Tag: University of Mumbai BMS Notes

Wholesaler is a trader, who buys goods in bulk quantities and sell it in smaller ones. On the other hand, distributors are the reseller of products, which cover a specific area or market.

To make goods available to the final consumer, a manufacturer or producer should choose the best channel for distribution, as he cannot sell the goods directly to consumers. In this way, the supply chain of a company has a great role to play because it highly influences its marketing and promotional activities. The two most important links of supply chain management are wholesaler and distributor, as they ensure timely availability of merchandise to the end user. As these two links are interconnected, they are quite commonly confused for one another.

Wholesaler

The wholesaler can be understood as an intermediary entity that buys goods in large quantities and resells them to the retailer, with the sole aim of earning profit. He/She acts as a middle-person between a manufacturer and retailer. Due to direct buying from the manufacturer or producer of goods, wholesaler obtains products at low prices and sells them to the retailer at higher prices. Thus the remaining amount is the source of revenue.

Whole-selling entities play a crucial role in the supply chain process, as it buys the goods from different manufacturers in bulk, break bulk into smaller units, hold inventories in warehouses, provides quicker delivery to buyers, reduces risk by taking the title of goods, and so on. As these entities mostly deal with business customers, i.e. re-sellers they do not pay much attention to the location, atmosphere and promotion.

Distributor

As the name suggests, the distributor is an agent who distributes products and services to various parties in the supply chain network. It is impossible for the manufacturer to reach customers directly for selling products and services, and for this purpose, they have to rely on middle agents or distributors, who exclusively store and sell the company’s products, in different locations.

The distributor is also known as channel partner who deals with the manufacturers to promote and sell their products and services to various customers, such as retailers or final consumers. To do so, the distributor enters into an agreement with the producer and purchase the right to sell the producer’s product. However, he cannot use the producer’s trade name.

Distributors purchase non-competing goods or product lines from different manufacturers, hold stock in warehouses, transport it to various locations and resell it to various parties.

Differences between Wholesaler and Distributor

The difference between wholesaler and distributor can be drawn clearly on the following grounds:

1. The term wholesaler is defined as a person or entity, who purchase goods in bulk and sell them in relatively smaller units. On the other hand, the distributor is one of the major links that supplies goods and services to the entire market.
2. In general, distributors enter into the contract with the manufacturer to trade in non-competing goods or product lines. Conversely, a wholesaler do not enter into the contract with the manufacturer, i.e. he has the liberty to offer products of competing for nature to the retailer, provided by various manufacturers.
3. There are four types of distribution levels, in which wholesaler is present in two level and three level channel. Unlike, the distributor is present only in the three-level channel of distribution.
4. As a distributor acts as a middleman to supply specific goods in the market, his area of operation is larger than the wholesaler, who serves a limited area.
5. Retailers are the only customers of a wholesaler. On the contrary, a distributor provides goods to many parties in the supply chain, like wholesalers, retailers and even direct consumers.
6. Wholesalers do not involve in marketing, pitching, selling products to the prospective buyers or retailers, i.e. product of an individual manufacturer waits for the retailer’s interest and order placement. In contrast, the distributor sets deal with the producer and engage in promotional activities, to increase sales. Hence, they act as a sales representative to the producer.

Conclusion

Wholesalers generate their income from the discount charged on products, i.e. they purchase products in large volumes from producers at a low price and sell it further to the retailers in small lots at relatively high price. Hence, the amount received from customers less amount paid to manufacturers is the source of income to the wholesaler.

On the other hand, distributor charge service fees for rendering services as a percentage of net sales. The fee is the major source of income to the distributors.

A channel partner is a person or organization that provides services or sells products on behalf of a software, hardware, networking or cloud services vendor. Channel partners include value-added resellers (VARs), systems integrators, consultants, managed service providers (MSPs), original equipment manufacturers, distributors and independent software vendors. Many technology providers, including Amazon Web Services (AWS), Cisco, Dell EMC, IBM and Microsoft, have formed partnership programs to engage closely with channel partners.

Two well-known channel partner programs are:

• Managed Services Channel Program (MSCP): Defines best practices for channel partner market or industry services. Best practice compliance validates channel partners and services.
• Outsourcing Channel Program: Designed for channel partners handling asset management for a specified period. Includes combined manufacturer, service provider or data center technologies.

A referral partner is a sales representative, consultant or customer that enhances marketing and boosts sales by directly referring customers to manufacturers via multiple channels.

Channel and referral partners are often compensated with gratis discounts, training, technical support or lead generation tools.

WHOLESALER

The wholesaler can be understood as an intermediary entity that buys goods in large quantities and resells them to the retailer, with the sole aim of earning profit. He/She acts as a middle-person between a manufacturer and retailer. Due to direct buying from the manufacturer or producer of goods, wholesaler obtains products at low prices and sells them to the retailer at higher prices. Thus the remaining amount is the source of revenue.

Whole-selling entities play a crucial role in the supply chain process, as it buys the goods from different manufacturers in bulk, break bulk into smaller units, hold inventories in warehouses, provides quicker delivery to buyers, reduces risk by taking the title of goods, and so on. As these entities mostly deal with business customers, i.e. re-sellers they do not pay much attention to the location, atmosphere and promotion.

Wholesaler – Business to Business sales and Business to customer sale

• Wholesalers have huge quantity of the same product (Imagine a marble shop which is a wholesaler and has huge quantity of different marble floorings and tiles).
• If you want to buy from a wholesaler, you have to visit his place. (He does not distribute the items)
• In large companies, wholesalers may buy from distributors. Wholesalers are lower then distributors in channel sales. There might be multiple wholesalers in the same city.
• Wholesalers mostly sell directly to other businesses (like retailers) but they are likely to sell to customers who need in bulk as well (example a cement wholesaler selling small amount of cement locally just to meet demand)
• Are very important in the perishable goods market (fish, vegetables etc).
• Major work is of warehousing
• Margins are lesser but the volumes are huge.

