support System
System to provide faster, less expensive &
more complete information for ‘Sales
Management’s decision making
High value information
Importance of Sales Forecasting
 Impact on supply chain & value chain
management
 Logistics, inventory, production process, etc.
planning can be regulated
 Final output inventory can be regulated
depending on the sales patterns in the market
 If not done properly – leads to higher inventory –
increasing the cost of the product & affects
profits
Importance of Sales Forecasting
A good sales forecast helps in:
Formulating & maintaining a
production schedule
Determining the company’s business
& marketing plan, growth strategies &
the marketing offer
Approaches to sales Forecasting
 Break down Approach ( Top Down )
 Build up Approach ( Bottom Up )

Break down approach
General environmental Forecast
Industry Sales Forecast

( Market Potential)
Company Sales Forecast
Sales Forecast for the Product lines
Sales / Mktg. Manager’s Forecast for

Regions, Branches, Territories &
Customers
Build Up approach
Step 4 : Combined into Company Sales Forecast
Step 3 : Combined into Regional / Zonal Sales Forecasts
Combined into Area / Branch Sales Forecasts

Step 2 :
Salesperson’s Sales Forecast of individual
Step 1 : customers
Sales Forecasting Methods
Qualitative
Quantitative
Qualitative
Intuitive
Subjective
Judgemental
Used when little or no historic data is
available – Horizon – Above 3 years
Qualitative
Expert Opinion
Survey of buyer’s
expectations
Qualitative
Methods
Sales Force Composite
Delphi Technique
Historical Analogy
Expert opinion
 Services of Experts used
oMarketing Professionals
oDistributors / Dealers
oProfessional Bodies / Associations
oMarketing Consultants
 Validity Questionable
Survey of Buyer’s Expectations
 Also called as Market Research or Market
Survey
 Existing & Potential customers are asked about
their likely purchases of the company’s product
& services for the forecast period
 Info. collected from buyers help the company to
make effective decisions not only in sales &
marketing areas, but also on Product, Research
& Development
 Forecasts based solely on this method tend to
be overly optimistic
Example of ‘grass roots’ or ‘bottom – up’
approach
Often used by industrial or business
marketing companies
Sales representatives make the sales
estimate in consultation with customers &
sales superiors & / or based on their
experience & intuition
 Company sales forecast is made up (composite)
of all the salesperson’s sales forecast
 To encourage better forecasting, salespeople

are given info. on their past forecast with actual
sales
 Discussions take place at different levels &

cascaded upwards to arrive at the final forecast
Delphi Technique
Method similar to & improvement over the
Executive opinion method
Panel of experts from within & outside the
organisation is selected
Delphi coordination is also selected
Each member submits his / her forecast in
writing anonymously
Delphi Technique
 Coordination summarises these forecasts into a
report that is sent to each panel member
 Experts asked to make another prediction
separately with the knowledge of the forecasts of
the other experts
 Process repeated until they arrive at some
consensus
 Process aims at gradual reduction of the
variability in the forecasts
Historical Analogy
 Used for forecasting the demand for a product or
service for which there is no past demand data
 Organisation might have marketed other
products earlier with features similar to those of
the new product
 Marketing personnel use the historical analogy
between the two products & derive the demand
for the new product using historical data
Quantitative Methods
Moving Averages
Exponential smoothing
Naïve / Ratio method
Regression Analysis
Test marketing
Trend Method
Moving Averages
Relatively simple method
Forecast made based on average
company sales for previous years
Two to three year average used for a
stable environment
For an industry with cyclical variations, a
longer duration average is used
Exponential Smoothing
Closely related to Moving Averages

method
Sales in certain periods to influence the

sales forecast more than sales in other
periods
Exponential Smoothing
 Equation as under:
Sales Forecast for next year:
(L) ( Actual sales this year) + (1- L)( This year’s sales
forecast)
L- Smoothing constant or Probability weighing
factor
 L is decided based on:
Review of Sales data
Knowledge & observations about the conditions
in the forecasted period & conditions in previous
period
Intuition
 High value of ‘L’ – Most recent periods of actual sales
influences more than sales in earlier periods
Naïve / Ratio Method
 Time series method of forecasting
 Assumption: What happened in the immediate past

will continue to happen in the immediate future
 Sales forecast for the next year:

