SALES AND RETAIL MANAGEMENT10MBAMM312 PART – A SALES MANAGEMENT MODULE 1 Introduction to sales management: Meaning, Evaluation, Importance, Personal Selling, Emerging Trends in Sales Management, elementary study Of sales organizations, qualities and responsibilities of sales manager. Types of sales organizations MODULE 2 Selling skills & Selling strategies: Selling and Business Styles, selling skills, situations, selling process, sales presentation, Handling customer Objections, Follow-up-action. MODULE 3 Management of Sales Territory & Sales Quota: Sales territory, meaning, size, designing, sales quota, procedure for sales quota. Types of sales quota, Methods of setting sales Quota. Recruitment and selection of sales force, Training of sales force. MODULE 4 Sales force motivation and compensation: Nature of motivation, Importance, Process and factors in the motivation, Compensation- Meaning, Types compensation plans and evaluation of sales force by performance and Appraisal process. PART – B RETAIL MANAGEMENT MODULE 5 Retail Management: Introduction, meaning, Characteristics, Retail industry India, role of retailing Trends in Retailing, Emergence of organizations of retailing, Retail Location and Layout plan, careers in Retailing. MODULE 6 Retail Market segmentation: Introduction to Market segment, Criteria for effective segmentation, Dimensions of segmentation, customer profiles. DEPARTMENT OF MBA, SJBIT Page 1 SALES AND RETAIL MANAGEMENT 10MBAMM312 MODULE 7 Retailing Channels: Products and merchandise management, structure, nature and channel, criteria for selection of suppliers. Channel choice, product movement, Merchandising plans, Store management, Retail Pricing: Factors and pricing, Retail pricing strategies, Retail promotion strategies, Retail sales promotion, publicity. MODULE 8 Relationship Marketing in Retailing: Management of Relationship, Evaluation of Relationship Marketing, Relationship, Marketing Strategies, Retail Research and Retail Audits. DEPARTMENT OF MBA, SJBIT Page 2 SALES AND RETAIL MANAGEMENT 10MBAMM312 INDEX MODULE 1 2 3 4 5 6 7 8 TOPIC PAGE No. 4 14 24 31 36 45 50 63 Introduction to sales management Selling skills & Selling strategies Management of Sales Territory & Sales Quota Sales force motivation and compensation Retail Management Retail Market segmentation Retailing Channels and Pricing Relationship Marketing in Retailing DEPARTMENT OF MBA, SJBIT Page 3 They sold colored sugar water as medicine and cheated people from smaller gains.SALES AND RETAIL MANAGEMENT 10MBAMM312 Module-1 Introduction to Sales Management Sales Management It is the attainment of salesforce goals in an effective and efficient manner through planning. these peddlers started using horse driven carts and wagons and started stocking heavier goods. In the next phase. spices. beads and ornaments and handicrafts. staffing. There were fewer than 1000 traveling sales people before 1860 in the US who were basically credit investigators and took orders for goods. and household articles from one part to another part. the drummers started visiting customer’s place of business. The drummers would meet the passengers form incoming train and ship with great fanfare to beat their competitors. training. leading and controlling organizational resources. Greeters and Drummers (Intermediary to buyer) Wholesalers and manufacturers hired greeters and drummers who would seek out and invite retailers to visit the display of the owner. Pack Peddlers The pack peddlers in India traded with the tribal Indians and exchanged knives. The first sales people The first sales people in the US were Yankee peddlers who carried clothing. Evolution of Sales Management Industrial revolution that took place in the 18th century gave rise to the expansion of market which required professional approach in selling. SJBIT Page 4 . In the beginning of the 19th century. The business and trade of buying and selling goods flourished over centuries and centered only on some specific cities of the world. dress materials and spices mostly in the rural markets because rural housewives have lessor mobility than urban housewives. These move from one village to village and sell sarees. DEPARTMENT OF MBA. The history of salesmanship is as old as human civilization. suppliers. This relationship approach has changed the scope of sales management and research has found that is costs five times more to register a new customer than to sell a product or service to an existing customer. In most industrial markets. He ran the National Cash Registry. motivating. A sales person has become the information provider. selecting. The best sales approach was printed in a sales primer and distributed to all the other sales people to follow Modern Sales Management Today the process of sales management has undergone numerous changes in terms of strategy. x Customers consider salesperson as the company selling product. The Domain of Sales Management The domain of sales management has become multidisciplinary in which sales manager has to manage a diverse workforce and complex technologies. controlling and administering people. training. SJBIT Page 5 . The real sales activity is now in retaining customers rather than just closing the sale. He asked his best sales people to demonstrate their sales techniques to other salespeople. widely known as the father of modern sales management. personal selling comprises the majority of the promotional budget and is a significant part of overall budget. x x Personal selling is the most commonly used method of promotion.SALES AND RETAIL MANAGEMENT 10MBAMM312 Selling Techniques The techniques of modern sales management and selling techniques were refined by John Henry Patterson. practice and technological adoption to achieve the desired goal. Importance of Sales Management x x The amount spent on selling product is very high. Sales manager have to perform duties such as recruiting. sales representatives and top management with the objective of increasing sales and profitability. forecasting. They have to manage and satisfy multiple and satisfy multiple stakeholders such as customers. Salesforce is the primary contact points so much attention to be given for improving the ability of selling through training and motivation. DEPARTMENT OF MBA. Personal selling It is a personal communication of information to influence a prospective customer to buy something. and different styles of negotiation and so on. service. or idea that satisfies an individual’s needs. Sales managers must also consider opportunities as many global markets are emerging and DEPARTMENT OF MBA. Sales managers selling goods and services in the global market place face challenges. different requirements for buying.a good. Types of Personal Selling Personal selling can be broadly classified into three categories. x Industrial selling o o o o x x Selling to reseller Selling to business user Institutional selling Selling to Government Retail selling Service selling Emerging trends in sales management To be successful in a changing marketing environment it is important that sales managers understand emerging trends in the following areas: x Global perspective Global competition is intensifying Domestic companies who never thought about foreign competitors suddenly find them in their salesforces to meet foreign competition in their country and improving their company’s personal selling efforts in other countries. SJBIT Page 6 . personal selling has become a method of marketing communication which fosters personalized and interactive dialogue with customers.SALES AND RETAIL MANAGEMENT 10MBAMM312 x With the advent of internet technology and web based platforms for interaction with customers. For example. They can access online a great amount of information about almost anything. mutually satisfying relations with key partiescustomers. the concept of relationship marketing came about earlier by bringing quality. its products and services to the needs of individual customers. Small and medium sized organizations can sell in global niche markets. To compete effectively. Sales manager will have to manage a salesforce consisting of women. more women are taking up careers in selling and sales management. Companies can collect more information about capabilities. customer. They can establish website and communicate information about the company. Buyers today can get information on products. distributors and suppliers in order to retain their long term preference and business. Some of the technological innovations for sales management are portable and desktop computers. x Revolution in Technology Digital revolution and the management of informational have greatly increased the capalities of consumers and marketing organizations.SALES AND RETAIL MANAGEMENT 10MBAMM312 growing rapidly. Interestingly. more educated and less educated DEPARTMENT OF MBA. mobile phones. Technology can make some sales activity efficient and cost effective. prospects and competitors by using the internet. x Salesforce diversity The demographic characteristics of the salesforce are changing and are becoming more varied. Marketing organizations also have a new set of capabilities. compare supplier’s prices and place orders on the internet in a matter of seconds. A company need not be large to sell globally. In addition. CRM enables companies to provide excellent real time customer service by focusing on meeting the individual needs of each valued customer by the use of CRM software packages. Relationship marketing aims at build long term. SJBIT Page 7 . customer service. x Customer Relationship management Combining relationship marketing with information technology has resulted in customer relationship management or customer relationship marketing. Companies can collect more information about markets. and marketing together. salespeople and sales managers will have to adopt to the latest technology. with college degree and some of them holding postgraduate degrees. video conferencing and videotape presentations. today salespeople are more educated. Giving payment or gift to get an order.SALES AND RETAIL MANAGEMENT 10MBAMM312 salesperson. It is also used for selling a technically complex product or service to a prospective customer. inside salesperson and salesperson or manufacturer’s representative. technical specialist. misleading. Sales people face ethical issues such as bribery. customer service. SJBIT Page 8 . x Managing multi-channels Multi channel marketing system occurs when an organization uses two or more marketing channels to reach one or more customer segments. as well as senior people. Customized selling-selling technically complex products and services by the company’s technical salesforce. and hence. The needs or expectations of the varied salesforce will be different and consequently the motivational tools will not be the same. Lower channel cost (ex: selling by phone instead of visits by salesperson to small sales potential customer) b. Major benefits of a multi channel marketing system are: a. DEPARTMENT OF MBA. x Team Selling Approach The practice of team selling is widely followed by most companies in recent years. Team selling approach is used when a company wants to build a long term mutually beneficial relationship with major customer. c. Multi channels may also lead to conflict and control problems as two or more channels may compete for the same customer. The successful sales manager will have to effectively manage the conflicts between channel members by using various techniques like co-operation. designing an effective compensation plan can be a challenging task. exchanging person. The composition of the team includes members from top management. misleading the customer by exaggerating the benefits of a product and using high-pressure tactics of committing wrong delivery schedules to a customer needing urgent delivery of a raw material are example of unethical