Sales Policy
Sales Policy
Sales Policy
MANAGEMENT
Objectives
The purpose of this course is to familiarise students with the principles, strategies and skills of selling and
managing the selling function. This course also provides an understanding of the tools and techniques necessary
to effectively manage the sales function, the sales organization and the sales individual.
INTRODUCTION
This course focuses on the activities of first line field sales managers. Modern selling is a complex and
disciplined mix of; professional selling and negotiation skills, people and Management skills (including
selection, motivation, Communicating and training). Companies are facing increasing competition, with threats
to many traditional markets and customer bases, as supply and purchase points in many market segments
become more concentrated. To tackle the threats and capitalize on opportunities, the modern sales manager
needs a far broader range of selling and managerial skills.
Managing sales and salespeople is an important element of every organization. It is the responsibility of the
sales manager to ensure that the objectives of the organization are met through proper planning, organization,
direction and control of the sales efforts of the organization. The selling activities are carried out by the sales
people of an organization and some organizations spend huge sums of money training their sales people in the
arts of selling. The reason for this attention to the sales people is that the sales people are the most important
link with the customers. Marketing efforts may fail if the sales people are ineffective.
Sales management is just one facet of a company's overall marketing mix, which encompasses strategies related
to the "four Ps": products, pricing, promotion, and place (distribution).
To facilitate our understanding, this course will be divided into the following parts:
- PART I: PERSONAL SELLING, ITS ROLE AND SIGNIFICANCE
- PART II: SALES MANAGEMENT
Page 1
PART I: PERSONAL SELLING
After going through this part, you should be able to:
- Define personal selling and salesmanship.
- Explain personal selling objectives.
- Bring out the qualities of a good sales person
- Explain the conditions that favour personal selling
- Bring out the characteristics of personal selling
- Discuss the importance and relevance of personal selling.
- Explain the diversity of selling situation (types of sales persons).
- Examine the theories of personal selling
- Elaborate the personal selling process and much more.
INTRODUCTION
“Everybody lives by selling something” (Robert Louis S). Personal selling is one of the oldest professions in the
world and it is as old as commerce itself. Personal selling is a very complex process, involving the use of a
whole set of principles, techniques and substantial personal skills, and coverers a wide range of different types
of selling task. Personal selling is a part of the communication mix. It is concerned with persuasive
communication. A sales person in personal selling tries to persuade the prospect so that he can take a decision to
acquire the product/service which the sales person is talking about. It is a major factor in creating sales volume.
It brings human element into marketing transactions and increases the customer's confidence in the supplier.
I.1 Definition of personal selling
Personal selling involves an alive, immediate and interactive relationship building between two or more
persons. Each party is able to observe the other's needs and characteristics at close hand and make immediate
adjustment. Some of the definitions of personal selling are as follows:
- Personal selling is a two way flow of communication between a buyer and a seller, often in a face-to-face
encounter, designed to influence a person’s or group’s purchase decision.
- It is the oral presentation of a company's products, or services to one or more prospective purchasers for the
purpose of making a sale. It is the art of successfully persuading prospects or customers to buy products or
services from which they can derive suitable benefit thereby increasing their total satisfaction.
- It is an interpersonal promotional process involving a seller’s person-to-person presentation to a prospective
buyer.
People who do the selling go by many names: sale force, sales people, sales representatives, agents, district
managers, account executives, sales consultants, and sales engineers. The sales force refers to the personnel or
Page 2
sales people changed to sell the products of a firm and to stimulate it demand to the acquired or prospective
customers.
Two categories of sales representatives can be identified:
-Exclusive sales representatives.
- Sales agents
Exclusive sales agents represent only a single firm and work exclusively for the firm.
A sale agent is not an employee to any firm but represents or sells the products of many organisations
NOTE: The terms personal selling and salesmanship have different meanings. Personal selling is a broader
concept than salesmanship. Salesmanship is a seller initiated effort that provides prospective buyers with
information and motivates them to make favourable decisions concerning the seller's product or services
Salesmanship is one of the aspects of personal selling and it is one of the skills used in personal selling.
