Riassunto International Retail and Sales Management

International retail and sales management

Sales function as a link

The sales function is a sort of link between the company and the outside world. Sales: underestimated, yet crucial.

• What is key to a company’s success? Considering the revenues. Revenues are one of the primary, if not the primary, indicator of a company success, health, growth.
• Which is the organizational function accountable to materially generate revenues? The sales department. It is the primary function in the organization which is mandate, generate sales and generates revenues.
• Which is one of the key drivers of company stock price fluctuation over time? Think of a company on the stock market. We know stock prices fluctuate over time. One of the key drivers that drives stock price fluctuation is: every 3 months companies need to report their sales, whether or not they have been able to accomplish the level of the sales they would realise. So the sales function is at the heart of generating the key indicator for a company success. And it is the ultimate goal of why a company exists. Companies exist to generate revenues; sales is the function of the organization (on top at revenues generation). Revenue generation/fluctuation not only is the key indicator of what a company is achieving, but also one of the core indicators for stock market to assess whether a company is in health or not. And so the stock price depends on that. Many times analysts review quarterly performances; there is a lot of weight to see whether a company has achieved their quarterly sales target. Marketing is an indirect generator of sales.

Yet... academic education on sales is lagging behind on sales. Commercial and retail knowledge is in high demand. There are many big companies (L’Oréal, Coca-Cola, etc.) that have as a policy that if you want to go in a higher level at a certain point, if you want to grow professionally, you have to spend some time in sales. Ability to meet customers' need in a way that is profitable for the company. That is the only function where theory has to become reality.

Sales over channels

Sales take place over channels, both to consumers and to businesses.

Business to Consumer (B2C)

• Private or family use

Customer → Manufacturer

Business to Business (B2B)

• Company-related use

Direct channel

Business to Business to Consumer (B2B2C)

• Intermediaries

Intermediary → Manufacturer → Customer

Intermediary → Intermediary

Indirect channels

Examples you can think of? We talk of the customers as if they were an entity with no understanding. As manufacturing companies, we have two ways: direct, B2C: the company has direct interaction with customers. In B2C the sales are made directly to the person, who will make a private, personal, familiar use or will speak directly to our customer in a B2B context. So, we sell to other companies.

Many times what happens in reality is that manufacturers deal with intermediaries that then deal with customers. We reach our customers through intermediaries. B2B2C. Except for a small proportion of direct sales like online channels for example, the majority of companies reach their customers through intermediaries. That is the case for L’Oréal, Coca-Cola, etc. Many companies have a mix of this relationship. Nike has its own stores but sells in other shops too. For many other situations, in B2B2C companies sell to intermediaries.

When we talk of sales we talk of retail. The first thing to understand is what are we talking about: direct to consumers, B2B, context of B2B2C.

Salesforce and turnover

Salesforce generates turnover - Example: Italian manufacturing companies

[Of which, mobile commerce: 1%]

Research on a sample of 214 Italian companies. Replies from Commercial Managers and Sales Managers International Retail and Sales Management 15. This is how reality works. This is research made before the pandemic. It is the salesforce that generates salesforce, through internal external and cross sectors/industries etc., for example, e-commerce. It is true online is growing, but still it is very small compared to the bulk of the revenues created through a function called sales management, that is generating a big part of revenues. Ikea: direct to consumers sales. Big difference in selling to consumers and to businesses. We need to understand what we are talking about because of the level of complexity we need to be aware of significant changes in the personal and professional sales. Selling to individual customers can be interesting but also very dull. In many cases personal or direct selling is made by order takers: people who rarely make an effort to promote sales. Any company is very dependent on sales team, regardless of channels. 2

Sales function in the organization

Sales is a separate function and at the same organizational level as Marketing – and sometimes higher

• In the vast majority of cases, Marketing and Sales are separate functions
• In most cases, the two functions are at the same organizational level
• In other cases, Sales incorporates Marketing (the ‘Commercial’ function)
• The Sales management is always responsible for revenue targets
• Often, Marketing has a ‘shared’ or ‘shadow’ P&L responsibility

Any company has a sales function. Sales is always at least at the same level of marketing. In many cases marketing is within sales. Sales is usually a more powerful function than marketing. You will know what sales do always and what they are responsible for. Sometimes in a company, marketing basically does communication, is in the commercial function (in charge of communication and very few things). Sales is typically very influential and strategic function in every company. Sales very often plays a key role in “marketing” decisions.

