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Quality Management
SIX SIGMA TECHNIQUES
An organization cannot do today’s job with yesterdays methods & be in business
tomorrow.
 A highly disciplined process that helps us focus on developing and delivering nearperfect products and services.
 The word Six Sigma is a statistical term that measures how far a given process
deviates from perfection.
 The central idea behind Six Sigma is that if you can measure how many “defects” you
have in a process, you can systematically figure out how to eliminate them and get
as close to “zero defects” as possible.
 The term Six Sigma originated from terminology associated with manufacturing,
specifically terms associated with statistical modelling of manufacturing processes.
 The maturity of a manufacturing process can be described by a sigma rating
indicating its yield, or the percentage of defect-free products it creates.
 A six sigma process is one in which 99.99966% of the products manufactured are
statistically expected to be free of defects (3.4 defects per million)
UNDERSTANDING SIX SIGMA
 Degree of variation;
 Sigma is a letter in the Greek Alphabet
 Level of performance in terms of defects
 Statistical measurement of process capability
 Benchmark for comparison
 Process improvement methodology
 It is a Goal
 Strategy for change;
 A commitment to customers to achieve an acceptable level of performance
ORIGIN OF SIX SIGMA
Motorola company that invented Six Sigma.
 The term “Six Sigma” was coined by Bill Smith, an engineer with Motorola
 Late 1970s - Motorola started experimenting with problem solving through statistical
analysis
 1987 - Motorola officially launched it’s Six Sigma program
 Motorola saved more than $ 15 billion in the first 10 years of its Six Sigma effort
Methods of Six Sigma
Six Sigma Project methodologies
DMAIC
Used for projects aimed at
improving an existing business
process
DMADV
Used for projects aimed at creating
new product or process designs
DMAIC
 Define the problem
 Measure key aspects of the current process
 Analyze the data to investigate and verify cause-and-effect relationships
 Improve or optimize the current process based upon data analysis
 Control the future state process to ensure that any deviations from target are
corrected before they result in defects.
Define
Measure
Analyze
Improve
Control
Collect data
Analyze data, Improveme Establish
Identify,
on size of the
establish and
nt strategy
standards to
evaluate and
selected
confirm the “ Develop
maintain
select
problem,
vital few “
ideas to
process;
projects for identify key
determinants
remove root Design the
customer
improveme
of the
causes
controls,
requirements,
performance.
Design
and
implement
nt
Set goals
Form
teams.
Determine
key product
and process
characteristic.
Validate
hypothesis
carry out
and monitor.
experiments Evaluate
,
financial
Optimize
impact of the
the process.
project
 DMADV:
 Define design goals that are consistent with customer demands
 Measure and identify CTQs (characteristics that are Critical To Quality)
 Analyze to develop and design alternatives
 Design details, optimize the design, and plan for design verification
 Verify the design
BENEFITS OF SIX SIGMA
 Generates sustained success
 Sets performance goal for everyone
 Enhances value for customers;
 Accelerates rate of improvement
 Promotes learning across boundaries
Executes strategic change
USFDA
 FDA is responsible for :
 Protecting the public health by assuring that foods are safe, wholesome, sanitary and
properly labeled; human and veterinary drugs, and vaccines and other biological
products and medical devices intended for human use are safe and effective
 Protecting the public from electronic product radiation
 Assuring cosmetics and dietary supplements are safe and properly labeled
 Regulating tobacco products
 Advancing the public health by helping to speed product innovations
 Helping the public get the accurate science-based information they need to use
medicines, devices, and foods to improve their health
OFFICES OF USFDA
 FDA regulates
 foods, except for most meat and poultry products, which are regulated by the U.S.
Department of Agriculture
 food additives
 infant formulas
 dietary supplements
 human drugs
 vaccines, blood products, and other biologics
 medical devices, from simple items like tongue depressors, to complex technologies
such as heart pacemakers
 electronic products that give off radiation, such as microwave ovens and X-ray
equipment
 cosmetics
 feed, drugs, and devices used in pets, farm animals, and other animals
 tobacco products
 FDA does not regulate:
 advertising (except for prescription drugs, medical devices, and tobacco products)
 alcoholic beverages
 some consumer products, such as paint, child-resistant packages, baby toys, and
household appliances (except for those that give off radiation)
 illegal drugs of abuse, such as heroin and marijuana
 health insurance
 meat and poultry (except for game meats, such as venison, ostrich, and snake)
 restaurants and grocery stores
 FDA shares the responsibility for regulating these products with other government
agencies:
 pesticides (FDA, the U.S. Department of Agriculture, and the Environmental
Protection Agency regulate these)
 water (FDA regulates the labeling and safety of bottled water, while the
Environmental Protection Agency develops national standards for drinking water
from municipal water supplies)
EXPORTS MARKET
 The Indian Pharmaceutical Industry currently tops the chart amongst India 's sciencebased industries with wide ranging capabilities in the complex field of drug
manufacture and technology.
 The Indian Pharmaceutical Industry ranks very high amongst all third world
countries, in terms of technology, quality and the vast range of medicines that are
manufactured.
The Pharmaceutical industry has grown from mere US$ 0.3 billion turnover in 1980 to about
US$ 21.73 billion in 2009-10.
 The Pharmaceutical industry has grown from mere US$ 0.3 billion turnover in 1980
to about US$ 21.73 billion in 2009-10.
 The country now ranks 3 rd in terms of volume of production (10 per cent of global
share) an 14 th largest by value (1.5 per cent of global share).