The best example of wholesalers is the local cement guy or the local vegetable market. Although a normal vegetable retailer might roam the market with his van or might visit place to place, a wholesaler sits in his own place and does business.

You might noticed from time to time various Cloth wholesale markets where a huge business is done from a small shop. The wholesalers generally operate from a small shop but they will have a huge warehouse nearby from where they supply the material.

Because wholesalers sell material in huge bulk or the material which they sell is in demand, these wholesalers do not move from shop (this is generally the norm) and they sell most of their products from their own shop. Imagine the vegetable wholesaler who might sell tons of vegetables from his shop when retailers visit him.

A wholesaler may buy direct from the company or he might buy from another distributor. If you look at the ice cream market, there is a C&F (wholesaler of ice cream) involved who stocks the ice cream in bulk and other ice cream vendors may buy from him or the distributor arranges transportation from the wholesaler to the retailer. This bulk stocking wholesaler is needed in every city within a few milers because otherwise the ice cream will melt. As a result, wholesalers have a huge role to play in perishable good items.

Finally, distributors are not allowed to sell to end customers are all whereas a wholesaler might do that. For example – a cement wholesaler generally sells in bulk to the local developers who are erecting buildings. However, he may sell small items through a shop to local labourers, plumbers who need small work to be done with cement (home jobs). A distributor cannot do that because he is obstructing the sale of the retailer to whom the distributor is selling.

DISTRIBUTOR

As the name suggests, the distributor is an agent who distributes products and services to various parties in the supply chain network. It is impossible for the manufacturer to reach customers directly for selling products and services, and for this purpose, they have to rely on middle agents or distributors, who exclusively store and sell the company’s products, in different locations.

The distributor is also known as channel partner who deals with the manufacturers to promote and sell their products and services to various customers, such as retailers or final consumers. To do so, the distributor enters into an agreement with the producer and purchase the right to sell the producer’s product. However, he cannot use the producer’s trade name.

Distributors purchase non-competing goods or product lines from different manufacturers, hold stock in warehouses, transport it to various locations and resell it to various parties.

Distributors – Strictly business to business sales

• Distributors are the ones whose job is to increase the visibility and sales of the product, for which they might visit shop to shop and pick orders.
• An excellent example of distributors are the ones selling Samsung Smart phones who visit all the shops within a region to ensure that the material is on display by the retailers. You will not find a wholesaler of Samsung but you will find retailers and distributors.
• Distributors sell to both – Wholesalers and retailers.
• Transportation is a huge cost for distributors as delivery from warehouse to end retail outlet is the work of the distributor.
• Distributors are never allowed to sell to end customers because the distributors have a lower price of the product and this move will cut off the sale of the retailers.
• The turnover done by the retailers is the target of the distributor. A distributor is more concerned with secondary sale (sales from retailer to customer) because if secondary sales don’t happen, then primary sale from happen (sale from distributor to retailer).
• Major job is visibility, distribution to many outlets and sales.

Consumer durable, electronics, hardware or other equipments, medicines are perfect examples of sectors which use distributors and not wholesalers. A medicine retailer may have more then 1000 different type of medicines. He cannot afford to visit wholesalers who are stocking all these machines.

So the companies appoint a distributor who can distribute the various medicines to the retailer who in turn sells it to customers. Similarly, there are various distributors for washing machines, televisions and other white and brown goods who distribute products to retailers – small retailers or modern retailers.

There might be vegetable and perishable goods disributors as well. These distributors might visit from town to town and deposit a bulk of the material with the local wholesaler who will later sell it forward to other retailers. In this case too, the cost of distribution from distributor to wholesaler has to be bourne by the distributor.

Transportation is a major cost for any distributor and hence, the distributor considers the cost of transportation in his profitability analysis. Alternatively, a distributor might try to club together various deliveries to the same place so that the cost is lesser for deliveries and transportation.

The main work of the distributor is to push retailers in converting more sale. Imagine the competition between Samsung and Micromax or Oppo or Vivo. There is a distributor for each of these companies and all distributors will try to push their own products in the market. They can do this by launching various trade promotions or pushing the retailer in picking more material so that the sale is maximum for their brand.

So if a retailer picks more Micromax unit from the Micromax distributor, he is likely to sell the Micromax brand more then Samsung to the end customer. For this to happen, the distributor has to give promotional support to the retailer or push for more sales so that ultimately the retailer sells more unit to the end customer.

If the secondary sale is happening (sale from retailer to customer), the primary sale (sale from distributor to retailer) will happen automatically. A good distributor concentrates on secondary sale and not primary sale.

A distributor is also supposed to stock products in bulk but he can anytime order smaller quantities from the company from time to time to distribute forward. Generally distributors are not expected to have as big warehouses as wholesalers because it is the work of the distributor to distribute and not to warehouse. Distributors use the storing capacity of retailers below them or wholesalers below them to stock the material.