Actual sales of this year * Actual sales of this year
Actual sales of last year
Regression Analysis
 Statistical Forecasting Method used to predict sales
 If one independent variable, it is called linear (or
simple) regression
y y
S S
A A
L L
E E
S S
Promotional Exp. x Price x
Regression Analysis
In practice, co. sales influenced by

several independent variables, price,
promotional expenditure, population,
etc.
Method used: Multiple Regression
Analysis
Test Marketing
 Useful for forecasting sales for a new product
 Can also be used for estimating sales for an
established product in a new territory
 Major methods are:
Full – blown test markets
Controlled test marketing
Simulated test marketing
Test Marketing
For industrial products:

Alpha Testing (Within the co.)
Beta testing (Outside the co.)
Participation in trade - shows
Trend method
Forecast based on past patterns of data
Data collected, observed & recorded at
regular intervals of time
Historical correlation of sales levels over
time is studied.
Sales Manager can identify a trend & find
a general indication of the possible
continuation of the time series
Trend method
 Time Series Analysis done in 4 ways:
Changes due to general tendency known
as secular movements
Changes during a period of 12 months as
a result of change in climate, weather
conditions & festivals – termed as seasonal
variations
Trend method
Changes as a result of booms &

depressions – cyclical variations
Changes due to unpredictable forces –
floods, earthquakes, etc.
Classified as irregular or erratic
variations
Guidelines for selecting Suitable
Forecasting Method
Ref Annexure
How to improve Forecasting
Accuracy
Use multiple forecasting Methods

Identify suitable methods
Develop a few factors
Obtain a range of forecasts
Use computer hardware & software
tools
Quotas & Territory Management
Quotas & Territory Management
Quotas
1. Definition
2. Objectives in using Quotas
3. Procedure for setting Quota
4. Types of sales Quota
o Sales volume
o Budget
o Activity
o Combination
5. Methods of setting Sales Quota
6. Setting & Administration of Sales Quota
7. Conclusion
Definition & What it means
Quotas are Quantitative Objectives
assigned to Sales Organisational units
Eg: Individual Sales personnel
Quotas specify desired performance levels
for :
Sales volume
Budgeted items as expenses
Gross margin / Net margin
Definition & What it means`
Quotas are also set for middle men such
as Agents, Wholesalers & Retailers
Quotas have a time dimension
Quotas are devices for directing &

controlling Sales Operations
Objectives in using Quotas
1. To control the sales effort
2. To provide Quantitative Performance
Standards
3. Used in appraising performances
4. Sales control is tightened through setting
of Quotas on expenses & profitability of
Sales volume
5. Expenses capped as a percentage of
Sales Volume
6. To motivate personnel to achieve desired
performance levels
7. Quotas to be attainable goals,
achievable with justifiable pride
8. Companies use Quotas to set sales
contests. A ‘common denominator’
feature is thus built into a contest
9. Helps to identify weak areas / sales
people so that attention can be given to
achieve the desired goals
10. Serves as a self supervisory mechanism
in the organisation
Procedure for setting Quota
 Three steps to be followed for Quota setting
Schedule Planning
Conferencing with each salesperson
Arriving at a summarised written
quota statement
 Meetings have to be formal, structured & run
with scheduled discussion
 Written & accepted goals become a
document of understanding for all purposes
Types of Sales Quota
Quotas fall into four different categories
Sales Volume
Budget
Activity
Combination
Sales Volume
 Sales volume Quota communicate the
Organisation’s expectations in terms of what
amount of sales – what period
 Sales can be in units or value or point sales
 Quotas can be set for geographical
territories, different product lines, different
marketing intermediaries or a combination
 In the ‘Points’ method, money or unit sales
is converted into ‘Points’ as per norms set
Budget Quota
Budget Quotas are set to control
expenses, gross margin or net profit
Expense Quotas emphasise keeping
expenses in alignment with sales volume,
thus indirectly controlling gross margin &
net profit contributions
Sales expenses are also controlled
Sometimes ‘contribution’ targets are set
Activity
Non – selling activities are set
Sales calls, missionary calls, product
demonstrations, displays, road shows, etc.
Insurance, Pharma are examples
Adequate supervision & close contact with
sales personnel are administrative
necessities
Combination
Combination Quotas control performance
of both selling & non – selling activities
Eg: Sales target of 1000 units, 20 new key

accounts, identifying 100 prospects &
bringing back 50 lost customers
Methods of setting Sales Quota
Based on:
 Sales Forecasts & Potentials
Forecast without regard to