behavior of salesperson. mediation. x Ethical and Social Issues Sales managers have social and ethical responsibilities. Team selling requires the joint selling effort of several persons. Increased market coverage. and high-pressure sales tactics. who have high sales and profit potential. Elementary study of Sales Organization A sales organization is an organization of individual either working together for the marketing of products and services. credibility. roles and the rights and responsibilities of sales people engaged in selling activities meant for the effective execution of the sales function. The knowledge. Some of the successful organizations have their own centers for training and management development. customers are more sophisticated and products and services have become more technical. professionalism. Today’s companies spend a lot of money each year to train salespeople in the art of selling and to make them professional. Factors influencing structure x x x x Product and service related factors Organization related factors Marketing mix related factors External factors DEPARTMENT OF MBA. because composition is more intense.SALES AND RETAIL MANAGEMENT 10MBAMM312 Today sales manager have no choice but to ensure ethical standards from the salesforce otherwise they may be out of business or even land up in legal problems. SJBIT Page 9 . skills and the right attitudes to meet complex and competitive market conditions of today are required by the professional salesperson through intensive training and practice. Selling has increased in complexity. manufactured by an enterprise or for products that are procured by the firm for the purpose of reselling. x Sales Professionalism Today’s top sales people are largely made. Success mostly comes to those salesperson who have a combination of natural ability and acquired skills. A sales organization defines the duties. not merely born. A study on what do buyers like most in a salesperson indicated qualities like reliability. integrity and product knowledge as most valued. Types of sales Organization x Line sales organization It is the simplest sales organization structure. Line managers are responsible to achieve target. from top sales manager to middle level managers. All managers. SJBIT Salespeople Salespeople Salespeople Page 10 . When new recruits have to be handled Narrow span of control can be used or else wider span of control is preferred. x Centralization and Decentralization The extent of control authority of the top management decides the level of centralization. x Span of control Number of subordinate and sales staff under the supervisor of a sales Manager is known as span of control. Highly centralized organization-Every decision will be made by the top management. x Integration and co-ordination The organization across departments integrated to serve customer with effective co-ordination. have line authority. Line authority means people in management positions have formal authority to direct and control immediate subordinate. Decentralization helps organization to be competitive at the respective market level. Head marketing Sales Manager Area sales manager 1 Area sales manager 2 Area sales manager 3 Area sales manager 4 Salespeople DEPARTMENT OF MBA.SALES AND RETAIL MANAGEMENT 10MBAMM312 Organizational principles A sales manager needs to understand the various organizational principles that help in the smooth functioning of the organization. supports the work of the team and helps the team to respond to market opportunities. has line authority of his/her function over salespeople. sales training. Head Marketing Marketing service Manager sales manager marketing research manager Area sales manager promotional manager Salespeople DEPARTMENT OF MBA. Staff manager don’t have any authority to issue directives to salespeople. Example. sales training. called staff are experts in certain support activities such as marketing research. who report to line sales managers. and advertising or integrated marketing research. SJBIT Page 11 .SALES AND RETAIL MANAGEMENT 10MBAMM312 Line and Staff organization In this type of organization structure. Each staff specialist manager. a group of specialists are made available to the top sales or marketing executive. Head marketing Marketing service manager sales manager Marketing research manager Promotional manager Area sales manager-1 Area sales manager-2 Area sales manager-3 Area sales manager-4 Sales People Sales People Sales People Sales People Functional sales organization In this sales organization. such as marketing research manager and promotion manager. marketing research manager can sales manager can directly issue instructions to all salespeople through area sales managers to obtain certain market information. and advertising or integrated marketing communication and marketing logistics. the principle of specialization is fully used. These specialists. DEPARTMENT OF MBA. catalyst. Advantages are reduction in supervision. He should be an amalgamator. and skillful manipulator. promotion channels. human resource. These teams also work with customer teams to solve the customer’s problems. and planner He should be a prognosticator. SJBIT Page 12 customer satisfaction sales and marketing pricing. logistics . sales and production or operation. unnecessary tasks and costs and substantial improvement in efficiency and customer responses with enthusiasm. All other people in the organization are the members of cross functional teams. a consolidator. and orchestrator directing efforts of many towards the achievement of common goal. Finance Human Resource Chief operation officer Customer support team Service Training Information Qualities and Responsibilities of sales manager Qualities x x x He should be good communicator. and finance are looked after b a small team of senior executives. Research design team Customer research Product /service design operation team production quality assurance Systems engineering Planning team Strategic Planning Accounts. The support functions like strategic planning. which perform many core processes like product design.SALES AND RETAIL MANAGEMENT 10MBAMM312 x Horizontal Organization This organization structure removes management levels (hierarchy) and also departmental boundaries. x Monitoring marketing environment. He should be an opportunist and a worthy advisor. SJBIT Page 13 . x Analyzing sales volume cost and profit x Measuring and evaluating salesforce performance. self fulfillment and economic growth He should be an innovator and creator of new ideas and promotion. DEPARTMENT OF MBA. selecting. and training of sale’s people x Allocating of salesforce and setting sales quota x Compensating. x Determination of size and structure of the sales organization. He should be an over achiever rising to the challenge of new forecast each year. motivating and leading the salesforce. He should be capable of handling unanticipated difficulties and events. Responsibilities x Sales planning and budgeting x Estimating demand and forecasting of sales. x Recruiting.SALES AND RETAIL MANAGEMENT 10MBAMM312 x x x x x x He should be a successful mentor who understands each individual’s needs. He should be a team-mate and referee. who mostly buy on impulse and consider non-functional reasons for making a choice. Theory of diffusion There are also customers who are vary conservative and buy only when they see everyone using the product. the quantity of purchase by the buyer the switching cost involved in buying from a competitor’s firm. In the theory of diffusion. will decide the nature of buying. conflict resolution skills. There is another set of people who but only after everybody has started using the product. problem solving skills and negotiation skills. This is called the theory of diffusion. the buyer’s ability to take risk. etc. SJBIT Page 14 . These buyers are the innovators in the marketplace. the bargaining power of the buyer in the market. This set of people is followed by another group who accept new products and innovations after observing the innovators using it. Majority of such people take time to make a buying decision. The buying styles vary depending upon the buyer’s capability to pay. the competitive landscape in the industry and many other factors. the innovators do not give much importance to the salesperson and make new purchases out of a habit of experimenting. Research has shown that the way people respond to an innovation varies in the marketplace. where as it are difficult to close a sale in the case of laggards. In many organizations buying is centralized. It is very easy to convince the innovators for buying the product. the prevailing level of competition. whereas in many others buying decisions are undertaken by a committee or a similar form of set up. listening skills. DEPARTMENT OF MBA.SALES AND RETAIL MANAGEMENT 10MBAMM312 Module-2 Selling skills and Selling Strategies Selling skills These are the sum total of aptitudes and skills such as communication skills. x Innovators and laggard People who are adventurous and have high risk capital are the overnight buyers. These laggards start buying a product when another new product is on the doorstep. Market conditions in terms of the number of competitors in the market. Selling and Business style The entire customer doesn’t buy the products in the same way. the quantity of purchase. doubts and he wishes the salesperson is involved in listening function. In the advertising world. counting inventory and taking replenishment orders. x The sales Task and Function The salesperson has to undertake various tasks during the process of selling. maintenance selling involves the art of servicing the existing accounts. But the customer may have queries. these kinds of salespeople are called client servicing executives who provide service to clients and also take the orders as and when required. When a salesperson gives a sales presentation or makes a sales call he communicates with the customer and basically performs the communication function. In non standardized markets. the salesperson needs to negotiate with customers and bargain wherever possible for the benefit of the organization and thus he is involved in the negotiations and bargaining function. securing promotional cooperation. x Maintenance Selling Typically. where there is no list price involved in buying and selling. We have classified the different kinds of salespeople in the introductory on the basis of sales responsibility and functions. and delivering the products. By providing information about other existing products of the company and new products that are likely to come to the market. In the IT sector. these DEPARTMENT OF MBA. SJBIT Page 15 . There is no question of prospecting for this kind of salespeople as it is done with the exiting customers. a salesperson also performs the information dissemination function.SALES AND RETAIL MANAGEMENT 10MBAMM312 x x x x x People oriented Problem oriented Sales technique oriented Push the product oriented Take it or leave it Selling Situations A typically selling situation explains what kind of customers a salesperson is going to face and what kind of customers a salesperson is going to face and what kind of sales approach will help him in closing a sale in that situation. The essential skills for successful selling are Problem solving skills Communication Skills Selling Skills Negotiation Skills Listening Skills Conflict Management Communication Skills DEPARTMENT OF MBA. failing which he may not be successful in selling. They are the real salespeople who try to do prospecting from the leads either available in the organization or collected by them and then take the prospect through the whole process of selling to realize a sale. Selling skills While it is very difficult to find out a set of characteristics for guaranteed success in selling. SJBIT Page 16 .SALES AND RETAIL MANAGEMENT 