Key Differences between Wholesaler and Distributor

The difference between wholesaler and distributor can be drawn clearly on the following grounds:

1. The term wholesaler is defined as a person or entity, who purchase goods in bulk and sell them in relatively smaller units. On the other hand, the distributor is one of the major links that supplies goods and services to the entire market.
2. In general, distributors enter into the contract with the manufacturer to trade in non-competing goods or product lines. Conversely, a wholesaler do not enter into the contract with the manufacturer, i.e. he has the liberty to offer products of competing for nature to the retailer, provided by various manufacturers.
3. There are four types of distribution levels, in which wholesaler is present in two level and three level channel. Unlike, the distributor is present only in the three-level channel of distribution.
4. As a distributor acts as a middleman to supply specific goods in the market, his area of operation is larger than the wholesaler, who serves a limited area.
5. Retailers are the only customers of a wholesaler. On the contrary, a distributor provides goods to many parties in the supply chain, like wholesalers, retailers and even direct consumers.
6. Wholesalers do not involve in marketing, pitching, selling products to the prospective buyers or retailers, i.e. product of an individual manufacturer waits for the retailer’s interest and order placement. In contrast, the distributor sets deal with the producer and engage in promotional activities, to increase sales. Hence, they act as a sales representative to the producer.

RETAILER

When buyers buy a product and sell it to the final customers for their consumption, and not to any supplier or wholesaler, this is known as Retail. The retailers are the mediator between wholesaler and customers. They purchase goods from the wholesaler and sell them to the ultimate customers in small quantity. Retailers offer a vast variety of goods and are in direct communication with a large chain of suppliers, giving them an opportunity to manufacture and develop more sustainable goods.

A retailer does not manufacture any product they sell, but they are the final link in the distribution chain and the one who connects and delivers the goods and services directly to the customers.

Importance of Retailer

1. Provide Assortments

Supermarkets or small Kirana shops sell different product items manufactured by different companies. These places enable and give choices to customers to pick from a vast assortment of goods, sizes, brands, and prices at one location.

2. Breaking Bulk Orders

Manufactures and wholesalers sell the products in bulk to the retailers. The retailers then sell it to the customers in smaller and more useful quantities. This activity of breaking bulk order into tiny amount according to customer’s requirement is known as breaking bulk.

3. Holding Inventory

The significant action accomplished by the retailer is maintaining an inventory, so the items are available whenever the customers want. This action allows the customer to buy products in a small quantity as required.

4. Providing Services

Retailers implement services that make customers shopping journey favourable. Example, retailers showcase all the products so that the customers can see and buy them. Retail store’s employee salesperson to assist the customers.

Key Points of Retailer

• It creates a high annual sale and has a huge impact on the economy.
• Creates employment and offers extensive varieties of career opportunity.
• Offers widespread categories of products and services.
• A retail service can improve a product’s image.
• Spread information to customers through display, signs, and sales personnel.

In the field of marketing, channels of distribution indicate routes or pathways through which goods and services flow, or move from producers to consumers.

We can define formally the distribution channel as the set of interdependent marketing institutions participating in the marketing activities involved in the movement or the flow of goods or services from the primary producer to the ultimate consumer.

The prime of object of production is its consumption. The movement of product from producer to consumer is an important function of marketing. It is the obligation of the producer to make goods available at right place, at right time right price and in right quantity. The process of making goods available to the consumer needs effective channel of distribution. Therefore, the path taken by the goods in its movement is termed as channel of distribution.

Distribution channels are the network of organizations, including manufacturers, wholesalers, and retailers, that distributes goods or services to consumers. A distribution channel is the network of individuals and organizations involved in getting a product or service from the producer to the customer. Distribution channels are also known as marketing channels or marketing distribution channels.

An entrepreneur has a number of alternative channels available to him for distributing his products. These channels vary in the number and types of middlemen involved. Some channels are short as they directly link producers with customers. Whereas other channels are long and indirectly link the two through one or several middlemen.

In short, the distribution channel can be defined as ‘the path through which goods and services or payment for those goods or services travel from the vendor to the consumers’. Distribution channel can be as short as a direct transaction from the vendor to the consumer, or may include several interconnected intermediaries along the way such as the followings:

• Wholesalers
• Distributors
• Agents and
• Retailers

Need for Selecting an Appropriate Channel of Distribution

It is a fact that the distribution channels are greatly required by the manufacturers. The need for selecting an appropriate channel can be understood on the basis of the parameters considered, which highlight the fact why distribution channels must be selected?

1. Attention

Little attention of companies to their distribution channels may damage results such as profit, brand, number of customers etc.

2. Imaginative distribution systems

Companies can use imaginative distribution systems to take competitive advantage. For example Dell, Flipkart.com etc. Dell is the best example of revolution in Distribution channel. Dell is selling its products directly to the consumer rather than through retailer.

3. Difficult to Replace

Companies can change their products, advertising and Pricing easily but not their distribution channels. It is not an easy task to change distribution channel, franchisees, dealers and retailers.

4. Value Addition

Distribution Channel Members can provide greater efficiency in making availability of goods to the target markets through their Contacts, Specialization, experience, and scale of operation. This can add value to the product or service at each level of distribution.

5. Reduced number of Channel Transactions

Marketing intermediaries or channel members help to reduce the number of channel transactions.

6. Information

Gathering and distributing information is very helpful.

7. Promotion

Communication to the consumer regarding product information and offers through advertising and promotion.

8. Financial support

Offering financial support for example Purchase on credit, exchange options, purchase using payment plans

9. Other

Financing, Physical Distribution and Risk Taking are other parameters that influence a channel selection decision Reduces Distribution cost and time.

Objectives of channels of distributions

The objectives of channels of distributions are discussed as follows:

1. Receiving Fast and Accurate Feedback of Information

In order to maintain and provide an efficient distribution system and service, a good and regular. How of relevant information is necessary, which includes inventory levels, sales trends, damage reports, service levels, cost monitoring etc.