Salesmanship is the art of successfully persuading prospects or customers to buy products or services from
which they can derive suitable benefits, thereby increasing their total satisfaction. Salesmanship is seller
initiated effort that provides prospective buyers with information, and motivates them to make decisions
concerning the seller’s products or services.
Personal selling on the other hand is a two-way communication involving individual and social behaviour. It
aims at bringing the right product to the right customer. It is used for creating product awareness, stimulating
interest, developing brand preference, negotiating price, etc.
I.2 Objectives of personal selling
These objectives can be qualitative or quantitative in nature.
Qualitative objectives
The qualitative personal selling objectives are long term and concern the contribution management expects
personal selling to make in achieving long-term company objectives.
1. To do the entire selling job (as when there are no other elements in the promotional mix).
2. To “service” existing accounts (that is, to maintain contacts with present customers, take orders, and so
forth).
3. To search out and obtain new customers.
4. To secure and maintain customers’ cooperation in stocking and promoting the product line.
5. To keep customers informed on changes in the product line and other aspects of marketing strategy.
6. To assist customers in selling the product line (as through “missionary selling”).
7. To provide technical advice and assistance to customers (as with complicated products and where products
are especially designed to fit buyers’ specializations).
8. To assist (or handle) the training of middlemen’s sales personnel.
Page 3
9. To provide advice and assistance to middlemen on management problems.
10. To collect and report market information of interest and use to company management.
Quantitative objectives
The quantitative objectives assigned to personal selling are short term and are adjusted from one promotional
period to another. Quantitative personal selling objectives include the following:
1. To capture and retain a certain market share.
2. To obtain sales volume in ways that contributes to profitability (for example, by selling the “optimum” mix
of company products).
3. To obtain some number of new accounts of given types.
4. To keep personal selling expenses within set limits.
5. To secure targeted percentages of certain accounts’ business.
1.3 Situations Conducive to Personal Selling
Product Situation
1. When a product is of high unit value, e.g., refrigerator, TV, etc.
2. When a product is in the introductory stage of its PLC.
3. When a product has to match specific consumer needs.
4. When product requires demonstration, e.g., industrial products.
5. When product requires after sales service.
6. When product has no brand loyalty or poor brand loyalty.
Marketing Situation
1. When a company is selling to a small number of buyers who are buying a product of high value.
2. When a company sells in small local markets or government or institutional markets.
3. When desired middlemen or agents are not available.
4. When an indirect channel of distribution is used for selling to merchant middleman.
Company Situation
Personal selling is more effective and economical when:
1. The company is not in a position to identify and make use of any communication media.
2. A company does not have a large advertising budget.
Consumer Behaviour Situation
Personal selling is more effective when:
1. Goods purchased are of high value and less frequently purchased.
2. Consumer needs instant answers to his questions.
3. Persuasion and follow up is required in the case of competition.
Page 4
1.4 Characteristics of personal selling
The characteristics of modern selling are as follows:
1. Customer retention and deletion: It is vital to devote considerable resources to retaining existing high
volume, high potential and highly profitable customers while minimizing efforts on those customers that cost
the organisation a considerable amount of money.
2. Database and knowledge management: The modern salesforce needs to be trained in the use and creation
of customer databases, and how to use the internet to aid the sales task (e.g. finding customer and competitor
information).
3. Customer relationship management: Customer relationship management requires that the salesforce
focuses on the long term and not simply on closing the next sale. The emphasis should be on creating win-win
situations with customers so that both parties to the interaction gain and want to continue the relationship.
4. Marketing the product: The modern salesperson is involved in a much broader range of activities than
simply planning and making a sales presentation. Indeed, face-to-face presentations can now sometimes be
replaced by information presented on web pages and by email attachments that give the customer up-to-date
information on many topics more quickly and comprehensively, and in a more time-convenient manner than
many face-to-face interactions. The role of the salesperson is expanding to participation in marketing activities
such as product development, market development, segmentation etc.
5. Problem solving and system selling: Much of modern selling, particularly in business to business situations,
is based upon the salesperson acting as a consultant working with the customer to identify problems, determine
needs and propose and implement effective solutions. Modern selling often involves multiple calls, the use of a
team-selling approach and considerable analytical skills.