10MBAMM312 sales people are posted at the client site and are responsible for solving the client’s problems. integrity. In high tech product categories also we find service and maintenance salespeople. honesty. x Developmental selling Salespeople engaged in developmental selling are called business developmental sales executives as they try to contact the potential customers and build business for the firm. Selling skills are a set of characteristics that are necessary for a salesperson to posses. level of maturity. communicative ability. working smartly in business. ability to set goals. hard work. can make a successful salesperson. In some situations these skills can be developed through training and practice. and other mass media through which sponsor sends messages about the products and services without a scope of knowing the recipients. TV. but can be understood as a perception of commonality by both the parties. Intent or empathy (placing the customer’s interest on par with the seller’s interest. This involves translating ideas and thoughts into symbols. which in this case is the salesperson himself. which have to be encoded in a presentable form by the sender. Non-personal communication means the use of mass media for providing product information to the consumers. Sales presentation. Communication Process Communication is the exchange of idea and information between two parties. such as business to business selling. A typical communication process begins with a source. The later element is necessary mostly in intelligent buying and selling situations. Sales communication can be both personal and non-personal. For this purpose. Competency ( ability/knowledge/resource) 4. concepts. SJBIT Page 17 . Predictability of action 3. The communication process is defined as a set of activities and systems integrated for an exchange of ideas. telephone calls and selling information over the internet are example of communication and information dissemination in the selling process. who provides the relevant product and service information.SALES AND RETAIL MANAGEMENT 10MBAMM312 The ability and expertise to communicate is necessary in selling function. Research has found out that trust between a buyer and a seller largely depends on five elements in the salesperson’s behavior. sales literature sent through direct mail. a commitment to solving the customer’s problem and responsive to the customer’s cause) 5. words and pictures to meaningful DEPARTMENT OF MBA. Non-personal communication involves newspaper. information and knowledge between a sender and a receiver. The salespeople should posses a good vocabulary and express themselves intelligently to the customer. 1. Likeability (It is an emotional issue and difficult to clearly define. Truth of words communicated by the salesperson 2. The source has thoughts and ideas to communicate to the audience. the message has to be encoded into a presentable format that can be transmitted to the customers. Poor listening skills may make a sales manager miss subtle issues in customer interaction and this may lead to non-resolution of customers problems and thus a poor level of sales realization. The words and symbols used by the source should communicate the same meaning to the receiver. The following will explain the strategy and tactics they should follow to manage body language to show that they are confident enough to handle a sales situation. Personal appearance Posture Gestures Facial expression Eye contact Space distancing Listening skills The sales manager has to be a very good listener and use his listening skills to lead towards sales realization. SJBIT Page 18 . Process of listening Attendance Interpretation Remembrance Evaluations Response action DEPARTMENT OF MBA. Research suggest that people are only 25% efficient in their ability to listen.SALES AND RETAIL MANAGEMENT 10MBAMM312 communication patterns. x Managing body language Salespeople can take care of their verbal and non-verbal communication while making sales presentations. An average person remembers only about half of what is being told to him after 10 min and forgets half of that within 48hrs. SALES AND RETAIL MANAGEMENT 10MBAMM312 Levels of Listening Feedback Paraphrasing Clarifications Empathetic listening Active listening Conflict Management Skills Conflict exists in every organization. Conflict in sales organization is more evident than in any other organization. SJBIT Page 19 . This is due to the fact that there is always conflict of interest among people at different levels as the goals are different at each level of the organization. x Models of conflict Approach –approach Approach-Avoidance Avoidance-Avoidance x Components of conflict Interest Emotional DEPARTMENT OF MBA. Wall-mart globally follows the strategy to negotiated exchange with its suppliers and these are set for a long-term period. the parties have some or one conflict of interest between them. Indian automobile majors like TATA and Maruthi Udyog also follow the same strategy in dealing with the auto ancillary and equipment manufacturer. Bargaining is a defined as a process where at least two parties are involved. they are atleast temporarily joined together in a special kind of voluntary relationship and the activity in the relationship concerns the division or exchange of one or more specific resources or resolution of one or more intangible issues among the parties. SJBIT Page 20 .SALES AND RETAIL MANAGEMENT 10MBAMM312 Value x Methods of conflict resolution Lumping Avoidance Coercion Conciliation Mediation Arbitration Adjudication Negotiation Negotiation Skills Negotiation occurs when someone else has what you want and you are prepared to bargain for it and the vise versa. Negotiation Tactics Acting crazy Auctioning The good guy-bad guy routine Big pot DEPARTMENT OF MBA. A true solver will analyze the situation and extract the real problem from an ocean of information and facts.SALES AND RETAIL MANAGEMENT 10MBAMM312 Budget bogey Get a prestigious ally Escalation The well is dry Limited authority Deadline Get lost/stall for time Take it or leave it Problem solving skills The sales person needs problem solving skills for effective selling. The rational and consultative selling approach suggests that a salesperson should not be a mere order taker. he should rather act as a problem solver and a consultant to the customer. Problem solving Process Define the problem Generate alternative solutions Decide the solution Implement the solution Evaluate the solution DEPARTMENT OF MBA. SJBIT Page 21 . These roles are more significant for high-tech selling and business-to-business selling. the salesperson presents his products and services before the prospect and makes effort to create and modify their interest into sales realization for the company. Here. SJBIT Page 22 . x Approaches to sales presentation Attracting customer objection Creating interest Arousing desire and building conviction x Methods of sales presentation Canned presentation Organized presentation Tailored presentation DEPARTMENT OF MBA. the salesperson should always try to link the features and attributes of the product with the customer needs so that the gap or conflict and level of customer objection can be reduced in the subsequent stages.SALES AND RETAIL MANAGEMENT 10MBAMM312 Selling Process Pre-sale preparation Prospecting Pre-approach before the interview Approach to the customer Sales presentation Handling customer objections Sales presentation Sales presentation There is need for two way communication between the salesperson and the prospect during a sales presentation. While giving sales presentations. or is not fully in agreement with the salesperson. Start with your highest expectations Avoid conceding first Be sure the customer understands the value of a concession Make concessions in small amounts Admit mistakes and make corrections willingly Be prepared to withdraw a concession Avoid split the difference strategy Do not advertise willingness to concede. These objections are many times excuses for not buying.SALES AND RETAIL MANAGEMENT 10MBAMM312 Handling Customer Objections Customers make objections after or during the presentations. SJBIT Page 23 . Objections normally pause the sales process because the customer either has not fully understood the product and its benefits. Methods of handling customer objection x x x x x x x x Superior feature method Yes… but method Reverse English method Indirect denial method Pass out method Comparison method Direct denial method Another angle method DEPARTMENT OF MBA. industrial buying. namely consumer. On the other hand. a distributor or a marketing organization at a given period of time. where bulk order booking is done by a salesperson.SALES AND RETAIL MANAGEMENT 10MBAMM312 Module-3 Management of sales territory and sales quota Sales management is defined as a group of present and potential customers assigned to an individual sales person. industrial and durable and non-durable. or in situations where a company also handles the retailers. Size of sales territory There are various factors influence the size of a sales territory Density of the population. the company may prefer to have a larger territory compared to smaller territories for the perishable commodities. DEPARTMENT OF MBA. When companies decide to go through intermediaries they prefer to have a larger territory. a dealer. which contributes towards achieving the organizational goal regarding sales forecasts. the size of the territory is kept small. mode of physical distribution. Designing the Sales territory Select the basic geographic control units Decide on the criteria for allocation Decide on the starting point Combine control units adjacent to starting point Compare territories on allocation criteria and conduct workload analysis Assign salesforce to new territories Sales Quota Sales quotas are the targets that salespeople try to achieve within a specific period of time. population spread within the territory. a group of sales person. the selling process and transport and communication facilities. If the product is a consumer durable with a longer shelf life. nature and demand of the product. Territories can be established on the basis of the nature of the product. a branch. SJBIT Page 24 . They are x x x Scheduled planning Conferencing with each salesperson Arriving at a summarized written quota statement Types of sales quota x Sales volume quota x Sales budget quota x Sales activity quota x Combination quota Methods of setting sales quota x x x x x x Quotas based on sales forecasts and Potentials Quotas based on forecast Quotas based on past sales or experience Quotas based on executive judgment Quotas based on salesperson judgment Quotas based on compensation DEPARTMENT OF MBA.SALES AND RETAIL MANAGEMENT 10MBAMM312 Procedure for setting quota A successful procedure for setting quotas in organizations is a process built on one-to-one discussion between the sales managers with each salesperson serving a territory. SJBIT Page 25 . This procedure is the most democratic way of handling the targets and motivating subordinates to achieve the organizational goal. The purpose of recruitment is to locate the sources of manpower to meet the job recruitments and the man specifications. SJBIT Page 26 . Sources of recruitment An important decision to be made at this stage is regarding the source of recruitment.SALES AND RETAIL MANAGEMENT 10MBAMM312 Recruitment and Selection of salesforce Recruitment It is the planned process whereby the scientific principles of management is utilized for finding out and filling up the positions in the right territory with the right people. The section and recruitment of efficient people is always a competitive advantage for an organization. hiring objective. Hiring process There are three stages x Manpower planning (examine labour turn over. The sources of recruitment are divided into two types