2. Making the Product Readily Available to the Market Consumers

To ensuring the product is represented in the right type of outlet or retail store is an important objective of channels of distribution. Having identified the correct marketplace for the goods, the company must make certain that the appropriate physical distribution channel is selected to achieve this objective.

3. Achieving a given Level of Service

Once again, from both the supplier’s and the customer’s viewpoints, a specified level of service should be established, measured, and maintained. The customer normally sees this as crucial and relative performance in achieving service level requirements is often used to compare suppliers and may be the basis for subsequent buying decisions.

4. Enhancing the Prospect of Sales being Made

The most appropriate factors for each product or type of retail store will be reflected in the choice of channel. The general aims are to get good positions and displays in the store; and to gain the active support of the retail salesperson, if required. The product should be “visible, accessible, and attractively displayed’.

Channel choice is affected by this objective in a number of ways:

(i) Does the deliverer arrange the merchandise in the shop?

(ii) Are special displays being utilised?

(iii) Does the product required to be installed, demonstrated or explained?

(iv) Is there a special promotion of the product is required?

5. Minimising Logistics and Total Costs

Costs are very crucially significant as they are reflected in the final price of the product. The selected channel will reflect a certain cost and this cost must be assessed in relation to the type of product offered and the level of service required.

6. Achieving Co-Operation with Regard to any Relevant Distribution Factors

These factors can either be from the supplier’s or the receiver’s point of view and include minimum order sizes, unit load types, product handling characteristics, materials handling aids, delivery access (e.g., vehicle size), and delivery time constraints, etc.

Marketing is defined as the set of activities which are undertaken by the companies to provide satisfaction to the customers through value addition and making good relations with them, to increase their brand value. It identifies and converts needs into products and services, so as to satisfy their wants. There are two types of marketing namely, domestic and international marketing. Domestic marketing is when commercialization of goods and services are limited to the home country only.

On the other hand, International marketing, as the name suggests, is the type of marketing which is stretched across several countries in the world, i.e. the marketing of products and services is done globally.

Domestic Marketing

Domestic Marketing refers to the marketing activities employed on a national scale. Marketing strategies were undertaken to cater customers of a small area, generally within the local limits of a country. It serves and influences the customers of a specific country only.

Domestic Marketing enjoys a number of privileges like easy to access data, fewer communication barriers, deep knowledge about consumer demand, preferences and taste, knowledge about market trends, less competition, one set of economic, social & political issues, etc. However, due to the limited market size, the growth is also limited.

International Marketing

International Marketing is when the marketing practices are adopted to cater the global market. Normally, the companies start their business in the home country, after achieving the success they proceed their business to another level and become a transnational company, where they seek to enter in the market of several countries. So, the company must be known about the rules and regulations of that country.

International marketing enjoys no boundaries, keeping the focus on the worldwide customers. However, some disadvantages are also associated with it, like the challenges it faces on the path of expansion and globalisation. Some of which are socio-cultural differences, changes in foreign currency, language barriers, differences in buying habits of customers, setting and international price for the product and so on.

Differences between Domestic and International Marketing

The significant differences between domestic and international marketing are explained below:

1. The activities of production, promotion, advertising, distribution, selling and customer satisfaction within one’s own country is known as Domestic marketing. International marketing is when the marketing activities are undertaken at the international level.
2. Domestic marketing caters a small area, whereas International marketing covers a large area.
3. In domestic marketing, there is less government influence as compared to the international marketing because the company has to deal with rules and regulations of numerous countries.
4. In domestic marketing, business operations are done in one country only. On the other hand, in international marketing, the business operations conducted in multiple countries.
5. In international marketing, there is an advantage that the business organisation can have access to the latest technology of several countries which is absent in case domestic countries.
6. The risk involved and challenges in case of international marketing are very high due to some factors like socio-cultural differences, exchange rates, setting an international price for the product and so on. The risk factor and challenges are comparatively less in the case of domestic marketing.
7. International marketing requires huge capital investment, but domestic marketing requires less investment for acquiring resources.
8. In domestic marketing, the executives face less problem while dealing with the people because of similar nature. However, in the case of international marketing, it is quite difficult to deal with customers of different tastes, habits, preferences, segments, etc.
9. International marketing seeks deep research on the foreign market due to lack of familiarity, which is just opposite in the case of domestic marketing, where a small survey will prove helpful to know the market conditions.

Conclusion

After digging the differences in the two subjects, we came to the conclusion that the world itself is a market, and that is why the guiding principles are versatile. It does not make any change that where the principles are applied i.e. in a local or a global market. The basic cause of the difference between domestic and international marketing is the area of its implication and the market conditions.

Direct consumer selling

Direct consumer selling is the oldest way of selling the goods. Under this system, the goods are directly sold to the consumer by the manufacturer. Direct consumer selling is gaining immense popularity these days on account of high cost of distribution through the middlemen.

Large organizations adopt direct selling in order to reduce distribution costs because they have ample facilities to sell directly to consumers. A manufacturer can sell goods to the consumers by opening his own retail shop in mill’s premises or by mail house to house selling or by engaging salesmen or by employing mechanical devices.

Direct consumer selling may be undertaken in the following circumstances.

1. If the manufacturer’s plant is located near the majority of the customers, it would be easier to sell directly to them.
2. If the manufacturer is not satisfied with the services of established retailers or if the retailers refuse to stock his goods, he may sell directly to customers.
3. In case of new products, the manufacturer may like to introduce the same directly to the customers.
4. Articles of technical nature which require demonstration before sale and as such services before sale can be best provided by the manufacturer.
5. If the manufacturer wants to curtail retail prices of his products, he can resort to direct consumer selling by eliminating various middlemen.
6. If the article is produced in small quantity, it is better to sell direct without intermediaries.
7. A manufacturer with enough capital and in a position to undertake the various marketing functions on his own may employ his sales force or establish his retail stores to sell his product directly to the consumers.
8. Manufacturers of perishable & fashionable goods may sell directly to avoid physical deterioration or fashion obsolescence.
9. Manufacturers of products requiring after sales services may sell directly to consumers in order to maximise sales and giving maximum satisfaction to customers.