Cost of drugs in India ranging from 5 per cent to 50 per cent less as compared to
developed countries.
 Indian pharmaceutical industry growth has been fuelled by exports and its products
are exported to a large number of countries with a sizeable share in the advanced
regulated markets of the US and Western Europe .

More of Indian companies are now seeking regulatory approvals in USA in
specialized segments like Anti-infectives, Cardiovasculars, CNS group.
 Along with Brazil & PR China, India has carved a niche for itself by being a top generic
Pharma player.
 Increasing number of Indian pharmaceutical companies have been getting
international regulatory approvals for their plants from agencies like USFDA (USA),
MHRA (UK), TGA (Australia), MCC (South Africa), Health Canada etc

More than 50 per cent share of exports is by way of dosage forms.
 The export markets can be broadly classified into:

Regulated Markets
 Unregulated Markets(soft regulated markets)
 In the regulated markets there are certain ‘regulatory barriers’ exporters are
required to follow.

An elaborate registration procedure.
 Inspection procedures to satisfy the drug control authorities about quality of
medicines.
 Such requirements are absent or are not so important in the unregulated
markets.

The stricter the regulations, the tougher are the entry barriers and accordingly
higher are the price realisationsThe regulated markets comprise of the following
countries.

North America(USA and Canada)
 Western Europe
 Japan
 Australia & New Zealand

Again, within the unregulated markets there are substantial differences:
 Vietnam, Syria, Jordan
 Here, there are no set regulations
 Countries such as China, Korea, Brazil, Taiwan & Egypt where some registration
requirements have to be satisfied.
 These markets are called ‘Semi-regulated’ markets.
 USA is currently India’s Largest trading partner
 The growth of Indian pharma Industry Has followed the following sequence:
 Domestic market
 Exports to unregulated markets
 Exports to regulated markets other that USA
 Exports to USA
 The reason to move up has been exposure to larger markets and higher price
realisations.
 USA account for half of Global Pharma market.
 Bulk drug makers are largest exporters to unregulated markets, here the
price realisation is poor.
ENTRY BARRIERS IN US GENERIC MRKT
 Regulatory Barriers
 Submission of DMF and ANDA applications
 This is a very expensive and time consuming process
 Cost of running a USFDA approved facility is 6X the cost of running a facility
without cGMP approval