DEPARTMENT OF MBA. deciding number of people required for particular time) x x Recruitment stage (identifying best source for generating pool of candidates) Selection (screening. positive equipment analysis. interview) Planning for recruitment Strategic position analysis Turnover Job Analysis Job Qualification and Job Description Salesforce Recruitment Recruitment forms the first stage in the process of hiring a salesforce and is followed by selection and ends with placement and socialization. SJBIT Page 27 .SALES AND RETAIL MANAGEMENT 10MBAMM312 Internal sources of Recruitment Lateral and upward moves Interns and cooperative students Employee referral programmes External sources of recruitment Other industry sources Educational institutions and campus recruitments Advertising Employment agencies Walk-ins Networking Web sources Selection of a sales person Selection is the process of making a ‘hire’ or ‘no hire’ decision regarding each applicant for a job. Selection procedure Inviting a blank application Personal interviews Reference checks Physical examinations Intelligence DEPARTMENT OF MBA. The sales manager obtains the database mechanism that determines overall quality of the human resources in an organization. and the evaluation stage. the new product either moves across the life cycle or salespeople are asked to perform the job in a new way. the training need assessment and development. SJBIT Page 28 . In this case. The training process A sales manager has to design a training programme that will help in improving the skill and efficiency levels of the salesforce. Training need assessment Design and conduct of a training programme Evaluation of a training programme DEPARTMENT OF MBA. the market situation undergoes a change with the entry of a new competitor or a new technology. The salesforce needs to be trained to meet these new kinds of situation. the sales training programme should be designed by following a scientifically planned and designed process.SALES AND RETAIL MANAGEMENT 10MBAMM312 Personality Aptitude and skills Determination of terms of service Appointment Initial orientation Training the salesforce Sales training is a process of providing the salesforce with specific skills for performing their task better and helping and helping them to correct deficiencies in their sales performance When a new product is introduced into the market. Training provides the necessary skill to the salespeople to perform a job better and correct any lacunae in the salesforce while executing their job responsibilities. The training process consists of three phases namely. conduct of training programme. For the purpose of the optimum benefit to the organization. a training programme is designed to improve selling skills and can be measured by analyzing the increase in the all conversion ratio of a salesperson. For example. Training Methods x x Structure the lecture Reinforce the message DEPARTMENT OF MBA.SALES AND RETAIL MANAGEMENT 10MBAMM312 Training need assessment Organizational level analysis Task level analysis Individual level analysis Designing and conduct phase x x x Location Job instruction training Presentation options Types of training Cross-functional training Team training Creativity training Literacy training Evaluation Phase This is last stage in the training process where the effectiveness of the training programme is assessed. The training programme is also designed to increase the sales performance of salesperson in the territory where they are working. The effectiveness of a training programme is measured either in monetary or non-monetary terms. The criterion by which the assessment is done reflects the needs for which the programme was designed. SJBIT Page 29 . SJBIT Page 30 .SALES AND RETAIL MANAGEMENT 10MBAMM312 x x x x x x x x x x x x x Aid concentration Material used for the lecture Make memorable for the participants Deliver with dynamism Use questions Visual support Participative Conferences Seminars Discussions Role play Case study Work shop DEPARTMENT OF MBA. • Motivation has a system orientation. Many times.SALES AND RETAIL MANAGEMENT 10MBAMM312 Module-4 Salesforce motivation and compensation Nature of motivation • The meaning of the word motivation is to move or activate. x Employees in organization posses a huge amount of information based on the experience about structures and processes of the sales organization and market.. DEPARTMENT OF MBA. which Can be observed in some situations. Motives are hypothetical constructs. • Motivation is complete process in which needs get satisfied and generated newer and modified needs. Importance of sales motivation x Sales organization is made of human beings working at different levels and every organization needs people in order to function. x The success of the sales organization depends on the ability and the style of functioning of the sales manager to motivate the sales people to achieve organizational goals. one can find out the reasons why salespeople work overtime. The reasons may be either monetary benefits or observable financial rewards. the higher is the likelihood of an individual contributing the organization. • The higher is the level of inducement. But if the goal-directed action does not lead to any expected reward the individual is less likely to pursue this action with similar intensity. It produces goal-directed action harnesses human energy towards the goals of the sales organization. SJBIT Page 31 . and it may also be the intrinsic motivation that guides the individual for over commitment. Motivation is an internal feeling and an energetic force within salespeople that drives them to behave in a certain way. which means that the goal of the individual is shaped by the forces within the individual and its interaction with the surrounding environment. the individual is likely to repeat the same action again and again. • If goal-directed action always leads to a certain rewards. Financial rewards • These constitute the current spendable income. personal growth and development. recognition. These include promotions. profit sharing. retirement. etc. x Efficient salespeople posses good knowledge about their job and can sell goods and services to the satisfaction of the customers. Non-Financial benefits • There are rewards that do not directly involve money.SALES AND RETAIL MANAGEMENT 10MBAMM312 x The nature of the job itself is a strong source of demotivation and the sales manager has to keep salespeople continuously motivated for achieving organizational goals. SJBIT Page 32 . Process of Motivation Motive Behavior Goal Factors in the Motivation • • • • Changes in marketing environment Conflicting company objectives Unique nature of the sales job Separate motivational package Compensation It is the financial and non-financial method of rewards to the salesperson . sales contest. security. and expense accounts. future income. programmes. Types of compensation plan DEPARTMENT OF MBA. SJBIT Page 33 .SALES AND RETAIL MANAGEMENT 10MBAMM312 • Financial Compensation – – – – – – Straight Salary plan Straight commission plan Bonus and Incentives Salary plus incentive plan ( combination plan) Drawing account and Commission plan Allied method • Non-Financial Compensation – – – – – – Promotions Recognition programmes Fringe benefits Expense Accounts Perks Sales Contests Evaluation of sales force by performance appraisal process Deciding on the criteria for measuring performance Deciding on the conduct of the performance appraisal Deciding on evaluation of individuals and teams Comparisons of actual performance with standards DEPARTMENT OF MBA. SALES AND RETAIL MANAGEMENT 10MBAMM312 Deciding on the frequency of the performance with standards Deciding on the frequency of performance appraisal The external variables and their influence Deciding on the criteria for measuring performance • • • • • • • • • • • Relative and absolute judgment Trait-based Outcome based Behavior based Performance Rating Force Choice Scales Behavioral Observation Scales Call reports Silent call monitoring scores Activity Reports Combinational methods Deciding on the conduct of the performance appraisal • • • Biases Base rate information Availability Heuristics Page 34 DEPARTMENT OF MBA. SJBIT . SALES AND RETAIL MANAGEMENT 10MBAMM312 • • • • • • • • Anchoring Hindsight bias Regression effects Fundamental attribution error Deciding on evaluation of individual and teams Comparison of actual performance with standards Deciding on the frequency of the performance appraisal The external variables and their influences DEPARTMENT OF MBA. SJBIT Page 35 . • Holding inventory-products are available at the disposal of consumers so they can keep small inventory at home. • • All retailers offer assortment of products. Characteristics of Retailing • Average amount of sales transaction is much less than manufacturer.SALES AND RETAIL MANAGEMENT 10MBAMM312 Part – B Module-5 Retail Management Retailing consists of activities involved in selling goods and services to ultimate consumers for personal consumption. but they also specialize in the assortment they offer. Location is critical factor in retailing. • Survey shows that large number of buyers makes impulse purchasing. Retail management mainly involves merchandise management and store management. Retail management Retail management is the process of understanding the environment especially customer and competition. DEPARTMENT OF MBA. etc. emphasizing more on special promotion. • • There is direct end user interaction and retailing increases the value of products and services. The bulk items shipped by manufacturer are offered in smaller quantities tailored to individual customers. SJBIT Page 36 . so there is need for tightly controlling the costs. developing and implementing effective strategies. this behavior indicates the value of in store displays the ability to forecast is difficult. maximizing the number of customers. Retailing is a set of business activities that add value to the products and services sold to consumers for their family or personal use. 7 billion dollar to US 24 billion dollar.6 billion dollar which is expected to grow at a compounded 30% over next 5 years and the revenues are expected to triple from current US 7.e. income tax. those who are registered for sales tax. supermarket. The quest for convenience on the part of consumers shown by • Frantic growth of convenience store fueled by the entry of petroleum marketers AM/PM store. Spatial convenience Number of working women has fueled an intense demand for convenience. Diversification of vending machine into food-clothing and videotapes Page 37 DEPARTMENT OF MBA. It is the second largest employer after agriculture. Organizational retailing refers to trading activities undertaken by licensed retailers i. SJBIT . etc. The revamping exercise of Indian retail industry goes with departmental stores. unorganized on the other hand. • • Exploding popularity of online shopping operators. It has estimated India’s total retail amount at US 202. There are 12mm retail outlets in India. refers to the traditional format of low cost retailing.SALES AND RETAIL MANAGEMENT 10MBAMM312 Retail industry in India The retail industry is the largest industry accounting for over 10%. Western style malls have began appearing in the metros and second ring cities alike introducing the Indian consumer to a shopping experience like never before. nuclear families in urban areas along with increasing working population and emerging opportunities in services sector are going to be the key driver of the organized retail sector in India. Role of retailing trends in Retailing The retail industry is changing rapidly due to various reasons 1. The Indian population is witnessing a significant change in its demographics. and specialty store. A large working population with median age of 24 years. Retailing in India is gradually inching its way toward becoming next booming Industry. India has been ranked 2nd in a Global Retail Development Index 30 countries. The retail Industry is divided into organized and unorganized sector. hypermarket. track what moves and what does not move well in their stores. Companies like Amazon. Ex. This knowledge of information has permitted retailer to calculate the (DPP) Direct Portfolio of Individual Items. SJBIT Page 38 .com which helped pioneer the retail E-commerce.SALES AND RETAIL MANAGEMENT 10MBAMM312 2. The reasons for this reversal are many. Growing Diversity of Retail formats 4. Department store with varied merchandising operations. 