6. Satisfying needs and adding value: The modern salesperson must have the ability to identify and satisfy
customer needs. Some customers do not recognise they have a need. It is the salesperson’s job in such situations
to stimulate need recognition. The salesperson has to make customers aware of the problem in order to convince
them that they have a need to modernize the production process. In so doing, the salesperson will have added
value to the customer’s business by reducing costs and created a win–win situation for their company and the
customer.
Page 5
• Salespeople provide expertise and serve as information resources
• Salespeople serve as advocates for the customer when dealing with the selling organization
1.6 The Four Sales Channels
• Over-the-counter selling: personal selling conducted in retail and some wholesale locations in which
customers come to the seller’ place of business
• Field selling: sales presentations made at prospective customers’ homes or businesses on a face-to-face basis
• Telemarketing: promotional presentation involving the use of the telephone on an outbound basis by
salespeople or on an inbound basis by customers who initiate calls to obtain information and place orders
• Inside selling: performing the functions of field selling but avoiding travel-related expenses by relying on
phone, mail, and electronic commerce to provide sales and product service for customers on a continuing basis.
Page 7
1) Order taking (suggestive selling)
An order taker is a salesperson who is primarily responsible for writing up orders, checking invoices, and
assuring prompt processing of orders. These people, do very little creative selling. They write up orders, check
invoices for accuracy, and assure timely order processing.
The order taker may engage in suggestive selling by suggesting that the customer purchase an additional item.
However, the typical order taker’s primary task is to keep selling existing products to well-established accounts.
In general, order-taking salespeople are divided into the; inside sales takers, outside or field sales takers, and
delivery sales people.
-Inside order takers receive incoming mails and telephone orders. They do not seek out the customer. The
inside salesperson may provide some advice on product quality or installation.
-Outside or field salespeople travel to customers either on request or at regular intervals to collect orders or push
special offers.
Order taking is a routine completion of sales made regularly to target customers. It requires continuous follow
up to ensure that customers are satisfied.
- Delivery sales people are primarily concerned with delivering the product e.g. soft drink, bread, milk,
newspaper etc. There is little attempt to persuade the customer to make more purchases and changes in order
size are customer-driven. Winning and losing orders will be dependent on reliability of delivery and the
personality of the salesperson.
2) Order getting (creative selling)
It is an adaptive selling process that tailors sales efforts and product offerings to specific customer needs; also
known as creative selling. An order getter is primarily responsible for developing business for the firm. Order
getters seek out customers and creatively make sales.
Order getters must seek out customers, analyse their problems, discover how the products for sale might solve
those problems, and then bring these solutions to the customers’ attention.
Pioneer: An order getter who concentrates on selling to new prospects or on selling new products.
Account manager: An order getter salesperson who concentrates on maintaining an ongoing relationship with
existing customers.
3) Sales Support personnel
They help the order oriented sales people but do not try to get orders themselves. They aid in selling but are
more involved in locating prospects, educating customers, building goodwill for the firm and providing follow
up activities. The following types of sales support persons can be identified.
Page 8
- Missionary sales people: A salesperson who visits prospective customers, distributes information to them,
and handles questions and complaints but does not routinely take orders. Missionaries really serve as customer
relations representatives.
- Technical sales people: Provide assistance to order oriented people by assisting customers in technical areas
such as explaining how a product is used, how it is made, how to install it.
- Customer service representatives: Work with customers to resolve problems that may arise with a purchase.
Changing Role of a Salesman
To facilitate the various roles of sales persons, they can be categorized as:
- Consultative sales
- Technical sales
- Commercial sales
- Direct sales.
Consultative Sales
This occurs at higher levels of organisation e.g. computer consultancy, high capital is involved. The salesman
adopts a low key, low pressure approach. He has strong knowledge of the product. Patience to discuss the
product with several people in the organisation is required along with creative effort in slack times without
appearing to exert pressure on the prospect.
Technical Sales
The technical sale requires a good knowledge of the product by the sales person. It requires the approval of
technical people in the organisation. In the end it is one or two people with technical knowledge in the
organisation who influence the decision. The salespersons have to identify and satisfy them with product
characteristics, application, installation processes, etc. The sales people are trained to use traditional approach
and know the utility and features of the product.
