S P JAIN SCHOOL OF GLOBAL MANAGEMENTEMBA

Final ExaminationSubject: Sales and Channel Management

Faculty: Prof Kartik RainaDuration: 180 mins Marks: 100Date: Sunday, April 23, 2017Time: 11:30pm

**Guidelines: This is an Open notes/books and Open laptop examination. Internet is NOT allowed. You are required to switch off Bluetooth on your laptop. Mobile Phones are NOT allowed inside the examination room. You must keep your bags outside the examination room. You are NOT allowed to borrow stationery, water bottle, or any other material. In case of minor ambiguity, you should state your assumption in the examination script clearly

and proceed. Please DO NOT debate with the invigilator. All other guidelines specified in the examination policy document are applicable. Kindly adhere to honour code guidelines. Blackboard Submission – Word and Excel. Invigilators will not answer any questions regarding the answering of questions in the exam.

When in doubt, state any and all assumptions you’ve made and carry on with the answers. Make sure you have signed the attendance sheet.

**Read the guidelines twice before you proceed

Honor Code Pledge

Name of Examination: Sales and Channel Management Name of Program (BBA / MGB / MBA (Global) / MBA (Executive): __ MBA (Executive) I hereby pledge and promise that, during this examination and in all my dealings at S P Jain School of Global Management, I have:

Represented myself in a truthful manner; Not fabricated or plagiarized information; Not received assistance, or provided assistance, to or from another person; and Upheld and abided by both the letter and spirit of the S P Jain Honor Code, as defined in the

Student Handbook.

Date : 23 Apr 2017

Student Full Name Student Roll Number

PART A – 40 MARKS. This question is compulsory.

1. Your company has a strong R & D driven range of products in the area of Nutrition & Wellness. Recently, your company has received FDA approval to market a sensational range of products, using genetic technology, which have been developed in house over the last 7 years. The products are as follows :

a. Brand called SURELAD. This is a product which is in the shape of a powdered nutrition drink. Commencing before conception, it’s regular use twice a day with milk till the 2nd trimester of pregnancy, ensures the birth of a boy.

b. Brand called SURELASS. This is a product which is in the shape of a powdered nutrition drink. Commencing before conception, it’s regular use twice a day with milk till the 2nd trimester of pregnancy, ensures the birth of a girl.

c. These are approved by FDA as products that need not be sold on a prescription ie from any type of outlet. In your Test Market geography, where you will initially evaluate the product’s success and acceptability, the following channel structure exists for your existing range of products.

i. Individual Chemists (20% of retail universe), Pharmacy Stores which are part of a chain (20% of universe) , selected Grocers (45% of Universe), Supermarkets (15% of Universe).

ii. In the Test Market area, the total Retail Universe is 1800.iii. From a Streetcombing exercise ,the following information has been

collected by you :1. The Most Important ie. “A” type outlets were 23% of the Universe,

and accounted for 66% of total sales of the category.2. The Important or “B” type were 35% of outlet numbers, but

accounting for 22% of total sales3. The least important or “C” type were 42% of total universe, but

accounted for only 12% of category sales.iv. You intend to recruit a company owned sales force to service these outlets.

1. The frequency of monthly coverage you have planned is :a. All A class outlets to be serviced once every 7 days.b. All B class outlets to be serviced once every 15 days.c. All C class outlets to be serviced once every 30 days.

2. The first sales call commences at 8.30 am & the last call ends by 3.30 pm.

3. Lunch break of 30 minutes is given and it is assumed that there will be 2 other breaks – smoking, toilet etc. of around 15 minutes each.

4. The market is compact, hence total time lost in transit on any given day is around 50 minutes.

5. Official (important) calls on the mobile take 15 minutes in a day.6. Your Working Norms are as follows :

a. Every Sunday is an off day.b. The company gives 21 working days leave in a year, which

is compulsory. The leave lapses if not taken in any year.c. There are official 8 days per year as compulsory holidays.d. Past experience shows that 10 days are lost per year due to

absence on account of sickness.e. The company does 4 days of training per quarter for the

frontline sales forcef. One day per month is the meeting and administration day,

done at the Regional Office.

d. You are tasked to complete the following :i. Will you cover the entire universe or a selected one ? Either way please

give the logic for your answer. On the basis of your decision, what would be your Width objective ?(10 marks).

