CHAPTER 1: SALES OVERVIEW A.

INTRODUCTION: The top line of the income statement and the driving force of all organizations, ideas and progress... also used to describe the greatest profession in history and greatest skill one can ever have. That is how Sales is described and this statement is a testimony to the importance sales has in an any organization. Sales refers to the exchange of Goods or services for some consideration be it money or some equivalent. Sales organization is like a fuel to the engine and this is the only department in the company which generates revenue. While other functions are equally important and play a vital role like Advertising, Marketing, Public relations etc the money spent and resultant impact would not be there if the sales process and person are ineffective. Sales in some form has been there from times immemorial. For example in Stone age, while there has been no formal process , they used to leave some gifts/articles for a Safe passage. Slowly socialization started increasing and the concept of Demand/Supply started taking shape. When men started cultivating and harvesting crops around 10,000 BC they used to go around to sell the extra surplus in lieu of Jewellery and other valuable metals. Agriculture produce slowly started coming to the marketplace and the concept of intermediaries started evolving. This prevailed for several thousand years and with the advent of the Shipbuilding industry, rapid advancement was made and goods started selling across the seas. Sales person were employed on commission or on a daily basis. Gradually commercial laws were passed and currency started finding a place in the market. Around 670BC Government backed coinage was issued which facilitated Trade and then after a brief period of lull due to fall of Rome, Trade started picking up again in the middle east and Trade fairs started gaining a lot of acceptance. The industrial revolution brought a dramatic change in the selling process and gave rise to the modern sales and marketing practices. Advancement in the means of Transport like Roads, Rail, Air and Shipping have further revolutionized the selling process. Thus a constant evolution has happened in the Sales function from the early Stone Age through the Iron and the Middle ages. The selling function in addition to generating revenue for the organization, builds relationships with Customers, suppliers and distributors and constantly tries to capture the right value for the company produce. In spite of being a pivotal function it has got some kind of a negative image in the society and a career in sales is something which is viewed with a bit of negativity. This has got to do more with the general misconceptions which the larger people have rather than based on hard facts.

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

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Marketing is one more function within the broad area of Sales and Marketing, It is important that both these functions perform like a well oiled machine, have a sound understanding between them, failing which, there will be a lot of chaos in the marketplace and the intended strategies of marketing can never get executed to perfection by the Sales organization. AGRICULTURE INDUSTRY SALES OVERVIEW: The customers are farmers and they buy Agriculture equipment (Tractors, Motors, Pumps, etc) Seeds, Pesticides, Herbicides, Fertilizers and Micro nutrients. Sales and Distribution largely was in the Govt. and Public sector domain and it was more a seller driven market with quotas and allotmentsThe key input was Fertilizers and seed which was also supplied by the Govt. agencies or the farmer largely used saved seed. However things started changing and chemicals (Pesticides, Fungicides and Herbicides) usage was being propagated largely by the European and American Multinationals. Agriculture equipment industry was largely driven by big Indian Industrial houses with collaboration from MNCs. The seed industry evolution is more recent relatively in the Agriculture industry with a very aggressive participation by the Private industry (Indian and MNC) with lot of technological breakthroughs. Currently there is a lot of investment being made by organizations in Sales and Marketing and from a seller driven market it is now turning into a buyer driven and the farmer has got a wide choice across the inputs. Unlike the FMCG industry DEMAND GENERATION is largely a function of sales given the MEDIA DARK markets in which we operate and the nonimpulsive nature of the product .Demonstrating the product features and benefits on the field is one of the important ways of driving sales. The position of a sales person becomes much more critical as in most of the cases he is everything to the prospective customer(farmer). He would plant a new variety of seed only depending on the rapport he enjoys with the salesman and his confidence on the neighborhood retail. Since the selling process involves a lot of technologies it is essential that apart from a formal qualification in Agriculture he should be willing to walk that extra mile and keep himself updated on the latest technological advancements. B. ROLE OF SALES ORGANISATION: The main component of a Sales Organization is the sales force which is guided and kept constantly motivated by a team of sales managers. The sales organization acts as a medium through which the sales managers achieve the overall objective of the organization. 2

The specific roles of a sales organization are:i) Creating specialists : who can help appropriate the product in the right manner. In Agriculture industry within the sales organization we have personnel who would specialize in Agronomy and whose job is to help the product get into the right segment and position it accordingly so that it is suited to those environment conditions and delivers the best. During product launch/ new product demonstrations or preseason it is not uncommon in our industry to find few hundreds who are recruited with a special mission of canvassing for company products. ii)Achievement of companys objectives: The structure of the sales organization should be in line with the company objectives. For example, if some company believes strongly in demand generation and pull activity, it should accordingly make heavy investments on the field force and impart training accordingly. In the other instance if a company believes in Trade push as their core of the strategy then the resourcing intensity as well as the specs of the resourcing needs will be different. Similarly during the case of special projects and special drive companies put huge manpower for short period of 3-6months to propagate the products. iii) Coordination and balance: A sales person is involved in selling as well as administration activities with respect to reporting, analysis, statutory compliance apart from spending major part of his time in building relationships. In order to do justice to the variety of activities within the broad function --Span of control or supervisory control should be restricted to 6-7. This way the supervisor can devote quality time to their team members and guide them and keep them motivated for deliveries. iv) Time optimization: Organizations may follow different structures depending on what they want to drive in the marketplace. In our industry there are organizations which drive the business, Product wise (Key crops) and some drive it across the crops through one person in specified geography. None of them is right or wrong as long as the objectives for driving in a particular way are clear and are articulated rightly with the support to the frontline person. The basis for designing a sales organization mainly depends on the following: i)Vision and the Mission of the organization ii)Target Market segments iii)Core competencies iv)Flexibility v)The type of culture one wants to show vi)Size of the sales force vii)Compensation viii)Market strategy( Push or Pull) 3

ix)Technology x) Company size The types of the organization are: i) Formal and informal organizations ii) Horizontal and vertical organizations iii) Centralized and decentralized organizations iv) Line and Staff organizational structure The types of Sales force structure: i)Product based sales force structure ii)Geographic based sales force structure iii)Customer based sales force structure iv)Combination based sales force structure Sales culture: Every sales organization has a unique culture that is created by the beliefs, attitudes and values of its members and top managers. Sales culture can be successful if every member of the organization imbibes it. The vision of the organization is shared with the larger sales force which motivates the frontline sales personnel and makes them feel tied with. For example -DuPont Pioneer has Safety, Valuing people, Environmental stewardship & Ethical behaviour apart from LONGLOOK of Pioneer which has been the guiding principle of Pioneer business for the 75Years of its existence across the globe. Similarly Monsanto has a pledge and articulates it very aggressively. Sales culture also has unique set of jargons, rituals, values and beliefs which are unique to an organization. In the Indian Agri input industry we have following sales force structure product based , geographic based combination of both of them. All the chemical companies in India follow geographic based structure whereas in the seed Bayer and Monsanto follow a combination of product an geographic whereas Pioneer-Dupont follows geographic based structure. Syngenta follows a product based sales force structure. C) SALES FUNCTION AND POLICIES: We will discuss about the hierarchy in a Sales organization and the different roles each of them play in the Sales organization. Indian Agriculture Organizations largely have 35 levels in a Sales organization.

The frontline is typically called as Sales officer/Sales Executive/ TerritoryManager. He would be covering a predefined geography consisting of a District or couple of Districts. He is like a CEO of his Territory and is responsible end to end, i.e. from Demand generation to connecting the demand back to the channel, Services the channel (Distributor and Retail), Collects money for the good supplied and is also responsible for discovering new markets and expanding the channel. Demand generation as I told in the earlier chapters is the responsibility of Sales in the Agri Input industry because of the product not being an impulse purchase, Media dark, Illiteracy and the farmer wanting to see the results practically before making the purchase decision. A frontline sales person has also to file MIS in predetermined reports and keep his Manager updated on the cropping trends and market. In Non-Agriculture industry the frontline sales personnel is largely involved in servicing the channel, channel expansion and discovering new markets, though he promotes the product using some sales promotional schemes However the major responsibility of generating demand lies with the marketing function. The middle level manager is called as a Regional Manager or Area Manager as the case be , he is responsible for a state or part of the state depending on the potential, current turnovers of the company and the geographical distance. He supervises 5-7 frontline sales personnel line- Salesofficer/Sales executive or Territory Manager. The middle level manager is the vital link between the frontline and the corporate. He presents the vision and mission of the organization to the frontline and aligns them with the broad objective of the organization and translates all the corporate dreams and at the same time presents their aspirations and concerns to the top management. He is responsible for strategizing at a regional level for the crops and drive distribution and farmer engagement programmes. Organisations with a strong middle management are extremely successful. It is important to have a strong and committed middle management failing which, most of the companys objectives would not go beyond them and success will not be on the expected lines. The Sales Manager is known by different designations like National Sales Manager, VP(Sales) and Head( Sales). He is responsible for : i) Preparing sales plan and budgets ii) Set Sales force goals and objectives iii) Estimate demand and forecast sales iv) Determine the size and structure of the sales force organization v) Recruit, select and train sales people vi) Design sales territories, set sales quotas and define the performance standards vii) Compensation and motivation of the sales force viii) Conduct sales volumes, cost and profit analysis ix) Evaluate sales force performance X) Monitor the ethical and social conduct of the sales force. Apart from the above , agriculture industry employs a lot of seasonal Manpower. These people report to the frontline( Sales officer/Territory manager). Each of the frontline would typically have 2-6 people reporting to them depending on the aggression of the company on investments on ground as well as the maturity of the market. These people in most of the cases are Agriculture graduates. 5