Commercial Sales
It includes non-technical sales to business industry, government and non-profit organisations e.g. office
equipment, wholesale goods, building products. Commercial sales person makes the sales on first or second
call.
Direct Sales
Sales of product to ultimate consumer, e.g. restaurants, door to door sales, insurance, encyclopedia, magazines.
There is emotional appeal in such type of selling. The sales persons must have persuasive ability. They are
trained to close the sale on first visit. If given time they may buy from competitors or cool off and postpone
buying.
Page 9
1.11 The stages of making a sale
Personal selling takes the prospective customer through the following stages; generally known as AIDA. That
is, attention, interest, desire, and action.
a) Attention: for effective communication to take place, the sales person must be able to gain the prospective
customer’s attention. Nonverbal expressions such as smiling are more likely to gain the prospective customer’s
attention more than verbal expressions.
b) Interest: the next thing the seller has to do is to arouse the interest of the potential buyer. This can be done
by demonstrating to the potential buyer that the product can satisfy a need.
c) Desire: desire is aroused when the benefits of the product or service on offer are understood and accepted by
the potential buyer as a solution to a particular need.
d) Action: this is when the prospect makes the purchase decision. That is, the sale is closed.
Page 10
failure of sales. According to Henry Tosi, behavioural factors of sales people are most influencing factors in
buyer-seller dyad relationship.
Another factor influencing buyer-seller dyadic interactions is the buyer’s initial conditioning with respect to
selling. Sales people have been criticized for generations. People are taught from childhood to beware of the
tricky salesperson.
There are indications that salespeople, not as stereotyped, but as they actually perform, leave much to be desired
in the impact they make on customers. Studies of the attitudes of buyers and purchasing agents reveal that many
are critical of the salesperson’s lack of product knowledge, failure to follow up, general unreliability, and
blatant use of flattery, bad manners, commercial dishonesty, and so forth.
The sales process is influenced both by the sales person and the buyer by their personal characteristics and role
requirements. The personal characteristics include personality, values, attitudes and past experience. Formal
authority and organisational autonomy interact with personal characteristics to shape needs and expectations.
Based on needs and expectations, seller and buyer develop a strategy aimed at negotiating a favourable
exchange. The strategy may be of persuasion, integration, communication of facts or offers, friendship and
other elements. If strategies are compatible, exchange takes place, otherwise sales person and buyer stop
interacting.
2) Pre-approach
This stage involves preparing to contact the qualified leads. It involves obtaining further information about the
qualified prospect and deciding on the best method of approach. Pre-approach is planning the sales presentation
to meet the customer’s wants or to solve the customer’s problem. It involves gathering research about the
prospect. The sales person must determine where the specific target market consumer is in the purchasing
process. The sales person should look for information on what the prospect needs, who is involved in buying,
the buyer characteristics and buying style. The sales person should also decide on how to approach the prospect.
Sales persons should carefully plan their sales call. Although numerous reasons exist for planning the sales call,
four of the most frequently mentioned are:
• Helps build a salesperson confidence
• Develop an atmosphere of goodwill and trust with the buyer
Page 12
• Help create an image of professionalism
• Increase sales because people are prepared.
3) Approach
At this stage, the sales person meets the prospective buyer for the first time. The objectives of this first meeting
are to gain the prospect’s attention, simulate interest and build the foundation for the sales presentation. The
first impression of the sales person is very important in gaining the potential buyer’s attention and gaining
interest. It should open up with a simile and salutation from the sales person. The ultimate goal during this stage
is to conduct a need assessment in relation to products or services on offer, customer and theirneeds,
competition, the industry.
A good approach should:
- Attract the prospects attention
- Arouse his interest in the conversation
- Make it easy to have a transition into the demonstration phase.
There are four basic approaches:
Introductory Approach: Here the sales person introduces himself and his company to the prospect.
Product Approach: Here the sales person hands over the product to the prospect for examination after briefly
explaining it to him.
Consumer Benefit Approach: In this approach the sales person starts the sale by informing the prospect about
the benefits that can be derived from the product.