Litigation Costs
 Efficient scale of operations
DRUG MASTER FILE (DMF)
 Exporters from India can be classified into 3 broad
groups:
 Companies with both DMF(Approval for API) and
ANDA(Approval for formulation) in their own name.
 Companies with DMF in their name but ANDAs in
the name of marketing partners
 Companies which have only DMFs in their own
name.
 Commodity Generics
 Most companies operate at lower end of the
market.
 Products are at a lower end of their product life
cycles where barriers are less and competitors is
more.
 Lupin is largest manufacturer of anti TB drugs.
 Shashun Chemicals is largest producer of Ibuporfen
 Calyx pharma for Pyrazinamide
 Divis Labs for Naproxen
 Value added Generics
 Non infringing process
 NDDS
 NDA under section 505(B)(2)
 Direct patent challenges(under Para – IV route)
PHARMEXIL
 Pharmaceutical Export Promotion Council (popularly
known as PHARMEXCIL) has been set up on 12th May
2004 by the Ministry of Commerce & Industry,
Department of Commerce, Government of India to
represent the Drugs & Pharmaceuticals and Healthcare
Industry in the global arena.
 PHARMEXCIL is mandated to help its members to
achieve excellence in export and facilitate overseas
buyers to find suitable trade partners from Indian
Pharma Industry.
 Various pharmaceutical sectors like bulk drugs and its
intermediates, formulations, veterinary drugs, herbal,
Ayurvedic, Unani and Homeopathic medicines, biotech
and biological products, diagnostics, surgicals,
nutraceuticals & phytochemicals and pharma industry
related services, collaborative research, contract
manufacturing, clinical trials and consultancy, etc. come
under the purview of Pharmexcil
STEPS IN IDENTIFICATION OF EXPORT MARKET
 Classification of product.(API, Formulations, OTC)
 Find countries with the largest and fastest growing
markets for your product
 Determine which foreign markets will be the most
penetrable
 Define and narrow those export markets you
intend to pursue
 Research export efforts of other Competitors
 Determine which countries might be profitable
markets for the product/service
MARKET RESEARCH
 This can be done by accessing the U.S. Commercial
Service Market Research Library containing more than
100,000 industry and country-specific market reports,
authored by our specialists working in overseas posts.
 The Library Includes
 Country Commercial Guides
 Industry Overviews
 Market Updates
 Multilateral Development Bank Reports
 Best Markets
Industry/Regional Reports
ESIS
 their contributions, with or without additional state support. Health-financing
models based on formal employment are widely prevalent and make up a significant
source of health financing.
 In tax-funded systems, the population contributes indirectly via taxes, which then
form part of the general revenues to be used in the provisioning of healthcare.
 In employment-based social health insurance systems, it is the employees and
employers who pay in
 In India, various forms of employment-based health coverage already exist, such as
the widely recognised Employees’ State Insurance Scheme (ESIS) for employees in
the formal sector.
 The Central Government Health Scheme for serving and retired civil servants, the
schemes for serving and retired employees of the Armed Forces, Railways,
Paramilitary forces and other government organisations, and the various health
coverage schemes and benefits provided by banks, insurers, other public sector
companies, and the private sector employers.
 Together, they make up about 7% of the total health expenditure in the country.
OBJECTIVES
 Ensuring adequate financial protection for all.
 Reducing adverse selection.
 Providing cross-subsidisation.

Effectively pooling health risks, bringing in efficiencies from bulk purchasing of
health services.
 Employees’ State Insurance Scheme (ESIS), one of the oldest health insurance
schemes in India.

It is aimed at targeting the formal sector to provide a social security mechanism for
the lower paid industrial workers.
 Established vide the ESIS Act in 1948, the scheme gives both cash and medical
benefits to the employees of factories and service establishments who earn less than
a specified wage ceiling, currently capped at Rs 7500 per month.
 All eligible members must contribute a share based on their wages (currently 1.75%
of wages, but exempt for those earning less than Rs 40 per day) while the employer
contributes a larger share (currently 4.75% of wages of all eligible employees,
including the low paid ones).
 The state government also contributes a minimum fixed amount.
 The scheme is managed by the Employees’ State Insurance Corporation (ESIC), a
statutory body established under the Union Ministry of Labour, comprising
representatives from the ministries of labour, health and employees’ federation.
 Benefits under ESIS
 free, comprehensive healthcare at ESIS facilities
 cash compensation for loss of wages due to illness
 maternity benefits
 disability benefits
 survivorship and funeral expenses in the event of death of the worker.
NGO’S
 A non-governmental organization (NGO) is a legally constituted organization
created by natural or legal persons that operates independently from
any government.
 The term originated from the United Nations (UN), and is normally used to refer to
organizations that do not form part of the government and are not conventional forprofit business.

In the cases in which NGOs are funded totally or partially by governments, the NGO
maintains its non-governmental status by excluding government representatives
from membership in the organization.