Sales force remuneration can be in the following ways : i) Straight salary ii) Straight commission on sales iii) Salary and commission on sales iv) Salary and commission on sales above a certain amount v) Salary and different rates of commission on varying totals vi) Salary and share in profits The compensation structure is largely driven by a combination of fixed and variable amount. The variable compensation as part of the salary goes up as the level (depends on the level in the organization). Current system followed by most of the organizations in the Agriculture industry is to have a higher variable pay at the higher levels of the organization. The frontline also have special incentives for certain products if they achieve some benchmark volumes. Apart from the incentive there are other non financial motivators like year end meetings at exotic locations, mementos and certificates for outstanding performance. The temp staff reporting to the frontline has a larger component of their salary on variable compensation and is sometimes on a per unit basis. Some of the established companies in the field of direct marketing keep their 90% of the compensation as variable, Eureka Forbes is a good example which has been following this system successfully for so many years. D) PERSONAL SELLING: It is the process of selling goods/products directly to the customer. Professional selling requires sales representatives to develop an efficient, systematic approach adaptable to the particular customer type and selling situation. The seven major steps that have been identified in the selling process are: i) Prospecting ii) Pre Approach iii) Approaching the prospect iv) Making the sales presentation v) Handling objections vi) Closing the sales vii) Follow-up on the sales In our Industry most of the sales is personal selling. Most of the times while it may not be restricted to a single person it might be for a group of people and hence in the Agriculture industry sales professionals require to learn both the Personal as well as group selling dynamics. Prospecting is important to increase the sales as well as replace the customer we would have lost in the course of time. The sales person can obtain leads from secondary information like telephone directories, directories of concerned associations and membership firms. The process involves making cold calls as the first step to find the interest of the customer followed by warm calls which eventually turn out to be hot calls or prospects. In Agriculture industry the prospecting can be done by looking at the 6

acreages of the crops and the cropping pattern subsequent to which the sales person can generate the list of the lead farmers/early adopters. After qualifying a prospect as a potential customer the sales person can learn about the prospect, his personal qualifications, his authority in the company, level of technical knowledge and other personality traits. In our Industry it is good to know the farmers cropping pattern, intensity of the Agriculture he does, his level of input usage, irrigation facilities and his risk taking capacity to try out newer products. The various types of approaches which can be followed is introductory approach, reference approach, customerbenefit approach, compliment approach, free gift approach, question approach, ingredient approach. A combination of the above approaches is followed in practical situations by sales personnel. It is advisable to have a strong introduction about the company, its legacy and its work in the past substantiated by blockbuster products of the yester years. One can use a flipchart or some kind of a detailing folder to articulate the above. After the introduction the sales person can go for the benefit approach on what the product can do for the customer and how will it benefit his income levels. Cost benefit ratios are pretty common in the Agriculture industry for Intra and inter crop( Hybridwise Comparisons). Once the benefit approach is over, one might like to close the sale by giving him a momento or sample seed. Once the customer is convinced and gives a go ahead then the formal presentation on the Features, Benefits and Advantages of the products can be explained. This can be through a formal audio visual presentation using LCD, LAPTOP etc, product literature or briefs and in a majority of the cases in the Agriculture industry demonstrating the product on the field vis--vis the Competition. The use of satisfied customer testimonials also comes very handy during this time. The Agriculture industry follows the practice of bringing farmers who have used their product to talk on their experiences. The customer may raise a lot of objections and seek clarifications with respect to the product presentation. This need to be clarified to his satisfaction, On some occasions the customer experience of a certain product may not be up to the mark. It might not necessarily be because of a product issue but because of the environment and the crop management interface. This is a right opportunity to put things straight so that everyone is on the same page on the expectations. coveted This is the most important step in the personal selling process. Some techniques used for closing sales are : i) Clarification closes ii) Psychologically oriented closes iii) Straightforward closes iv) Concession closes In the Agriculture industry we would normally follow the clarification closes coupled with some concessions with respect to the price and the offerings in the market. The clarification close is reiterating the benefits of the product vis- -vis the competition by way of demonstration on the field. Normally since the product is available through a 7

channel it is important to keep the concerned retailer in the loop and wherever possible take him too for the sales call. Following up is the most important activity. In fact in our industry the actual selling starts post selling the product. Handholding the farmer throughout the crop cycle specially in the Seed industry is very critical for further success. If the farmer has followed the practices recommended he will benefit the maximum out of the product and he might increase the acreages in the subsequent year as well as recommend to his fellow farmers. Any laxity in follow up will have disastrous consequences for further sales and will result in a dissatisfied customer. The sales personnel have a variety of communication tools at their disposal and with technology available, companies are leveraging the most of it by equipping their sales force with Laptops, handhelds and LCDs. The automation in the sales force reporting has also helped the salesperson in getting different analysis by customer, geography and product lines as well as profitability by product/customer. These data help the sales personnel in making the necessary course corrections.

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CHAPTER 2 : SALES PLANNING A) MARKET POTENTIAL ESTIMATION: Assessing the market potential is the first step of the planning process. This is an important input to the strategy and overestimation/underestimation of the potential might lead to huge losses or missed opportunities as the case may be. In certain cases the entry to the market may be a little early and the market may not be ready for that kind of a product offering whereas in other cases it might take time to graduate the customers to the next level which requires a lot of patience, commitment and investments from the company. Once the marketer is convinced about the potential of the product, it makes sense to invest and be patient. Some of the celebrated success in the Indian context are Dabur Real fruit juices, Kelloggs Corn flakes and in our industry the Biotech revolution led by Bollgard. There are 2 ways to analyze the Market potential which are Ability to Buy and Willingness to Buy .Here sources of data can be primary information straight from the customer by way of market research, dipsticks and focused group of studies. Most of the times marketers would take the concept of the product and test it out directly from the customer. The secondary source of data is from the Government on demographics, National level institutes and syndicated studies. In Agriculture industry the potential estimation is done by crops The gross crop acreages are first taken into account and potential is arrived at by the cropping pattern, irrigation/rainfed, commercial/non commercial, farmers input, Investment levels and severity of the pest/disease and the economic loss it would cause to the farmer. The dosages or the seed rate are used to calculate the final potential in MT/KL. Similar is the case with the fertilizer industry which is more driven by the supply constraintsHowever the Agri equipment industry potential estimation depends on the Government support in terms of loans and subsidies. B)FORECASTING : The importance of the Sales forecasting has been increasing over the years because of constantly changing environment, changing customer attitudes and preferences as also to maintain optimum inventory levels. Forecasts are both short run( 1-3 months and annual sales plan) and long run( Typically the 5-10Year plan)The short run forecasts are done for meeting the objectives of the current year and deriving the production planning and Cost estimates. Forecasting in the seed industry has to be done an year in advance since it has to be produced live and not an assembly line production. One needs to keep a close watch on the product performance and accordingly estimate for the 10

demand. Any excess of production may discard the product if its not meeting the qualities which will hit the bottom line. In case of the Agri chemicals since it is an assembly line production with a higher shelf life it can be planned within a short time unless there is a technical which is getting imported. In case of fertilizers too it depends on the raw material usage and transport being a critical component because of the load factor it needs to be planned a little more in advance than the chemicals. The long run forecasting (5-10Years) is more to do with the macro cropping trends, new technology interventions and is required to plan investments in plant, regulatory, trials and people. This type of planning makes assumptions of the growth in the industry, changing trends in the crops depending on the commodity cycles, Government intent and priorities as well as changing climatic conditions. There are controllable and uncontrollable factors in the forecasting, Controllable factors are pricing policies, Distribution channels, promotion campaigns, new product development and investments to some extent. Uncontrollable factors include larger climatic shifts, state of economy (though some predictions are made but still there can be always surprises) and competitive landscape. In case of the seed industry any product advancement not happening as per the timelines might hit the volume plansTypically the products might not get advanced because of sufficient trials not getting into place which restricts the evaluation (This may happen because of adverse climatic conditions) .Similarly in the chemical industry a product might not get launched if the regulatory authorities are not convinced about the trials.

Exhibit 1 :RETAIL SALES FORECASTS in INDIA During 2003-07, retail sales in India are forecasted to grow around 6% per annum. Retailing in India is largely under the unorganized sector and organized retailing is still a 11

new and developing concept in the country.It is estimated that organized retailing is poised to grow substantially due to the rising income levels of consumers, industry deregulation and increased global influences. Analysts believe that growing trends of consumer financing is one of the major factors influencing retail sales growth. Retailers of refrigerators, televisions, washing machines, computers and other household appliances are collaborating with banks and financial institutions to provide loans at low interest rates to their customers in order to increase their sales. It is also felt that customization of products according to local tastes will also play a major factor in the sales growth. Retailing of food and groceries has good sales prospects. According to the estimates of CII 50% of the retail sales in India takes place through supermarkets. Sales forecasting methods are broadly divided into Qualitative and Quantitative. The expectations of the customers, the sales force, executives and experts about the future trends in sales are used in qualitative methods whereas forecasting through the use of mathematical models comes under quantitative methods. Qualitative methods: i)Sales force composite: Totaling the estimate of each sales persons during the forecast period. ii)Jury of the executive opinion : This method is based on the opinion of the senior executives of the company. iii)Delphi Technique: In this technique the experts involved are beyond the company and would include experts from universities, Government institutions and industry. iv)Market Test: The product is tested in a limited area and based on the results the forecasting is done. In the Agriculture Industry sampling of the seed or chemical is a very common practice and based on the results of the sampling future decisions of scale up are taken. Quantitative methods: i)Time series analysis: Time series analysis is a method of estimation of future trend based on the past performance of the organization. The past sales performance forms the basis of the future sales for the company. ii)Moving Average: An extension of the time series analysis is the moving average model. In this method sales are forecasted based on the sales of the previous period and this is done on the assumption that environmental factors prevailing in the previous periods will also be present in the future period. iii)Exponential smoothing: Exponential smoothing is a further refinement of moving average methods for sales forecasting. In exponential smoothing greater weightage is attached to the sales in recent periods compared to sales in earlier periods. iv)Regression and Correlation analysis: Regression and correlation analysis are used for forecasting the sales of a firm. Regression analysis is used to identify factors that influence sales. If there is only single independent variable then it is called simple 12

regression analysis and when the number of variables is more it is called multiple regression analysis. Correlation analysis is carried out to measure the degree of relationship between the sales and other variables. This method helps identify a coefficient of correlation, The value of the coefficient ranges from -1 to +1( -1 represents perfect negative correlation and +1 represents perfect positive correlation). A correlation coefficient of + would indicate that for each unit change in the independent variable there would be equal change in the sales in the same direction in the independent variable. The converse is true in case of negative correlation. Multiple regression analysis will help forecaster to identify the relationships between sales and several independent variables. The appropriate sales forecasting method for a particular purpose can be selected depending on factors and requirements like accuracy, costs, type of data available, requirements of software and experience of the company. The difficulties associated with forecasting are lack of adequate sales history, lack of time, money and qualified personnel, changing customer attitudes and fashions and fads. C)SALES QUOTAS : Quotas are quantitative sales goals assigned to a unit of the sales organization. A sales unit may be sales person territory, branch office, and regional distribution centre. They are used as standard of measurement of performance in a sales organization. The concept of Quotas originated in the goal setting theory propounded in 1968 by Edwin Locke, an organization behaviorist. The purpose of assigning sales quotas is to achieve organizational objectives and provide a direction to the sales activities. Sales quotas are used to plan control and evaluate sales activities. They provide i) Goals and incentives for the sales people. ii) Evaluate their performance and control their activities. iii) Uncover the strengths and weaknesses in the selling process. iv) Improve the compensation plans effectiveness. v) Control selling expenses and enhance sales. There are 5 basic procedures for setting sales volume quotas: i)The simplest method is based on the sales units past sales results. Sales of last year or previous few years is taken and averaged out and extrapolated looking at the trends in the marketplace. ii)The second method uses the sales potential of a territory or assigned geography. Estimating the potential would be the key to get the right volume quota and as discussed in the earlier chapter the potential is estimated on the basis of macro, micro and other environmental factors. The middle management and top management would then adjust the potential depending on the pricing, investments, supply position etc. It might like to exploit the potential in a phased manner.

