Sales management

Sales Management

2005

Sales Management

Every company seeks to increase the number of its sales in to obtain more profits . There are many key determinants of a successful retailing strategy , such as quality of service , convenience competitiveness in the market , price , and many others . It is very important for the company to focus on all of the mentioned determinants because only a well-balanced retailing strategy can enable the organization to achieve all of its sales goals

Price is one of the major determinants of a retailing strategy , and there

is no wonder that many salespeople tend to focus on price the most when they try to make a sale . Proper pricing is the primary determinant of the success of a counter trade transaction (Paun , 1994 br

.830 . In many cases , customers will choose the product over the competitors because of a competitive price

At the same time , it is necessary to mention that many salespeople underestimate the importance of other components of the retailing strategy . While focusing on price , they tend to forget that consumers are looking not only for the lowest price but also for a certain level of quality . The lowest price does not always motivate customers to make a choice for this or that product . The mistake of focusing solely on price is one of the most common problems which salespeople have nowadays . Currently , too many companies adjust pricing without adjusting their level of service accordingly (Mccrea , 2004 ,

.42 This approach is not going to be efficient by any means because price and quality always have to be adjusted in to attract the customers

It is very important for the sales team to realize the timing when the price card has to be played . If the timing is not proper , the salesperson will not make the best deal for the company . It is vital to understand to essence of pricing strategy and key determinants of the price for this or that product . If salespeople fail to understand what the determinants of the price are , he will never be able to make successful sales

First , it is necessary to identify the value which the customer is receiving from the product or service . The price has to be closely connected with the value . Once a company has designed the package of benefits it wishes to provide to prospective customers , a price must be determined . But the key to effective pricing is to ensure that the price charged reflects the amount of value a customer is receiving . A fundamental principle in market-based pricing is to recognize that price is a statement of value , not a statement of costs (Morris , 1990 br

.1 . Price should not be used in simply to cover the costs of the production because price is not a derivative of the company 's costs Instead , price has to be based on the value which the consumer receives If the value is high , the company can set up a high price and have a large margin . High value will motivate consumers to get the product for a higher price . The price does not have to be based on costs only because the company can lose profits as a result of setting low prices for high-quality products . The underlying reason for much of today 's ineffective pricing is a preoccupation among those who set prices with the need to cover costs . Cost coverage , not customer value , is the single most important factor in the pricing policies of most companies (Morris , 1990 ,

.1

Salespeople also need to be aware that different groups of consumers have different attitudes towards the price level . In to set a competitive price , salespeople need to know which segment of consumers is being targeted and adjust the price level accordingly . Consumers can be divided into 4 large groups according to the way they regard price and value : 1 ) value is low price 2 ) getting what I want in a product 3 ) quality I get for the price I pay 4 ) what I get for what I give (Morris , 1990 ,

.1

For the first group of customers , price is the key determinant Salespeople dealing with customers of this group have to know that playing a price card is the most efficient strategy with them . People belonging to this segment will choose products or services with lower price . They will sacrifice the quality of products for a low price because it is the most important attribute for them . Some buyers use the word value to refer to situations where they simply pay a relatively low price , such as when an item is on sale . The focus here is purely on what is given up monetarily . When a product or service is sold at a specially reduced price , such as at an inventory clearance . there is a sense of getting value (Morris , 1990 ,

.2 . These customers will willingly buy products on sale and will not care that they are buying an older model of shoes , for example . This segment is the most sensitive to price changes

The second group of consumers tends to make a decision to buy a product based on the value they get from it . They have their own estimation of the usefulness of the product for them . Therefore , they are able to determine whether they are willing to pay a certain price for a certain product or not . If these consumers think the satisfaction from the product will be very large , they will most likely purchase the product Price is not a key determinant of consumers ' decision in this case . A consumer of this group is not very sensitive to the change of prices , he is more sensitive the changes in quality of the products . Other buyers look at value in terms of the benefits they receive from the item . They focus on their own subjective estimate of the usefulness or amount of need satisfaction resulting from the purchase (Morris , 1990 ,

.2

The third group of consumers is sensitive to the level of price . When making their decisions to buy a product , they estimate the ratio between the quality of the product and the price which they are required to pay for it . Such consumers buy the product from the company which offers the highest ratio . They are usually not very loyal to some particular brands and decide to make a purchase only when the ratio is high enough for them . There is no sense for a salesperson to decrease the prices for these consumers without adding certain quality to the product . In most cases , companies offering a higher price but a much higher value will be the ones attracting this group of customers . They are not going to be attracted only to a low price . An alternative approach is to view value as perceived quality received from a purchase divided by the price paid . The buyer 's focus is affordable quality . The best value is not the highest-quality item or the lowest-priced item (Morris , 1990 ,