The term is usually applied only to organizations that pursue some wider social aim
that has political aspects, but that are not overtly political organizations such
as political parties.
 India is estimated to have around 3.3 million NGOs in year 2009, which is one NGO
for less than 400 Indians, and many times the number of primary schools and
primary health centres in India.
 NGO Definition : NGO are“ an independent voluntary association of people acting
together on a continuous basis for some common purpose other than achieving
government office, making money or illegal activities.“
 Common usage varies between countries - for example NGO is commonly used for
domestic organizations in Australia that would be referred to as non-profit
organizations in the United States.
NGO’s - Classification
 NGO type can be understood by orientation and level of co-
operation.
Orientation
Level of cooperation
Charitable
Community
based
organisations
Service
City wide
organisations
Participatory
National
NGO’s
Empowering
International
NGO’s
NGO’S WHO CLASSIFICATION

The typology the World Bank uses divides them into Operational and Advocacy
 Operational NGOs :
 Operational NGOs seek to "achieve small scale change directly through
projects.
 " They mobilize financial resources, materials and volunteers to create
localized programs in the field.

They hold large scale fundraising events, apply to governments and
organizations for grants and contracts in order to raise money for projects.
 Operational NGOs deal with a wide range of issues, but are most often
associated with the delivery of services and welfare, emergency relief and
environmental issues.
 Operational NGOs can be further categorized, one frequently used
categorization is the division into relief-oriented versus developmentoriented organizations; they can also be classified according to whether they
stress service delivery or participation; or whether they are religious or
secular; and whether they are more public or private-oriented.
 Advocacy/Campaigning NGOs :
 Campaigning NGOs seek to "achieve large scale change promoted indirectly
through influence of the political system.

Campaigning NGOs need an efficient and effective group of professional
members who are able to keep supporters informed, and motivated.
 They must plan and host demonstrations and events that will keep their
cause in the media.

They must maintain a large informed network of supporters who can be
mobilized for events to garner media attention and influence policy changes.
 Campaigning NGOs often deal with issues relating to human rights, women's
rights, children's rights.
 The primary purpose of an Advocacy NGO is to defend or promote a specific
cause.

As opposed to operational project management, these organizations
typically try to raise awareness, acceptance and knowledge by lobbying, press
work and activist events.
NGO’S METHODS
 Some act primarily as lobbyists, while others primarily conduct programs and
activities.
 Public relations
 Non-governmental organisations need healthy relationships with the public
to meet their goals.

Foundations and charities use sophisticated public relations campaigns to
raise funds and employ standard lobbying techniques with governments.
Interest groups may be of political importance because of their ability to influence social
and political outcomes
 Project management
 There is an increasing awareness that management techniques are crucial to
project success in non-governmental organizations.
 Generally, non-governmental organizations that are private have either a
community or environmental focus.
 They address varieties of issues such as religion, emergency aid, or
humanitarian affairs.

They mobilize public support and voluntary contributions for aid; they often
have strong links with community groups in developing countries, and they
often work in areas where government-to-government aid is not possible.

