A Guide to Sales Management

Massimo Parravicini

• Publisher: Business Expert Press
• Year: 2015
• ISBN:
  9781631572593
• Topic: Business
• Subtopic: Sales
• Index: Business

In many FMCG companies, the challenges for the sales function are to develop effective sales strategies and to deliver excellent sales operations in order to support the achievement of business targets. The purpose of this book is to provide a practical guide to sales management through the analysis of its key components: route to market, sales strategy, key performance indicators, organizational models, sales force management, customer business planning, order to cash, and sales and operations planning. For each of these topics, the content of this book is a balance of theory, practical tips, and useful tools, keeping in mind not only the "what, " but also the "how" of the implementation. The reader will learn how to map sales channels, assess a customer base, design a sales strategy, build a sales scorecard, and organize a sales team's frontline and back ofi ce. The book also covers how to structure trade category plans, customer business plans, and customer negotiation plans and how to optimize the sales team's contribution to the company's key fundamental processes. It concludes with an overview of the future challenges of sales management.

CHAPTER 1

Trade Structure and Route to Market

Retail outlets and sales channels

The retail outlets of every market can be grouped into sales channels that are supplied and serviced by a multiplicity of trade accounts: retailers, distributors, and wholesalers. A sales channel is a cluster of retail outlets with similar selling proposition, physical characteristics, and target shoppers. The first challenge for a newly appointed sales leader is to choose the combination of sales channels and trade accounts where she will sell her company’s brands—in other words, to select the path to reach out to her target shoppers, her route to market (RTM).

The identification and selection of sales channels is the first step to take in the definition of a RTM. We can describe a sales channel in detail focusing on its:

• Outlet characteristics. Stores can have a small or large sales surface, can have an urban or suburban location, can exclusively or predominantly offer either clerk or self-service, etc.

• Target shopper. Shoppers can be depicted in terms of their sociodemographic profiles, but also on the basis of the primary shopping mission that drives their choice of a sales channel.

• Outlet offering. The product and service assortment offered by the stores is a functional and emotional solution to the target shopper’s needs.

• Evidence and differentiators. The channel provides a reason to believe that it can meet the target shopper’s needs better than other channels and has something special that makes it different in its shopper’s eyes.

• Specific requirements. The channel has strong preferences in terms of product sizes, point of purchase (POP) materials, secondary packaging, delivery methods (e.g., direct store delivery), etc.

• Trends. The channel is winning business from some channels and losing business to others. Its turnover evolution might not be the same in every product category as the drivers of change do not have the same impact on all the offering.

Any channel can be considered a specific answer to one of these questions: (1) “Where is the consumer buying for immediate consumption?” and (2) “Where is the shopper purchasing for delayed consumption?” The answers to these questions help us to define for every market macrosectors and sectors into which we can group channels and to identify shopper-based channel definitions.

The “In Home” and “Out of Home” macrosectors, sectors, and channels

If we want to identify the channel architecture of a target market, it really helps to start from the purchase and consumption behavior of consumers. Any channel architecture will have at its first hierarchical level the macrosectors of “out of home” consumption and “in home” use. Sometimes these macrosectors are also referred to as “on trade” and “off trade,” respectively—a terminology that is typical of the food and food service business.

In out of home (“on trade”), the key sectors are impulse, on premise, and vending machines. The impulse sector includes three channels: (a) confectionery shops, tobacconists, and newsagents (CTN), and kiosks; (b) convenience stores; and (c) petrol stations’ forecourts stores. The on-premise sector includes five channels: (a) café, bars, public houses, and licensed trade outlets that focus either on coffee-based or alcoholic beverages, but also offer some food for immediate consumption; (b) hotels; (c) restaurants; (d) catering; and (e) all the leisure out of home outlets, such as cinemas, theaters, and sport venues, where food and beverage offering is complementary. Most of the on-trade stores are supplied by concessionaires, specialist distributors, and wholesalers.

In “in home” (“off trade”), the key sectors are modern grocery distribution (MGD), traditional grocery distribution, and specialist retail outlets (mostly nongrocery).