Referral Approach: The sales person can give the name of a present satisfied customer (with his prior
permission) to the prospect as a reference during the meeting.
Page 13
b) Formula selling format: Also known as the canned approach is based on the view that to get the prospect
to buy, the information to be passed on has to be provided in an accurate, thorough, and step-by-step manner. It
may be a standard memorised message that is used with every prospect.
c) Need satisfaction format: This format seeks to identify the real needs of the prospects by encouraging them
to do most of the talking. Once these needs are identified, the sales person then presents his products,
emphasizing on the benefits that the prospect can derive from them. Two selling styles are associated with the
need satisfaction format:
Adaptive selling: This involves adjusting the presentation to suit the selling situation such as knowing when to
offer solutions and when to ask for more information.
Consultation selling: Focuses on problems identification, where the sales person serves as an expert on
problem recognition and resolution that is, developing a good understanding of the prospect’s needs before
trying to close the sale.
d) Fully Automated: This is based on a highly structured approach and is usually done with the help of films or
slide projections. It is mostly used to sell intangible services, like life insurance to rural or semi-urban prospects.
e) Semi-Automated: In this approach the sales person takes help of brochures or literature and keeps on adding
his comments where necessary. It is useful in selling pharmaceutical products.
f) Memorised Notes: In this type of presentation, the company message is presented by the sales person with a
few changes.
g) Organised: This is the most popular and effective sales presentation. Here, the sales person is given a
complete flexibility of words but has to follow the company prepared outline or checklist. The prospect is taken
through the four stages: 'attention', 'interest', 'desire' and 'action' (AIDA) to a purchase decision.
h) Unstructured: This is the problem solving approach of presentation. Here the prospects and the sales person
get together to explore the problems and find solutions. Such presentations are not too well focused and much
time is wasted. Therefore, there is a need for experienced sales persons who can quickly clear the doubts and
complaints of the customers.
Requirements of a Presentation
The effectiveness of the presentation does not lie in how well it is delivered but in seeing how well it has helped
the buyer to relate his needs to the product and his motivation to buy the product. A good presentation should
satisfy six basic requirements:
Plan: Good presentations are always planned and do not just happen. The sales person should incorporate the
information about the customer while planning for the presentation.
Pattern: There should be a step by step logical sequence that will guide the customer to accept the product.
Page 14
Power: Behind every successful presentation there is enthusiasm, self-confidence and the skill of persuading
people.
Proof: While making any claims regarding the product or service, adequate proof should be supplied to the
customer. They can be informed of letters from satisfied customers.
Pictures: Since we are a part of a visually oriented world and are constantly being bombarded by television,
print advertising and other visual stimuli, therefore, a visual presentation always makes a greater impact than a
verbal one.
Demonstration
Presentation is accompanied by a real demonstration of the offering on sale. Demonstration forms the core of
the selling process. There are two stages of demonstration, first involves a description of the features and
benefits of the product and an explanation of how it works. The second stage is the actual demonstration itself.
This process is mainly directed at converting the prospect into a customer.
An effective product demonstration should be:
- Well prepared and referred.
- Should be designed to give a 'hands on' experience with the product.
Conducting the demonstration
- Commence with a concise statement of what is to be done or proved.
- Show how potential purchasers can participate in the demonstration process.
- Make the demonstration as interesting and as satisfying as possible.
- Show the potential purchaser how the product’s features can fulfill their needs or solve their problems.
- Attempt to translate such needs into a desire to purchase.
- Do not leave the purchaser until they are completely satisfied with the demonstration. Such satisfaction will
help to justify ultimate expenditure and will also reduce the severity and incidence of any complaints that might
arise after purchasing.
- Summarise the main points by re-emphasising the purchasing benefits that have been put forward during the
demonstration.
- The objectives of a demonstration should be: (a) to enable the salesperson to obtain a sale immediately (e.g. a
car demonstration drive given to a member of the public); or (b) to pave the way for future negotiations (e.g. a
car demonstration drive given to a car fleet buyer).
- Depending on the objective above, in the case of (a) ask for the order now, or in the case of (b) arrange for
further communication in the form of a meeting, telephone call, letter, an additional demonstration to other
members of the decision-making unit, etc.