10. 5. small independent stores across product categories are very common retail format in India. Retailers have many new products from which to choose when deciding what to stock on their selves. Product selection is limited and products are usually sale in bulk size.. Blockbuster video. convenience store. 7. or more. Specialty discounter-Category Killer: DEPARTMENT OF MBA. Increased power of retailer At one time. Traditional Kirana stores. 8. category killer. So the manufacturers struggled to get space in the shelves of retailers. specialty store. Mass merchandiser. 3. Now the retailers tend to dominate them. 11. Warehouse club (wholesale club): appeal is to price conscious shopper. ft. Usually has a central distribution centre for receiving and shipping direct to the customer. Size is 60000 sq. Franchise: territory rights are also sold to franchisees. Various distribution and other services are provided by contract to franchisees for fee. they are department store. Further the IT has diffused throughout retailing to such an extent that virtually all major retailer can capture item-by-item data via scanning devices at that electronic point of sale terminal. 9. They offer pricing concession. colgate dominated retailers. slotting allowance etc. Consumers can now purchase same merchandise from wide variety of retailers. McDonalds. Mail order catalog: non-store selling through the use of literature sent to potential customer. E-Commerce: the amount of retail business conducted on the Internet is growing every year. Hypermarket. Particularly in small townships. to promote products. 6. such as haats. DEPARTMENT OF MBA. 228.11.SALES AND RETAIL MANAGEMENT 10MBAMM312 Offers merchandise in one line (e. Emergence of organized retailing Organized retailing in India represents fraction of total retail market. However. SJBIT Page 39 . especially in south India. and are spreading over India at a rapid pace.000 square feet. There has been a strong resistance to FDI in retailing from small traders who fear that foreign companies would take away their business. ration shops are the most popular vehicles of retailing. Only 3. office supplies. Govt has discouraged FDI in retail sector. costs can be quite high. Apart from this.g. peeth and mealas. there are periodic or temporary markets. The Mckinsy report predicts that FDI will help the retail business to grow to US dollar 460-470 billion by 2010. Rising incomes has led to an increased demand for better quality products while lack of time has led to a demand for better quality products while lack of time has led to a demand for convenience and services.000 to 75. Location decisions can be complex. More and more women are taking up corporate jobs. there is often little flexible once a location has been chosen and the attribute of location have a strong impact on retail overall strategy. provision stores. The modern retail formats are showing robust growth as several retail chains have established a base in metropolitan cities. Rural India continuous to be serviced by small retail outlets.6 million outlets cater to more than 700 million inhabitants of rural India. lead to the closure of many small trading businesses. In 2001. space and rentals are providing to be the biggest constraints to the development of large formats in metropolitan cities since retailers are aiming at prime locations. Retail location and Retail layout Retail Location Location is the most important ingredient for any business that relies on customers. Store usually range in size from 50. families are experiencing growth in income but dearth of time. which is adding to the family’s income and leading to better lifestyles. organized retail trade in India was worth Rs. children merchandise) with great depth of product selection at discounted prices. sporting goods. In urban India. that come up at the same location at regular time intervals. Therefore. and result in large scale unemployment. Here. It is also one of the most difficult to plan for completely. 7 billion. Selection of a city Factors to be considered for selection of city • Size of the city’s trading area: a city’s trading is the geographic region from which customers come to the city for shopping. Cities like Mumbai and Delhi have a large trading are as they draw customers from far off cities and towns. A city’s trading area would comprise it suburbs as well as neighboring cities and towns. number. • • The retailer also considers. Total purchasing power and its distribution: Cities with a large population of affluent and upper middle class customers can be a attractive location for stores selling high priced purchasing power and its distribution among a large base of middle class is contribution to a retailing boom around major cities in India. • Total retail trade potential for different lines of trade: A city may become specialize in certain lines of trade. Page 40 DEPARTMENT OF MBA. • • High growth in population in the trading area can also increase the retail potential. size.SALES AND RETAIL MANAGEMENT 10MBAMM312 Importance of location decision Location is a major cost factor because it: • • • Involves large capital investment Affects transportation cost Affects human resource Location is major revenue factor because it • • Affects the amount of customer traffic Affect the volume of business Levels of location decision and its determining factors 1. Development cost. SJBIT . quality of completion before selecting a city. DEPARTMENT OF MBA. The volume of vehicular traffic and pedestrian shoppers who pass by the specific site should be assessed since they represent the potential customers. For ex. The vehicular or pedestrian traffic moving past the site would be attracted only if it represents the segment the store is targeting. number of stores in the area.SALES AND RETAIL MANAGEMENT 10MBAMM312 2. Mumbai’s suburbs abd Navi Mumbai are growing at a fast rate. Availability of access routes-There should not be traffic jam and congestion Nature of zoning regulations: Retailers should examine the plans of zoning commissions and municipal corporations regarding the development of shopping centers. 3. • Direction in which the city is spread. • Ability of the site to intercept the traffic following past the site. Neighborhood stores: located in residential neighborhoods and serve a small locality. Types of Location 1. stationary etc. Selection of an Area or Types of location within a city Evaluation of the following factors required • Customer attraction power of a shopping district or a particular store (commercial street. • Complementary nature of adjacent stores: A store selling school uniforms would have greater potential if adjacent stores sell school books. SJBIT Page 41 . Section of a specific site • Adequacy and potential of traffic passing the site. 2. They sell convenience products like groceries. Dhabas on highways. residential areas. Bangalore) • • • Product lines carried by other stores. Free standing location: where there is no other retail outlets in the vicinity of the store and therefore depend on its own pulling power and promotion. flyovers. 2. SJBIT Page 42 . have enclosed malls. serve a large trading area and have high rents. Bangalore. Chikpet. a variety store and a few other sotres. CBDs in major metro like Delhi and Mumbai we find two or more CBD’s each serving different segments. It can further classified into two: 1. dhabas with good parking facility. Highway stores: located along highways or at the intersections of two highways and attract customers passing through these highways. Planned shopping centers i. Neighborhood / community shopping centre Usually has a balanced mix of store including a few grocery stores a chemist. Suburban business district: stores located on the town’s periphery have lower rents. Business associated location: these are locations where a group of retail outlets offering a variety of merchandise work together work together to attract customers to their retail area but also compete against each other for the same customers. Secondary business District: They are composed of an unplanned cluster of stores often located on a major intersection of a city. iii.(spencer Plaza in Chennai) ii. 4. (cities and towns) v.SALES AND RETAIL MANAGEMENT 10MBAMM312 3. DEPARTMENT OF MBA. Downtown or central business district A CBD usually have trade area that varies according to the size of the city or town. iv. Koramangala in Bangalore. Regional shopping centre malls Regional shopping centers or malls are the largest planned shopping centered: often they are anchored by two or more major department stores. Unplanned business districts i. ii. Bangalore. Neighborhood Business District: Stores located in neighborhood business district form a small cluster and serve neighborhood trading area. often rely on traffic generated by the downtown and may sometimes offer parking facilities. Commercial street. Fast food restaurants. SJBIT Page 43 . increased productivity and higher sales. controls traffic flow.SALES AND RETAIL MANAGEMENT 10MBAMM312 iii. Layout: External Factors x x x x x x Size must be adequate to accommodate business needs Appearance must create the proper image or personality for the business in the customer’s eyes. Create effective window displays and change them often: they can be powerful sales tools Must comply with Americans with Disabilities Act (ADA) Pay attention to the business sign.the logical arrangement of the physical facilities of a business that contributes to efficient operations. uses selling space efficiently. Most of these markets operate in evening hours. Study: Look and feel of employees work spaces is third most important consideration (after salary and benefits) when deciding whether or not to accept or to quite a job. o Supermarkets and self-service discount stores. formal. the most direct method of reaching potential customers. Entrances must invite customers to come in. Layout Layout. Three retail Layout Patterns x Grid o Rectangular with parallel aisles. Periodic Markets: Another peculiar types of market found in India is the periodic market. These markets are mostly associated with the name of day it is held on. which is established at particular places on a particular day in a week. DEPARTMENT OF MBA. SALES AND RETAIL MANAGEMENT 10MBAMM312 x Free-form o o Free-flowing. Layout guidelines x x x x Know your customer’s buying habits and plan your layout accordingly. SJBIT Page 44 . informal. DEPARTMENT OF MBA. each with its own theme. flexible Small specialty shops x Boutique o Divides store into a series of individual shopping areas. creates “friendly” environment. unique shopping environment. Display merchandise as attractively as your budget will allow Display complementary items together Recognize the value of floor space: never waste valuable selling space with non-selling functions. o Small department stores. Marketer Approaches The marketer has the option of either approaching the entire customers with a uniform marketing approach or adopting a differential approach for different set of customers. An understanding of the target is essential. Understand consumer behavior: It helps a retailer to gain insight into why the target group acts the way it does. Promotional campaign DEPARTMENT OF MBA.SALES AND RETAIL MANAGEMENT 10MBAMM312 Module-6 