Sales Management: Role,

UNIT 1 SALES MANAGEMENT: ROLE, Nature and Ethics

NATURE AND ETHICS

Objectives
After studying this unit you should be able to:
 understand the nature and scope of sales management
 discuss the evolution of sales management
 describe its role in marketing management
 discuss the objectives of sales function
 understand importance of sales management

Structure

1.1 Introduction
1.2 Nature of Sales Management
1.3 Evolution of Sales Management
1.4 Role of Sales in Marketing Management
1.5 Sales Management-Formulation of Sales Strategy
1.6 Managing ethics in sales environment
1.7 Summary
1.8 Key Words
1.9 Self-Assessment Questions
1.10 References / Further Readings

1.1 INTRODUCTION
Sales Management is management of an organization’s personal selling
function. Sales managers are involved in both the strategic and implementation
aspects of selling. They generate direct revenue for their organizations while
carrying out their company’s marketing strategies in their interactions with
the customers.

Sales management can be defined as “Sales management is the management

of the personal selling part of a company’s marketing plan.

According to American Marketing Association (AMA), sales management is

defined as the “the planning, direction and control of the personal selling
activities of a business unit, including recruiting, selecting, training, equipping,
assigning, routing, supervising, paying and motivating as these tasks apply
to the personal sales-force.” This definition does not include evaluating and
controlling sales-force performance. In effect, the definition makes sales
management same as the ‘the management of sales-force’. It is not in line
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Introduction to Sales with the overall responsibilities of contemporary sales managers which include,
Management
in addition to above,

 Building sales force organization structure and territories

 Coordinating and communicating internally with other functional

departments of the organization and externally with the customers,
intermediaries etc.
The AMA definition fails to capture the fast paced, expanding role of sales
management in satisfying customers and achieving company objectives. Sales
managers of today are/have all kinds of new ideas, sales channels and
technologies to develop mutually beneficial relationships with customers.

Sales management is considered as a key function in many of the enterprises

that include manufacturing and wholesaling. It is also a key function in those
enterprises, and firms selling intangibles such as insurance, banking and telecom
etc. All these organizations also carry out sales activities in their respective
businesses and do face sales management problems that are unique to them.

1.2 NATURE OF SALES MANAGEMENT

The nature of the sales management can be comprehended in three ways;
1. its integration with marketing function
2. scope of sales management
3. roles and skills of sales personnel.
Sales management is viewed as part of marketing management; sales planning
needs to be integrated with marketing planning. The former involves personal
selling while the later is more strategic and involves marketing team at the
head quarter and performs service and support based functions. These functions
include promotion and marketing communications, marketing research, market
logistics customer service and coordination etc.
The scope and importance of sales management has increased over time. Earlier
it was limited to recruiting, selecting, training, motivating and supervising sales
personnel. Now, it has expanded to include activities such as participating in
strategic planning, forecasting, taking part in budget preparation, designing
territories and developing sales force organization structure etc.
The main objective of sales management is to achieve targeted sales volume.
Sales managers are also responsible for achieving market share and sales growth
related goals. They are involved in setting these objectives.
There are typically three levels of sales managers in organizations;
 top-level, tactical
 middle level and operational
 first level sales managers.
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In many medium and large organizations, there are staff managerial positions Sales Management: Role,
Nature and Ethics
that provide assistance to line sales managers. These include sales training
manager, sales coordination manager and customer service manager.
The roles of contemporary sales managers include strategic planning,
coordination, usage of ICT tools and technology and managing channels.