Sales influence on marketing decisions

Sales very often plays a key role in “marketing” decisions:

Sales is responsible, or at least plays an important role, in a very high number of marketing decisions. Who is in the lead? As we can see, most of these decisions relate in a way or another to the 4 Ps of marketing.

Sales many times make the decision (price setting, customer satisfaction, service program, promotion, even ad campaign, even communication). People are much more educated and very highly paid and play significant role.

Sales plays key roles in a company’s strategy

• Analysis of current market situation (marketing audit). Because they have the closest proximity to customers and competitors. They know. They understand what customers want.
• Determining sales potential/sales forecasting: understanding of sales opportunities and trends.
• Generating and selecting strategies: front-line people who know if and how strategies will work.
• Budgeting, implementation and control: annual sales budget drive the whole planning process. How much we will get, how much we can spend.

The sales function is essential to achieve full customer orientation.

The sales function and customer orientation

The sales function is essential to achieve full customer orientation. They help the customer make purchase choices that satisfy them. They help the customer define and evaluate their needs. They offer the customer products/services able to meet these needs. Describe products/services accurately and correctly. They are the face of the company towards customers, impacting on brand image. Build stable and lasting customer relationships based on trust and loyalty. Customer orientation is the core for the success of a company and sales play a big role in that. They help the customer to make the purchase decision. They even help customers understanding their needs. Tells everything to know about a product. The brand image goes through the face of the sales person who talks to the customers.

What does the sales function do?

So, what does the sales function do? As we will see, selling through a pipeline, having customers at different stages, and feeding back to the organization also take data. The sharing of information is core. Many times serving customers can be unprofitable. You can still do revenues, but not making a margin, for a number of reasons. B2B is the one more common and also much more sophisticated. If you need to negotiate and you are a fashion company, you want to export in China: you have to do a lot of things (customer service aligned, administration aligned etc.), so the sales person becomes a pivot that activates many resources, the point person between the company and the broker/intermediary in China. You have to go through brokers to export in China anyway. Person in the position to activate all the person resources to activate the sales. In the last 20 years, the speed at which market changes and how the market has changed has brought along the need for true transformation, commercial transformation.

The pillars of commercial transformation

1. Economic dynamics: stagnation (lack of growth in the market is a crucial condition where it is difficult to generate revenues), hyper-competitiveness (for a company to grow in a stagnate market you need to steal customers), difficulties in achieving and maintaining long-term competitive advantages (increasingly difficult: the speed at which first movers have been actually met is very short, I need to reorganize myself if my competitors are faster and faster in bridging the gap I have created).

2. Progressive globalization of the markets: markets are becoming more and more global. Italy is one of the core countries where export is fundamental. We also import a lot. Continuous changing in competitive landscapes globally. I need to compete in other geographies as well. If I want to survive and thrive in my market I need to refine my market. Suffer of global competition.

3. Re-definition of the boundaries between numerous markets and segments

4. Concentration and increase of purchasing power of business customers, starting with international and larger ones

5. Growing attention to issues in efficiency and effectiveness of business processes

6. New and growing customers sensitivity towards the issue of business risk

If I am selling benefits and I need to understand and know how to talk of benefits and not of product attributes. I need to understand the customer, not a list of attributes. This makes the role of sales more sophisticated also in knowing how to speak the language of customer. The relationship between customers and retailer and between companies and their suppliers is becoming much more rational, efficiency-oriented. Understand how to balance different aspects of selling. The lack of stability and lack of ability to forecast revenues, activities in the future, is being tougher in relationships because many consumers are holding their decisions because of risk. So, consumers are spending less, they postpone the decisions. There is a lot more uncertainty in the process that sellers have to handle. How do companies respond to this? They transform their commercial function. Companies invest in rethinking their sales function, strategy, way they do sales. Companies are responding transforming the commercial function.