Retail Market Segmentation Market and Market Segmentation A market is the group of potential customers with similar needs who are willing to exchange something of value with sellers. Store location Decision: The retailer outlets can be located where there is a concentration of the target people. pricing strategy and promotional programme. those with children and those without children. Segmentation helps the retailer to customize the product or service and tailor its promotional campaign. Benefits of Market Segmentation Development of marketing mix: It helps retailers in developing a customized marketing programme in terms of product offering. Marketers usually identify niches by dividing a segment into sub segments. The proliferation of distribution channels and retail formats is increasing competition and forcing retailers to focus their selling efforts on select group of customers. SJBIT Page 45 . Merchandising Decisions: Merchandising is essentially the skill that decides which item will on the shelves. Market Segmentation It is the process of dividing the heterogeneous total market into small groups of customers who share a similar set of wants. which target higher income groups should ensure that there is a significantly large population of such high income groups should ensure that there is a significantly large population of such high income groups in their trade area before locating a store. This will help a retailer to focus its effort on its identified target segments. like Korammangala in Bangalore must be accessible to its target population. Stores like Bombay stores and lifestyle. A few dimensions are demographic. others are geographic. the identified segments may satisfy the following Homogenous within. purchasing power and the characteristics of the market segment must be measurable. Substantial: The market segment that a retailer plans to target must be large enough and have enough discretionary income to help the retailers to be profitable.SALES AND RETAIL MANAGEMENT 10MBAMM312 Positioning: the shoppers stop and cross roads have targeted the upper income class while Westside has targeted the larger base of middle and upper middle class. the retailer must first decide which combination of segmenting dimension to use. Criteria for Effective Market Segmentation For market segmentation to be effective. Heterogeneous within: The customers in different segments should be as different as possible with respect to their needs and buying behavior. Actionable: The segmenting dimensions should be useful for identifying customers and deciding on Marketing Mix variables Accessible: The target segment must be reachable so as to serve them effectively. SJBIT Page 46 . The retailer needs to determine the size of the target segment and estimate its purchasing power to develop an effective marketing programme. Dimensions of Segmentation In segmenting the total market. A mall in a city suburb.The segments into which the market is divided should be homogenous within. Measurable: The size. The customers in a segment should have similar needs and wants and follow similar buying behavior as much as possible so that their needs can be addressed through a uniform marketing programmer. psycho graphical and behavioral. Respect to their needs. DEPARTMENT OF MBA. social. anf fashion) and opinion (politics. cities or neighborhoods.SALES AND RETAIL MANAGEMENT 10MBAMM312 Geographic Segmentation Market is divided into geographical units such as nations. Demographic Segmentation Market is divided into groups based on demographic variables such as age. personality. intellectual issues or business matters while sipping coffee. regions countries. Life style is a distinct mode of living. or values. In India most market research agencies prefer to segment on the basis of socio economic class rather than on income basis. Subiksha-Chennai at short distances. family size. Indian coffee houses provide good quality coffee at a very modest price. and hobbies) interest (family. serving the nearby colonies. It targets customers above 40 years interested in discussing politics. need and ability of the customer. gender. Retailer segment the market on variable which reflect interest. café coffee Day target youngsters from high income families looking for fun. DEPARTMENT OF MBA. religion. and social issues). SJBIT Page 47 . On the other hand. It gets reflected by various activities performed (work. Psychographic Segmentation Divides buyers into different groups based on their lifestyle. Retailers in India have often segmented markets by cities and focused on metro and large cities. educational level and marital status. income. education. social class. with their up-market décor and attractive layout. job. occupation. The customer of café coffee day are youngsters who like to move around in groups. SJBIT Page 48 . x Customer Demographic Data about the target segment may be collected on demographic characteristics such as age. as well as their interest. deciders. educational background and professional background. opinions. use or know a product. benefits. Marketers can compile information on behavioral variables such as occasions. live a fast active life and entertain friends. buyers. Products and services are purchased for a variety of reasons. influencers. DEPARTMENT OF MBA. different family members can play different roles as initiators. adventure. income levels. The various activities pursued by target segment such as sports. a retailer must develop detailed profiles of customers in the identified target segments. sex. worship. usage rate. x Family Decision Making In such situations.SALES AND RETAIL MANAGEMENT 10MBAMM312 Behavioral Segmentation Customers are divided into groups based on the way they respond to. etc. and values may be profiled to get a better understanding of the target segment. Customer Profile After deciding on target segments. hobbies. It should compile information regarding purchase motivation the cultural influences on purchasing behavior. etc. x Purchasing Behavior of the target population The retailer should also develop a detailed understanding of the purchasing behavior of the selected target segment. consumers and evaluators x Psychographic The retailer has to profile consumer’s lifestyle and values. user status. Market research may be necessary to develop profile. Place utility refers to the benefits of shopping at particular shopping locations due to availability of wide range products. The retailer should understand the purchase motivation of the target segment. DEPARTMENT OF MBA. For example.SALES AND RETAIL MANAGEMENT 10MBAMM312 x Purchase motivation The decision to buy or not to buy often comes from what one anticipates as the consequences of one’s decision. a young man may buy a fashionable brand of shirt from shoppers stop to announce to his colleagues and friends that has come of age. x Source of purchase Customer’s choice of shopping locations depends on time utility and place utility. low prices. SJBIT Page 49 . Time utility refers to availability of products and services at convenient hours or in case of urgent requirements. trends in the product category and its strategic fit with the retail business. Product management is also an implementation of the segmentation strategy of the retailer who attempts to attract the target segment the product profile and specific pricing strategies. Hence. SJBIT Page 50 . Product. For example every shopping centre. Selection of the product is designed to meet some unmet needs of the customer. places. has at least one eating outlet. The product selection process It involves a review of the performance of the existing product range. Identification of the products to be sold forms the core component of the retailer’s business plan. it could constitute goods. It has immense cost and profit implication. While product management deals with issues related to the kind of products sold by the retailer. Role of product in retail business Products are critical to a retail firm’s existence and profitability. whether planned or unplanned. etc. merchandise management concerns itself with the selection of the right quantity of the products and ensuring its availability at the right place and time. Product management by the retail firm is critical to the satisfaction of consumer needs. Increase in variety and range DEPARTMENT OF MBA. a grocery shop and a chemist shop. and events. These relates to the type of products to be retailed. Merchandise plan is drawn in keep in mind that influences shopping behavior and the strategic and cost concern of the retailer. is defined as anything sold and purchased in a retail transaction. services. A related issue is the management of retail brands and the decision to offer retailers private labels along with or instead of national and local brands. Deletion of the product ii. Product range review assists retailers to go in for possible decision such as i.SALES AND RETAIL MANAGEMENT 10MBAMM312 Module-7 Product and Merchandise Management Product and merchandise management is the key activity in the management of retail business. life cycle of the products. in retailing context. planning. Merchandise management is the process by which a retailer attempts to offer the right quantity of the right place and time while meeting the retail firm’s financial goals. Merchandise Management The primary function of retailing is to sell merchandise. and control of the merchandise investment of a retail operation. fashion. Review and revision of promotional campaign. handling. SJBIT Page 51 . procurement. The product category life cycle describes the primary form of sales pattern over a time. One of the most strategic aspects of the retail business is to decide the merchandise mix and quantity to be purchased. DEPARTMENT OF MBA. Sales forecasting helps the management in a forecast of expected sales. Merchandise management is the analysis. Projected sales Expected or projected rupees volume of sales for each merchandise or department. Identification of new suppliers iv. fad. staple. Component of merchandise management Analysis Planning control Acquisition Handling The merchandise budget plan The four important components of the merchandise budget plan: i. Additions to product features v. and seasonal. The understanding of the life cycle while developing sales forecast.SALES AND RETAIL MANAGEMENT 10MBAMM312 iii. The special categories of product life cycle are style. They supply the retailers from their own stocks rather DEPARTMENT OF MBA. Markdowns (reduction in the original list price to encourage sale of the product) b. two wheelers. They actually take ownership of the goods between the producers and the retailer. inventory turnover. Estimated reduction Retail reductions are classified into three a. It helps to devise the stock support levels for a specific sales period. SJBIT Page 52 . iii. inventory available.SALES AND RETAIL MANAGEMENT 10MBAMM312 ii. Large retailers regularly deal directly with a product manufacturer. There are number of alternatives that a retailer might consider as a suitable source of supply: i. ii. Manufacturers will normally have sales office or a showroom either attached to a production unit or in a location convenient for retail customers. Here a retailer or planner use information compiled at the initial stages of merchandise budget planning. Retailing Channel A retailer can depend on one supplier or a combination of suppliers. ordered quantity. Shortages are reduction in the total value of inventory that results from damages to merchandise iv. Manufacturers and Primary producers This category sells cars. sales forecast and quantity of order for specific SKU (stock keeping units). gasoline and other products and consumer durable from company owned stores. Wholesalers Wholesalers accept small orders from retailers. Estimated purchase level At this stage a retailer is supposed to devise an