1.3 EVOLUTION OF SALES MANAGEMENT

In the pre-industrial revolution period, small scale enterprises dominated the
economy; selling was not an issue. The main challenge was to produce enough
goods to meet customer demand. In most firms a single person supervised all
business functions including manufacturing and selling of goods. With the onset
of industrial revolution in the middle of eighteenth century, factories started
producing large quantities of goods and it became necessary to identify and
sell to new markets.
Initially, separate functional departments were established to take care of
various business problems but later followed by specialized sales departments
to solve problem of market expansion. However, another problem remained
that of communicating with customers. Gradually, manufacturers shifted
portions of the marketing function to middlemen and retailers came into being
eventually leading to large retailers and wholesalers. Increasingly, it was
difficult for manufacturer’s sales department to maintain contact with the
customer. Thus adding of middlemen complicated the problem of market
expansion.
On the other hand, marketing activities conducted by the manufacturer’s sales
department grew in importance. Tasks such as advertising and sales promotion
became quite complex. The solution lay in splitting the marketing function.
New departments were organized to carry out specialized tasks such as
advertising, marketing research, exports, sales promotion, merchandising and
shipping. Despite the fragmentation, the sales department still occupies
strategically important position. The basic responsibility for making of sales
has not shifted elsewhere emphasizing the premise that the sales department
is the revenue generating division of business.

1.4 ROLE OF SALES FUNCTION IN MARKETING

Managers use ‘marketing’ and ‘selling’ as synonyms. However, there is a
significant difference between the two. ‘Marketing’ is a dynamic and much
wider concept than ‘Selling’ and the focus is on the customer rather than the
product.
‘Selling’ has a product focus and is mostly producer centered. It is the action
part of marketing and has short term goal of achieving market share. The key
focus of any sales activity is to maximise profits through increased in sales
activity.
It is to be noted that selling primarily revolves around the interests and needs
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Introduction to Sales of the manufacturer or marketer, while marketing revolves around needs and
Management
wants of a consumer.
Marketing is the process of meeting and satisfying the needs of consumers.
The task commences with identifying consumer needs and lasts till feedback
on consumer satisfaction after the product consumption is received. It is a long
chain of activities, which involves product creation, packaging, promotion,
pricing, distribution and selling.
According to Prof Theodore Levitt, “The difference between selling and
marketing is more than semantic. A truly marketing minded firm tries to create
value satisfying goods and services which consumers will want to buy. What
is offered for sale is determined not by the seller but by the buyers”.
Seller takes cues from the buyer and the product becomes the consequence
of the effort not the vice versa. Selling merely concerns itself with techniques
of getting the customers to exchange their cash for the company’s products.
The dilemma in marketing and selling prompts one to resolve the conflict for
the purpose of understanding and studying sales management. Both the
disciplines are complementary to each other. As explained earlier, a sale is
just one of the dimensions of marketing promotion which is part of the core
marketing mix elements. In conventional business organizations sales and
marketing are treated as two separate functions leading to role conflict and
disharmony in the organization due to unhealthy competition. However, lately,
selling and marketing have gradually started merging with each other due to
common orientation and long term planning perspective. The role of the sales
within an organization has become more customers driven than product driven.

1.5 SALES MANAGEMENT – FORMULATION OF

SALES STRATEGY
The sales management function, as noted earlier comprises the management
of the sales personnel and activities that make up the corporate sales effort.
Sales managers are entrusted with the ‘task of organising, planning and
implementing the sales effort so as to achieve corporate goals related to market
share, sales volume and return on investment. The task involves the sales
manager in a set of activities both within the organisation, and outside with
other organisations.
Within the organisation he has the responsibility of structuring relationships
both within his own department and with interacting organisational entities
so that the sales task can be coordinated with other marketing tasks and
performed effectively. It also includes allocating and operationalizing the sales
effort among the sales personnel.
Outside the organisation, his task would include developing and maintaining
channel relationships effectively so that the flow of goods and service, and
also promotion and feedback is facilitated.
Embodiment of all these functions can be seen in the development of sales
strategy which often proves vital to the success of the organisation. Key decision
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areas in sales management which are particularly relevant to strategy formulation Sales Management: Role,
Nature and Ethics
are:
 Deciding upon type and quality of sales personnel required
 Determination of the size of the sales force
 Organisation and design of the sales department
 Territory design
 Recruitment and training procedures
 Task allocation
 Compensation of sales force
 Performance appraisal and control system
 Feedback mechanism to be adopted
 Managing channel relationship’
 Coordination with other Marketing department
The above decisions give a fair idea of the scope of the sales management
function. Strategy formulation in case of sales would involve identification
of the sales goals and designing of a game plan, using the organisational
resources at hand, to achieve those goals. The strategy formulation process
can therefore be summarised as:

Assessment of Competitive Situation and Corporate Goals

The sales objective is directly affected by the corporate mission or goal
which in turn identifies the specific set of common needs and wants the
company would like to satisfy. Another input in objective setting is the
macro business environment. Variables in the political, economic, social
and technological environment have significant bearing on what and how
much the company would be able to sell. The environmental scan thus
provides pointer to a company’s specific opportunities and threats, strengths
and weaknesses.
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Introduction to Sales A sound market analysis is also a prerequisite to objective, setting for sales
Management
strategy. Specifically, the company would need to know.
i. Current size and growth rate of the market. In multiproduct companies
this analysis would have to be made by product/market and by geographical
territories covered:
ii. Consumer needs, attitudes and trends in purchasing behaviour
iii. Competitor analysis covering
 current strategy
 current performance, including market share analysis ® their strengths
and weaknesses
 expectations as to their future actions.
It may be noted that the role and scope of the sales functions of an organisation
is related to the competitive situations facing its products in each of the markets
participated by it.
Under conditions of pure competition, each seller is too small to be able to
influence prevailing market price. Identical undifferentiated products make it
difficult to specialise sales effort. Under this sort of competitive situation, sales
effort is usually limited to maintenance of adequate market supplies. Most of
the markets today are competing under varying degrees of monopolistic
competition where there are large number of sellers for a product but the offering
of each seller, is capable of being differentiated in a discernible manner.
However, in the Indian situation most marketers seek to differentiate ‘their
products through variation in product attributes, packaging and promotional
efforts. Under these market conditions sales efforts support the promotion and
maintenance of market share objective of the firm and coordinate with the
distribution and customer service needs of the product. Distribution function,
on its part, complements the sales efforts in so far as the regular availability
of products at almost every purchasing point is concerned. The market conditions
characterised by oligopoly are also characterised by aggressive competition.
Selling effort here becomes an effective tool of market cultivation, building
dealer relationship and maintaining them, providing vital informational feedback
on competitors and their market operations.
In case of new product, where the marketer is faced with little or no direct
competition, selling effort plays a very vital role in market cultivation.
Missionary ‘Salesmen’ are used to familiarize and demonstrate the product,
both to the channel members and the ultimate consumers.
These competitive situations affect the corporate goals relating to growth
and profit which in turn affect the marketing goals. The sales related marketing
decisions which significantly contribute to sales strategy formulation that
affect both the quantitative and the qualitative sales management objectives
are:
a) decision on what to sell - i.e. what products and what specific mix of
products the company has decided to sell.
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 b) decisions on whom to sell - i.e. whether to sell directly to the ultimate Sales Management: Role,
Nature and Ethics
consumer or to make the wholesaler or the retailer the first level to
contact. This has vital implications for the size and type of sales force
needed.
c) decision on the price.
These decisions define the scope of the sales effort, in the total marketing
effort.
Setting Sales Objectives
Sales objectives are intended to direct the available sales resources to their
most productive use. These also serve as standards against which actual
performance is compared. The sales objectives are stated in quantitative and
qualitative terms. The qualitative goals generally relate to strengthening dealer
relationships, developing good consumer support, nullifying product
misinformation, attaining desired corporate image.
The qualitative sales objectives reflect the expectations the top management
regarding .the contribution of sales function to the total marketing effort.
They, therefore affect both the size and quality of the sales force. For example
when a company selling high value, technical household products relies only
upon its own sales personnel to carry out the entire sales function and take
up part of promotional responsibility too, the quality and the size of the sales
personnel it requires would be significantly different from that of a company
where sales personnel are, only required to coordinate with and service
channels. Examples of the products could be the Eureka Forbes salesman
selling vacuum cleaners to consumer and the Usha salesman servicing Usha
dealers. In the former case the salesmen are expected to carry out the entire
selling and market cultivation function while in the “second case, they are
mainly expected to coordinate and service the distributors. The qualitative
sales objectives are relatively long term one and emanate out of the marketing
policy; of the company.
Quantitative objectives on the other hand relate to the operating results that
the company would like to achieve. They, like the qualitative objectives-are
heavily dependent on a keen analysis of competitive situation and corporate
goals, and obviously would vary over operating periods. Quantitative, sales
objectives could be in terms of sales volume, market share or number of back
orders per operating period. Drawing from these quantitative objectives, goals
can be set for the sales organisation in terms of:
a. Sales volume in units or rupees
b. Sales cost
c. Accounts receivables
d. Inventory levels Basic. Functions
e. Dealer support
f. Feedback input
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Introduction to Sales It would be worth noting here that both the qualitative and quantitative sales
Management
objectives are set in context of the competitive position of the company. As
we get down to the actual task of formulating the strategy we evaluate alternative
plans, against the backup of the competitive strength and weaknesses of the
company at the market place and try to build up the sales effort so as to achieve
the desired goals.
The important decisions involved in this task are given below.
Determination of the Type of Sales Force Needed
The quality of the sales personnel needed, would depend upon the quality of
contribution that top management expects the sales organization to make as
well as the actual workload that is expected to be generated. Specifically, it
would depend upon the role that the salesmen are expected to perform. If the
company has decided to do significant amount of preselling through its
advertising the salesman’s job is considerably simplified and this has implication
for the type of salesmen needed.
Companies like Siemens, manufacturing sophisticated technical equipment
expect their sales engineers to carry out the entire span of activities from
commissioning and installation of equipment to after sales service. You can
therefore clearly envisage that the type of sales personnel would vary across
organizations, depending upon the role that has, been decided for them in the
organization. Some of the factors that influence the type of sales person are
product characteristics, customer characteristics; competitor’s practices channel
design and corporate marketing policy.
A strategic choice which has to be made at this stage is related to the degree
and kind of specialization needed. Should the company go in for product
specialists or market specialists or both? This is often a decision which is taken
along with the decision regarding segmentation strategy.
Product specialists would be required when the product or its usage is highly
technical, requiring demonstration and/or advice from the sales personnel.
Marketing of banking services provides a good example. Service packages
like agriculture financing, short and long term institutional financing etc. have
package specialisation as the product on offer is typical.
Market specialisation would be needed when different groups of target customers
need specialised service or different sales approaches. In still other situations
salesman may need to be knowledgeable about more than one line of company’s
products and deal with more than one set of customers dictating a combination
of market and product expertise.
Activity 1
Ascertain the type of selling effort of the sales personnel in an organization
that you are familiar or associated with and analyze whether the type of
specialization of the sales force is by product or by markets or by both.
Also find out as to what factors necessitated this kind of specialised selling
effort.
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 Sales Management: Role,
.................................................................................................................... Nature and Ethics