Answer: Please refer to attached excel sheet for calculations.

All types are to be covered, however the number of calls that is to be made to each of these types ( A,B,C) will form the guiding factor.

total retail universe 1800

Type Break up

1 Individual chemists 20% 3602 Pharmacy Stores(chains) 20% 3603 Selected Grocers 45% 8104 Supermarkets 15% 270

100% 1800

Street combing findings and Data is given as follows

Importance( Class)

percentage of Universe

Actual Numbers

Percentage of Total sales

Given Service Plan( every

Total Services every

Monthly calls

Total Calls every

/days) month monthClass A 23% 414 66% 7 4 4 1774Class B 35% 630 22% 15 15 15 9450Class C 42% 756 12% 30 1 1 756

100% 1800 100% 11980

Basis the given information as per the combing exercise, the entire universe will therefore be categoriesed into Type A,B and C. Prioritised based on the contribution to sales from a higher to lower contribution in that order.

We should cover all types, even though type A is contributing 66%, because though there is a lower contribution from other Type B and Type C (much lower than 66%) at 22% and 12%, none the less there is a contribution. We may in the future work towards arriving at higher contribution. We understand that we can use type B and C as well and should not be neglected at all. Though the calls we make will be rationally based as per the calculations shown above.

ii. What Distribution Network would you employ ie Direct, through Wholesaler, using Stockists etc. Why you chose that network. (5 marks).

The product we are trying to market is a product which is in the shape of a powdered nutrition drink. This has FDA approval and is consumed by a pregnant lady. Though it can be sold over the counter without a prescription, the buyer will need to trust it the most. Having said that its also a new product. Being new in the market, it’s unknown and that is a challenge when the end consumer is a pregnant lady.

The consumer need to be assured of the benefits and the fact that it will not cause any risk. This product should be treated as a pharmaceutical product.Pharmaceutical products may require different set of partners to handle doctors, chemists,

and hospitals and nursing homes.

But we are also given and the assumption is that the company wants to hire its own sales force.

Preference should be to use the Stockist approach as that would allow us not to finance the distribution. The stockiest would therefore meet the following

– Purchasing only from mfr.– Generally no compete clause– Obtain/maintain local regulatories– Redistribute through wholesale/retail & institutional network

– Sales force to support redistribution– Handle/feedback on complaints– Reporting/feedback as agreed– Manage promotions/claims.

However since it is given that we intend to HIRE our own sales force we should consider working together with the Stockist initially with our sales team till the brand image is generated.We can also consider a parallel workforce to have our own sales team to reach the sales outlet and not entirely depend on the stockiest sales force. However this can be an expensive way.

iii. How many total Salesmen would you need and how many supervisors? Assume a span of control of 1 Supervisor per 3 salesmen. Show the entire method of calculation used to arrive at the numbers. (15 marks).

given data Numbertotal retail universe 1800

Type Break up

1 Individual chemists 20% 3602 Pharmacy Stores(chains) 20% 3603 Selected Grocers 45% 8104 Supermarkets 15% 270

100% 1800

Street combing findings and Data is given as follows

Importance( Class)

percentage of Universe

Actual Numbers

Percentage of Total sales

Given Service Plan( every/days)

Total Services every month

Monthly calls

Total Calls every

monthClass A 23% 414 66% 7 4 4 1774Class B 35% 630 22% 15 15 15 9450Class C 42% 756 12% 30 1 1 756

100% 1800 100% 11980

Ref Attched excel sheet.

Basis the above calculation we have to work with the total no of calls to make in a month for making our team of sales persons and supervisors.

Sales person req=45, Supervisors req=15Please ref the attached excel sheet for detailed calculations.