Page 15
Advantages of demonstrations
a) Demonstrations are a useful ancillary in the selling process. They add realism to the sales routine in that they
utilise more human senses than mere verbal descriptions or visual presentation.
b) When a potential customer is participating in a demonstration, it is easier for the salesperson to ask questions
in order to ascertain buying behaviour.
c) Such demonstrations enable the salesperson relate product benefits to match the potential buyer’s buying
behaviour and adopt a more creative approach, rather than concentrating on a pre-prepared sales routine.
d) Customers’ objections can be more easily overcome if they can be persuaded to take part in the
demonstration process.
e) There are advantages to customers in that it is easier for them to ask questions in a more realistic way in order
to ascertain the product’s utility more clearly and quickly.
f) Purchasing inhibitions are more quickly overcome and buyers declare their purchasing interest sooner. This
makes the demonstration a very efficient sales tool.
5) Handling objections
This is a critical stage in the selling process. Objections are excuses for not making a purchase commitment or
decision. They are a natural part of the selling process and can come at any stage of selling. Some objections are
valid and are based on the characteristics of the product or service or price. However, many objections arise
because of prospects’ skepticism or indifference. Whether valid or not, experienced sales people should be able
to handle the objections in a courteous, ethical and professional manner. The following techniques are
commonly used:
-Acknowledge and convert the objection: This involves using the objection as a reason for buying. For
example a prospect might say. “The price is too high”. The reply “yes the price is high because we use the finest
materials”.
- Postpone: This is used when the objection will be dealt with later in the presentation. “I am going to address
that point shortly. I think my answer would make better sense then”.
- Agree and neutralise: Here a sales person agrees with the objection, then shows that it is not important
“That’s true and others have said that. However, they concluded that issue was outweighed by other benefits”.
- Accept the objection: Sometimes the objection is valid. Let the prospect express such views, probe for the
reason behind it, and attempt to stimulate further discussions on the objections.
- Denial: When the prospect’s objection is based on misinformation and cleanly untrue, it is wise to meet the
objection with a firm denial.
Page 16
- Ignore the objection: This technique is used when the objection is clearly not important to the prospect.
When handling objections, it is essential that the sales person does not take any objection personally. An
objection is not a personal objection.
7) Follow-up
The selling process does not end with the closing of the sale. Professional selling requires customer follow-up.
Attention to this stage helps to build buyer-seller relationship. The seller should ensure that the product is
delivered and installed and the use of the product properly explained. After sales activities are key ingredients
of follow-up process. The customer has to be continuously monitored to ensure customer satisfaction. A good
after sales services can increase business success.
Page 17
SALES NEGOTIATION
The interpersonal nature of personal selling activity means that a process of negotiation takes place between the
parties in the exchange.
Definition
Negotiation is the process during which both the salesperson and the prospective buyer offer concessions in an
attempt to arrive at a sales agreement.
‘The process through which two or more parties who are in conflict over outcomes attempt to reach agreement.
It is the constructive, positive alternative to haggling or arguing; it is aimed at building an agreement rather than
winning a battle.’ Pillutla, M. and Nicholson, (2004).
Negotiation is an activity, generally face to face with two or more players who, facing interest divergence and
feeling that they are interdependent choose to actually look for an arrangement, in order to put an end to this
divergence and thus create, maintain or develop a relationship between them.
In the negotiation process, sellers may negotiate price, credit terms, delivery times, trade-in values and other
aspects of the commercial transaction. The deal that is arrived at will depend on the balance of and the
negotiating skills of the respective parties.
Types of negotiators
There are several negotiating types, all with their own strengths and weaknesses.
1) The factual negotiator
A factual negotiator will know all the facts related to the negotiation. He or she asks factual questions and will
cover all angles to make sure that no facts are omitted. A factual negotiator will provide all the necessary
information, but tends to leave out emotional issues.
2) The relational negotiator
A relational negotiator establishes relationships with the other party. He or she is keen to build trust and is
sensitive to emotional issues related to the case. A relational negotiator perceives the position of the other party,
but can lose sight of the reason for the negotiation.