.3

The fourth group of consumers makes a decision to buy a product based on how much money they can give up for a certain product . They are sensitive to price in some way but they are also concerned with the quality of the product . A final perspective is to approach value as a trade-off between what a buyer is going to receive from the purchase and what a buyer is required to give up . The best value is the one that provides the most benefit (in terms of the customer 's desired set of attributes ) for the least price (Morris , 1990 ,

.3

After investigating all of the major types of consumers , it is possible to determine pricing patters for salespeople in a team . The level of price is the most important for the consumers of the first group . They will give up other products as long as they can get the lowest price for a certain product . In case of targeting this type of customers salespeople should be free reducing prices because they are going to make up in the volume of operations . Unless the price is low , customers of this group will shop elsewhere . Playing a price card is the only suitable strategy for these customers

The pricing strategy for 3 other groups of customers is not as simple The lowest level of prices would not work for them , and the company would have significant losses if it established the lowest prices while dealing with these customers . When targeting the group of customers who are obsessed with value , the company needs to ensure that the quality of their products is high enough to attract them . At the same time , they can establish prices on a higher level because these consumers will make a final decision about the purchase based on the value they receive . The third and the fourth group of customers are interested in the ratio between the quality and price , as well as how much money they are going to give up for a certain product . In to target these customers , it is useful for the company to analyze the quality /price ratio of competitors and also the income level of consumers . The quality /price ratio of competitors will give information to the company about its prospects of targeting the third group of customers while the analysis of the income level of customers will provide information about how much money they would be willing to give up for products

In to develop a successful retailing strategy , the company needs to target one of these consumer groups . If targeting all of them , the company would have a very hard time developing a pricing strategy because all of the groups of consumers are sensitive to prices and quality of products in different ways . Therefore , if the company is willing to focus on prices as a key determinant of their sales volume they need to target the first group . If the company wants to attract any of the other three groups , it needs to focus on price level and quality as 2 sides of one medal . In to increase their sales volume companies need to follow many recommendations . Do enlist "price trackers " in your company to track competitors ' pricing strategies Gather updated once information for each competitor . Do understand the position that you want your pricing to communicate and stick with that vision . Do base your pricing on value . This can be challenging to determine and takes more WORK , but it will Day off in the long run (Mccrea , 2004 ,

.42

It is also necessary to stop at some issues which companies need to avoid when developing their pricing strategy . For example , even though the analysis of competitors is important , it should not determine the pricing strategy of the company . As it was mentioned above , cost analysis is also important for the company , but it should not play the major role in determining the level of price . The key determinant of the price level is the segment of consumers which the company (and a particular salesperson ) is targeting

Current trends of the retailing market show that in many cases , on-line companies develop much more efficient pricing strategies that conventional companies . On-line retailers have a very different pricing strategy from the conventional retailers . Physical shops offer significant price breaks on the more popular products and increase prices once the products do not have sustained mainstream market appeal . On-line stores , on the other hand , have much more dynamic pricing strategies (Gosain , Lee , 2002 ,

.55 . In to be successful in the market , all of the companies need to apply dynamic pricing strategies . Only in this case they can retain their customers and acquire new ones fast

In conclusion , it is necessary to mark that price plays an important role in sales management . In many cases , a consumer will buy a product because the salesperson offers a lower price to him . However , it is not the general rule . There are many customers who are much more interested in quality than in price and prefer to pay more for higher quality Salespeople need to understand consumer segments . Playing a price card can be useful only in the cases when a consumer is looking for the lowest possible price or when he is looking for the highest quality /price ratio . When consumers are interested in the highest quality or if their income is the key determinant of their making a purchase , there is no sense to reduce the price because such customers are not very price sensitive

Bibliography

Gosain Sanjay , Lee Zoonky . A Longitudinal Price Comparison for Music CDs in Electronic and Brick-and-Mortar Markets : Pricing Strategies in Emergent Electronic Commerce . Journal of Business Strategies . Volume 19 . Issue : 1 . 2002

Mccrea Bridget . When Is the Price Right ? Effective Pricing Is Crucial to Remain Competitive and Move Product . Black Enterprise . Volume : 34 Issue : 12 . July 2004

Morris Gene , Morris Michael H . Market-Oriented Pricing : Strategies for Management . Quorum Books . New York . 1990

Paun Dorothy Ann . The Effects of Marketing Objectives on Seller and Buyer 's Pricing Strategies in International Counter trade . Journal of International Business Studies . Volume : 25 . Issue : 4 . 1994

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