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iii)The third process uses an estimate of the market , then determine the employees sales potential and individual quotas are set on the basis of this potential. Either we do it for the company as a whole and then split it territory wise or alternatively do it territory wise and sum it up for the country. iv)Quotas based on the sales force compensation in mind. The quotas are worked out in a manner where the sales personnel gets higher amount as incentives and stays motivated. The ranges are fixed from 50% to 200% attainment of quota and overachieving it. v)Quotas fixed by sales people themselves.

Types of Sales Quotas : Sales volume quota is the most commonly used type. It can be measured in terms of Rs or physical units. Profit Quotas are the other way of looking at itThere are some organizations where a profit objective is given. The profit Quota may be a territory level or at the region level. In this case selling more necessarily should not be the objective, profitable selling and selling a portfolio of products with higher margins is what the salesperson would look for. Expense quota is an indicator where the fixed cost of a sales person for a year is fixed as an absolute amount or as a % to sale. Activity quota is basis for evaluating non selling activities like maintaining customer relations, providing after sales service to customers, helping retailers display product on the company shelves. Typically some Indian organizations have Agronomy goals for the sales personnel apart from Sales development goals. This helps them drive these activities which further the sales. These quotas are driven independently or a combination of these are assigned to the sales people D)SALES BUDGETING: The sales budgeting process is an exercise which starts in the 3 rd quarter as one gets fair indications of the progress the company is going to make for the year. A typical budgeting process in a Seed company would start with the sales forecast regionwise / cropwise /hybridwise taking into account the actual sales till date and the estimates for the balance of the year.The closing stock is taken into account and any discards and rejects are factored before arriving at the final quantity for production. This is then given to the production manager to plan the quantitative and block the acreages accordingly. This budget then goes for 2-3 iterations and the volumes for 14

production are accordingly revised. Once the broad budgets are agreed upon they are sent back to the region to be split up territory wise and resend to corporate for uploading in the system. The travel/market promotion and allied expenses are also budgeted subsequently territory wise. All the fixed costs are budgeted as per the broadly agreed norms as a % to the revenue and monitoring and evaluation is done on a monthly basis.

E)SALES AND COST ANALYSIS: Sales control involves the statistical and accounting analyses that help a sales manager to determine the profitability of the company based on product lines, customers etc. The objectives of the sales control are i)Performance management : The performance management helps the sales manager evaluate the progress the sales organization is making in achieving the objectives. The ratios used to evaluate the sales force performance include Sales/Quota ratio, Sales/Budget ratio, Sales this period/ Sales same period last year( SPLY) and closes/call ratio. ii)Problem identification: Sales control helps managers to identify problems in sales before they become liabilities to the firm. Some of the common sales related problems that organizations face today are the inability of sales personnel to bring in adequate business, inaccurate sales forecasts, difficulty in increasing profit margins and the inability of the sales management to capitalize on revenues from existing customers. Constant feedback would help the sales personnel in setting the problems right at the beginning. iii)Identifying opportunities : Identifying opportunities before the competitors do and thus helping the firm gain a competitive advantage. A sales managers job is not to only set quotas but to make efforts to ensure that the sales personnel achieve the quotas by providing them all the necessary support in terms of resourcing, inputs & investments. While setting a quota the sales manager also has to see that there are no biases creeping in and the process is very objective & transparent. The quota setting process should follow the principles of SMART which stands for Specific, Measurable, Agreeable, Realistic and Time bound. Once the quotas are set there should be a general briefing explaining the broad logic of the quota setting followed by a detailed planning exercise on strategies to be developed to achieve the quotas, resource planning and a detailed activity schedule with clear accountabilities. This activity schedule needs to be monitored and course corrections if required to be done to achieve the final objective. The sales manager needs to coach their team members constantly to achieve the objectives as also find out how they can exceed their expectations. Exhibit 2:Sales Planning by Objective at Pinoeer.: 15

Goal 1: To Achieve 140 MT of Corn against a base of 70MT in Chitradurga territory by end of 31st December 2008. Key Actions: Review current farmer base for 70MT volume. Incremental farmer contacts to be made Use Customer calculator. Identify the markets in which these farmer contacts have to made. Determine how much of farmer contacts through PDA and through pre season. Arrive at Budget and seek approval. Maximize and Project Manpower requirement based on need ( Proposal with justification is required). End of the season analyze and present the impact on the above. Appoint retailer based on need assessment focus. No access areas or less access areas. Identify Villages / do an analysis for Positioning and to place product for sampling / selected villages. Having an account for 1) Sample at existing customer 2) Competitors Customer hold and 3) New customer .

Sales Analysis involves gathering, classifying, comparing and studying the sales data of a company. It helps identify the strengths and weakness of the company thereby allowing the management to formulate suitable marketing strategies for it. Sales analysis also helps the management in production planning, cash management, inventory management and other non-marketing functions. A typical sales analysis involves comparing the sales of a company at two different time periods or comparing it with the peer group companies.The key elements that constitute the sales analysis process are : i)Purpose of evaluation: The objective behind the analysis needs to be defined clearly before getting into the analysis. ii)Comparison standards : This analysis compares the company sales with certain benchmarks and industry standards. iii)Reporting and control systems : A sales informations system uses mathematical and statistical procedures to generate reports that depict trends, seasonal patterns, regression analysis etc. iv)Hierarchical sales analysis:This involves studying the sales performance at a micro level by investigating and analyzing its components. The sales manager may like to look at a particular territory in the region for either an increase or decrease in the sales of that region. This will help in looking at factors resulting in such performance which can get replicated to the other territories. Steps in sales analysis : i)Determining the sources of sales information ii)Collection of sales data iii)Processing of sales data 16

iv)Studying the results Variations of sales analysis i) Sales analysis by region ii) Sales analysis by sales officer/Territory manager iii) Sales analysis by product line iv) Sales analysis by customers v) Sales analysis by distribution channels vi) Sales analysis by SKU vii) Sales analysis by Hybrids( In case of Seed company Sales Audit is a periodic review of a business activity. A sales audit covers the sales management environment, sales management organizational evaluation, sales management planning system and sales management planning functions as represented diagrammatically. Marketing cost analysis involves the collection, classification, Comparison and study of marketing cost data. The types of costs are: i)Natural and functional costs: Natural costs are the costs that are recorded in the books of accounts like salaries and rents whereas functional costs costs associated with specific business activities like sales and production. ii)Direct and Indirect costs : Salary and commission are a good example of direct costs whereas administrative costs are indirect. iii)Fixed and Variable costs : Fixed costs dont change with the volume whereas variable costs fluctuate with change in volumes. Profitability Analysis: The profitability analysis of a firm can be done using techniques such as i) Breakeven analysis ii) Capital budgeting iii) Return on Asset management. Breakeven analysis is calculation of the breakeven point. It is the point at which the total revenue from sales equals the total costs. The formulae would be as under: (Unit sales priceUnit variable cost)*No: of units=fixed costs is Equal to operating income in equal to zero . For example the selling price of perkg of seed is 106Rs and variable cost per kg is 6Rs, Fixed costs are 10,000Rs/( 106-6) * No of units10,000=0 100N=10000 N=10000/ 100 N= 100Kgs of seed has to be sold for breaking even.

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Capital budgeting tools like Net present value(NPV), Internal rate of return ( IRR), Pay back period are also used for taking decisions on marketing expenditure. Similarly ROAM is calculated using the following formula: Contribution margin or netprofit * Sales/Sales assets managed Note : The above financial analysis are not being explained in depth as you might cover it in management accounting.

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CHAPTER 3 : SALES FORCE MANAGEMENT A) RECRUITMENT: Recruitment is finding potential job applicants, telling them about the company and getting them to apply. Sales force recruitment has been one of the most important responsibilities of the sales manager because to most customers and prospects the sales people are the company. Over the years sales force recruitment has become even more important since the cost of hiring and training has increased dramatically. In the Indian context we are going through a very dynamic stage. Agriculture Industry which hardly had any attrition is seeing double digit attrition. Opening up of the Retail, Rural banking, commodity and the general bullishness in the Seed Industry is throwing lot of opportunities to the existing employees as well as fresh Agriculture graduates. An effective selection process is key to getting the right person on the ground and every organization has its own selection process ranging from written test, group discussions and series of personal interviews in addition to a battery of psychometric tests. Once we get the right person chances of his staying back for a reasonable period of time becomes more and the company would have recovered the cost of recruitment and training on the individual. The typical process followed is in the order mentioned below: i) Sourcing the candidate ii) Screening the candidate iii) Selection Test---Personality, Psychometric and Honesty tests iv) Background check v) Personal Interview vi) Letter of recommendation( Referral checks) vii) Physical examination viii) Making the employment offer The process of recruitment starts with basic adherence to a RECRUITMENT STRATEGY which most of the big Indian and MNC companies have. The strategy would clearly determine the composition of the entry level sales personnel w.r.t to MBA hires, Agriculture graduates, Non Agriculture graduates from Non Agriculture industries and internal promotes from Temp staff. Similarly strategy of recruitment for other levels of the organization is also documented. For Example Pinoeer Hi-bred International (A Dupont company) has Agronomy and Sales development function which requires some special skills and is not available in the open market. The company generally builds up the talent pool 20

by recruiting fresh postgraduates in Agronomy as trainees and grooms them for the larger roles of Regional Agronomists. The recruitment process can be once or twice in a year with the company inviting applications from prospects through paper ads, participating in the campus recruitment programmes, going through referrals from the existing employees, asking consultants to send a shortlist of the prospects or searching through net. Given the current growth trends coupled with attrition, recruitment has become a daily process and hence organizations have gone a step ahead of maintaining a databank of all the hot prospects.Companies in IT industry as also the other conventional industries have started creating benchstrength to mitigate the risk of loosing people during peak seasons and cycles.A standard job description should be well in place before the recruitment process kicks off. Now a days prospective employees would like to have the job description to ascertain themselves of their fit and liking. Even some companies conduct guided tours of their campus for all the prospects before the start of the interview. Exhibit 3 : Sample Job Description of a Territory Business Lead of Pioneer(A DuPontCompany) Job Description For- Pioneer Frontline Name : Locations : Any where in India Reports to : Regional Manager POSITION PURPOSE Organising sales, collections, sales development, conducting product advancement trials and forwarding harvest data, implementing free sample distribution / side-by-side/ demonstration programmes, maintaining farmer contacts, providing feedback on market conditions and product performance, responsibility for market development activities in the assigned territory. SUPERVISORY RESPONSIBILITIES List the titles of positions that report directly to this position. Indicate which positions are part time Regular Employees Nil ; Seasonal Workers 5 to 10 Position Title : Territory Business Lead Department : Sales Amount of Supervision Received : Regular