actual budget for planned purchase. Discounts (reduction in the original retail price given to special customers) c. Inventory plan Inventory plan provides information regarding sales velocity. samples and nil-effect delivery. SJBIT Page 53 . Technically capability. Agents Provide purchasing and delivering facility to the retailers against negotiated commissions on the percentage to the total value of the goods purchased. iii. Retailers depend on agents for weekly or fortnightly purchases from the major trading centers. i. v. design experts. acting as agents. quality benchmarks. At the same time. Government and semi-Government source Public distribution system acquires its entire stock of goods from the central government of India through various official state bodies such as the Food Corporation of India. Mother dairy and safal. iv. Product range and quality Retailers will asses the product range available with the supplier and the standard maintained while manufacturing or delivering. Retailers will consider the following parameters to judge the standing of a particular supplier. This is very common source to retailers in the semi-urban areas or in and around major trading centers. They cater to the needs of the immediate consumers along with the small retailers form contiguous areas. retailers as per the norms prevailing in their industry look DEPARTMENT OF MBA. ii. Other Retailers This category comprises who operate a larger scale.SALES AND RETAIL MANAGEMENT 10MBAMM312 than from the producers stock. They usually make attractive profits from the merchandise they selled to the retailers. Criteria for the selection of suppliers Retailers regularly confront with the issue of locating a new supplier for the existing merchandise or identifying a new supplier for fresh merchandise introduced. running their stores in interior localities of urban areas or in the rural areas. Price Retailers will always have relative assessment of the different suppliers while deciding the purchase. SALES AND RETAIL MANAGEMENT 10MBAMM312 forward to credit terms, payment options, penalties, discounts, and price levels and price points. iii. Delivery In order to avoid sales loss a retailers is generally interested in assessment of suppliers capacity to deliver ordered goods in time and as per specification. Retailers also evaluate the performance of the suppliers or gather information on these parameters to ascertain delivery capacity, such as minimum order requirements, lead times, workforce ability, and response and ability to collaborate on consumer-led response initiative. iv. Service This encompasses all those facilities and support extended by the supplier to add value to the goods, assistance in the sales of goods. It includes pre and post sales service by the supplier. Retailers will be interested to assess the working of the supplier on parameter such as innovation, speed of new product or variant introduction, sampling service, marketing support (advertising and promotion) and handling queries and complaints. Product Movement or Retail Movement Retail logistics is the organized process or managing the flow of merchandise from the source of supply to the consumer from the producer/ manufacturer, wholesaler/intermediary through to the warehouse, transport to the retail units the merchandise is sold and delivered. The retail logistics system will include the following: Physical movement of goods Holding of those goods at stock keeping units Holding of stock in sufficient quantities to meet the demand Management and administration of the distribution system Importance of information in the supply chain The logistics system ensures that all the activities of SCM are carried out on logical sequence on a specific timetable. DEPARTMENT OF MBA, SJBIT Page 54 SALES AND RETAIL MANAGEMENT 10MBAMM312 The cost structure in retail logistics Everyone in the organization have to consider the components of distribution right from the manufacturer through the intermediaries’ upto the time goods are sold through the retail outlet. Storing and transmitting of information Data warehouse: When customers make purchase at the retail outlet, all the data obtained at the point of sale is put into a huge database known as a data warehouse. This can be used for developing and replenishing merchandise management. Electronic data Interchange: It is the computer exchange of business documents from retailer to vendor. Many retailers requires vendor to make a notification of deliveries before they actually take place. The retailer requires vendor to make a notification of deliveries before they actually take place. The retailer’s computer receivers an Advanced shipping Notice, from the supplier in advance of shipping. This will inform the retailer what to expect in the shipment and if accurate, the retailer can do away with procedure of opening and checking the merchandise. Retail Pricing Setting the right price will result in increased revenue to the retail firm. The prime objective of retail pricing is to achieve profitability which is influenced by two factors. They are profit margin of the offering and cost of merchandising. Factors influencing pricing Porters model can help to understand the influences of Retail Pricing 1. Customer Customer’s price sensitivity is influenced by many factors. For ex: café coffee day offer the coffee at the same price of Rs.35 (minimum) in all its branches of urban and semi urban areas, though it is a general assumption that semi urban customers wont go for highest prices. But in order to maintain, its positioning strategy, coffee day maintained the same price and attracting its target customers through its ambience. DEPARTMENT OF MBA, SJBIT Page 55 SALES AND RETAIL MANAGEMENT 10MBAMM312 2. Suppliers In order to maintain the image of the brand and achieve the goal of the firm, sometimes the manufacturer may arise when the manufacturers decide to introduce a new model and that hampers the movement of retailer’s old stock. Reputed retailer’s have more bargaining power when they buy bulk items from the manufacturer. Also sometimes retailers seek, for price guaranteed i.e. if the prices of sold items to retailer go down. 3. Competitor It affects the freedom to fix price. The range varies from being perfect to monopoly. Retailers generally avoid price based strategy because it may end up in price war. 4. Government There are legal issues relating to price discrimination. The retailer can charge different price to different customer only when the distance is the justifying factor. Vertical price fixing: the retailer to set price at manufacturer suggested price. Horizontal agreement: agreement between retailer competitors Predatory pricing: this pricing is considered as illegal as it intends to drive away the competition. Retail pricing strategy i. Every Day Low Pricing (EDLP) Everyday low pricing is popularized by Wal Mart, Home department. In India, this strategy is followed by Big Bazar. But the bulk volume is necessary to negotiate with the manufacturer for price concession so that it can be offered at reduced price to the customer. Low prices are stable and not subject to one time sale. The strategy is that it continues to offer products below MRP. Advantages: Less reliance on price reduction to change, Reduced advertisement, informed customer service, better inventory management. DEPARTMENT OF MBA, SJBIT Page 56 Price lining It refers to the offering of merchandise at a number of specific but pre-determined prices. v. EDLP is difficult to implement. Charging high price for a product where it is judged this in itself this in itself give it prestige. Effective only when the firm is facing inelastic demand. Advantages: Some merchandise can be used to target different segments. SJBIT Page 57 . Prices may be held constant over a period of time. iv.SALES AND RETAIL MANAGEMENT 10MBAMM312 ii. DEPARTMENT OF MBA. image of quality is created (high price-no compromise on quality). Prestige pricing: High prices to convey distinct and exclusive image for the product. Enthusiasm is created among customers (impulse purchase). vii. Penetration pricing Setting a relatively low initial entry price so as to increase market share. Loss Leader Pricing: Fast moving products offered at low price as to attract buyers and to persuade them to buy other products also. The retailer has to be very careful with this strategy as it may establish long term price expectation and that makes it difficult to eventually raise prices. iii. vi. High-Low Pricing Prices that are sometimes above their competitors EDLP. Also use ‘sale’ to respond increased competition. It uses ad to promote frequent sales. The solution is to set the initial price at the long term price but include an initial discount coupon. so it has advantage over that. Psychological pricing It intended to have special appeal to customers a. Skimming Sets relatively high price for a product or service at first and then lower price over time. e. services by an identified sponsor. Extinction pricing: has overall objective of eliminating competition and involves setting very low prices in the short term in order to undercut competition. g. Advertising is recognized as an indispensable tool of promotion. Increasing the share of wallet for all shoppers c. Increasing store traffic by encouraging new shoppers to visit store. advertising can be understood as follows: DEPARTMENT OF MBA. a. Pre-emptive pricing: Setting low prices in order to encourage or deter potential new entrants. Odd-Even pricing: eg: Rs. Traditional pricing: Ti uses historical/long standing prices (sports products) d.95 to denote lower price or a “good deal” Rs. Based on the conceptualization.SALES AND RETAIL MANAGEMENT 10MBAMM312 b. Gross margin that is sacrificed in unit sales is more than offset by the savings that occur from reduced selling and handling expenses. Eg: sports items. and or reminds the target market or other prospective segment about marketing mix of the retail firm. Multiple unit pricings: Encourage additional sales and increase profits. b. c. Used to increase both unit and rupee sales by brining traffic in to the stop. Bundles pricing: Practice of offering two or more different products at one price.10 imply high quality. SJBIT Page 58 . Retail promotion Retail promotion is broadly defined as all communication that persuades. h.9. Reference pricing: It uses consumer’s frame of reference that is established through previous experience of purchasing. f. Increasing the sale of a given product category Retail advertising The AMA defines Advertising as any paid form of non personal presentation of ideas. The retailer seeks to communicate with customers to achieve a number of objectives. goods. suppliers or retail store itself. To encourage new triers by offering free trail To encourage repeat purchase Supplier originated sales promotions Sales promotion can originate from two sources. Internal impediment (unsold stock). an added value or incentive for the product to customers. to support personal selling programme To reach out to people not accessible to salesperson. to manage competition. x Objectives of advertising To promote new product. Non personal presentation of message (face to face direct contact with customer) 3.SALES AND RETAIL MANAGEMENT 10MBAMM312 1. To enter new market. External impediment (competition) Objective of sales promotion Assist the other communication activities undertaken by the store. SJBIT Page 59 . Sales promotion provides extensive tactical measures to marketers to manage internal or external impediments to sales or profits. Issued by an identified sponsor. To enhance goodwill of the retail firm and to improve dealer relation To warn the public against imitation of the retailers product. Paid form of communication 2. Sales promotion Sales promotion refers to communication strategies designed to act as a direct inducement. DEPARTMENT OF MBA. and sometimes the demonstrator may also be present to explain the product. SJBIT Page 60 . For ex: Rin gift hunt. The suppliers tend to associate the charisma associated with these personalities. Its attached to the pack or inside the pack. enclosing empty packets. Basically the customer provides some proof of the purchase.N Shesan the former election commissioner was used by safal vegetables since he did not appear for any other product and he had an honest and upright image. Co-operative promotions Two or more products share and fund in joint store promotion. Maggi noodles packet free with the purchase of four or one gets three soaps at the price of two. Self-liquidating premiums Customer has to write to the suppliers for the gifts. 