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Determination of the Size of the Sales Force

Another key decision is the determination of the number of sales persons needed
to achieve the sales objectives. In case the hiring is more than the required
number would mean that the company is bearing unnecessary costs at the
expense of its net profits.
On the contrary hiring less than required would mean losing opportunities for
exploiting sales prospects. It is not easy to prescribe an ideal sales force size
as the important determinants of sales force size-market size, and potential,
competitive activity, allocation of sales task between the channel and corporate
organization differ from company to company. With respect to their own set
of variables, companies do try to arrive at an ideal figure by using various
methods such as
(a) the incremental method,
(b) the workload method and the
(c) sales potential method
The incremental method utilizes incremental reasoning in that it suggests that
salesmen should be added to the sales force if incremental margins exceed
incremental sales costs. The sales potential method uses estimates of sales
personnel units (which mean the set of activities expected to be carried out
by one personnel unit); expected productivity of sales personnel and the
estimated sales volume to arrive at the ideal size. In the workload method,
through the computation using total market size, sales, volume potential and
volume of non-selling activities like travelling the company arrives at the total
workload. Dividing this by the work it expects one individual salesman to
carryout, gives the sales force size.
Activity 2
Select any three organizations primarily using direct selling methods.
Ascertain the sales force size in these organizations. Analyze the reasons
for difference in the size.
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Introduction to Sales
Management B ..............................................................................................................
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Organizing the Sales Effort: - Territory Design