How many employees are supervised indirectly (through direct reports ) Nil CONTACTS 21

CONTACT Regional Agronomist

REASON To take guidance regarding all Promotional Programmes, PAT, Product Placement suggestions etc. To provide feedback regarding performance of our products and Competitors products To sell and collect payment To discuss about Pioneer products / obtain feedback/ building direct relationship & providing service To build and strengthen relationship To build Pioneer image / Market intelligence

All distributors / preferred dealers / important retailers VIP / key farmers/ Ego farmers Officers of Government Departments /Agencies Officers of Seed / Agri input companies RESPONSIBILITIES

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

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WORKING CONDITIONS Contacts Working conditions: Overnight Travel inside the < 10 days/yr. Multiple Deadlines Few Unfavorable Conditions Little or none Occasional Moderate _X__ Frequent Constant

Primarily company X Primarily outside the 11 - 50 days/yr. Moderate company Equal inside and ___51 - 130 days/yr. Frequent outside the company X Seeks/ X 131 - 200 days/yr. X_ Continuous provides information X Discusses > 200 days/yr. project results Instructs others Other : X Coaches or Persuades others X Negotiates with others

REQUIREMENTS Education : Bachelor or Master Degree in Agriculture Experience : Two years experience in seed/ agro-input industry KNOWLEDGE, SKILLS and ABILITIES

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

B) COMPENSATION: 23

Every organization has a compensation and benefits philosophy and benchmarking within the industry as well across the industries. The benchmarking can be targeted to be at a certain percentile of the industry. The broad components of the salary follow the philosophy. The variable pay as % of the total pay varies from organization to organization and the % tends to be more at the higher levels. Organizations have also come out with stock options to motivate the employees and make the part of the profit sharing. Most of the components of the compensation are taxable and very few companies are offering voucher payments. Statutory payments by law have to be put with by the companies and there is very little choice, however some of the companies go beyond the statutory laws and offer more long-term incentives in order to retain talent like higher PF contribution (Higher base pay), superannuation, medicals and insurance. The annual increments subsequent to the employee joining are on the basis of his performance. After a six-twelve months probation, on satisfactory discharge of his responsibilities he/she is confirmed in the company and during that time the compensation might get positively effected.

C) TRAINING and DEVELOPMENT: The success of an organization depends on the effectiveness of its sales force to convince customers to make the purchase. The purpose of a sales training programme is to increase the effectiveness and productivity of the sales force and to refine the selling techniques. The maximum allocation of the training budget goes to the sales personnel in any organization. According to a research study, a salesperson spends around 37 hours of training per year. Sales training depends on the timing and the target audience. The first training which any sales person goes is the INDUCTION programme. This programme basically takes him through the organizations mission/vision and value systems apart from the broad strategies and philosophy. It also gives the employee an exposure to the various functions of the organization. If the employee is a fresher from the college without any formal sales experience he is then taken through a longer period of induction in the Sales and Marketing function with practical training in the field with Temp staff in selling and demand generation process. It is not uncommon in the companies to put the new recruits through a very strenuous and hard grind from basic selling to the shopkeeper, merchandising activity and travelling in the wholesale vans for redistribution to mofussil markets and in the Audio visual vans for promoting the products. The duration of the initial sales training for fresher may range from 3-6 months subsequent to which he is given a posting to handle an independent territory. There are a battery of tests which are conducted post training to evaluate the employee on his understanding of the sales concepts and areas where he would require some more help. There are refresher training programmes which are conducted at regular intervals. There are training programmes conducted by the companies to the distributors 24

sales force and also sometimes to the customers. In the Durable industry the counter sales person are given special trainings and incentive programmes are run for them on successful conversion. In certain cases the sales and service personnel are the same. In the Agriculture Industry training is given a lot of importance. It is important since the sales personnel are going to recommend to the farmers on the usage of their products and any wrong recommendation would cause irreparable damage to his crop and finances. There are structured training programmes which are given to all the sales personnel at the beginning of the year. These programmes are supplemented by literature, notes, PowerPoint presentations and reference books. Also all the Temp staff are trained in the relevant products they handle withFAQs(Frequently Asked Questions) for them to handle farmer query. Some companies also invest on training the Retailers and Distributors every year on the product features and benefits. Apart from the formal product training there are training programmes on the following : i) ii) iii) iv) v) vi) vii) viii) Personality development Communication Media handling Objection handling Supervisory skill development programmes Individuals nominated for programmes to develop certain specific skills On the job training programmes to develop certain skills Group selling skills

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

Training programmes are evaluated through an impact assessment study formally by HR as well as informally by the line manager on a daily basis.The assessment will throw open feedback for course corrections for future training programmes as also the relevance and impact of the programmes. D) MOTIVATION and MONITORING: The word motivation is derived from the latin word movere which means to move. Motivation is a process that induces goal directed behavior in an individual. The key motivational theories are as follows: 25

i)Maslows Hierarchy of needs : Physiological needs form the lowest or most basic level of needs and include the need for food, drink and clothing etc.The second level includes safety and security needs i.e. protection from physical, psychological and financial harm. The third level includes social needs of love, affection and belongingness. Self esteem forms the next level and includes the need for achievement, recognition and status. The highest order of needs in the Maslows hierarchy is Self Actualization and involves seeking fulfillment by making maximum use of ones abilities or skills. When applied to the sales function Physiological needs take the form of need for a steady income and good working conditions. Safety and security needs include the need for job security and safe working conditions. Social needs include the need for acceptance by peers and good interpersonal relations with organizational members and customers. Self esteem needs include the need for status or job title, recognition, rewards and promotion. Self actualization needs refer to the need for growth in ones career, need to exploit ones full potential and need for autonomy and self development. ii) Hertzbergs Two-Factor theory: The theory states that job environment of an individual is characterized by two fundamentally different set of factorsHygiene factors and motivational factors. The hygiene factors are known as maintenance factors or job contest factors. Working conditions, job security, company policies and quality of the technical supervision and interpersonal relations are some of the examples. While these may not motivate the employee, absence of it may cause de-motivation. The motivational factors are job content factors and related to the content of the job like responsibility, work itself, promotion, recognition and achievement. iii) Goal setting theory: Goal setting theory presumes that people have specific needs and aspirations and in order to fulfill these they set certain goals for themselves. It is also known as Management by Objectives (MBO) as discussed in the earlier chapters. Setting goals encourages a person to work persistently towards the same and helps the person plan their activities better, align then with organizational objectives and formulate action plans to achieve their goals. IV) Expectancy theory: This theory states that motivation is a function of three factorsIndividual has certain expected outcomes (expectations), the extent to which the outcome is valued by the individual (valence) and the probability that the efforts expended by the individual will help in attaining the outcome (Instrumentality). Thus motivation is a function of expectation, valence and instrumentality represented by the equation: Motivation=f (e*v*I) where ev and I represents expectancy, valence and instrumentality. v) Job design theories: Job design theories correlate motivation with job satisfaction. Job satisfaction is the feeling of pleasure that one derives from ones experiences in a job. Job design theories 26

suggest that job satisfaction can be created by means of job enrichment, job rotation and job enlargement. Sales force productivity is defined as the ratio of sales revenue to sales expenses Sales force productivity==Sales revenue/Sales expenses Sales force productivity is a function of many factors such as work environment, work methods, selling skills of the sales person and salesperson motivation. Sales person has been characterized into four personality types and all these types differ in their needs and motives and require to be motivated in different ways: i) Competitor: This type of sales person thrives on beating the competition and is motivated by sales contests, plaques and perks. ii) Achiever: Achiever set their goals and perform purely on self motivation. They dont require motivation from the sales managers and they dont bother who get the credit as long as the team wins. They are good team players and excel in team selling. These people can be motivated by giving challenging tasks and designing long term plans for them. iii)Ego-Driven : These type of sales person consider themselves to be the best in the organization. They like to be given importance and opportunities for decision making. They make good coaches and mentors. iv) Service oriented: Their strength is their empathy and ability to build relationships. They may not get big business for the sales organization but their ability to delight the customer helps maintain its territory irrespective of the competition. E)PERFORMANCE MANAGEMENT: Performance evaluation is an important process for supervisors and employees. It is a tool that can enhance the way in which an organization is managed. It allows employees to be recognized for good performance and provides recommendations for further improvement. If done properly it strengthens the relationship between the sales manager and sales personnel, increases the flow of communication between the sales force and management, highlights present expectations from the management and appraises past performance. Another important use of performance evaluation is to provide feedback to the sales personnel and sales managers about any inherent weakness in the selling approach and process. The sales force evaluation process has the following steps : i)Determine factors that influence the sales force performance ii)Select the criteria for sales force evaluation iii)Establish performance standards iv)Compare sales force performance v)Performance review and feedback 27

The objectives of the performance evaluation: i)To be aware of the company objectives ii)To improve motivation and skills iii)To appraise past performance iv)To develop a sales plan to increase future sales The evaluation should be done by the immediate supervisor as also seconded by supervisors supervisor( Father/Grandfather appraisal).This removes any bias the supervisor would have on his team Member. The frequency of the appraisals are normally twice a year although informal feedback is encouraged every time the supervisor sees that his team member is faltering on some issues and coaching and feedback is required. Information sources for evaluation are: i)Company records ii)Reports from salesperson iii)Customers iv)Managers field visits v)Managers personal insights vi)Feedback from others( Distributor, customers, other functional heads) Criteria for the evaluation of sales force performance: i) Qualitative The qualitative goals look at the process and adherence to the systems which the sales personnel may have followed in delivering his/her goals. This becomes important from the long term sustainability of the performance. It also eliminates any shortcuts which the sales personnel might have taken in accomplishing his goals. Typically the planning and prospecting records, customer database and participation in non core sales activities, reporting and feedback are taken into account. ii)Quantitative: Quantitative measures include sales volume, sales revenue, gross margins, fixed cost as % to sales, stock management, inventory management, collection efficiency as well as distribution addition and retailer involvement. All these are measured against the Targets which are set or against certain standards/ benchmarks which are followed within the industry. The following methods of sales force evaluation are followed: i)Essays : Sales managers describe the performance of sales personnel in few paragraphs. He mentions the individual potential, strengths, weakness and other relevant matters. ii)Rating scales : Sales manager identifies certain specific criteria for a particular type of job which might be personality, behavioral or performance related. The sales personnel are evaluated on the extent to which they meet the desired performance criteria.