Callsstarts at 8:30 ends 3:30

7 hours each day

Normal work day 8 hrs 30 mins

Minutes per day 480 min/daygiven Lunch break -30 min/daygiven Break 1 -15 min/daygiven Break 2 -15 min/day

Remaining/days 420 min/dayTransit Time/day -50 min/dayImp-Mobile calls/Day -15 min/dayAssume 30 min in office -30 min/dayAfter last call 30 min in office -30 min/dayAvailable time for calls 295 mins/day

Margin of safety

Assume 30 mins loss due to personal calls, etc -30 mins/dayTotal available time for calls 265 min/day

Call time

Assuming each call takes 20 mins 20 min/call

Total Possible calls by 1 pers 13.25 callsSafety margin 13 calls/day

Available days per year 365 dayssundays -52annual leave -21official compulsory -8Sickness -10Training -16 4 days/QtrMeeting/Admin -12 1 day/mth

Available days of work per year 246work days/year

Available days of work per Month 20.5 12 monthsround off 20 safety margin

Total calls by 1 salesperson /Month 265 Call/month

Basis Street combing findings and Data is given as followsTotal calls to be done /Month 11980 call/Month

Toatl sales person needed45.2086253

4eq Total sales person req. is 45 sales person.

Supervisor req1 supervor 3 per three salesmenTotal supervisors= 15 Supervisors

iv. What strategy would you use to counter the likely media reaction from social activists who would feel this could lead to genetic discrimination and sex determination issues? (10 marks)

Since there is possibility of sex determination, therefore its highly likely to draw media reaction. We must put in place a through Media and social media handlinh program including some of the following:

A media handling program:Training for management and senior management in media handling.A media holding statementA media spokesperson, who is authorized to speak.

The above should form part of internal development plan.

Instead of trying to deflect the media, it has to be put forward that it’s legal. The FDA has approved, and the company is complying with all the regulatory requirements.It’s also to be actively communicated that it’s a choice available for people, and therefore its people who choose and both options are available. If its legally not right it won’ be sold. If

people intrinsically do not feel the need for it, the market will kill the product naturally over a period of time.The product is all about giving society the power, and not snatching it away. Its nutritional product as well hence the objective is also to provide society with the ability to have healthy offsprings and a sound demographic in the long run.

Our focus should be on the need of human society and how we are trying to resolve that. Empowering people and generations ahead rather than to defend ourselves on the only fact that it can deter sex ratio in the future.

PART B – 40 MARKS. Please answer any 4 of the 6 questions given. Each question carries 10 marks

2. Please work out the Working Capital requirements in the examples given below :S.

No.Description Case 1 Case 2 Case 3

1 Monthly Turnover ($ Mn.) 10 35 272 Stock Level carried (days of monthly sales) 12 21 183 Market Credit 1 (days of monthly sales) 15 21 30

Market Credit 1 (% of Monthly sales) 45 35 234 Market Credit 2 (days of monthly sales) 10 16 14

Market Credit 2 (% of Monthly sales) 30 15 455 Market Credit 3 (days of monthly sales) 13 10 8

Market Credit 3(% of Monthly sales) 25 Balance 326 Claims unsettled (days of monthly sales) 4 2 77 Company gives credit for (days) 15 21 12

3. Please explain what is the Impact : Effort Grid, used in the evaluation of different alternative solutions in any Problem Solving exercise. In what ways does the grid allow you to select the most effective solution ? Please illustrate your answer with an example.

4. Your company’s sales department has had a high rate of attrition – almost 30% higher than the industry average. Informal surveys show that the salary structure for your front liners is at nearly 90 percentile of the market. However, you have a pure fixed salary system, and your increments have traditionally been in line with the market. You have been asked to consider whether having a fixed cum variable compensation structure would motivate the team and reduce attrition rates. Please indicate how you would go about doing the initial research and then suggest what the key elements of you plan would be.

Answer: Initial research will be based on Gaining knowledge of compensation trends and the marketplace Decide at which Percentile you wish to operate

Creating a sales culture where low performers either step up or step out Aligning compensation plans with the Company’s financial objectives Transitioning to performance driven awards – have a Fixed + Variable culture

As given we have the following informationInformal surveys show that the salary structure for your front liners is at nearly 90 percentile of the market. However, you have a pure fixed salary system, and your increments have traditionally been in line with the market.