• Numerous "Commercial Transformation" and "Sales Excellence" projects: substantial rethinking of role, nature, strategy, targets, structures and sales processes.
• The knowledge and skills required are increasing, along with the strategic role of sales.
• Less “art” and more “science”: talent and improvisation increasingly flanked by method and analytical rigor to plan, carry out and control sales activities.

The Sales Force Transformation is based on the pillars of the "5 i":

• Involvement: greater involvement in corporate strategies.
• Intelligence: incorporating market insights from customer contact into strategies.
• Integration: creating cross-functional working mechanisms, especially between marketing and sales (but also with product managers).
• Internal marketing: salespeople as promoters of the customer's voice in the company.
• Infrastructure: processes and structures to support sales activities, e.g., account management, CRM, planning.

Tools, concepts, frameworks we need to know to execute sales more professionally.

The relationship between sales and marketing

Sales is a separate function and at the same organizational level as Marketing – and sometimes higher. Sales management and sales function is always present in an organization, is always clear what they do, sometimes they even have marketing within. Some other times marketing is at the same level as sales. In the vast majority of cases, Marketing and Sales are separate functions:

• In most cases, the two functions are at the same organizational level.
• In other cases, Sales incorporates Marketing (the ‘Commercial’ function).
• The Sales management is always responsible for revenue targets.
• Often, Marketing has a ‘shared’ or ‘shadow’ P&L responsibility.

There is obvious cost, as production cost, fixed or variable, and that is easy to quantify. That’s not the entire amount of the costs. We have also distribution costs, agreements for example on logistics, we can include in our agreement how we are going to deliver, to sell in one go etc. so distribution and logistics cost, selling cost (how many time does a sales person need to spend with the customer to conclude the sales), customer service cost (how we provide services to these costumers, how many times is the customer calling, how many times do we have to intervene in problem solving, how many times do we need to fix some problems).

If you add all of that what happens sometimes is that either we have made a big investment on the customer in terms of time and service and then the customer is not actually generating the revenue we would be expecting to cover for those costs, or maybe we started with a very nice price and quantity and then over time especially if the customer is a big one, the customer starts negotiating the price down but still keeping all the benefits we agreed first. When we agree a deal with our customers, there are many aspects we take into account and selling is more and more becoming a consulting exercise, the salesperson is more and more a pivot for the entire company. All of that has costs.

The customer sometimes fails to become or generate the profits, or become as big as it was expecting, or maybe we want to acquire customers believing that sooner or later, based on those initial favourable conditions, the customer will buy more and that doesn’t happen. Example: Many retail banks offer student products (deposits, current account, free debit cards) to acquire new customers hoping that when the students become professionals they will remain as customer, acquiring more products, starting savings, taking loans etc. The reality is that as long as a customer stays with the student state, most of them are generating a loss for the bank and so they have to be very strict as what expected is not repairing your investment after a certain time.

The relationship with marketing: the importance of an integrated perspective

Benefits of an integrated perspective on customers, according to commercial leaders:

• Increase customer satisfaction 88%
• Acquisition of new customers 86%
• Increase in the number of negotiations concluded 83%
• Increase in the proactivity of commercial employees 83%
• Reduce customer churn/retention rate 79%
• Creating a new perspective that goes beyond transactions 79%
• Increase in average negotiating size/order value 75%
• Reduce the duration of sales cycles 71%

What happens if sales and marketing take a similar approach to customers and they collaborate? This is a research from a few years ago to the sales force, asking a number of questions on taking an integrated perspective on customers. 88% said that customer satisfaction increased, why? On one side we have the benefit on understanding and looking into this insight, and on the other hand sales can actually create actions on this, and that is a way to serve the customer, that is based on additional inside, so bringing more information to the salespeople into what they do.