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iii)Forced choice method : In this method the sales manager is asked to go through a group of statements and select the best that explains the individual. iv)Ranking : All the sales personnel working in different areas are put together and then subjective as well as objective criteria are used to rank them in order of merit. New methods of evaluation which are being used by some sales organization: i)360-degree performance evaluation ii)Critical incident appraisal: All the positives and negatives behaviors are documented and shared with. iii)Work-Standards method: List of the different activities and job duties which the sales personnel is supposed to perform is shared with. iv)Management by Objectives: It is an objective evaluation which looks at the results and not the behavioral or personality traits. v)Behaviorally anchored rating scale(BARS) : A combination of critical incident method and a graphical rating scale which helps in increasing the accuracy of sales force evaluation by emphasizing objective measures rather than subjective ones. vi)Family of measures (FOM): FOM is a new tool which helps measure the progress made by the sales person individually and not by given ratings. It compares the results with the previous results over a time period. It is a continuous evaluation process.

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Exhibit 4 :- Elements of Sales Force Management Audit

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Exhibit 5 :- Common Drawbacks cited in Formal Appraisal Programmes

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Exhibit 6 :- Recognition as a Motivating Factor

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Exhibit 7 :- Motivate Employees with fun

Exhibit 8 :- What motivates the Japanese Salesperson 33

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CHAPTER 4 : DISTRIBUTION OVERVIEW

A) LOGISTICS: It is a complete process by which companies transport products, parts and materials from the place they are manufactured to the place where they are required. Companies are finding way and means of creating a difference in the way they manage logistics as it is turning out to be a competitive edge. The importance of Logistics can be attributed to the following reasons: i) Companies now have a wider choice of alternatives available to them to maintain cost and service standards. These alternatives may be in the form of shipping products through containerization, using mini computers and sophisticated satellite communication system to track shipment or transporting them by air to ensure speedy delivery of products. ii) The location of the retail outlets is based on the proximity to market. During energy shortages transportation costs becomes very critical and in times like this it is very advantageous for companies having their own logistic system which helps in minimizing the cost and overruns. iii) The growing complexity of product lines and the increasing shortage of raw materials are forcing companies to focus on logistics management to ensure constant and steady supply of raw material to manufacturing locations. iv) An effective logistics system (Computerized inventory control) will help them tide over any crisis that may arise on account of swings in the business cycle, changes in interest rates and increase in the cost of labour. Functions in Logistics Management: i) Procurement/Purchasing: Procurement is the process of buying goods and services for the user department based on the order specifications given by the department. Procurement begins with sending the purchase order to the supplier. Procurement or Sourcing department as it is called in different companies involves maintaining an active list of vendors/ constantly updating them, negotiating prices either on a yearly basis or as and when required, terms and conditions of supply along with payment schedules, organizing delivery of orders, arranging for insurance and sending the purchase order to the suppliers. It also monitors whether the supplies are being affected as per the quality standards and penalty clauses are incorporated if supplies either fail to meet the quality criteria or the timelines. ii) Inward transport is the function of the logistics process in which parts and components are moved to warehouses before they are finally shipped to their destinations. iii) Receiving is the function in which the material is received at the warehouse for storage, checked for the quantities and quality matching as per the purchase order. iv) Warehousing is the function in which the material received for the productions/shop floor is stored before it is finally dispatched for 35

trade. Since goods cant be shifted to the trade directly from the manufacturer because of quantity limitations, they are shipped from the factory to warehouses located at various points in the geography and demand is then serviced from these warehouses. This ensures that the market would keep getting their requirements as and when they require. This helps the companies also in ensuring that goods outflow and payments inflow is in tandem and the risk is spread out. The other role which warehousing plays is in pre testing of the products before they are released in the market.

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Exhibit 9: Warehousing trends in the 21st century v) vi) Stock control in logistics is the function that involves keeping track of the amount of stock present in the inventory. Timely stock audit on agreed frequency is one of the important responsibilities. Order picking is the function of the picking or retrieving products stored in the warehouse from their respective storage locations to cater to customer orders. Companies have different ways and systems to arrange the stocks in the warehouse for easy retrieval. Material handling is the function that involves the movement of materials required for operations. It might take place within different sub functions in the warehouse. Outward transport : It involves shipping of the material from the factory to different warehouses and subsequently dispatch of the material to various distributors in the market place. Outward transport has therefore 2 componentsPrimary and Secondary transportation. Recycling, returns and waste disposal: This involves handling of the goods which have come back from the market, sorting them out w.r.t their quality and putting it back for reprocessing or destruction as the case may be.

vi) vii)

viii)

Technology has become a key factor in which companies are gaining a competitive advantage over other players in the industry. Advances in the technology in the form of WAP phones, Personal Digital Assistants(PDAs) etc allow companies to keep track of the shipment progress along the logistics chain of process. The various types of technology available are : 37

i)Electronic Data Interchange( EDI) : It is the exchange of the routine business information between distantly located computers. The exchange of the information takes place in a standardized local format through the use of networks. EDI facilitates the exchange of structured business messages such as invoice forms, purchase orders etc. This technology helps the companies in maintaining their inventories at optimum levels and avoids cash flow problems as well as manage working capital mote efficiently. ii) Artificial Intelligence: It refers to the ability of the machine to process data and response with human like intelligence. The areas where AI is used in logistics is management assessment or audit, inventory planning and control, purchasing analysis, production planning and scheduling , freight rate negotiation, transport routing and scheduling and management information systems. iii)Expert systems: Expert systems can be defined as an artificially intelligent computer program that makes use of knowledge and problem solving logic of human experts to solve problems at an expert level. They can process both qualitative and quantitative data. iv)Communication Technology: Companies use various methods like satellite communication using WAP enabled phones, pagers, handheld devices such as delivery information acquisition devices (DIAD), radio frequency identification (RFID) technology, specially designed packaged delivery vehicles and global communication and computer systems. Some of the companies use advanced wireless communications in their operations. v)Bar coding and Scanning : Barcodes are a series of black and white stripes printed on the labels glued to items and provide a unique identification in these items. They work on auto data capturing technology which is based on reflective optics. The black and white stripes in bar codes absorb and reflect light rays in various intensities and thus help in identifying the product. Bar code requires a scanner for reading the code. There are several benefits of using bar codes for product identification.Apart form tracking shipments of packages in warehouses it results in improved data accuracy, consistency, improved efficiency and inventory and asset management. The local and global challenges in logistical management: i) Integration of logistics activities : Most operations within the logistic function operate independently and in the absence of integration the customer satisfaction becomes an issue. ii)Lack of qualified personnel . iii)Distance : Since distribution of materials involve great distances to be covered it involves longer pipelines, great lead times and accuracy. This is more applicable for international logistics. 38

iv)Modes of transport : This becomes very critical when goods are shipped internationally as it would involve Air/water They require a different set of knowledge as one has to understand the intricacies involved in conference and nonconference rates , ports, schedules and sailings. v)Documentation : Extensive documentation is required for transport by Air and surface and knowledge in Exports/Import clearances. vi)Coordination of intermediaries : Various intermediaries like transportation companies, warehousing firms, customs personnel and even banks. Any slippage on one of the intermediaries would delay the process of shipment vii)Cultural differences : Language is one of the biggest barrier. viii)Government/political difference : Differences in regulatory constraints are a natural consequence of the global movement of materials. One needs to understand the rules and regulations prevailing locally as well as the tax structure . B) PHYSICAL DISTRIBUTION SYSTEM: Physical distribution is a term used for the outgoing product flow from the firm to the customer through some defined network of transportation and storage or distribution nodes called distribution network.

Exhibit10: Flow within the logistics pipeline 39

Exhibit 11: Operational elements of a physical distribution system The physical distribution function offers great potential for profit improvement. Distribution cost can be as much as 30-40% of the total cost . An integrated physical system can reduce the visible costs such as transportation, warehousing and inventory management in addition to controlling the distribution costs. There are hidden costs and profit opportunities lost due to failure to ship the product on time, cancelled orders and customers dissatisfaction associated with stock outs. The Physical distribution cost is the total concept and provides the following guidelines for achieving the critical balance between the costs and the level of service provided by the system. The four main components of physical distribution concept are : i) Total cost perspective : The key to the total cost approach is to consider simultaneously the cost of all physical distribution elements visible and hidden when trying to achieve specified levels of customer service. ii) Understanding of the relevant trade-offs among cost: The cost patterns of different activities of the firm sometimes display characteristics that put them in 40

iii)

iv)

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

C) CHANNEL INTEGRATION Channel integrations shifts the point of logistics management from simply total cost reduction to a return on investment focus. Its purpose is to streamline the physical and information channel flows by reengineering the distribution process. Logistics system is making great physical contribution to corporate goals of i) Revenues : Positioning of goods and stocks in locations and facilities where they can be delivered reliably and swiftly. ii) Expenses : Key contributors are transportation, warehousing and inventory. iii) Capital investment The core components of channel integration are : i) Development of customer service standards ii) Selection of transportation modes iii) Determination of optimal number and location of warehouses iv) Setting of inventory management and control procedures v) Determination of production scheduling vi) Design of order processing

