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Unit 3 of 4 · MBA Sem 4

Unit 3: Sales management and organization

Integrated Marketing Communication and Sales Management notes · PTU syllabus (MBA 923-18)

3 min read8 topics10 exam questions
On this page
  1. Unit summary
  2. Nature and objectives of sales management
  3. Sales objectives and strategies
  4. Types of sales organisation
  5. Personal selling theories
  6. The personal selling process
  7. Market potential and sales potential
  8. Sales forecasting methods
  9. Sales-related product, distribution and pricing policies
  10. Key terms
  11. Quick revision
  12. Important questions

Unit summary

The sales function turns marketing plans into revenue. This unit covers the objectives of sales management, types and set-up of sales organisations, theories of personal selling, market and sales potential, sales forecasting methods, and sales-related product, distribution and pricing policies.

After this unit you can

  • Explain the objectives of sales management
  • Explain the types and set-up of sales organisations
  • Explain personal selling theories
  • Estimate market and sales potential and forecast sales

PTU syllabus topics

  • Objectives of sales management
  • sales organization types and setup
  • personal selling theories
  • market and sales potential
  • sales forecasting methods
  • sales-related product/distribution/pricing policies
ClassificationSales forecasting methods
Forecasting

  • Executive opinion

    Managers' judgement

  • Sales force composite

    Reps' estimates

  • Buyer intention surveys

  • Time series

    Trend and seasonality

  • Market test

    Trial in a region

1

Topic 1

Nature and objectives of sales management

Sales management is the planning, direction and control of personal selling, including recruiting, selecting, training, equipping, assigning, routing, supervising, paying and motivating the sales force (AMA). Scope: sales planning and forecasting, sales organisation, territory and quota management, sales force management, and sales analysis and control. Importance: generates revenue, implements marketing plans, builds customer relationships and provides market feedback.

2

Topic 2

Sales objectives and strategies

Objectives: sales volume, market share, profit contribution, new customers, and customer retention. Strategies: market penetration, key account focus, territory strategies, channel strategies (direct vs dealers), pricing and relationship strategies.

3

Topic 3

Types of sales organisation

ComparisonSales organisation structures
Basis
Suits

Line

Direct chain of command from sales head to salespeople

Small firms, simple products

Line and staff

Line managers supported by specialists (training, research)

Medium and large firms

Functional

Specialists for different sales functions

Complex selling tasks

Territorial

Salespeople by geographic area

Wide markets, similar products

Product-based

Separate sales forces for product lines

Technical, diverse products

Customer-based

By customer type or key accounts

Distinct customer needs

Combination

Mix of the above

Large organisations

  • Setting up a sales organisation: define objectives, determine activities, group activities into positions, assign personnel, coordinate and control.
4

Topic 4

Personal selling theories

ClassificationTheories of selling
Selling theories

  • AIDAS theory

    Attention, interest, desire, action, satisfaction

  • Right set of circumstances (stimulus–response)

    Right stimulus produces the desired response — scripted selling

  • Buying formula theory

    Focuses on the buyer's needs and problem-solving; solution plus satisfaction leads to purchase

  • Behavioural equation theory

    Purchase as a learning process — drive, cue, response, reinforcement

5

Topic 5

The personal selling process

Personal selling is direct, face-to-face (or virtual) communication by a salesperson to persuade a prospect to buy.

ProcessAIDAS principle
  1. 1Attention

    Capture the prospect's interest

  2. 2Interest

    Show relevant benefits

  3. 3Desire

    Make them want the product

  4. 4Action

    Ask for the order

  5. 5Satisfaction

    Ensure satisfaction after the sale

ProcessThe personal selling process
  1. 1

    Prospecting and qualifying

  2. 2

    Pre-approach

    Research the prospect

  3. 3

    Approach

  4. 4

    Presentation and demonstration

  5. 5

    Handling objections

  6. 6

    Closing

  7. 7

    Follow-up

6

Topic 6

Market potential and sales potential

  • Market potential: maximum total sales of a product by all firms in a market over a period.
  • Sales potential: the maximum share of market potential a firm can achieve.
  • Sales forecast: expected actual sales under a given marketing plan.
Key formulasEstimating potential

  • Market potential

    Number of potential buyers × average quantity bought × average price

  • Market build-up

    Sum of potential from each segment or territory

  • Buying power index

    Weighted index of income, retail sales and population by region

Example

5 crore potential households × 4 packs a year × ₹50 = ₹1,000 crore market potential; a 15% achievable share gives ₹150 crore sales potential.

7

Topic 7

Sales forecasting methods

ClassificationSales forecasting methods
Forecasting

  • Executive opinion

    Jury of executive opinion

  • Sales force composite

    Salespeople estimate their territories

  • Survey of buyers' intentions

  • Delphi method

    Expert panel with anonymous rounds

  • Time series

    Moving averages, trend projection, exponential smoothing

  • Causal

    Regression on drivers

  • Test marketing

8

Topic 8

Sales-related product, distribution and pricing policies

  • Product policies: product line and range, new product introduction, product modification, after-sales service and warranties — salespeople provide market feedback.
  • Distribution policies: choice of channels (direct, dealers, distributors), intensity (intensive, selective, exclusive), channel margins, credit terms, logistics support.
  • Pricing policies: list prices, discounts (trade, quantity, cash), credit terms, price flexibility given to sales staff, resale price maintenance and MRP rules.

Key terms

Sales management
Planning, directing and controlling personal selling
AIDAS
Attention, interest, desire, action, satisfaction
Market potential
Maximum industry sales in a market
Sales potential
Maximum share a firm can achieve
Sales force composite
Forecast built from salespeople's estimates

Quick revision

  • Objectives: volume, profit, growth; sales strategies.
  • Structures: line, line and staff, functional, territorial, product, customer, combination.
  • Selling theories: AIDAS, right set of circumstances, buying formula, behavioural equation; selling process.
  • Market vs sales potential; buying power index.
  • Forecasting methods; product, distribution and pricing policies.

Important exam questions

Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).

Short-answer questions

  1. Q1.State the objectives of sales management.
  2. Q2.Name four types of sales organisation.
  3. Q3.Explain the AIDAS theory.
  4. Q4.Distinguish market potential and sales potential.
  5. Q5.What is the Delphi method?
  6. Q6.Name three sales-related pricing policies.

Long-answer questions

  1. Q1.Explain the objectives and functions of sales management.
  2. Q2.Explain the types of sales organisation.
  3. Q3.Discuss theories of personal selling.
  4. Q4.Explain methods of estimating sales potential and forecasting sales.

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