Organizational Selling

Organizational selling is the process of selling goods to companies and organizations instead of to individual consumers. The buyers in organizational selling transactions use their purchased to support ongoing operations or to resell to their own customer base.

When selling to an organization instead of an individual, you have to consider the group you are selling to, and their production needs that go beyond the buyer’s journey. Here are some considerations to help you understand and master organizational selling.

Difference between Consumer Selling and Organizational Selling

Both individuals and organizations need to purchase items to accomplish their daily tasks. There is a large difference, however, in how and why an organization purchases goods and services versus how an individual shops. Understanding these differences is important if you want to tap into both an organizational and a consumer market.

Why Goods are Purchased?

Organizations purchase goods to use in their ongoing operations and to resell to consumers, while consumers purchase goods for their personal use. Organizations also purchase more raw materials such as wood, steel and other items used in manufacturing than individuals who don’t have the tools or knowledge to put those raw materials to use as a product. Organizations generally purchase goods in larger volumes than individuals, and are driven by customer demand and need for manufacturing materials.

Consumers, on the other hand, are driven both by need and by want. It is possible to entice a consumer to purchase something he does not need through effective marketing or peer pressure, but it is much harder to entice an organization to buy an unnecessary product, especially when dealing with a purchasing department that is accountable for what it spends.

Buying Products in Bulk

Organizations often purchase in bulk, whereas consumers typically do not. For example, a consumer might buy three gallons of white paint to paint his house while an organization might need 3,000 gallons to paint shelving units for resale. The organizational market is thus more condensed it is possible to have a business succeed catering only to a small number of organizational clients while businesses that typically focus on consumers sell smaller quantities to more people.

That said, Costco and similar wholesale warehouse companies do successfully market low-price, high-quantity goods to individual consumers. These consumers tend to buy for small office spaces or family homes, however, rather than only for themselves.

Choices and Use

Consumers typically purchase goods for different reasons than organizations, and have more freedom in choosing the items they want. A consumer may purchase a chair so people can sit comfortably in his home. He will be able to choose any chair within his budget that he likes. An organization, on the other hand, may purchase a chair because an administrative assistant needs it to do his job.

The organization may be restricted in a chair purchase, not only by the budget set by a purchasing manager, but also by guidelines set by the Occupational Health and Safety Administration, and by company-wide guidelines on office furniture.

Marketing Strategy for Each

Reaching organizational clients requires explaining how your products and services will help their organization serve their clients and customers. It is a help them help others approach. However, to reach a consumer market, you have to show how your products enhance a consumer’s life in some way. whether it makes life easier or more enjoyable, or both.

Hard Selling

Hard sell strategies are aggressive and usually put a high amount of pressure on the client. The clerk who sold me the shovel is a simple example. Other tactics include cold calls, forceful sales letters, and unsolicited pitches. You’re there to sell, they know it, and you know it, there’s no gray area.

The main advantage of hard selling is that it gets straight to the point. This is especially important for clients who are ready to buy and aren’t looking around to do a few more meetings. The decision should be made now, and you want to step up and offer yourself as a part of their team.

The problem with the hard sell is that when it’s done too aggressively, your attempt to help will be seen as an annoyance. This plays a big role, especially if you’re working with small businesses that are savvy to such sales techniques. No matter how genuine your offer is, it might come off sounding like a scam.

Soft Selling

Soft selling focuses on the relationship-building aspect of sales. You don’t put psychological pressure on potential buyers. Instead, you find passive ways to show them that you have the solutions they need.

In online freelancing, this could be done through your blog, by providing a free ebook or white paper, or even by participating in online discussions. With all the available online tools for these, it’s no wonder that this tends to be the approach chosen by more tech-savvy freelancers.

A study released by New Century Media in October 2007 showed user buying behavior after being exposed to informational and educational resources that were actually soft selling efforts from businesses. According to the study, consumers were 30 percent more willing to buy a product through non-direct advertising rather than media advertising. Not only that, consumers exposed to this method of advertising were 97 percent more likely to tell their friends about it, and 95 percent more likely to repeat their experience with the business.

There is, however, such a thing as taking an approach that’s “too soft.” You might spend so much energy on updating your personal blog that you forget to use it as a platform for selling your services. Or you could be spending so much time Tweeting with your potential clients that you don’t make firm, actionable proposals that will bring you recurring revenue in exchange for your efforts. Being too gentle with your sales approach might also give clients the impression that you’re not too confident about your services, or that you’re just not interested in working with them.

Soft selling may work in some cases, but it doesn’t make sense to apply those tactics to all of your clients, regardless of where they are in their buying cycle and what services you’re trying to sell. Find out the conditions that make soft selling work and apply it there, but don’t waste your time and effort using these techniques exclusively.

When salespeople believe that closing is their top priority no matter how they get there they earn your brand labels like “obnoxious” and “rude.” The days of “Glengarry Glen Ross” are over. Consumers today are too wary of being manipulated to be won over by pushy tactics.

But people appreciate finding solutions to their problems. Consumers may not always be able to pinpoint their own stress points, but they love a company that makes their lives easier or more exciting.