D)AGRI- INPUT INDUSTRY DYNAMICS : The Agri- input industry can be classified into Fertilizers, Seeds and chemicals (Pesticides/fungicides), each of the input has its own dynamics and nuances, and we will deal in brief on each one of them: i)Fertilizers: Logistics is the most important factor in this industry. Goods are shifted normally in RAKES (Train loads) and subsequently transshipped into full truck loads from the rail heads. Negotiation with railways on rates as well as the schedule becomes 41

very important for achieving the desired outcome. Since the rail heads are not as extensively spread as surface transportit is important to get into structured agreements with the transporters on transshipment from the rail heads. Any delay in transshipment beyond the specified time frame would attract demurrages and incremental cost. Since some of the components are importedthe transshipment would happen through ports and adequate know-how of the practices and skilled manpower is very critical to sail smoothly through the custom and import/export process. Warehousing is another important cost and direct shipments to the distributor in full truck loads would save monies as compared to holding huge inventories in company warehouses and the associated cost. Documentation of the entire shipments as per the formats is critical since there is a subsidy which the government extends to the industry on the freight. ii)Seeds: Seeds are live material and perishable in nature. Moreover most of the Agriculture in this country is rain fed. Packing of seeds is done in poly bags for consumers and bulked in secondary bags for the wholesale. Rough handling by the godown keepers and hamals result in damage of secondary bags and tearing of the primary bags of the customer. Availability of seeds in time and in required quantities would make the companies successful. The rain fed cultivation results in a very short buying cycle and hence companies should ensure availability of material in time. Estimation of demand would be very critical as over placement of stocks in the market and poor sales will result in huge returns; 50-60% of the return stock in the seed goes into discards thus impacting the bottom-line of the company. Shuffling of stocks quickly to places where the season is in progress from the places where season is over would help in better inventory management and reduced discards. Warehouses should be equipped with skilled manpower and sufficient space to reroute returns after screening for return rejects and damages. Transport contracts should be in place for all secondary as well as primary shipments to be in time. The Service level agreements (SLA) and Turnaround time (TAT) for all the destinations has to be documented. The cost of the goods is high unlike fertilizers and does not require shipment through rail. Vegetable seeds are dispatched even through courier since goods are of lesser weight and the quantity requirement too is less on a per acre basis. iii) CHEMICALS : In terms of the space and bulk they would fall between Fertilizers and seeds. Their packing is normally in cartons or bulk containers, they would occupy more space in proportion to their weight. Since chemicals are not live material their shelf life is longer and hence the impact on bottom lines in the event of over placement in the market is minimized. However transportation cost for all the return material to be shipped back to the plant and also reprocessing if the product has been for 2-3 seasons can have a hit on the bottom-line. The other issue is of leakages and damages. This is very common in this industry and manufacturers normally provide for an allowance tothe trade on this account.

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CHAPTER 5: CHANNEL EVOLUTION, EVALUATION & CONTROL As mentioned in the earlier chapters the evolution of the marketing channels has taken place in tandem with businesses response to environmental forces. The evolution has been over the 4 Eras. A) EVOLUTION OF MARKETING CHANNELS: Production Era :where the supply was sufficient to cater to the demand and there was no surplus, managements focused on cost and production efficiencies. Sales Era :began when Industrialization and economic prosperity were at their peak, continuous technological advancements and labour efficiency drove production to newer heights and the supply-demand equation tilted towards supply. Sales assumed prominence as management understood that selling involved much more than goodwill, convincing skills and minimum knowledge. Large scale distribution systems started developing to spread the excess produce. Marketing Era: started during the Second World War when technological advancements achieved newer heights and Industrial boundaries got eroded. Steel industry started facing stiff competition from plastic and glass started facing competition from paper. Customers were more educated and sophisticated. The marketers job was not only restricted to selling but also find out alternative and new ways of product usage. Thus the sales person in the marketing era became a problem solver, educator and an emphathizer. There was a shift in the focus from sales volume to profitability of the company or the product line. Relationship Marketing Era :the present day highly competitive marketplace has found business to first determine the needs and wants of users and then produces the goods and services that fulfill these needs. It is one thing to acquire a new customer and the other to retain them. Retention has become one of the big pieces of marketing strategy as the cost of acquiring a new customer is 3 times the cost of retaining an existing one. Loyalty programmes in different formats have been rolled out by majority of the companies to secure their customer base. It is a two-way interacting system and the company is constantly trying to find out the unmet needs or the changing needs and design products accordingly. Channel is a set of interdependent individuals and organizations involved in the process of making a product or service available to the end-user for use or consumption. The key constituents of the channel are manufacturers, intermediaries and end users. Manufacturers are the owners of the product and are liable for it till it reaches the intermediary. They are at all points of time responsible for the quality and the delivery of the product as per the promise. 44

Intermediaries are merchants or agentsthe former owns the title of the producer whereas the later only facilitates the negotiation. Merchants can again be classified as Whole sellers and retailers whereas agents can either be manufacturing, sales or brokers. End users are the final consumers or sometimes in the industrial product they may use these as inputs into their product. Role of channel members: i) Facilitate the search process of buyers and sellers: +They make the products and good available to the end-user and thus reduce the uncertainty among them. ii) Sorting: They make homogenous lots among the different assortment of goods they get from different manufacturers. This helps the end user in getting a wide variety and within the variety homogeneity. iii) Making transactions routine: Channel members help in making transactions routine through standardization and automation for example like placing orders, lot size , payment etc.. iv) Contractual efficiency: Since the flow of goods take place typically from ManufacturersDistributorRetailerCustomer and the flow of payment takes place in the reverse direction, it would be extremely cumbersome and inefficient if a manufacturer has to transact with each and every end user, thus the intermediaries bring in a lot of efficiency and speed in the system. Function of channel members: i) Market coverage and product availability: The marketing channel does this by contacting existing and potential customers and provides customers support services in the form of credit, delivery and technical advice. ii) Market development: The channel also contributes towards expanding the manufacturers market share by soliciting new business from customers. iii) Technical support: Channels do extend technical support and there are exclusive channels for after sales service in case of durables and computes. iv) Market information: They provide insights on customer usage as well as demographics. v) Inventory Management: Channels maintain optimum inventory which results in a steady supply of goods to the customers thus ensuring that there are no stock outs. In this way the channel makes investments in the product. vi) Risk taking: Channel also takes the risk of damage, storage losses, misplaced items, product obsolescence and bad debts. However the channel negotiates with the manufacturers; on giving allowance on these areas and depending on the company, product and the market those allowances are given. B) CHANNEL EVOLUTION IN THE AGRICULTURE INDUSTRY: Agriculture interventions in this country were largely driven by the Governments in the early years post independence and hence most of the distribution was done through different departments of the Government and through their outlets. Also as the market was regulated ,it was more of a seller driven and customers used to get the supply as per prescribed/pre-allotted quotas. The Green revolution and the target of achieving self 45

sufficiency in agriculture attracted investments from the private sector with Government encouragement through incentives and tax sops. Indian companies invested in the fertilizer industry and pesticide industry attracted lot of European and American MNCs with superior molecules and break through technologies for pest control and productivity improvement. Seed Industry has been seeing a lot of action in the last two decades and with an aggressive participation of private companies and public private partnership the availability in terms of quantity, quality and variety has increased. All this ensured regular, timely and uninterrupted supply at majority of the times and the customer getting wider options to choose from. Channel development and associated interventions started gaining a lot ofimportance and attention since goods had to be reached to the interior markets and limitations of infrastructure, rain fed cultivation and seasonal nature add to the inefficiencies. Investments in demand generation have been intensified and the Point of sale has been brought closer to the customer. Apart from the conventional channel of Distributor (Whole saler) and retailer there are many Government channels like Primary Agriculture Cooperative Societies(PACs), Farmer societies and clubs, State seed development corporations, Agriculture extension offices to name a few. The investments by the channel in stocks and infrastructure is relatively less compared to the other industries. Channel at this point of time makes advance investments in the fertilizer industry whereas in seed the investments would be in the range of 20-25%, the balance being mostly after the sales. Pesticide industry of late has been witnessing very little advance investments and the credit period would be anywhere in the range of 15-45Days. The infrastructure owned by the channel is very basic and servicing of the retailers/dealers to the interior markets is still a point of concern. The channel has been evolving and with corporates participating more aggressively in the interior markets, the service levels, advise and availability has been witnessing a change.

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

C)DESIGNING CHANNELS: The design of a channel is influenced by factors like technological advancements, changing demographics and competition. There are several dimensions of choosing a channel which include : Channel length : Number of intermediaries between producer and customer. Channel breadth : Number of outlets available to customer. Costs involved in selecting a particular channel. Channel Structure : i)Manufacturer--------------Customer ii)Manufacturer--------Retailer/Dealer--------Customer iii) Manufacturer---Distributor----Retailer/Dealer----Customer iv) Manufacturer---Superstockist----DistributorRetailer/DealerCustomer. The examples of some companies in the above channel structures are : i) Direct marketing companies like Modi Hoover/Eureka forbes ii) Automobile/Oil companies/Durable industry iii)FMCG/Ag Inputs/Durable Industry 47

iv)Ag Inputs/ FMCG. Channel Intensity: i) Intensive distribution: Producers of mass consumption and convenience products store their products in as many counters as possible and this is known as intensive distribution. ii) Exclusive distribution: Automobiles, Apparels and high end lifestyle items apart from select durables have exclusive distribution restricted to few outlets and it is the distributors responsibility to provide the after sales service. iii) Selective Distributors: Manufacturer supplies product to select outlets within certain geography like frozen products where the channel member is expected to invest in the cold chain and maintain the products as per the required specifications. Types of channel intermediaries at each level: i) Manufacturers representative: He sells the manufacturers products to whole sellers and retailers. He works on a commission and may sell products for more than one manufacturer. ii) Manufacturers sales force :These people are on the manufacturers role, get a fixed salary and commission and work exclusively for the manufacturer only. iii) Industrial Distributors : These are independent firms consisting of sales and support personnel. They take possession of the product they sell and have a partnership arrangement with the manufacturer. 3M, Norton and Pfizer follow this route. The advantages are: Manufacturing firms gain access to specialized knowledge about the markets which would have been costly and time consuming otherwise, the distributors name and goodwill helps in overcoming the customer resistance. The disadvantages are Stocking of the product and the associated sales might not happen as enthusiastically as it would have happened with a manufactures sales force. Margins of the industrial distributor would push the price of the product further. The distance between the manufacturer and consumer might increase.