5 lacks worth of educational gift to children (requires customer has to fill the form and submit to the nearby store) Personality promotions Many companies use show. The product may be entirely new and customers may have little knowledge about them. For ex: T. Shaving foam and after shave lotion. This is in the form of discount. Multipack: Two or more packs are attached and sold for a better and attractive price than the price of the items singly.SALES AND RETAIL MANAGEMENT 10MBAMM312 In-store activities Price-off pack The product is sold at reduced price from its normal selling price. Premiums: These are in the form of small gifts that a customer gets on purchasing a product. etc of the product plus some money. Sampling: Free sample. Rs. bottle crowns. DEPARTMENT OF MBA.business personalities to endorse their products. paid or non-paid and sponsor controlled or non. Wedding season.the sales promotion can be designed around one or combination of the following: Premium or value adding/experience (dinner with celebrity)/discount involves price reduction. Types of publicity a. Publicity is a non personal form of promotion where messages are transmitted through mass media. Planned publicity A retailer outlines its activities in advance. Designing the response and follow up Publicity Publicity means any communication that fosters a favorable image for the retailer among its public. SJBIT Page 61 . Community services like donations and social sales and introduction of new goods or services of the activities which lead to media coverage.SALES AND RETAIL MANAGEMENT 10MBAMM312 Buy one get one free The customer can get two units of the product at the price of one. displays. and anticipated that certain events will result in media coverage. It can be personal or non personal. Christmas.sponsor controlled. Steps in Retail promotion 1. and there is no identified commercial sponsor. flyer distribution. 2. joint promotions. 4. Identifying the source of sales promotion (inserts. the time or space provided by the media is not paid for. events) 5. DEPARTMENT OF MBA. strives to have media report on them. Set goals: it should be determined by the particular need of a specific promotion scheme and contextual factors like time of the year-Diwali. Design the offer. Analyze benefits 3. SJBIT Page 62 . TV and nespaper reporter may anonymously visit stores and rate their performance for their coverage.SALES AND RETAIL MANAGEMENT 10MBAMM312 b. Unexpected publicity It takes place when the media reports on a firm without any advance notice about the media coverage. DEPARTMENT OF MBA. Complementary publicity Sometimes media reports about a firm in a complimentary manner with regards to the excellence of its retailing practices. c. Micro level (at the micro level there was a shift from Transaction focus to Relationship Marketing) DEPARTMENT OF MBA. there was a shift from Database marketing to Relationship Marketing. SJBIT Page 63 . Scandinavia and Northern Europe. Information Technology and Statistical analog was also used for this purpose. customers.The Relationship Marketing was emphasized in B2b marketing. customer service. In the later half of 1990. x Relationship marketing draws upon number of areas (customer quality.SALES AND RETAIL MANAGEMENT 10MBAMM312 Module-8 Relationship Marketing in Retailing Relationship Marketing refers to all marketing activities directed towards establishing. suppliers and Government) 2. developing and maintaining successful relational exchanges. social interaction) x Relationship marketing implemented through various components (rewards. The evolution of Relationship Marketing Customer relationship management (CRM) originated in two unrelated places. ii.Database Marketing was used when the marketers directed their efforts to increase selling effectiveness. Relationship Marketing emerged out of 2 major consideration 1. Marketers and retailers started using IT to communicate with customers and that helped them to base their product offering. i. Macro level (at the macro level there was an increased necessity to maintain relationship with employees. USA. customer services and involvement of customers in planning and execution of retail strategy) x Customer service is the vital part of Relationship Marketing. DEPARTMENT OF MBA. friendship and friendship and social support by retailer. Related to this is Pareto’s law which states that 80% of the company revenue comes from the 20% of the loyal customers. money savings.SALES AND RETAIL MANAGEMENT 10MBAMM312 Transaction marketing: It focuses on single sale. It emphasizes relationship with the loyal customers. 2. Communication benefits Efforts must be taken “stay in touch” with customers is the key determinants of Relationship Marketing. Rewarding efforts must be more functional and economical. 3. Up gradation and service augmentation are the ways to provide special Treatment benefit to the loyal customers. high commitment. SJBIT Page 64 . Relationship Marketing attempts to optimize the resources for the retailing by retaining customers. high emphasis on customer service. Special Treatment benefit Relationship marketing does not tell to maintain relationship with all customers. free gift are the ways to reward loyal customers. The fact is that acquiring a new customer cost 5 times of retaining an existing customer. e-mail and telephone and SMS service to keep in touch with the customers. Relationship Marketing: It focuses on customer orientation. little emphasis on customer service and moderate customer contact. Companies use Direct mail. personal recognition. Customer focus and selectivity is the key aspect of Relationship marketing. Personalization It describes the social content of the interaction between service employees and their customers. Sometimes retailers recognition customers calling by their name. 4. Differentiation required between loyal and non loyal one. Relationship Marketing Strategies 1. product features. It can be regarded as a means showing recognition and respect ex: feeling of familiarity. Rewards Pricing incentives. evaluate marketing actions. which retail format will be most suitable for the particular target market. thoughts and intentions. Exploratory research It defines the problem in detail.SALES AND RETAIL MANAGEMENT 10MBAMM312 Retail Research Marketing research specifies the information required to address the marketing issues (marketing opportunities. Clinical : gaining insights of issues which otherwise might be impossible to pursue structured research methods. The retailer will be able to get oriented to the range and complexity of consumers activity and concerns. manages and implements the data collection process. Focus group study is used to identify the most likely product positioning and to know the cues on the various features which go into the shopping such as ambience. design the method of collecting information’s. Qualitative Research method It is used to find out what is in consumer’s mind. understanding and analyzing consumer behavior. Orientation Method-Getting to know the consumer’s best view and vocabulary. At the retail level. third person role playing and sentence completion test) DEPARTMENT OF MBA. research is used for concept testing. analysis and communicated findings and their implications. used for generating ideas for new product. 2. SJBIT Page 65 . monitor marketing performance). Three major types 1. Such data may help retailer to know more about things (feelings. Retail research can help retailers to take important decisions such as market positioning. style preferences. suggest hypotheses. past behavior) which cannot be directly observed or measured. shopping needs and requirements. projective techniques (word association test. 3. business feasibility analysis. understanding the target market profile. identifying the correct product mix. how best to display merchandise and so on. Qualitative research can take the form of Focus Group Discussion. visual merchandising? x What is the pattern of customer’s movement? x What is the reaction to private labels? x Which are frequently asked questions by the customers? Forms of observation 1. The research design can be. to know the size of the market. It will be easy to observe the following information: x What is the in store traffic pattern? x What is the customers’ reaction to displays. DEPARTMENT OF MBA. The surveys in many forms is one of the most widely used and well know method of acquiring marketing information’s by communicating with the group of customers through questionnaire or interview. It is efficient and economical. casual or systematic. 2. SJBIT Page 66 . Direct observation The retailer may use an observation disguised as a shopper to observe how long customer spend time in the display area. Observation method of Research It is used to provide information on current behavior. size of the core target.SALES AND RETAIL MANAGEMENT 10MBAMM312 Quantitative research through survey Survey can help to understand the consumer’s behavior Current shopping pattern. Contrived observation Buying teams disguised as customers will try to find out what happens during normal interaction between the customer and the retailers. the retail formats currently being used. Content analysis It is used to analyze the content or message of advertisement 4. etc. For instance with the help of retail process audit. Behavior recording services It helps to overcome deficiencies of human observers. premises. 5. the retail auditor will collect observable information such as the shelf prices. Two methods for collecting this data: DEPARTMENT OF MBA. Consumer purchase panel audit It helps to understand how much product is moving through the distribution channel. Retail Audit It helps to ascertain the sales personnel’s efficiency at the point of sale or to find out the average time taken on a normal day or during the weekend. eye movement recorders voice pitch analysis. A detailed date and time sequenced notes which are kept on the technique used for enquiry with special attention to biases or distortion. SJBIT Page 67 . the retailer can work out ways to improve customer service delivery and to improve performance. the presence of special display and in store promotion activities. Theory construction which records in detail the thoughts. People meter. Retail store Audit While visiting the store. The retailers can use retail store audit results to project and arrive at nationwide and regional estimate of total sales. inventories. Retail process Audit Such retail process audit helps to examine store efficiency in terms of operating processes or reduces the cycle time. display space. hypotheses ii.SALES AND RETAIL MANAGEMENT 10MBAMM312 3. Humanistic Enquiry It involves immersing the researcher in the system under study. The researcher maintains two da i r y i. SALES AND RETAIL MANAGEMENT 10MBAMM312 1. DEPARTMENT OF MBA. Mail Dairy Method: The panel member records a detail of every purchase made in certain categories and returns the completed dairy by mail at regular intervals. SJBIT Page 68 . Home audit approach: Panel member aggress to permit an auditor to check the household stock of certain product categories at regular intervals 2.