Potential
Past sales or Experience
Executive Judgement
Salespeople Judgement
Compensation
Setting & Administration of Sales
Quotas
Good Quotas are accurate, fair &
attainable
Setting a fair Quota involves determining
the proper blend of sales potential &
previous experience
Management must make certain that sales
personnel understand quotas & the quota
setting procedure
Setting & Administration of Sales
Quotas
 Quotas setting method should be simple enough
for sales personnel to understand, yet
sufficiently sophisticated to permit acceptable
accuracy
 Sales personnel to be involved in Quota Setting
 Sales personnel to be frequently informed about
their progress during the period
 Flexibility in administering the system is
important – If a quota is proving unrealistic, it
should be adjusted
Conclusion
Quotas are Quantitative Objectives
assigned to sales Personnel & other units
of the selling organisation
Intended to stimulate performance & also
to evaluate it – Performance measures
Special pains are taken in setting up
Quotas, using sales potential, planning
data from sales forecast & sales budget
Conclusion
Sound judgement required for carrying out
intermediate changes within a year
Requires continuous managerial review
When intelligently administered, Quotas
are effective devices for directing &
controlling Sales operations
Sales Territory Management
Sales Territories
1. Introduction
2. Sales Territory Concept
3. Reasons for establishing Sales
Territories
4. Procedures for setting up or Revising
Sales Territories
5. Assigning salespeople to Territories.
6. Managing Territorial coverage.
Introduction
 Territorial assignments lend direction & control of
sales operations
 Establishment of sales territories facilitates Selling
efforts with sales opportunities
 Company consciously deploys people in territories
with the knowledge of their strengths & weakness.
Company attains a competitive position
 Breaking down the total market into smaller units
makes control of sales operations more effective
 Comparisons of performances with sales
opportunities present in each territory provide sound
basis for
appraisal
Sales Territory Concept
 Sales territory is a grouping of customers &
prospects assigned to an individual
salesperson
 Products like, Insurance, Investment
securities, automobiles, etc. – do not require
geographical division of territories
 Complex products require salesman to be
specially trained & hence difficult to divide the
area geographically
 Generally in India, Geographical grouping of
territories is followed for most products /
services
Reasons for Establishing or
Revising Sales Territories
 Major reasons are:
1. Increase market coverage
2. Control Selling Expenses
3. Better evaluation of sales force
performance
4. Contribute to sales force morale
5. Aid in the coordination of Personal –
Selling & Advertising efforts
1. Increase Market coverage
 Design of territories should permit sales
personnel to cover them conveniently &
economically
 Work load should be reasonable
 Sales personnel should have sufficient time to
spend with customers – less time on the road
 Should be able to visit customers at the desired
frequency
2. Control Selling Expenses
Design should be such that you have low
selling expenses & high sales volumes
Sales personnel to spend fewer nights
away from home
Customers or towns requiring frequent
visits should be closer to the Headquarters
3. Better Evaluation of Sales
Personnel
 Selling problems vary geographically & impact of
competition differs widely
 Depending on company’s strengths &
weaknesses in different areas, appropriate
adjustments can be made in selling strategies
 Quotas can be set depending on Sales, market
share, etc. & evaluation can be done accordingly
4. Contribute to Sales Force Morale
 With good designing of territories, sales force’s
workload is reasonable
 All know what Management expects from them
 Good design plus assignment of sales force
done intelligently – results in making each
person productive besides making him earn
high, build up his self – confidence & also results
in job satisfaction
 Good design makes them spend less time
travelling & helps in boosting their morale
5. Aid in coordination of Personal
Selling & Advertising
Sales personnel take ownership of
Territory & customers
Ensure participation of customers in key
promotional programmes
Certain promotions call for dealers to
share costs & sales person plays an
important role in coordination
Procedure for Designing Sales
Territories
1. Select geographical territorial base, also
called control unit.
e.g. City, Dt., town etc.
2. Find Sales Potential of Present &
Prospective customers in each control unit.
3. Estimate the total sales potential for all
customers in each control unit.
4. Decide on basic or fundamental territories
using
 Build up Method.
 Break down method.
Procedure for Designing Sales
Territories
Build Up Method
 Equalises work load.
 Used by manufacturers of Industrial Products &
Services or
By customers that want selective distribution
strategy.
Break Down method
 Equalises sales Potential of territories.
 Generally used by manufacturers of consumer
products.
Build Up Method
Decide call frequencies.
Calculate total no. of calls in each control
unit.
Estimate work load capacity of a sales
person.
Make tentative territories.
Develop final territories.
Break Down Method
Estimate company sales potential.
Forecast sales potential for each control
unit.
Estimate sales volume expected from
each sales person.
Make tentative sales territories.
Develop final territories.
Assigning salespeople to
Territories
Consider salesperson’s competence /
ability.
Consider salesperson’s effectiveness in a
territory.
Marketing objectives for the territory.
Strength of main competitor in the territory.
Competence / Ability
Product Knowledge.
Market Knowledge.
Past Performance.
Selling skills.
Overall skills.
Effectiveness
Social, cultural characteristics.
Local language & customs.
Comfort level & Effectiveness with the
customers / territory.
Managing Territorial Coverage.
Planning of efficient routes.
Scheduling salesperson’s time.
Use of Time Management tools.
Advertising
Advertising Decisions
1. Role of PM in Advertising
2. Target Audience
3. Advertising Objectives
4. Advertising & Marketing Mix
5. Advertising Budget
6. Evaluating ad copy
7. Media Selection
8. Evaluating Advertising Effects
9. Summary
Role of PM in Advertising
1. Identifying Target Audience
2. Advertising Objectives
3. Setting the Budget
4. Developing the general Advertising Strategy
5. Working closely with the ad Agency
6. Media Plan
7. Carry out an evaluation on the plan executed
Target Audience
 PM already has a Marketing Strategy in place