Traditional sales tactics focus solely on the product, but a better strategy is to understand consumers’ problems first and then provide solutions through the company’s offerings. This is a relational and empathetic approach. Rather than turn people off, you build trust. This is especially true when selling solutions extends beyond closing deals and into managing problems customers encounter after they’ve made a purchase with your company.

Forming your business around helping consumers disrupts industries and earns customer loyalty, which means more reliable and consistent revenue streams. In “Reorganize for Resilience,” Ranjay Gulati explains that the customer-centric companies he tracked delivered shareholder returns of 150 percent over six years. This is in stark contrast to the S&P 500’s 14 percent.

Small interventions applied at the right time and to the right issues can improve customer experiences disproportionately. But turning complaints into happy customers requires appropriate resources and strategies. Here are four ways to turn your sales team members into problem solvers:

1. Open doors across silos

Perhaps the biggest obstacles sales teams face are their own companies. Suffocating parameters, outdated compensation systems, and tension between departments all hold salespeople back.

Everyone has to rise above internal politics or arguments over resources and recognize that each department plays an important role in the customer experience. Your salespeople need insights from marketing and R&D, among others, to better understand how your brand can solve people’s problems.

One of the things we’ve implemented within my team is a “work backward” approach. Start with what the customer experiences (or should experience), and work backward to improve that experience. This has allowed us to work through silos, competing agendas, and conflicting opinions to focus on what matters most for the customers and, by extension, the company.

Best Buy broke down silos to improve its customer experience and survive Amazon’s and Walmart’s lowered prices. The company did some research and found that women who made up 55 percent of its customer base, according to research in Gulati’s book didn’t actually enjoy shopping there.

So Best Buy adjusted its layout, trained its store staff to help more women in the ways they preferred to be helped, and introduced the Geek Squad so women who were seeking installation assistance were no longer turned away. These changes went far beyond a training session for sales reps, but they helped the business survive changes in the industry and even expand its services while competitors faded into oblivion.

2. Focus on the relationship between sales and marketing

Silos and tensions are notoriously problematic between sales and marketing departments. When a marketing strategy produces poor leads, sales teams often simply get angry because there isn’t a system in place to communicate effectively. Yet marketing can’t adjust its strategy without insights from sales.

These teams should be entwined in a dance not a street fight. The people on both teams must understand how a lead is defined and when a lead is ready for a sales call. A liaison can help communicate preferences between departments and help both teams move forward as a united front.

3. Develop customer intelligence

You can and should use data and hard facts to guide strategies. But salespeople need more they need valuable insights into their audience’s world from a thorough analysis of data. The shift for sales teams to think more like business advisors can be intimidating, especially when current tactics were effective in the past. But becoming solution-based often means changing up some job descriptions.

Strategic collaboration is a huge portion of our sales managers’ responsibilities. They constantly pull team members to their whiteboards, developing strategies together, challenging each other, encouraging creative thinking, and reviewing outcomes. This results in knowledgeable reps who can offer helpful insights and work together to solve each other’s problems and customers’ issues as well.

4. Don’t be afraid to educate consumers

When marketing and sales work together to produce quality leads and salespeople help shape strategic decisions, they’ll know more about the challenges customers face than the customers themselves. Don’t be afraid to use that knowledge to educate consumers and teach them new perspectives.

In the past, many companies believed that educating consumers gave them leverage and would empower consumers to find solutions with competitors. In reality, sharing information builds trust. Consumers want companies to be transparent, and receiving information about why a product will genuinely solve their problem is a pleasant and desirable experience. This approach makes sales reps into partners in a customer’s pursuit of satisfaction.

Today’s volatile, high-speed markets make innovative strategies essential. A problem-solving approach to sales can give you a competitive edge by creating loyal and appreciative customers.

The rep then needs to shift gears from consultant to negotiator in order to engineer an agreement that’s a win-win for both their own and their prospect’s companies.

While negotiations can go in a seemingly infinite number of directions, salespeople with the following negotiation skills will be well-equipped to roll with the punches.

Sales Negotiation Skills to Develop

The most important negotiation skills in sales are:

1. Define the concessions you’re willing to accept in advance

In the heat of the moment, a 30% discount or additional six months of support might seem perfectly acceptable. It’s only when you get back to your desk and start drafting up the contract that you realize you agreed to terms you can’t or shouldn’t accept. Clearly defining the limits on price discounts, freebies, or other add-ons before you meet with your prospect will ensure you come to a mutually beneficial agreement.

2. Let the prospect go first

You’ve presented the terms of the deal, and the prospect would like to negotiate them, so let them start the conversation. In the spirit of being accommodating, salespeople are often tempted to offer a discount or an adjustment before the prospect even opens their mouth. But you don’t know what they’re going to say! Just as in other areas of sales, it pays to listen first, and then speak.

3. Don’t give a range

If the customer would like money knocked off your product’s price tag, don’t say, “Well, I could probably reduce the cost by 15 or 20%.” Who would accept 15% when 20% has been offered? Always quote one specific number or figure and then go higher or lower as necessary. The word “between” should be avoided at all costs.

4. Avoid splitting the difference

According to sales expert Art Sobczak, offering to split the difference can do more harm than good. For example, if the product or service costs $100 and the prospect wants a 50% discount, the salesperson shouldn’t counter with $75 although it seems logical to do so. If the salesperson offers a slight discount but still keeps the number in the neighborhood of the original price, the prospect will likely accept, and the margin takes less of a hit.

5. Don’t put anything in writing until the conversation is over

Negotiations can swing back and forth and around again. Many ideas will be proposed, and while some will be accepted, others will be shot down. A salesperson would be wise not to revise the contract until the meeting has ended, and all parties have verbally agreed to the terms.