With the above initial finding a first look is to be for the consideration for a fixed cum variable component, and attach the variable component to performance. That way we compensate our high performer and retain them. The total compensation should be designed such that:

Total compensation equals salary and bonusSalary increase may not be given every year and will be mapped to market or industry averageBonus should be motivating and tied to resultsTotal compensation should be potentially more than the position could earn elsewhere.While arriving at the total compensation the following can be considered

Travel & Entertainment component Auto expenses Dues and memberships to clubs, etc. Holidays or Family outing

A total compensation based on the above initial research and the key elements as mentioned would be the recommendation.

5. Your company has a range of consumer products in the area of home lighting which include LED lights, Table lamps, Wall lamps, decorative lights etc. These are sold through the retail & wholesale outlets, using a Stockist method. The Board has now taken a decision to move into the B2B market with this range, with a focus on 2 customer types – the large builders who create large scale gated colonies and the government sector for lighting at streets, parks etc. In what way will your approach to the Distribution Strategy change when compared to your consumer products division. Why ?

Answer:We are as mentioned above moving from a B2C mode to B2B mode.While doing that I will not change the present B2C mode that’s in existence, and will rely on that to support the company with cashflows, that’s already in place. Having said that the future expansion concentration will be towards the newly strategized B2B model.

Now for the B2B model, its important to keep the following in mind the following.

Areas of Difference B2B MarketMarket Characteristics Geographically Concentrated

Relatively Fewer Buyer

Product Characteristic Technical Complex

Customized

Service Characteristic Service , timely Availability extremely Important

Buying Behavior Involvement of Various functional area from both the ends

Purchase Decisions are performance based and rational

Technical Expertise /Stable Interpersonal relationship

Channel Characteristic More Direct

Fewer Intermediaries

Promotional Characteristic Emphasis on Personal Selling

Price Characteristic Competitive Bidding and Negotiated Prices

List Price for Standard Products

Basis the above, we can consider a Selective Distribution.

6. Your company is in the manufacture and marketing of a range of specialized hair care treatments. These products range from localized serums, hair oils, shampoos and conditioners. Well researched and designed, these products are likely to be priced at a premium ie. about 35 – 50% higher than the well known brands in the category. You have been asked to suggest what Intensity of Distribution you intend to use for the brands – Intense, Selective or Exclusive. Please state your strategy, giving reasons why you chose that intensity.

Strategy would be

Selective distributionSelective distribution is a more limited form of distribution where the product is less widely distributed than if an intensive strategy is employed but is more available than under an exclusive arrangement. The objective is to gain a level of coverage and retain some semblance of control (influence) over how a product is sold, how an image is portrayed, and other factors that might affect the product’s sales and reputation. We can distribute through a multistage distribution system turn to a selective implementation of distribution. Selective distribution (along any number of different dimensions) is one way for us to balance the breadth and depth of distribution effort to maximize long-run profit. Depending on product and consumer characteristics, we can employ more selective distribution strategies while others employ less selective approaches. The product and consumer characteristics that argue for exclusive distribution approaches usually support more selective strategies, while the product and consumer characteristics that argue for intensive distribution approaches usually support less selective strategies. By employing selective distribution, we can employ the channels most likely to appeal to the most customers.

7. You are working as a Sales Head of a Telecom company. Your company is in the business of providing Telecom services to individual consumers . As part of the

expansion plan, they have decided to venture into the corporate services sector, aiming to convince large corporates to avail of their services. You have been chosen to design a sales organization for this vertical. Please indicate how you would go about doing the same , giving the logic for your decisions at each stage.

We can design a sales organization by the following methoDefine a channel of distribution,Discuss different forms of channels and their benefits and liabilities,Describe the process of designing a channel of distribution,Present trends that affect the nature of the relationship between manufacturers and their go-tomarket strategies, andDiscuss issues related to margin structure and branding.