3) The intuitive negotiator
An intuitive negotiator sorts the key issues from the irrelevant detail. He or she often comes up with unexpected
solutions and sees the ‘big picture’. This type of negotiator visualises the implications of a proposal and predicts
the negotiation’s progress. However, intuitive negotiators are often regarded with suspicion because of their
unconventional approach and lack of discipline.
4) The logical negotiator
Page 18
A logical negotiator sets the rules of the negotiation and develops an agenda. He or she will argue in a logical,
unemotional way, and will adapt their position to meet changing circumstances. A logical negotiator can
sometimes see the negotiation process as being more important than the content or result.
a) Assessment of the balance of power: In the sales negotiation, seller and buyer will each be expecting to
conclude a deal favourable to them. The extent to which each is successful will depend upon their negotiating
skills and the balance of power between the parties. This balance will be determined by four key factors:
Page 19
- The number of options available to each party: If a buyer has only one option – to buy from the seller in
question – then that seller is in a powerful position. If the seller, in turn, is not dependent on the buyer but has
many attractive potential customers for the products, then again they are in a strong position. Conversely, when
a buyer has many potential sources of supply and a seller has few potential customers, the buyer should be able
to extract a good deal.
- The quantity and quality of information held by each party: If a buyer has access to a seller’s cost
structure then they are in a powerful position to negotiate a cheaper price, or at least to avoid paying too high a
price. If a seller knows how much a buyer is willing to pay, then their power position is improved.
- Need recognition and satisfaction: The greater the salesperson understands the needs of the buyer and the
more able they are to satisfy those needs, the stronger their bargaining position. The more the buyer believes
that their needs can be satisfied by only one company, the weaker the buyer’s negotiating stance. In effect, the
seller has reduced the buyer’s options by uniquely satisfying these needs.
- The pressures on the parties: Where a technical problem is of great importance to a buying organisation, its
visibility high and solution difficult, any supplier who can solve it will gain immense bargaining power. If, on
the other hand, there are pressures on the salesperson, perhaps because of low sales returns, then a buyer should
be able to extract extremely favourable terms during negotiations in return for purchasing from them.
b) Determination of negotiating objectives: It is important for negotiators to set objectives during the
preparation stage. This reduces the risk of mistakes being made in the negotiation process. It is useful to
consider two types of objective:
- ‘Must have’ objectives: The ‘must have’ objectives define a bargainer’s minimum requirements; for
example, the minimum price at which a seller is willing to trade. This determines the negotiating breakpoint.
- ‘Would like’ objectives: These are the maximum a negotiator can reasonably expect to get; for example, the
highest price a seller feels they can realistically obtain. This determines the opening positions of buyers and
sellers.
When considering ‘must have’ objectives it is useful to consider the Best Alternative to a Negotiated
Agreement (BATNA). This involves the identification of one’s alternative if agreement cannot be reached. It
sets a standard against which any offer can be assessed and guards against accepting unfavourable terms when
pressured by a more powerful buyer. Having attractive BATNAs allows higher ‘must have’ objectives to be set.
For example, a person wishing to sell a house may set a ‘must have’ objective of 9,000,000fcfa. However, by
considering their BATNA of renting the property, it may become clear that its rental value is equivalent to
10,000,000fcfa. This means that the ‘must have’ objective would rise by 1,000,000fcfa. Also during the
Page 20
negotiations themselves, its identification allows a comparison with each possible proposal that emerges with
the BATNA to assess whether a negotiated agreement is better than the alternative.
c) Concession analysis: Since negotiation implies movement in order to achieve agreement, it is likely that
concessions will be made by at least one party during the bargaining process. Preparation can aid negotiators by
analysing the kinds of concession that might be offered to the other side. The key to this concession analysis is
to value concessions the seller might be prepared to make through the eyes of the buyer. Doing this may make it
possible to identify concessions that cost the seller very little and yet are highly valued by the buyer. For
example, to offer much quicker delivery than is usual may cost a seller very little because of spare capacity, but
if this is highly valued by the buyer, the seller may be able to trade it in return for a prompt payment agreement.