MGD includes all self-service channels, ranging from hypermarkets and superstores to supermarkets, superettes, and mini- and micromarkets. This classification is normally linked to the store sales surface and the merchandise on sale. In terms of sales surface, a simple store classification broadly based on AC Nielsen’s and Symphony IRI’s types is the following:

• Hypermarkets: sales area from 2.500 sqm

• Superstores: sales area from 1500 to 2499 sqm

• Supermarkets: sales area from 400 to 1499 sqm

• Superette: sales area from 200 to 399 sqm

• Mini- and micromarkets: sales area from 100 to 199 sqm.

The nongrocery offering is normally very limited in superstores and smaller stores, while hypermarkets also sell houseware, textiles, consumer electronics, domestic appliances, and car accessories, although with more restricted assortments than in the past. Superstores respond in the best way to the family need of a weekly one stop bulk shopping, offering a good balance of assortment, price competitiveness, and shopping time requirement, especially compared to the largest hypermarkets. Discounts used to be identified as self-service stores above 400 sqm not ranging branded goods and fresh produce, but today, it is better to distinguish between soft and hard discounts on the basis of the percentage of branded items that they list, whether above or below 20 and 25 percent of the assortment as a rule of thumb. Superettes and mini- and micromarkets are the modern grocery component of the in home convenience sector. The “brick and mortar” channels of MGD are complemented by the online direct-to-consumer channel, which, as far as grocery is concerned, is still a challenge for most retailers.

Traditional grocery distribution typically includes small independent self-service stores (supermarkets below 800 sqm, superettes, and mini- and micromarkets), clerk service stores from 25 to 100 sqm, including butchers, bakers and confectioners, and open market stalls stores from 10 to 25 sqm. Independent superettes, independent mini- and micromarkets, and clerk service outlets are the traditional grocery component of the in home convenience sector.

Specialist retail outlets include some food self-service stores (e.g., frozen food, and wine and spirits), drugstores, and nonfood outlets such as pharmacies and perfumeries, pet care specialists, clothing and footwear shops, consumer electronics, entertainment (books, music, videos, and games), do it yourself (DIY), and furniture stores. In this sector, the online direct-to-consumer channel is increasingly important especially in nonfood markets: Amazon is already ranked no. 15 among the global powers of retailing (Deloitte 2015) and is expected to enter the top 10 soon.

You will have noticed that the convenience or “C sector” is present across the two macrosectors of on trade and off trade. Convenience typically caters for the out of home consumption of soft drinks, snacks, sandwiches, ice creams, and confectionery, at the same time carrying the assortment of a small supermarket or superette for in home consumption. The C sector is the new battleground of retail, especially in Western Europe. While in some countries like Germany the top end of the market is saturated and there is an excess of large suburban outlets fighting to win the weekly bulk shopping trips, there seems to be space in every country for retailers to develop winning formulas to maximize their share of the daily top-up shopping trips.

Cash’n’carries are normally considered indirect trade accounts, rather than a sales channel, because they serve traders, independent stores, hotels, restaurants, catering, etc. However, it should not be forgotten that a good slice of their business, especially in the western world, is represented by the so-called complementary business users (CBUs), the professionals that are buying for self-consumption as in home end consumers. Metro Makro is an example of a cash’n’carry chain that carries a specific assortment and runs ad hoc promotions targeting CBUs. For this part of their business, cash’n’carries can be considered a MGD channel.

Figure 1.1 Channel architecture: global—all markets

Courtesy of David B. Easton

The channel architecture based on the in home and out of home macrosectors is shown in Figure 1.1 and can be easily applied not only to all the food and beverage markets, but also to many health and beauty markets, as shown in Figure 1.2. This channel architecture is roughly the same in every country, both in mature and in developing and emerging markets. There might be slight differences or local variations at the lower levels that are not shown in Figure 1.1, but typically the first three levels—macrosector, sector, and channel are the same everywhere.