NGOs are accepted as a part of the international relations landscape, and
while they influence national and multilateral policy-making, increasingly
they are more directly involved in local action.
MARKETING
SCOPE OF MARKETING
 Goods
 Services
 Events
 Experiences
 Personalities
 Place
 Organizations
 Properties
 Information
 Ideas and concepts
Core Concepts of Marketing
Needs, wants
demands
Markets
Products
Marketing &
Marketers
Utility, Value &
Satisfaction
Exchange, Transaction
Relationships
8
CUSTOMER
Anyone who is in the market looking at a product / service for attention, acquisition, use
or consumption that satisfies a want or a need
Uniqueness of medical prdcts marketing
•
Customer and consumer are two separate entities
•
Customer is more aware and informed about the products
•
Marketing is regulated by various guidelines (example: advertising not allowed for
schedule H drugs)
•
Medical council of india( MCI) governs the inputs provided to medical practitioner
(doctor i.e customer for pharma companies)
•
While Drugs and Magic remedies act governs the content of advertising of the
medical products
•
Direct to consumer marketing is not allowed for on prescription medical products
•
Marketing of product and claims has to be backed by clinical evidences for medical
products
•
Evidence based marketing is desirable
•
For OTC ( over the counter products) marketing can be done by advertising directly
to the patient (eg: ranbaxy’s revital)
medical products selling process
products
Pharma
company
detailing
Sales
representative
Product sample
Doctors
Clinical data
Prescribes
Rx
money
Retail
chemist
Patient
medicine
FUNCTIONS OF DISRIBUTION
•
distribution is about getting the product or service to the customer as conveniently
as possible; it deals with access and availability
•
intermediaries perform many of the distribution functions on behalf of suppliers
•
merchant intermediaries actually take title to physical products that they distribute
•
agents do not ever own the products, but they arrange the transfer of title
•
Distribution happens through various channels
What is a Distribution Channel?
•
A set of organizations (intermediaries) involved in the process of making a product or
service available for use or consumption by the consumer or business user.
•
Used to move the customer towards the product
Selling through wholesalers and retailers usually is much more efficient and cost effective
than direct sales
•
The role of distribution entails:
– Arranging for its sale and transfer of title
– Promoting the product
– Storing the product
– Assuming some risk during distribution.
FUNCTIONS
•
Intermediaries often perform these activities for producer or consumer.
•
Information: gathering and distributing marketing research and intelligence
information about the marketing environment.
•
Promotion: developing and spreading persuasive communications about an offer
•
Contact: finding and communicating with prospective buyers
•
Matching: shaping and fitting the offer to the buyer’s needs, including such activities
as manufacturing, grading, assembling, and packaging.
Pharma distribution channel
Pharma company
Cental govt or
state govt
1
CFA
2
Distributor ( stockist)
Selected Institutes
(hospitals)
Sub Distributor ( sub
stockist)
3
Retailer ( chemist)
Patient
(consumer)
3-level channel of distribution
•
ROLE OF CARRYING & FORWRDNG AGENTS (CFA)
•
A extended part of pharma company ( single pharma company)
•
CFA can also be a manufacturer owned warehouse or an independent service
provider paid a certain commission per unit handled
•
They help in the routinization of transactions
•
adjustment of assortment discrepancy and sorting-breaking down a heterogeneous
supply into separate stocks that are relatively homogeneous
•
ALLOCATION- breaking down a homogeneous supply into smaller slots &
ASSORTING-Building assortments that are readily consumable
•
Accumulation-BRINGING SIMILAR STOCKS from different suppliers
•
Does not have a fixed margin for doing that but operates on share of revenue on the
volumes that it trades ( 1.5 to 2% commission)
•
Appointed at a state level ( at max 2-3 CFA’s per state)
•
Keep stock of multiple pharma companies to distribute it to the retail chemist
•
They get fix margins for selling the medicines from the pharma companies ( 10% for
the product out of price order and 8% for the product within price order)
•
They are appointed by the pharma company and have to operate to distribute
products for a particular region (territory)
•
Pharma company appoints minimum1 and max 3 distributers for one region)
•
Order stock at every month end from the respective CFA’S (termed as closing 28 th to
31st or 1st week of every month)
•
Is take a permission from All India Organisation of Chemist and Druggist ( AIOCD)
ROLE OF SUB STOCKIST
•
They share the stock with stockist to distribute it to the area not covered by the
stockist
•
Shares the margins with the stockist
•
Act as mediator between stockist and retailer
•
Have a limited existence in pharma supply chain
•
For rural and extra urban regions a pharma company appoints a sub-stockist to
increase their reach in those areas
ROLE OF CHEMIST
•
Is a point of purchase for the patient
•
Operates on fixed margins(20% for products not under price order and 16% for
products under price order)
•
Order stock from stockist as and when required and do not have a fixed ordering
schedule
•
Keeps stock of all the companies and sells to the patients at maximum retail price
(MRP)
•
They are registered with state FDA authorities
PATTERNS OF DISTRIBUTION
•
Determines the intensity of the distribution
•
Intensity decides the service level provided
•
Types of distribution intensity:
– Intensive
– Selective
– Exclusive
INTENSIVE DSTRBTN
•
Intensive: distribution through every reasonable outlet available – FMCG
•
Selective: multiple, but not all outlets in the market – pharma, frozen food
•
Exclusive: may be only one outlet in a market - car dealers
SELECTIVE DSTRBTN
•
A few select outlets will be permitted to keep the products
•
Outlets selected in line with the image the company wants to project
•
Preferred for high value products
•
•
Tanishque jewelry
Keeps distribution costs lower
EXCLUSV DSRTBTN
•
Highly selective choice of outlets – may be even one outlet in an entire market
•
Could include outlets set up by companies – Titan, Bata
•
Producer wants a close watch and control on the distribution of his products.
WORDS ON MARKETING
1. “The purpose of a company is ‘to create a customer…The only profit center is the
customer.’”
2. “A business has two—and only two—basic functions: marketing and innovation.
Marketing and innovation produce results: all the rest are costs.”