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Exhibit 13 :Marketing flows in channels of Distribution: Hybrid Marketing channels: Companies have been looking for alternatives to the traditional systems of selling in view of the ever increasing competition, difficulties in sustaining profitability and changing consumer tastes. Companies traditionally depended on sales force or distributors for selling but now host of options like retail selling, direct mail, internet selling and telemarketing are available. The use of different channels is known as Hybrid marketing system. IBM was one of the first companies to use it. The costs of selling it through a direct sales forces versus direct mail or telemarketing is substantially higher.

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Exhibit 14: Developing strategies for designing Hybrid Marketing channels Agriculture industry follows an intensive distribution with largely 2/3 tier structure to reach its product to the farmers. It has also started experimenting with parallel concepts of marketing through the channel routes of direct mailing( Largely postcards are used), Coupon redemption( The coupons are given either at the time of product demonstration or preseason campaign) , Telecalling( There are toll free numbers which are publicized for a free service, alternatively there is a prospect calling and product detailing which happens through a call to the concerned) apart from using referrals and chain marketing.

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

Exhibit 15 :Effective Channel Management. Recruiting is a continuous process since some of the channel members may wish to leave and some of them may get terminated due to performance issues. The company may also expand into newer areas or wish to intensify their resource in the existing geography. The criteria used for selecting channel partners after the initial screening is : i) Sales Factors : knowledge, ability to sell and expertise in the market. ii) Product Factors: The channel members experience in the relevant category or product line. iii) Experience iv) Administrative: Pricing pattern and the infrastructure like salesperson, transport, godown etc. v) Risk factor : Financial standing in the market and investment potential vi) Reach : Retail/Dealer universe covered and rapport with the members of this chain. MOTIVATING CHANNEL MEMBERS Agriculture Industry specifics: i) Ensuring that sufficient demand is created so that the channel members turnovers are in line with his expectations and he earns decent monies out of the company business. 51

ii) iii)

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

E)EVALUATING CHANNEL MEMBERS:

MODIFYING CHANNEL ARRANGEMENTS This again is a continuous process and companies should have an open mind in looking at this issue constant changes in the customer preferences, emerging competition, expanding markets and other environmental factors influence market performance. The factors would influence the modification process are: i)Product lifecycle changes : Initially if the product is highly technical in nature it might require a specialist channel as customers have to be educated about the product and its working and maintenance in detail, later on when the product becomes generic it may be sold through many outlets and when it is on a decline stage the company may decide to add on newer channel members to increase the reach and attract new customers. In the Agriculture industry Bollgard( Biotechnology cotton) when it was initially launched , it was sold through very selective outlets in selected markets and the company( Mahyco-Monsanto) invested lots of amounts in training the channel as well as conducting awareness programmes for all the stakeholders. 2 years down 52

the line when the product gained acceptance and understood the channel as well as the markets were opened . ii)Customer-Driven refinement of existing channels: customer expectations and requirements keep changing continuously and the company might like to improvise on their channels. Typically in the consumer durables/telecom space there is a sprucing up which is done in the showrooms at regular intervals to give a fresh look and feel and to keep it contemporary . iii)Growth of multi-channel marketing systems: companies have a broad range of products which can be best appropriated using multi channel approach. This also keeps the cost of contact lower and delivers bang for the buck. For example Eureka Forbes may choose to sell its water and air purification systems through personal selling to industries and institutions whereas it may use telemarketing for individual customers. EVALUATING CHANNEL PERFORMANCE: i)Channel efficiency dimension judges the ability of intermediaries to undertake the necessary channel functions with a minimal cost. Productivity and efficiency deal with maximizing outputs for a given level of inputs while keeping the costs down. ii)Channel effectiveness measures channel performance and considers its ability to satisfy customer needs. It focuses on issues like lot size, delivery time and location convenience. iii)Channel equity refers to the distribution of opportunities available to all customers in accessing the marketing channels of a region. The Agriculture industry channel is/can be evaluated by the following parameters: i)Achievement w.r.t Target ii)Growth over previous year iii)Market share improvement iv)Coverage reach( Interior markets as well as new Point of sale additions) v)Investments in Market development or participation in the same vi)Collection efficiency( Days Outstanding) vii)Sales Return % Six sigma interventions will help us in assessing the channel profitability too. Price value capture(PVC) and Channel value capture( CVC) are some of the sophisticated and advance tools used for arriving at the profitability each channel member contributes too. They can be classified as Stars, Deadweights, Light weights and fit categories. There are several incentives given to the channel members subsequent to the evaluation and the Agriculture industry also runs Long term channel loyalty programmes. Models to diagnose channel profitability: Strategic profit model: Return on Net worth ( RONW) is the most informative and significant measure of profitability. Net profit/Net worth is formulae used to calculate this parameter. 53

F)MANAGING CHANNEL CONFLICTS:

Exhibit 17 : Channel conflict model. Conflicts arise because of a faulty channel design and can be broadlydivided into those arising from attitudinal differences and those arising from structural differences. Structural causes arise mainly due to : a)Goal divergence or incompatibility among channel members. b) Tendency towards autonomy. c) Greater control by channel members. d) Competition for scarce channel resources( Financial and tech support). Attitudinal sources arise from difference in perceptions, channel roles and channel communications. Unexpected changes in the competitive environment, consumers and markets, differences in economic and ideological objectives among channel members also lead to conflicts. Third reason can be because of a specific channel market strategy adopted by the companies.

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Exhibit 18 : Market channel strategies Common sources of conflicts: i)Goal incompatibility: Differences in policies and procedures of a channel member may be problematic and impede the progress of other channel members. Difficulty in measuring goal is the other reason for goal incompatibility. Thirdly because of the limitations of resource and infrastructure constraint each channel member may tamper with the goal and may try developing some thing on is own. ii) Differing perceptions of reality: When one channel member wrongly perceives the role of another channel member regarding marketing channel functions and flows, it hinders the proper communication flow among the channel members. iii) Clashes over Domain: This is a very common cause of complaint and we often see channel members crossing their domains and selling across the borders. The domain definition would include Product allotment and Territory allotment . Types of conflicts: There are conflicts which arise with different objections and clarifications asked before the contract is signed off. Also, there are conflicts which arise once the contract is signed. .There may be certain unforeseen situations which would arise. The channel level conflicts take place between the manufacturer and Channel member, between the channel members and when the manufacturer tries to appoint alternate channels.

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Conflict Management techniques: i) Negotiation: It can be over price, cash credit, discount, delivery, inventory level and other elements of the marketing mix. ii)Persuasive mechanism: In this technique each of the parties tries to persuade the other and bring him to his viewpoint. iii)Problem solving strategies: Alternative solutions are looked for in this technique with each member of the channel trying to understand the goals and objectives of others. iv)Personal relationships: This is very commonly used by all the members of a channel and is most of the times found effective. It at least temporarily tries to put the issue at rest. CHANNEL INFORMATION SYSTEMS: The channel information systems are a mechanism to preserve, collect, interpret and transmit useful and timely information to respective channel members. The impact of the channel information systems on the channel flow is : i) Transaction flow ii) Inventory flow iii) Distribution flow iv) Promotional fow v) Negotiation flow G. WHOLESELLING: A whole saler gets the good from the producer and delivers them to the other intermediaries down the channel. Those intermediaries may either directly give it to the consumer or may change one more hand before it goes to the Wholesalers They resell the merchandise to retailers, industrial, commercial, farm or professional business user or to semi-wholesalers. This trade is common in foods products, beverages, drugs, tobacco products, Household goods etc. In the case of the Agriculture Industry too the wholesalers model is prominent. He is the person who would do the investments and also absorb the shocks of the trade. Over the years with penetration into the interior markets The wholesaler has started loosing some of its importance with companies trying to appoint the big retailers in the interior markets as their direct POS. The northern states of Punjab and Haryana witness most of the wholesalers retailing the stocks to the consumers directly to the tune of 50% upwards whereas in U.P and Bihar the whole selling goes on at 2-3 levels before the product reaches the customer. A wholesaler brings down the manufacturers cost by stocking adequate inventories, shipping it forward in smaller lots to the next intermediary. They also help in sorting out the product into homogenous lots of smaller quantities at the same time providing the range and the variety which is required by the end consumer. The functions of the whole seller can be thus broadly classified into transactional, logistical and facilitating. 56

Whole sellers can be classified as under: i) Merchant Wholesaler ii) Full-service merchant wholesaler iii) Limited service merchant wholesaler iv) Cash and Carry wholesaler v) Agents and brokers vi) Manufacturers wholesaler The highly competitive market place, changing customer preferences, direct selling without intermediaries and e-commerce have made it necessary for whole sellers to design innovative strategies to survive in the business. The key issues in whole selling are : i) Target Market : Identification of the right retailers, customer base, distance from his location and service requirements. ii) Product offerings: Assortment of products to be offered has to be decided; Investments in inventory and warehouse should be justified. iii) Product pricing: Breakeven prices and markups have to be clearly decided and while margins can be compromised at certain times, one should also be careful not to resort to undercutting. iv) Product positioning : They should constantly keep talking about their product features and benefits and try to differentiate them from the competition. v) Promotion: Wholesalers are stepping their promotional activities in the recent years; previously they were directing their efforts through direct sales force. vi) Place: Availability of products in time and closer to the customer is a big challenge and whole sellers have to constantly keep working on this aspect. The concept of whole selling is ceasing to exist with most of the corporate channels trying to have their own direct company retail outlets. H) RETAILING: Retailing is the last step in the distribution process and if customer is a KING then retailers are KING MAKERS. The importance of retailing is as follows : i) Customers: Retailers add value to the distribution process by ensuring that the customers get the right product at the right time and the right place. A retailer helps in inventory management, providing product variety and disseminating information. Importance to other Channel members: They are an important source of information to manufacturers about consumer requirements, feedback on the quality and usage. They enjoy the advantage of being the closest to the customer and interacting with them at a very high frequency. Source of employment: It is a labour intensive activity and employs large number of people. 57

ii)

iii)