Personal selling objectives set the tone of the selling activities to be performed
in an organization. Defining these activities and their level of performance
would lead you to an estimate of how many sales personnel at various levels
are required in the organization.
The strategic decisions here include the organizational structure of the sales
force and the choice of the field sales organization.
Companies may treat their entire market as their total field of operation and
assign sales duties to their personnel indiscriminately but more often than not
they prefer to divide the market into sales territories either on the basis of
geographical size or sales potential, or a combination of both because of valid
reasons. Of these the customer related reasons are that the territories provide
for a more intensive market coverage yielding to higher sales and better customer
relations. For the salesperson they facilitate performance evaluation and foster
a far higher degree of enthusiasm and clearly defined responsibilities resulting
in lower turnover and higher morale. Managerially it becomes possible to have
a better degree of control, reduce expenses and evolve coordinated promotion
plans. Review of call pattern territory-wise and evaluation of territory performance
aided .by field visits may help managers in evolving effective future practices.
While creating territories sales managers can choose from different type of
bases:-
 Geographical basis which utilizes the existing geographical boundaries
and assigns them to the sales personnel.
 Sales potential basis which consists of splitting up a company’s
customer base according to the dispersion of its sales potential.
 Servicing requirement basis where the company splits up its total
market according to servicing requirements of its current and
prospective customers (servicing here means maintaining and
developing the account).
 Workload basis an approach considers both account potential and
servicing requirements and in addition reflects the difference in
16 workload created by topographical, location and competitive factors.
Establishing and Managing Channels Support and Coordination Sales Management: Role,
Nature and Ethics
The channels of distribution usually act as the only point of contact the final
buyer has with the manufacturer. They together with the sales organisation
of the manufacturers collectively bear the responsibility, of consummating
exchanges with the final buyers. When indirect distribution is adopted, it is
imperative that the sales organisation initiates dealer cooperation programmes.
Dealer support typically has to be, ensured in the area of maintenance of
adequate stocks of the products and local promotion in the form of point
purchase displays and local advertising. Another key area of support is the
provision of market feedback the norms of which must be decided between
the dealer network and the manufacturing organisation.
The management of manufacturer dealer cooperation includes:
a. Choice of appropriate dealer incentive programmes to stimulate
distributive outlets to greater setting effort.
b. Deciding upon procedures for sharing information with the dealer
network.
c. Deciding upon measures to ensure and promote dealer loyalty.
Activity 3
Talk to one manufacturer each of
a. computer and related peripherals,
b. confectionary products and also their respective distributors and find
out the methods that have been adopted to ensure
i. maintenance of stocks
ii. adequate feedback
iii. promotional support in each case
a) i) ......................................................................................................
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Introduction to Sales
Management ii) ......................................................................................................
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1.6 MANAGING ETHICS IN SALES

ENVIRONMENT
Ethics describes the moral conduct of behaviour. Business Ethics is the study
of how business persons behave when confronted with situations with moral
consequences. Sales management ethics is the specific part of business ethics
that deals with ethically managing the sales function.
Professional Sales Codes of Ethics
Codes of ethics express the values of a firm by specifying specific behaviours
that are consistent or inconsistent with those values. Whether codes of ethics
are effective is often debated. Mere existence of codes does not guarantee an
ethical environment; these need to be put in to practice through favourable
work culture. Codes often list employee behaviours that are not acceptable
to the firm. Each industry is confronted with unique ethical in sales related
codes of ethics:

Conflict of interest Bribes, gifts, kickbacks

Fraud and deception Moonlighting

Use of insider information Illegal political payments

Violation of secrecy agreements Violation of laws in general

Falsification of sales accounts Justifying the means by intended end

Illegal payments abroad Over-invoicing

Some sales related unethical behaviours

Offering better prices and terms for customers who buy exclusively from
one person

Using customers to get information about competitors’ activities

Attracting customers with lower priced products, then shift to more

expensive products

Offering bribe in return for signing a purchase agreement

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 Sales Management: Role,
Using expense account to pay for personal expenses Nature and Ethics

Padding an expense account

Misleading someone about product safety by withholding true information

Overstating list prices to give a customer a refund

Dealing with unethical behaviour

Sales managers should not encourage/tolerate sales behaviours inconsistent

with professional sales standards of the firm. Dilemma arises when sales
managers have to choose between ethics and sales success. An effective sales
manager strives to discipline all salespersons with the same standards. Although
unethical selling tactics may benefit firms in the short run, they almost end
up being detrimental in the long run.

An ethical work climate is the way employees view their work environment
on moral dimensions. It has four aspects; policies and rules, trust and
responsibility, peer behaviour and sales emphasis. Policy and rules need to
be put in place and interlized by employees. Trust and responsibility dimension
define how far people are trusted to behave in a responsible manner and are
held responsible for their actions. Peer behaviour is the extent to which
employees view co-workers as having high moral standards. Sales emphasis
is the extent to which employees feel pressured to prioritize increased sales,
profits over all other concerns. Strong sales emphasis coupled with strong
controls leads to a more negative ethical work climate.

1.7 SUMMARY
After going through this unit, you would have learnt about the nature, scope,
role and evolution of sales management. You would have also acquired
understanding of the process of developing the sales strategy and the major
determinants. Besides you were also introduced to the importance of ethics
specific to sales function or business in general and how to manage them in
your respective jobs/positions.

1.8 KEY WORDS

Monopolistic competition : A market situation where many sellers offer
differentiated products to a large number of
customers.
Sales objectives : These are intended to direct the available
sales resources to their most productive use
and serve as standards against which actual
performance is compared.
Territory : The geographical area a sales person is
assigned.
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Introduction to Sales Vertical integration : The strategy by the manufacturer, which
Management
involves acquiring ownership rights down
the channel of distribution.

1.9 SELF-ASSESSMENT QUESTIONS

1. Explain nature, scope and importance of sales management.
2. Discuss the role of sales management in marketing function.
3. How do the sales objectives affect the designing of sales strategy?
4. Explain the evolution of sales management function over time.
5. Describe the key decision areas in sales management.

1.10 REFERENCES/ FURTHER READINGS

Eugene M. Johnson, David Kurtz and Elurand icheuberg, Introduction to sales
ManagementMcGraw Hill.
G. David G. Hughes and Charles H. Singler, Strategic & Sales Managenment,
Mass Addison Wesley
Havaldar K. K. and Cavale V M, ‘Sales and Distribution Management, Text
and cases 3rd edition, McGraw Hill Education
Ingram et al, ‘Sales Management, Cengage India Learning (P) Ltd
Joseph F. Hair et al, ‘Sales Management, Cengage India Learning (P) Ltd
Richard R. Still, Still, Norman A. P. Govoni. Edward, W. Cundiff and Sales
Management, Decisions. Strategies and Cases, Pearson Education India (P)
Ltd.
Online Resources
1. What is Sales Management, Role of sales and functions of sales
department[Link]
2. Evolution of Sales Management: [Link]
watch?v=_Sb_RTVlRXc
3. 9 tactical strategies to a world class sales culture,[Link]
watch?v=oIdmd_W5bQA
4. Ethical issues in Sales Management: [Link]
watch?v=4PTeZOQWzsc

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