3. “The aim of marketing is to make selling unnecessary.”
4. “While great devices are invented in the Laboratory, great products are invented in
the Marketing department.”
5. “Marketing is too important to be left to the marketing department.”
SELLING
•
The face to face meeting with your prospect at the Intention or Buying level
•
Getting there—right place, right time, right person
Hierarchy in a Large Organization
Organisational
Levels
Organisation Structure
Type of
Planning
Corporate
Corporate Office
Corporate
Strategic
Planning
Division /
Business Unit /
SBU
SBU
‘A’
SBU
‘B’
SBU
‘C’
Product
Product
‘x’
Product
‘y’
Product
‘z’
Divisional /
SBU Strategic
Planning
Product /
Operational
Planning
• For effective planning, operations, and control, a large
multi-product / multi-business firm divides its major
products / services into divisions / strategic business
units ( SBUs)
• Each SBU has a separate business, a set of competitors
and customers, and a manager responsible for strategic
planning, performance, and control
3
Types of Sales Managers / Levels of
Sales Management Positions
CEO /
President
V. P. Sales /
V. P. Marketing
Top-Level Sales Managers /
Leaders
National Sales Manager
Regional / Zonal / Divisional
Sales Managers
District / Branch / Area Sales Managers
Middle-Level Sales Managers
First / Lower Level Sales Managers
Sales Trainee / Sales Person / Sales Representative
Hierarchy in sales department in a pharmaceutical company
4
Prospecting
•
It is identifying or finding prospects i.e. prospective or potential customers.
•
Methods of prospecting or sales lead generation are: (1) referrals from existing
customers, (2) company sources (website, ads., tradeshow, teleprospecting), (3)
external sources (suppliers, intermediaries, trade associations), (4) salespersons’
networking, (5) industrial directories, (6) cold canvassing
Qualifying
•
Companies qualify sales leads by contacting them by mail or phone to find their
interests (or needs) and financial capacity.
•
Leads are categorized as: Hot, Warm, and Cool
PREAPPROACH
•
Information gathering about the prospect.
Sources of information: the Internet, industrial directories, government
publications, intermediaries, etc.
•
Precall planning
•
Setting call objectives
•
Tentative planning of sales strategy: which products, features and benefits
may meet the customer needs
•
Make an appointment to meet the prospect
•
Make favourable first impression
•
Select an approach technique:
•
Introductory
•
Customer benefit
•
Product
•
Question
•
Praise
•
The approach takes a few minutes of a call, but it can make or break a sale
There are four components:
•
Understanding the buyer’s needs
•
Knowing sales presentation methods / strategies
•
Developing an effective presentation
•
Using demonstration as a tool for selling
We will examine each of the above points
UNDERSANDING BUYERS NEED
•
Firms and consumers buy products / services to satisfy needs
•
To understand buyer’s needs, ask questions and listen
•
In business situations, problem identification and impact questions are important
E.G.
•
Have you experienced any problems on quality and delivery from the existing
supplies?
•
What impact the quality and delivery problems will have on your costs and
customer satisfaction?
Knowing Sales Presentation Methods/StratEGIES
Firms have developed different methods / styles / strategies of sales presentation
•
•
Stimulus response method / canned approach.
•
It is a memorised sales talk or a prepared sales presentation.
•
The sales person talks without knowing the prospect’s needs. E.G. Used by
tele-marketing people
Formula method / formulated approach.
•
It is also based on stimulus response thinking that all prospects are similar.
•
The salesperson uses a standard formula – AIDA (attention, interest, desire,
and action).
•
It is used if time is short and prospects are similar.
•
Shortcomings are: prospects’ needs are not uncovered and uses same
standard formula for different prospects.
•
•
•
Need – satisfaction method
•
Interactive sales presentation
•
First find prospect’s needs, by asking questions and listening
•
Use FAB approach: Features, Advantages, Benefits
•
Effective method, as it focuses on customers
Consultative selling method / Problem-solving approach
•
Salespeople use cross-functional expertise
•
Firms adopt team selling approach
•
It is used by software / consulting firms
Team selling method
Team selling is the practice of using teams of people from various company departments to
sell to a large account. A large account can be complex with multifaceted purchasing
decisions so therefor more than one specific sales department can be used. Additional
departments usually not used for selling may include technical support teams, finance
departments, management personnel, and even engineering. Sales and marketing
departments are usually always present in the team marketing mix.
USING DEMONSTARTIOON
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Sales presentation can be improved by demonstration
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Demonstration is one of the important selling tools EGs: Test drive of cars;
demonstration of industrial products in use
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Benefits of using demonstration for selling are:
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Buyers’ objections are cleared
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Improves the buyer’s purchasing interest
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Helps to find specific benefits of the prospect
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The prospect can experience the benefit
TRIAL CLOSE AND CLOSING SALE
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Trial close checks the attitude or opinion of the prospect, before closing the sale (or
asking for the order)
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If the response to trial close question is favourable, then the salesperson should
close the sale
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Some of the techniques used for closing the sale are: (a) alternative-choice, (b)
minor points, (c) assumptive, (d) summary-of-benefits, (e) T-account, (f) specialoffer, (g) probability, and (h) negotiation
FOLLOW UP AND SERVICE
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Necessary for customer satisfaction
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Successful salespeople follow-up in different ways: For example,
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Check order details
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Follow through delivery schedule
