Page 55 - DMGT205_SALES_MANAGEMENT

Unit 4: Sales Strategy Formulation

coordination and efficiency in operation. The selection of these exclusive agents is done with Notes
great care.

Vertical Integration

It is the process of requiring management membership rights at various levels of distribution
channel. It is a costly affair for absolute channel control. Business balance has to be maintained
between desire for market control, coordination and distribution costs and specialisation. A
balance should be maintained between channel control and the cost incurred in it.

Task Discuss the steps involved in designing sales Strategy.

4.7 Transaction Cost Analysis

Transaction cost is the cost of transacting business. Here the rough channels are compared with
costs through firms own distribution systems'. It includes cost of prospecting, bargaining and
maintaining the distribution system.
Services expected from middlemen are definable as we move towards exclusive distribution.
1. Delineation of territory (exclusive domains) of the middleman and freedom in letting
him cultivate the territory.
2. Inventory holding (to prevent stock-out): Agreements can be made for holding inventory.
Price guarantee is given in case of fluctuating prices.

3. Installation and after sales service: After sales service is important and for after sales
service training is also required.
4. Price maintenance in selling to ultimate consumer: Dealers must maintain price.

5. Promotional services: Sales displays, local advertising, catalogues and sales promotion.
This can be provided more effectively by exclusive distribution.
6. Exclusive dealing (not carrying competitive brands): In case of competitive products dealers
should not carry competitive brands.

4.8 Determining the Size of the Sales Force

There are three methods to determine the size of the sales force:
1. Incremental Method

2. Sales Potential Method
3. Work Load Method.

4.8.1 Incremental Method

It says that we can increase the size of the sales force till the incremental revenue exceeds
incremental costs.
Assumptions: Profits will increase when additional sales person are employed.

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