Retailers can be classified based on the type of ownership: i) Independently owned ii) Chain owned iii) Franchise-operated iv) Leased department format v) Consumer cooperatives Retailers can also be classified according to the products they handle: i) Food retailers ii) Convenience stores : Open for longer hours and sell soft drinks, Snack foods, car wash, lottery tickets, courier service, gasoline, ATM services and so in. They are attached to petrol stations. This trend which was more prevalent in the western countries is catching up fast in India. iii) Food based superstores iv) Limited-Restricted item stores v) Warehouse stores/Discount stores: These are huge stores where products would be available at a cheaper price compared to the normal retail. However these discounting is available on minimum purchase quantities. The variety of the goods available may also be restricted during times. vi) Speciality Stores vii) Department stores : They carry the maximum product range and each of the broad categories are arranged separately. viii) Full line discount stores ix) Variety stores: Examples are DOLLAR STORES which have come up at different locations in India. x) Thrift stores or Second hand stores xi) Mobile Retail or HAATS---This is more typical of India and some of the countries in Africa and Asia. Markets congregate at a place on a particular weekday and exchange of goods takes place between the intermediary and the consumer. NON STORE BASED RETAILING: Direct marketing, Catalogue retailing, Direct mail, Direct selling, Multilevel Marketing (AMWAY, TUPPERWARE) and Automatic vending machines are some of them. NON TRADITIONAL RETAILING: Internet, online shopping, Business to consumer, Video catalogs and videoKiosks. Key issues in Retailing are: i) Store location ii) Retail store image iii) Services rendered iv) Store personnel v) Layout and Ambience vi) Product assortment vii) Customer profile viii) Store Size 58

ix)

Promotional offers

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

Exhibit 19: Corporate channel update

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CHAPTER 6: SALES PROMOTION & MERCHANDISING Sales promotion is a tactical weapon used to increase sales. A . Types of Sales Promotion: ATL(Above the Line) is a direct media advertisement( Print, TV and Radio), Outdoor( Hoardings, Bill boards and any sponsorship activity at the national level) BTL( Below The Line) is all promotions which are done at the field level like consumer contact programmes, trade connect programme, participation in the local events, fairs and melas apart from creation of visibility at the outlets and in the market through use of banners, posters, dangler, literature and any other POP material. Advantages of sales promotion : i) Very flexible and adaptable in terms of tackling specific problems or supporting mainstream marketing communication at national level. ii) Capable of specific action through a specific focus and structure. iii) Relatively shot lead times to design and implement. iv) Easy to monitor through tangible results. v) Economical and cost saving possibly with economies of sale. vi) Can be adopted to large and small market major or minor products or brands. Key to successful use of sales promotion: i) Narrow in its focus of objectives. ii) Simple to comprehend and implement. iii) Simple to measure and monitor. If a promotion is successful then it should increase sales above the base level at the time of promotion. Sometimes the sales may come back to normal levels post withdrawal of the sales promotion as the customers may try the product and eventually then might not repeat the same. Sales promotions sometimes is also required to increase the pipeline and create some kind of pressure on the supply chain and block the channel investments. Different types of Sales Promotion: The different types of sales promotion are Introductory offers/incentives: i) ii) iii) iv) Product training programmes (Through lectures/film shows etc), Giveaways on products, Performance incentives( Trips to domestic locations or foreign locations), Personality promotions and sponsorship of events ( Sponsorship gives ample opportunity to display products and communication material), Points of sales material( POP as communicated earlier), Merchandising(Display of the POP material and product in the shelves or creatively displaying it in different formats. There are contests and gifts planned for the best display to the outlets as well as the salesman concerned. Sampling and product use demonstration. 61

v)

vi) vii) viii) ix) x)

Promotional aspects of packaging. Press meets and public relation exercise. Consumer competitions. Consumer coupons. Cash Discounts and lifting discounts.

B. Objectives of Sales promotion: The key objectives of sales promotion is: i) Product awarenessPromote awareness of the product. ii) Product distributionExpand the reach so that more users can try. iii) Product trial------------Increase trails. iv) Product usage--------Explore newer ways of usage of the product. v) Product display-------Create visibility( If it is seen it is sold). vi) Block competitors----Block the shelf space and prevent competition. C. SALES PROMOTIONAL PLAN: The annual promotional plan should have: i) ii) iii) iv) v) vi) Timings of the promotions for each product taking into account the seasonal factors. Objectives of each promotion. Special promotional media support. Special packaging requirement and production lead times. Manufacturing, shipping and other distribution lead times. Promotional aides and other materials needed to support the activity.

Each promotion programme should have a fully detailed written plan incorporating the following: i) ii) iii) iv) v) vi) Budgeted expenditure in total. Objectives of the promotion. Lead time for preparation of all the support material required. All rules applicable to any competition. Legality and any approvals if required for promotions. Criteria to measure the promotion success.

D. EVALUATING AND MONITORING PROMOTION: Evaluation of a sales promotion can be done on the following parameters: i) ii) Sales volumes through specific accounts( Pre and Post promotions). Increase in product user base. 62

iii) iv) v) vi) vii)

Increase in display facings in targeted outlets. Increase in product availability throughout chain(Distributors/Retailers). Increase in product distribution (Pre and Post). New trade channels being opened up. Response to consumer audits increasing product trials.

the

supply

E. SALES PROMOTION IN THE AGRICULTURE INDUSTRY: Agriculture industry has traveled a long distance as far as sales promotion is concerned and some of the sales promotion techniques can be compared to be at par with the NonAgriculture industry both in terms of concept, creativity as well as execution. The Government chips in whenever it feels that the product deliveries are being over promised. While the core of the sales promotion remains in the product demonstration at the field level Creative approaches of communication have been employed to convey the product features and benefits. Typically the fields are decorated and given a festive look, farmers are taken around the field explaining about each and every aspect of the crop and the associated impact on the yield either due to the application of a fertilizer in time or use of pesticide. The commitment from the farmers is taken and to translate the commitment to confirmed sale thereare coupons which are given wherein they get additional discount if they exchange the same during the buying season. The preseason campaign are the ones which are done during the months of May and June. They aremore of reminder campaigns and companies use Audio visual vans, Nukkad nataks( Street plays) and even local folklore and artists to conveythe message in a more creative, simple and interesting way. The communication through print, TV and outdoor medium is also getting exploited of late in a big way as most of the villages have access to the TV and Print. Government of India through its Agriculture extension machinery also does parallel campaigns on relevant crops and their Agriculture management practices through their staff and also by way of seminars and Agriculture fairs. There has been a lot of Public private partnership in promoting high quality Agriculture inputs and the Indain farmer has responded very positively in adopting the same. F.MERCHANDISING: It can be defined as the physical placement of the product in a store in a location that is easily accessible by the consumers and the display is enhanced by the use of Point of sale material. This may gain customer attention and he may make the right choice after feeling, seeing and reading about the product . Basic objective is to gain attention of the customer and influence his purchase decision in the last minute. In the earlier years it was restricted to cosmetics, perfumes, confectionary, ice-cream, soft drinks etc. but now it is getting extended to industrial, durable and even real estate. 63

Advantages of Merchandising: i) Helps generate increased revenue and profits for no additional investment. ii) Key sales force activity that can have an immediate impact on off take through retail channels. iii) All levels of distribution channels work towards a common goal of maximizing the sales opportunity with a lot of team work. iv) Effective space management and creative merchandising combine to optimizes the use of key resources of space and investment in stock. v) Improved stock management resulting from a space management programme reducing stock out situation and resultant lost sales. vi) Enhanced image of trade outlets in the eyes of the customers. Benefits of merchandising for different levels of supply chain: Manufacturer: Effective use of promotion funds, Develop total product category, Increase Turnover, Improve quality of display, build market share , Improve the pull factor and induce retail push, establish as a product category manager and as a concerned supplier, gain retailers respect from expertise and genuine contribution to their growth and endorse brand images at the point of sale. Distributor : Generating data from retail outlets, Improve ROI, Product pull and improved forecasting, induce retail push , improve the quality and effectiveness of the sales force, improve turnover on company portfolio, Improve retailer relationships and earn retailer respect for their genuine contribution to growth.. Retailer: Reduce stock out situations, influencing customer purchase Decisions, store image, improve turnovers and return on investments. Consumers: Time saving , stock available to purchase, better quality of choice, improve loyalty and enhanced display allows more opportunit to make purchase decisions, easier to shop from a logical layout and receive correct brand message and knowledge. MERCHANDISING TOOLS : i)Leaflets ii)Stickers iii)Posters iv)Showcard and cardboard cutouts v)Dump bins vi)Injunction mounded characters vii)Holograms viii)Standies ix)Banners x)Desk calendars xi)Key chains, caps xii)Display shelves( In the shop) xiii)Interactive POS system 64

xiv)LCD Video terminals xv)Window displays MEASURING MERCHANDISING EFFECTIVENESS: i)Record of sales of a particular product if more shelf space is allowed. ii)Sales response to new advertising campaign and price change. iii)Stock contract iv)Daily, weekly and monthly fluctuations.

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CHAPTER 7 :

BUSINESS ETHICS

Ethics is defined as a system or code of morals of a particular person, group or profession. Business ethics is a collection of principles and rules of conduct based on beliefs about what is right and wrong business behavior. It has a variety of aspects such as expectations of society, fair competition, social responsibilities, consumer , autonomy and corporate behavior in the home country as well as abroad. Accounting ethics is the code that guides the professional conduct of accountants. The four levels of ethical questions in day to day business are : 1.Societal level 2.Stakeholders : Honest, transparent and fair dealing with employees, channel members, vendors and customers. As far as customers are concerned , one should advertise vigorously about products and attributes, there should be no over promise and the claims about the superiority of the product should be substantiated by facts and logic. 3.Internal Policy : This has to do with contracts and terms and conditions of employment of employees with employer. 4.Individual: Treatment of individuals as Human beings first and then the roles they play in the company and their hierarchy. Every company has some or the other form of ethics or code of conduct written which is articulated and reinforced through a series of communication in oral and written form apart from contests and visibility through lot of communication material. Also companies proactively share incidents of ethical violation as well as high ethical behavior with all its employees. Ethical concerns of Sales Force: The broad areas which the sales force has to deal with are : 1. Product quality and service: Deceptive product advertising, misleading product warranties, odd size packages that make price comparisons difficult, oversized packages for small products and surrogate indicators for product features and quality which might not be true. 2. Price : Inflating prices and offering discounts subsequently, giving a better deal but cheating on quality and downward price revisions not getting appropriated in time ( This happens when there is a stock hoarding at either higher or lower prices.) 3. Distribution : Control over the channel in applying all the policies uniformly and the frontline not getting hand in glove with distribution in doling out undue favors to few channel members. Also the distributors not passing all the benefits to the retailers and customers. 67

4. Promotion : Deceptive advertising, stereotyped portrayals of women or people from a group. NOTES _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _________________________________________ 68

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