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Visit when the product is delivered
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Build long-term relationship
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Arrange warranty service
COMPONENTS OF SALE STATEGY
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Selling Methods
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These are: (1) Stimulus response, (2) formula, (3) need-satisfaction, (4) team
selling, (5) consultative
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Selection of appropriate selling method depends on relationship strategy
Channel Strategy
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There are many sales / marketing channels. For example: company
salesforce, distributors, franchisees, agents, the internet, brokers, discount
stores
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Selection of a suitable channel depends on both the buyer and the seller,
products / services, and markets
Sales Forecast is the prediction, projection or estimation of expected sales over a
specified future time period.
IMPORTANCE OF SALE FORCASTING
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Companies that implement accurate sales forecasting processes realize important
benefits such as:
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Enhanced cash flow
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To set targets
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Knowing when and how much to buy
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In-depth knowledge of customers and the products they order
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The ability to plan for production and capacity
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The ability to identify the pattern or trend of sales
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Determine the value of a business above the value of its current assets
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Ability to determine the expected return on investment
BASIC TERMS
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Market demand for a product or service is the estimated total sales volume in a
market (or industry) for a specific time period in a defined marketing environment,
under a defined marketing program or expenditure. Market demand is a function
associated with varying levels of industry marketing expenditure.
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Market (or industry) forecast (or market size) is the expected market (or industry)
demand at one level of industry marketing expenditure
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Market potential is the maximum market (or industry) demand, resulting from a very
high level of industry marketing expenditure, where further increases in expenditure
would have little effect on increase in demand
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Company demand is the company’s estimated share of market demand for a product
or service at alternative levels of the company marketing efforts (or expenditures) in
a specific time period
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Company sales potential is the maximum estimated company sales of a product or
service, based on maximum share (or percentage) of market potential expected by
the company
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Company sales forecast is the estimated company sales of a product or service,
based on a chosen (or proposed) marketing expenditure plan, for a specific time
period, in a assumed marketing environment
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Sales budget is the estimate of expected sales volume in units or revenues from the
company’s products and services, and the selling expenses. It is set slightly lower
than the company sales forecast, to avoid excessive risks
Forecasting is used in budgeting
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Two basic approaches:
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Top-down or Break-down approach
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Bottom-up or Build-up approach
Some companies use both approaches to increase their confidence in the forecast
Steps followed in Top-down / Break-down Approach
Forecast relevant external environmental factors
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Estimate industry sales or market potential
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Calculate company sales potential = market potential x company share
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Decide company sales forecast (lower than company sales potential because sales
potential is maximum estimated sales, without any constraints)
Steps followed in Bottom-up / Build-up Approach
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Salespersons estimate sales expected from their customers
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Area / Branch managers combine sales forecasts received from salespersons
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Regional / Zonal managers combine sales forecasts received from area / branch
managers
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Sales / marketing head combines sales forecasts received from regional / zonal
managers into company sales forecast, which is presented to CEO for discussion and
approval
Sales Forecasting Methods
Qualitative Methods
Quantitative Methods
• Executive opinion
• Moving averages
• Delphi method
• Exponential smoothing
• Salesforce composite
• Decomposition
• Survey of buyers’
intentions
• Test marketing
• Naïve / Ratio method
• Regression analysis
• Econometric analysis
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Executive opinion method
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Most widely used
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Procedure includes discussions and / or average of all executives’ individual opinion
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Advantages: quick forecast, less expensive
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Disadvantages: subjective, no breakdown into subunits
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Accuracy: fair; time required: short to medium (1 – 4 weeks)
Delphi method
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Process includes a coordinator getting forecasts separately from experts,
summarizing the forecasts, giving the summary report to experts, who are asked to
make another prediction; the process is repeated till some consensus is reached