 Product & segment are identified
 Target audience is now finalised
 Industrial Products may have a larger target
audience who can be the decision makers
All need to be addressed
 Target audience may be selected based on
Product behaviour & in specific terms that
facilitate media planning
Advertising Objectives
Customer:
 For a new product, the objective is to increase
awareness & spread knowledge about the product
 To increase sales & profits
 To generate leads for conversion
 Direct response ads – to get immediate benefit
 To increase awareness, create interest, positive
attitude & induce intention to buy the product
 To shorten cycle time between Advertising & Buying
 Strategic Advertising Objectives may be to differentiate
between High Involvement and Low Involvement
Decisions
Advertising Objectives
Exposure:
 Reach
 Frequency
 Gross Rating Points
 Target audience to be linked to the above
Other objectives:
 Ads to specify objectives
 Incentives from 40% to 60%
 Improve attitude by 1 point in a 7 point scale
 Increase consumption by ___ %
 Reach 80% Target audience during a time period
Advertising & Marketing Mix
According to Frank Jefkins, Advertising is
related to different elements of Marketing Mix
as follows:
• Volume, emphasis & timing of an
advertisement depends on the stage of the
PLC
• Marketing research will throw light on
motives, preferences & attitudes which can
help in deciding on the theme & the media
• Branding shall play an important part in
advertisement design
• Desired Product Image can be projected by
an Advertisement
Advertising & Marketing Mix
5. Marketing segment will decide the tone or style of
advertising & the choice of Media
6. Pricing plays an important role in the formulation of the
copy
7. Packaging - when projected – is itself a form of
advertisement to identify the product at the point of sale
8. Distribution – Participation in exhibitions
9. Maintenance of customer interest & loyalty achieved
through repeated advertisements
10. Even test marketing – will require a small advertising
campaign
Relationship Between Reach &
Frequency
Reach:
 It is a measure of how many prospective customers the
typical advertisement is able to reach
 No. of distinct target market members who are exposed
at least once to a media vehicle in a given period of time
Frequency:
 The average no. of times, the target audience was
exposed to a message in any medium
 As frequency increases, Effective Reach decreases
 Marketer may choose media with smaller audience &
insert the advertisement more frequently or vice versa
Advertising Budget
Advertising is in many ways an investment
Marketing oriented firms view advertising
as a long term investment in the Brand
PM needs to estimate quantitatively the
impact of advertising on Sales & Profits
PM needs to determine optimal spending
levels analytically for a simple model or by
trial & error
Advertising Budget
1. Budgeting by Objectives:
 PM first decides on advertising objectives
 Target audience, Reach & Frequency
 Plan & consequently Budget is made
2. % of sales:
 Convenient & safer
 Useful starting point for trying to put together a
budget from scratch
3. Competitive Parity:
 Based on Market share
 Higher the market share, lesser the spend
4. Affordable:
 Depends on level of sales
 However, company tends to spend less
Advertising Budget
Points for consideration
1. Higher the market share, higher should be the
spend to protect it.
2. New products require higher ad support
3. Markets growing at 10 % or more annually, require
higher than average ad investment
4. Increase ad budget if your production is less than
two thirds of your capacity
5. Higher quality products generally require higher ad
spending
6. Standard, off the shelf products need more support
than customised products
Evaluating Ad copy
 PM should be involved in testing the Ad campaign
before a substantial amount of money is committed to
it.
 Lab tests are done to evaluate Ads & these have a
very high internal validity. Environment is controlled.
 Disadvantage : Situation is not realistic
 Other tests include :
Consumer Jury
Portfolio Tests- Portfolio of Ads shown &
feedback obtained.
Readability Tests- For print audience
Physiological Methods- For TV commercials
Theater Tests
Media Selection
Media Plan is often left to the Agency
Main factors are :
 Where and
 When
Where
 Matching the Media to the Target Audience
 Foll. Factors are considered during selection:
 Language
 Rating & circulation figures
 Cost
 Choice of general media fit & Ad context should also be
examined.
When
 Seasonality & Spending pattern
 Depending on the product, the Ad campaign may start prior to
the season / event
 Studies have found that Ad spending during the early life cycle
is more effective.
Evaluating Advertising Effects
Very little effort is spent in assessing the
result / effect of advertising
1. Tracking studies:
A set of simple surveys carried over a
period of time to get ‘Top of mind’ recall on
the advertisements
Focus is more on the objectives than on
sales
Evaluating Advertising Effects
2. Post sales Advertising:
Past advertising & sales are used for
comparing the effect of the recent
campaign
3. Evaluation on objectives:
PM’s goals on different objectives is
evaluated separately before & after the
campaign
Summary
 Selection of Target Audience is Primary.
 PM should have the objectives very clearly laid
out in line with the Marketing Plan
 Ad Budgets should be made using the
guidelines with Sales, Profits & Brand Building in
mind.
 Coordination with the Ad agency & choice of
Media Plan to achieve the objective is also an
important activity of the PM
 Evaluation, before and after the Plan is a must.