The kinds of issue that may be examined during concession analysis include the following:
• Price;
• Timing of delivery;
• The product – its specification, optional extras;
• The price – ex works price, price at the buyer’s factory gate, installation price, in-service price;
• Payment – on dispatch, on receipt, in working order, credit terms; etc.
d) Proposal analysis: A further sensible activity during the preparation stage is to estimate the proposals and
demands the buyer is likely to make during the course of negotiation, and the seller’s reaction to them. This is
similar to the anticipation of objections in pure selling.
In a nutshell, the following elements are important during preparation:
- Product knowledge and customer benefits
- Knowledge of competitors’ products and their benefits
- Sales presentation planning
- Setting sales and negotiation objectives
- Understanding buyer behaviour
- Assessing the power balance
- Concession analysis
- Proposal analysis
2) Discussion
In the negotiation process, it is important to listen and seek information by questions. This allows the seller to
draw the buyer’s attention to the negotiation process. Telling and trying to win personal points may drive the
Page 21
buyer’s attention. Discussion is a two way flow of information and the seller must try to be empathetic in the
cause of the discussion.
3) Signals
The good negotiator should be able to look for and identify signals that move the negotiation forward.
4) Proposition
In making any proposition, the negotiator must be fair and flexible. In any negotiation, it important to open
realistically, move modestly, and invite a response. Avoid words that convey insincerity such as ‘fair’,
‘reasonable’, ‘generous’ etc. this is because they are often resisted by the other party who may have a different
meaning to them.
5) Presentation
In the course of the presentation, the negotiator should not only concentrate on making claims about the positive
aspects of the offering but should also try to match the presentation with the buyer’s objectives. It will be very
important for the negotiator to spell out the concessions in the terms of the buyer.
6) Bargain
Bargaining between the parties is central to the negotiation. In bargaining, everything is conditional. For
example ‘if you reduce the price then I will make the purchase”. Also, the negotiator should avoid matching a
proposal with a proposal. A good negotiator listens to a proposal, acknowledges it, examines it and asks
questions about it. They may then bargain on one or two points but not necessarily all.
7) Close
Negotiation must have some form of outcome and therefore agree your points, summarise your position but do
not be aggressive.
8) Agreement
Don’t just close, agree. Don’t just agree, get commitment and if possible write out the commitment so that there
is no misunderstanding.
Page 22
MISTAKES IN SALES
1. Not Understanding Selling
Selling is not just about being pushy and being aggressive. Companies must train their employees to be
professional salespeople or persuaders, service oriented, and relationship-builders. Good salespeople should
have knowledge of the company’s current style of selling and how it is analyzed so that it can be improved,
should know who the ideal customer is, and what he or she wants, should know why some people buy their
product and why some do not etc.
2. Expecting Things to Improve by Themselves
“Sales skills are not a gift of birth.” For most salespeople sales do not come naturally. Training salespeople is
very imperative if sales managers want them to be masters of what they are to do. It is something that can be
mastered with study and work. Watching people from personal experience will help you identify what makes
people good and bad persuaders.
3. Talking Too Much and Not Listening Enough
A salesperson does not just talk, he/she listens too. The salesperson must ask the right questions, take good
notes, and “intently” listen to what the customer says as well as their body language.
4. Using Words that Kill Sales
Sales people should avoid using words and actions that create negative thoughts in customers’ minds
5. Not Knowing When to Close the Sale
Customers who leave a place of business without purchasing something are lost sales. A sales person must look
for “buying signs.” One uses these signs to help understand when to close a sale.
6. Not Knowing How to Close the Sale
One must ask a question that moves the prospect into a position of having to make an ownership decision. An
example would be: “If I have the red one, do you want to take it with you today, or shall I ship it?”
7. Lack of Sincerity
Be sincere and mean it. Make sure you are selling to benefit the customer and not yourself. A salesperson needs
to be selling a product that they believe in and believe that it is good.
8. Not Keeping in Touch
People do business with people who give them attention. All it takes is a couple of phone calls to keep
customers. Call customers every so often to see how the product is doing, and if there is room for improvement.
It shows that a company cares about the customer by keeping in touch.
Page 23