Some people might object that, given the digital revolution that is happening at retail, it does not make sense anymore to make a distinction between online and offline (brick and mortar) channels. I believe that it is too soon to take this stance. There are some markets such as consumer electronics, clothing and footwear that will become more and more hybrid sooner, while in other markets the distinction will make sense for a much longer period of time. The first decade of this century saw the coming of virtual online stores as opposed to brick and mortar stores, the current decade is a time of channels’ instability. Shopper needs and habits are changing more rapidly than ever, they are fluid and hybrid. Shoppers can research online and purchase offline – thus using virtual stores and consumers’ blogs as an information source – or research offline and purchase online – thus using the physical store as a showroom. The growing diffusion of mobile devices such as smartphones and tablets works as an accelerator of these behaviors. If the shoppers are increasingly hybrid, retailers respond with hybrid solutions and attempt to combine the best of the two worlds in the development of new retail formats that provide omni-channel solutions through the deployment of new digital technologies for customer identification, signage, visual merchandising, self scanning, promotions, new product introduction, product usage suggestions, payments, etc. As retailers aim to enhance their shoppers’ multi-channel retail experience, everything is digitized, including mirrors and changing rooms. Some retailers are starting to use their physical stores as e-shops for the items – variants, colors, sizes, etc. – that they do not intended to make available directly in store in order to reduce inventory and improve profitability. On the other hand there are stores that can enjoy a new life as pick up points for online purchases: convenience stores, daytime bars, post offices, etc.

Figure 1.2 Channel architecture: health and beauty markets in Europe

The key point is that if sales channels are not stable, it becomes harder for a sales director to set direction for the channel mix and to identify her priorities for resource allocation.

Macrosectors, sectors, and channels in the nonfood markets

There are industries that, unlike food and beverage, do not have at all or have a very little out of home macrosector. This is true for fast moving consumer goods markets like household care, health and beauty, and pet care, and it is even more relevant for macrocategories such as clothing, accessories and footwear, home improvement, furniture and DIY, electrical and office, and a part of leisure and entertainment—excluding video, music, and e-books downloads, and services in streaming that can be considered on trade. For some of these categories, the lack of an out of home business is compensated for not only by the fast growing importance of online stores, but also by brick and mortar factory outlets, that are of little or no relevance to grocery, but are essential for the business and therefore the outlet mapping of clothing, accessories, and footwear.

There are also industries like tobacco where the on-trade and off-trade macrosectors tend to coincide, with duty free shops being basically the only off-trade channel where people are compelled to buy in bulks. Nevertheless, the tool that I recommend to identify the channel architecture of the markets is always applicable and can be easily adapted. As an example, in Figure 1.3, I map the consumer electronics (white and brown goods) market in Europe, which is a completely off-trade business. In most European countries, this consumer electronics market has four in home sectors: (a) MGD, (b) multispecialist stores, (c) specialist and operator stores, and (d) online stores. In MGD, the channels are hypermarkets, superstores, and cash’n’carries, when they sell to CBUs. MGD was a very important and price competitive sector before the rise of large multispecialist stores, which can be classified into two subgroups: (1) multiples like the Metro Group (Media Markt), Darty, and Dixons Retail, usually with large stores; (2) retailers associated to national or international buying groups like Euronics, Expert, and E Square. Specialist stores tend to focus only on one category such as household appliances, audio, or photo and video, while operator stores carry exclusively mobile phones, tablets, and accessories. Online stores can be classified as manufacturers’ or retailers’ e-commerce websites.

Figure 1.3 Channel architecture: con...

Table of contents

• Cover
• Half Title Page
• Title Page
• Copyright Page
• Abstract
• Contents
• List of Figures
• Figure Credits
• Foreword
• Preface
• Acknowledgments
• Chapter 1 Trade Structure and Route to Market
• Chapter 2 The Sales Strategy
• Chapter 3 The Performance Indicators for Sales Management
• Chapter 4 Organizational Roles and Responsibilities
• Chapter 5 Organization Models, Recruitment, and Incentives
• Chapter 6 The Business Planning Process
• Chapter 7 The Order to Cash Process
• Chapter 8 The Sales and Operations Planning Process
• Chapter 9 The Challenges of Sales Management
• References
• Index