6. Negotiate with the decision maker

This tip might seem obvious, but according to John Holland, many salespeople make the mistake of negotiating with the wrong person. And this means that when talks begin with the true decision maker, they’ll likely start at the already discounted price quoted in the first meeting. A great outcome for the prospect, but a poor outcome for the seller.

7. Get something in return for concessions

Healthy salesperson-customer relationships are borne out of mutual respect and trust. With this in mind, salespeople shouldn’t accept every single one of a prospect’s demands without making some requests of their own. By keeping the negotiation a win-win for both sides, salesperson and client remain on equal footing, which lays the groundwork for a mutually beneficial relationship.

8. Expand the conversation beyond money

The most commonly negotiated aspect of a sales deal is price, so salespeople should be prepared to talk discounts. However, since price is tied to value, and value tied to a customer’s perception of and satisfaction with a product, salespeople might consider offering other add-ons or freebies in lieu of a smaller price tag. But bear in mind that this is not a hard and fast rule the specific concessions a salesperson can offer depends on the situation.

9. Keep the conversation light

Although prospect and salesperson sit on opposite sides of the table during a negotiation, they will be partners if the deal is signed. Keep the talk light and jovial to avoid creating bad blood.

10. Walk away if necessary

Salespeople shouldn’t be willing to accept any curveball a prospect throws at them. If demands become unreasonable or unprofitable for the company, don’t be afraid to walk away from the deal. A customer who only agreed to sign if the contract was radically amended or the price was drastically dropped is bound to cause problems down the road. And since they clearly don’t see much value in the offering, it’s only a matter of time before they become dissatisfied. Get out for your and your prospect’s sake.

Sales skills training builds a sustainable competitive advantage because it differentiates your team in an increasingly commoditized market.

The best sales teams are a lot like great schools: They care about results, but the way they achieve them is by being relentless about developing the inside sales skills of their reps. In fact, the best sales teams are most often led by someone who is more like a sales coach than a sales manager. This dedication to developing inside sales skills ultimately creates a sales team that not only hits its short-term goals, but instills a culture of learning and self-improvement in order to achieve its long-term goals as well.

1. Communication Skill

On the phone, the tone of voice, volume and pace of a sales rep’s speech are surprisingly important sales skills. In sales, how you say things to a prospect matters more than what you say. According to Sandler Sales Training, only 7% of communication relies on the content of what you say, whereas 38% of communication is about other attributes of communication such as tonality, etc. As you may have heard before, it’s not what you say but how you say it. Reps should try to subtly mirror a prospect’s tone of voice and style of talking – if a prospect is more formal and polite, speak similarly; if they’re more informal and joke around, do the same. This helps prospects feel familiar with you, and relate to you more easily to create rapport. Reps also need to speak clearly, not too quietly, and not in a monotone. You need to let your emotion and personality shine through, so that the person on the phone knows you’re a human, and is interested in talking to you.

2. Listening Skill

Every great salesperson knows that listening is the most important of all sales skills. Most people think it’s the smooth talkers who make the best salespeople, but in reality it’s those who have mastered listening and identifying people’s true motivations who are most successful. Listening isn’t just something you should do when your sales manager is screaming at you; it’s also what will help you become the top salesperson at your company.

Why is listening so important in sales? There are several reasons. The first is that most people want someone to listen to them. In today’s fast-paced world, however, few of us get someone’s undivided attention for very long. The second reason listening is so important in sales is that since there are so few good listeners these days, those who are will stand out in the customer’s mind.

3. Trust Building Skill

Selling is a people-oriented business requiring a customer-focused sales approach. Sales are made in the dialogue, person-to-person. The conversation may be face-to-face or over the phone, but the very essence of a successful outcome is based on the ability of the seller to build trust in client relationships.

This means that salespeople must be at their very best, bringing value to the table and to their customers. If instead, they just push products, they sacrifice goodwill and trust. Their sales success is likely to be short-lived, not the basis of a long and mutually productive relationship.

Building Trust with Your Customers

Building and maintaining trust across the full lifespan of a customer relationship takes attention and focus in the following areas:

• Prepare with the customer in mind.
• Ask great questions not bad ones during sales conversations.
• Create value proactively, not reactively.
• Be honest about what you can and can’t do.
• Make your value explicit, not implicit.
• Always maintain a collaborative tone, even when you don’t see eye to eye

Importance of Rebuilding Trust

It can be a difficult task to build trust and credibility with prospects and customers. It is even harder when attempting to rebuild trust after it has been damaged by scandal or misstep. It doesn’t matter which company or sector is making headlines for bad decisions, unethical or illegal practices, or individuals who displayed bad behavior. There will always be some event that triggers a crisis in trust.

During difficult periods, especially when daily headlines keep bad news front and center, you may find yourself spending more time explaining, defending, and deflecting. Most people think of “fight-or-flight” reactions when faced with stressful situations. These natural reactions protected your ancestors back in the day, when conflict meant life or death, but all are ineffective for regaining the trust, respect, and confidence of customers, and in turn, growing sales.

So, what does work? If executed with authenticity, patience, and skill, the following four-step process is straightforward and effective in rebuilding trust with clients and customers:

• Empathize: Expressing empathy will help you to coax out and reduce negative emotions.
• Question: Open-ended questions and effective listening take courage and a strong stomach when trying to rebuild fractured trust. The payoff: the customer is allowed to vent and feels heard, while you show depth of caring and a greater understanding of the customer’s perspective on the issue.
• Position: If you’re like most competitive salespeople, your first reaction when presented with customer anger may be to explain and defend. While accurate, your comments will not be persuasive and may sound defensive, triggering in customers their own fight, flight, or freeze reactions. Instead, maintain a customer-focused selling approach: after empathizing and questioning, your solutions or ideas should be linked to what you learned from the customer’s responses to your questions.
• Elicit Feedback: Only by checking and using open-ended questions can you elicit sufficient feedback to know if the proposed ideas hit or missed their marks.