Distributors(wholesaledistribution)Businesses that sell to other businesses. They create value through the movement of goods by providing activities such as providing assortment, breaking bulk,financing, and managing inventory. These channel members usually take ownership of the goods.

Master Distributors These channel intermediaries often sit between the manufacturer and other middlemen and hold inventory of hard-to-get parts. They often will have subdistributors who work with them doing more traditional distribution and logistics functions.

Value-AddedResellers (VARS)Designers, engineers, or consultants who partner with manufacturers of productsthat are used in their designs. They typically buy at a discount and then resell theproduct as part of their solution.

Manufacturer Reps Independent sales agents who carry different manufacturers’ lines of product and serve as a third-party sales force for these firms. They carry

multiple lines (often noncompeting) and specialize in different end-user applications. They are usually paid a commission on the sale.

PART C – 20 MARKS. Please answer 4 questions out of the following 6. Each question carries 5 marks

8. In what way does exploitation of a local opportunity by your Stockist help you build your brand’s Market Share in the Stockist’s area? Please illustrate your answer with an example.

9. You are heading the sales of your company. Your products are special tyres made exclusively for industrial use like in forklifts, earthmovers etc. While there is a small market for original equipment manufacturers, the major market is the replacement market, especially in the logistics and project construction areas. Would you build a Direct distribution system ie from you directly to customer, or would you prefer a Distributor/Stockist to drive your Distribution? What are the reasons for your choice ?

Answer: I shall employ Distributors, but Exclusive distribution strategy.

Exclusive distributionExclusive distribution reduces greatly the availability of the product and is associated with one outlet per region or location. Often certain rights are granted in exchange for exclusivity, whereby the manufacturer influences a set of business decisions made by its channel partners. Related to exclusive distribution is exclusive dealing, where the seller demands that the reseller sell only his products or noncompeting products, enforceable by sanctions if intermediaries do not comply. There are many benefits that accrue from exclusivity, including:

Reseller dependence on the supplier, which enables greater control over the reseller’s behavior

The elimination of competitors from these exclusive channels Lower transaction costs, given the nature of the relationship For suppliers, a greater share of mind and greater commitment from the reseller,

since their fortunes are linked

10. You have been invited by a company which manufactures a range of cosmetics. They have a total of 67 SKUs in their range. Currently, their sales persons are selling an average of 23 SKUs per call. You have to give a talk on how to improve Range Selling. Please indicate what would be the flow of your presentation ?

11. “ Since it is the Distributor who is extending credit to the customer, it is his job to ensure the money is collected. The Sales Manager of the company and his/her team have nothing to do with Market Credit “ - please indicate if you agree or disagree with this statement, and your reasons why.

Answer:The distributor is supposed to collect money and pay back to the manufacturer.

However though there is no direct management required, it still needs to be understood that if the distributor is unable to collect money, at some point of time it will not be able to pay back to the manufacturer. So the collection of money for the manufacturer is tied to collection of money though all the work is put in by the distributor.

It also needs to be understood that over a period of time if the distributor cannot collect the money, it will slowly stop selling and that would impact the manufacturers’ sales.So I disagree to with the above statement.

The Sales manager of the manufacturer should work with the distributor for collection.

12. You work as a Sales Manager in a Health Foods company. Your products have an expiry date that is 1 year from the date of manufacturing. What would you brief your sales force to do to ensure that no product ever expires in any retail outlet ?

Answer: The sales forces have to provide the right inputs regarding the sales data at the out lets.This would be the feed that the manufacturer need, and can therefore manufacturer and distribute, supply as per demand.

If we have a fair idea of sales (ccurate information), we can stock the shelfs appropriately. Also we can redistribute to those outlets where sales are higher.This would ensure an apt demand-supply match, and the health foods are sold off the shelves before they expire.

13. What is meant by the term WIDTH OF DISTRIBUTION ? If the Retail Universe in a town is 350 outlets, and your brands are available in 275 outlets, what would be your brands’ Width of Distribution ?

Answer:

Width of distribution is the spread of the distribution network available , and its coverage.

Width as per above is: 350 outlets