3.0 Sales & Marketing Management - 1

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

3.0 Sales & Marketing Management - 1

Uploaded by

Copyright:

Available Formats

Sales & Marketing

Marketing is a social & Managerial

Coordination Relationship Customer

Factory Products Selling & Profit

Marketing Market Customer Coordinated Profits

Revolves around the Revolves around the

Starts with existing Starts with the

 Every benefit promised by the product, carries a

Products Price Promotion Place

 Is the interpretation which is made,following

Specific to Customer needs

Not an organised search

Viewer is sensitive to information that

Balance has to be struck between the

Market Potential Capacity, consumption, imports,

Leads for mergers, joint Information concerning

Intelligence on broad General conditions General information: Political,

Suppliers & raw materials Purchasing information

Political instability in a country can also have a marked effect on

Prosperity demand for well known

Recession demand for basic

 Different regions of a country exhibit different

 Culture is reflected in the prevalent core beliefs

 These beliefs & values are declared in family &

Reflected in the kinds of food that people consume, the drinks

Marketers have to understand cultural values in all aspects of

Depending upon the above factors, a powerful supplier is in

In recent years, more no. of companies seek a partnership

Substitute products put a ceiling on the profitability of an

 Substitute products that deserve the most

2. Product Planning includes the Basic corporate &

3. Product Planning covers the entire spectrum of

 Product Manager is also called as:

Legal Product Packaging

1. Costs High Average Low Low

4. Competitors Few Increase Stabilisation Decline

Product Management begins with Product

Production Marketing Other

Pricing Promotional Distribution Product

Pricing Promotional Product

Present Market Product

Introduce current products to new markets

Development of new products for existing

Growth in sales by introducing new

Top of mind recall

1. Brand loyalty gives a stable & growing

Assumed that the Market size is limited

New Multiple Brands New Brands

1. One reason to add a product variant is to

Dropping a Product Variant:

1. A variant may be dropped due to slow sales or low

Perceived value > Price > Variable cost

Price > Perceived value > Variable cost

 The Product is a bad deal.

Price > Variable cost > Perceived value

 Product needs to be withdrawn from

There are three forms of display:

c). Stage of the product Life cycle:

Sales Displays are very important for

 It is important to spell out the objectives which

Specific Practical & realistic

Clear & concise Attainable