The theories of selling implies to the behaviour of the salesperson towards the prospect or the customer, which ensures the active sale of goods or services. The selling theories gained significance due to the emerging role of the salesperson in marketing since a seller acts as a marketer too.

Building a strong relationship with the customers is essential for the salesperson to create the brand image since he/she is the face of the company.

Terminologies Used

• Selling: Selling is the exchange activity carried by the organizations and individuals to fulfil the needs of the consumers to earn profit in return.
• Salesperson: The one who represents the company in front of the customers and is responsible for the sales of goods or services, is known as a salesperson.
• Prospect: The prospect refers to the lead or prospective customer whom the salesperson needs to convince for closing a sales deal.

1. Stimulus-Response Theory

The salesperson’s application of the correct stimulus with the appropriate efforts for acquiring the desired response from the prospect is defined as the stimulus-response theory.

Given below is the diagram, which clearly explains how this model functions:

Functioning of Stimulus Response Theory

Following are the four essential actions or stimuli over which the salesperson holds a command and can modify according to the situation, are as follows:

• Self: The salesperson can groom oneself to be presentable; in terms of body language, physical appearance, communication skills, mannerism, voice pitch and tone.
• Price Concession: The salespeople have limited control over the discount or price concession provided to the prospects who are considered to be valuable for the organization.
• Price Change Proclamation: The change in product price can be declared by the salesperson anytime, according to his/her convenience.
• Preferential Treatment to Valuable Customers: The buyers who usually procure goods in bulk quantity and make instant payments on their purchase, are offered various price concessions and other privileges by the salesperson.

Shortcomings of Stimulus-Response Theory

There are certain limitations due to which this theory was criticized. Some of these are as follows:

• The prospect has no say in the whole selling process and plays a passive role, where he/she only needs to follow the salesperson blindly.
• In a case where the prospect is not fully assured with his/her purchase, may even face the situation of post-purchase disagreement.
• At times, a manipulative salesperson cheats on the prospect, by using the consumer’s weakness as a stimulus for selling a product.
• The application of this approach is limited to the selling oriented organizations, which has a primary motive of increasing the sales volume.
• This theory ignored the role of relationship management in carrying out selling activities.
• It emphasized the presentability and interactive skills of the sales personnel, along with giving liberty to take decisions for closing the sales deals, which adversely affects the profitability. Since the salespeople tremendously decreased the price and increased the credit period.

In simple terms, the stimulus-response theory enlightens the repetitive actions of a salesperson which initiates the customer’s positive response towards the product or service.

2. Product-Oriented Selling Theory

In this theory, it is assumed that the prospect or buyer has no idea about the new product and scientific or technological advancement. Neither they know about the benefits or impact which the new products or technology can create for the prospects.

Therefore, in such a situation, the product-oriented selling style is adopted, where the salespeople need to spread awareness about the product by specifying its features, advantages, benefits and usage, to the prospects.

It is believed that this strategy will not only make the prospect familiar to the new product but may also motivate or pursue him/her to purchase the product.

Here, the customer is targeted indirectly with slight influence through motivation. This theory is usually applied in organizations dealing in software projects, computers, machinery, pharmaceutical, etc.

The following image represents the working of product-oriented selling theory:

In the above diagram, the maximum i.e., almost 85% of the time, interaction is carried out by the salesperson, where he/she explains and presents the product features in front of the prospect.

The only drawback of this theory is that, if the salesperson fails to understand the present need of the prospect, or is unable to associate this requirement with the benefits of the new product; then the buyer won’t show any interest in purchasing the product.

3. Need Satisfaction Theory

The need satisfaction theory brings forward an interactive approach or a win-win assumption, where the prospect and the salesperson communicate with each other to ensure mutual satisfaction of both the parties.

The salesperson enquires and understands the requirements, wants and expectations of the prospect and then presents a suitable product to achieve consumer satisfaction.

Here, the salesperson gets a chance to associate the product features with the prospect’s needs and desires. The salesperson has the power to convince the buyer by highlighting the benefits the product will generate to satisfy his/her specific requirements. In this approach, even the prospect feels valued and listened.

Stages of Need Satisfaction Theory

The process of need satisfaction theory can be identified through the following three steps:

(i) Need Development

The initial phase of this theory emphasizes on generating the need for the product. The salesperson interacts with the prospects to take feedback about their contentment with the former products along with proactive enquiry of their present needs and requirements.

This step helps to gather sufficient information on what the consumer wants and past product performance.

(ii) Need Identification

In the next step, the salesperson sums up the information collected in the development stage and thoroughly analyzes the needs of the prospect. Then he/she confirms this requirement with the buyer, to ensure complete understanding and clarification.

(iii) Need Satisfaction

The last stage is all about meeting the buyer’s needs appropriately. The salesperson prepares a complete presentation on the product offering and its features which have the potential of meeting the identified needs and wants of the prospect.

The salesperson also exhibits his/her interpersonal skills by resolving the queries and doubts of the buyer. Thus, finally convincing him/her to purchase the product.

It is a customer-oriented approach where the priority is given to building a long-term relationship with the consumers rather than just selling the products.

• Some may say that selling was a traditional concept, but in reality, it is an inseparable part of marketing management. Understanding its different theories provide the power of healthy market acquisition to the organizations.