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Experts are company managers, consultants, intermediaries, and trade associations
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Advantages: objective, good accuracy
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Disadvantages: getting experts, no breakdown into subunits, time required: medium
(3/4 weeks) to long (2/3 months)
Salesforce composite method
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An example of bottom-up or grass-roots approach
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Procedure consists of each salesperson estimating sales. Company sales forecast is
made up of all salespersons’ sales estimates
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Advantages: Salespeople are involved, breakdown into subunits possible
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Disadvantages: Optimistic or pessimistic forecasts, medium to long time required
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Accuracy: fair to good (if trained)
Survey of Buyers’ Intentions Method
• Process includes asking customers about their intentions
to buy the company’s products and services
• Questionnaire may contain other relevant questions
• Advantages: gives more market information, can
forecast new and existing products, good accuracy
• Disadvantages: some buyers’ unwilling to respond, time
required is long (3-6 months), medium to high cost
Test Marketing Method
• Methods used for consumer market testing: full blown,
controlled, and simulated test marketing
• Methods used for business market testing: alpha and
beta testing
Test Marketing Method (Continued)
• Advantages: used for new or modified products, good
accuracy, minimizes risk of national launch
• Disadvantages: Competitors may disturb if some
methods are used, medium to high cost, medium to long
time required
Quantitative:
Moving Average Method
• Procedure is to calculate the average company sales for
previous years
• Moving averages name is due to dropping sales in the
oldest period and replacing it by sales in the newest
period
• Advantages: simple and easy to calculate, low cost, less
time, good accuracy for short term and stable conditions
• Disadvantages: can not predict downturn / upturn, not
used for unstable market conditions and long-term
forecasts
EXPONENTIAL SMOOTHING METHID
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The forecaster allows sales in certain periods to influence the sales forecast more
than sales in other periods
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Equation used:
Sales forecast for next period=(L)(actual sales of this year)+(1-L)(this year’s sales
forecast), where (L) is a smoothing constant, ranging greater than zero and less than 1
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Advantages: simple method, forecaster’s knowledge used, low cost, less time, good
accuracy for short term forecast
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Disadvantages: smoothing constant is arbitrary, not used for long-term and new
product forecast
DECOMPOSTION METHOD
Decomposition Method
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Process includes breaking down the company’s previous periods’ sales data into
components like trend, cycle, seasonal, and erratic events. These components are
recombined to produce sales forecast
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Advantages: Conceptually sound, fair to good accuracy, low cost, less time
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Disadvantages: complex statistical method, historical data needed, used for shortterm forecasting only
Naive / Ratio Method
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Assumes: what happened in the immediate past will happen in immediate future
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Simple formula used:
Actual sales of this year
Sales
forecast for next year  Actual sales of this year 
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Actual sales of last year
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Advantages: simple to calculate, low cost, less time, accuracy good for short-term
forecasting
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Disadvantages: less accurate if past sales fluctuate
REGRESSION ANALYSIS METHOD
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It is a statistical forecasting method
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Process consists of identifying causal relationship between company sales
(dependent variable, y) and independent variable (x), which influences sales
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If one independent variable is used, it is called linear (or simple) regression, using
formula; y=a+bx, where ‘a’ is the intercept and ‘b’ is the slope of the trend line
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In practice, company sales are influenced by several independent variables, like
price, population, promotional expenditure. The method used is multiple regression
analysis
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Advantages: Objective, good accuracy, predicts upturn / downturn, short to medium
time, low to medium cost
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Disadvantages: technically complex, large historical data needed, software packages
essential
ECONOMETRIC ANALYSIS METHOD
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Procedure includes developing many regression equations representing (i)
relationships between sales and independent variables which influence sales, and (ii)
interrelationships between variables. Forecast is prepared by solving these equations
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Computers and software packages are used
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Advantages: Good accuracy of forecasts of economic conditions and industry sales
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Disadvantages: need expertise & large historical data, medium to long time, medium
to high cost
PHARMA INDUSTRY FORCASTING
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Sales forecasting is done first to arrive at revenues and to prepare forecasted PNL
and Balance Sheet
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Sales forecasting is done on annual basis and then broken down in to monthly and
quarterly basis
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Mostly the bottom up or build up approach is preferred to arrive at a the forecasted
sales figure
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Some companies also do rolling forecast ( every monthly forecast of annual sales
from that month)